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European Central Bank: We’re Exploring a Decentralized Digital Euro for Retail Use

The accelerated discussions comes after ECB President Christine Lagarde said in December 2019 that Europe “better be ahead of the curve” when it comes to digital currency.
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Chatter around the possible launch of central bank-backed digital currency in the European Union continues to grow.

On Monday, May 11th, Yves Mersch — a member of two top administrative boards at the European Central Bank (ECB) — gave a livestream address at the virtual CoinDesk Consensus 2020 event. In his speech, Mersch illuminated the potential trajectory of a digital euro going forward.

Specifically, between the two main conceptions of central bank digital currencies (CBDCs) date, wholesale or retail style, Mersch notably said the ECB was exploring the latter in the interest of decentralization and general accessibility.

The accelerated discussions comes after ECB President Christine Lagarde said in December 2019 that Europe “better be ahead of the curve” when it comes to digital currency.

A New Digital Dawn in Europe?

In his talk, Mersch began by noting four-fifths of the 66 central banks the Bank for International Settlements (BIS) surveyed earlier this year were actively experimenting with CBDC tech, and that the ECB was among those institutions.

The ECB official went on to say that the EU’s top bank was exploring CBDCs precisely because the institution was unbiased when it came to the future of payments:

We are technology neutral … Although cash often gets a bad press, demand is not receding. We currently see no indication that the public at large is willing to abandon the valued and trusted advantages of cash. But we are preparing to be ready should things change.

Retail-Focused Digital Euro?

CBDC discussions to date have been dominated by proponents backing the wholesale vision of the tech, wherein a government dispenses a state-backed digital currency to select private-sector partners.

Indeed, a report from blockchain consortium R3 earlier this month even went so far as to say that no central bank in the world was currently working on a CBDC offering focused on everyday, retail consumers. Perhaps until now, that is.

In Mersch’s Monday remarks, the official said that if the ECB did move forward on a digital euro initiative, it would likely be retail-centric:

“A wholesale CBDC, restricted to a limited group of financial counterparties, would be largely business as usual. However, a retail CBDC, accessible to all, would be a game changer. So a retail CBDC is now our main focus.”

EU’s Heating Up on CBDCs

China’s digial yuan project has dominated financial headlines in recent months, but don’t sleep on all the related activity going on in Europe right now.

For example, last month De Nederlandsche Bank (DNB), the central bank of the Netherlands, published a report in which it said the institution intended to play a leading role around CBDC efforts in Europe in the years ahead.

“The Netherlands offers good opportunities for these efforts due to its status as a progressive testing ground for digitization efforts,” the bank said at the time.

Prior to that, the Association of German Banks — a group spanning +200 German banks — publicly called for increased EU-wide collaborations on a digital euro project last fall.

“[A] programmable account and crypto-based digital euro should be created and its interoperability with book money ensured,” the association said.

However, there’s also recently been chatter around a wholesale digital euro in Europe, too. Last year, the Governor of the Bank of France François Villeroy de Galhau said he’d seen some preliminary interest across the Eurozone in a wholesale CBDC initiative:

“I see an interest in rapidly advancing the issuance of at least one wholesale central bank digital currency in order to be the leading issuer internationally and derive the profits earmarked for a reference central bank digital currency.”

With that said, though, the interest de Galhau spoke of may already have waned in favor of the retail model that’s now seemingly picking up steam in the EU.



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William M. Peaster is a professional writer and editor who specializes in the Ethereum, Dai, and Bitcoin beats in the cryptoeconomy. He's appeared in Blockonomi, Binance Academy, Bitsonline, and more. He enjoys tracking smart contracts, DAOs, dApps, and the Lightning Network. He's learning Solidity, too! Contact him on Telegram at @wmpeaster

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