In October 2023, the European Central Bank formally launched the preparation phase of the digital euro project, moving Europe’s central bank digital currency from conceptual study toward concrete implementation. The decision followed a two-year investigation phase and signalled that the project had reached a level of maturity requiring operational and legislative groundwork.
The step was approved by the ECB’s Governing Council, underlining broad institutional backing across the euro area. ECB President Christine Lagarde described the launch as “a key milestone in ensuring the euro remains fit for the digital age,” framing the digital euro as a strategic response to rapid changes in payments and money use rather than a purely technical upgrade.
From design questions to delivery
The preparation phase, scheduled to run until 2025, focuses on building the foundations required for a possible issuance decision. This includes developing the technical infrastructure, drafting a detailed rulebook, and testing how a digital euro would operate in practice across the euro area. The ECB is also tasked with selecting technology providers and refining the payment architecture, while working closely with the European Commission on the regulatory framework.
Throughout the process, the ECB has stressed that a digital euro would function as digital cash. It should be usable everywhere in the euro area, accepted widely, and available to citizens and businesses regardless of which bank or payment provider they use. A core design objective is resilience, ensuring payments can continue even when private systems fail.
Offline functionality remains central to that ambition. The ECB has confirmed that enabling payments between devices without an internet connection is a priority, both to mirror cash-like usability and to address privacy concerns raised during earlier public consultations. In offline mode, transactions would offer a higher degree of privacy, with limited or no data shared beyond the payer and payee.
Banks, safeguards, and legislation
During the preparation phase, the ECB began working with national central banks and private sector participants, including commercial banks, fintechs, and payment service providers, to test technical solutions and integration models. These experiments are intended to show how a digital euro could fit into existing financial infrastructures rather than replace them.
At the same time, concerns from the banking sector have remained prominent. Banks have warned that a retail central bank digital currency could draw deposits away from commercial institutions, particularly in times of stress. In response, the ECB has reiterated that safeguards such as holding limits and tiered remuneration are under consideration to contain financial stability risks.
Parallel to the ECB’s technical work, the European Commission advanced its legislative proposal to establish the legal basis for a digital euro. The draft regulation aims to guarantee access, protect privacy, and ensure interoperability with existing payment methods across the single market.
By the end of 2023, the digital euro had moved decisively closer to reality. For the first time since its launch more than two decades ago, the euro was being redesigned to meet a payments landscape shaped by digitalisation, geopolitical fragmentation, and concerns over monetary sovereignty. The ECB has been clear that a final decision on issuance will only come after the preparation phase concludes, likely around 2026. Until then, the emphasis remains on testing whether digital public money can work safely and credibly at European scale.
Related: ECB Outlines Core Design Features for the Digital Euro in New Technical Annex