The European Central Bank has given the green light for a multi-year project to create a digital version of the euro, or what has come to be known as the digital euro. The digital euro is the electronic equivalent of banknotes and coins.
European Central Bank President Christine Lagarde said, our work aims to ensure that Europeans and businesses in the digital age continue to have access to the safest form of money, central bank money.
The initial investigation phase lasts two years and focuses on the design of the digital euro before a final decision is made on whether to proceed. The digital euro is likely to be a digital wallet that eurozone residents can keep with the European Central Bank.
It is part of drive-by central banks to meet the growing demand for electronic payment methods, and address the boom in private sector cryptocurrencies from Bitcoin to Diem proposed by Facebook.
The digital euro would be a means of payment that would give its holders a right to the European Central Bank like banknotes and coins but in digital form. It is likely to resemble an online bank account or digital wallet with the European Central Bank, and not in a commercial institution, according to Reuters.
This is a fundamental difference because the European Central Bank cannot run out of the euro, which makes its digital currency intrinsically safer than any peer in the private sector.