The European Central Bank on Wednesday, made another advancement towards the introduction of a digital form of the euro that would enable electronic payments across the 20 countries.
On November 1, the ECB announced that it would begin a two-year “preparation phase” for the digital euro, during which it would clarify rules, select its partners in the private sector, and conduct some “testing and experimentation.”
The ECB’s move on Wednesday, while only a tiny step in a multi-year effort, puts it ahead of the central banks of the other wealthy Group of Seven countries and could serve as a model for others to follow.
While China and Sweden are among those that have initiated experimental initiatives, some Caribbean nations, including Nigeria, have already implemented digital currencies.
According to the ECB, a digital euro will increase competition in the market for payments, which is currently controlled by American credit card corporations.
The ECB has stated it will establish a cap on how many digital euros any one person may acquire, perhaps in the range of 3,000 euros, in order to allay worries about the hollowing out of commercial banks.
The International Monetary Fund has released a “how to” manual for central banks and stated that digital currencies should only have a minor influence on monetary policy outside of times of crisis.
The COVID-19 pandemic accelerated the growth of electronic payments in the EU, which increased from 184.2 trillion euros ($201.7 trillion) in 2017 to 240 trillion euros in 2021.
