ECB Starts Next Digital Euro Stage with Investigation Phase

The European Central Bank took a major step toward a digital euro on Wednesday, approving an “investigation phase” that could ultimately lead to a virtual currency being implemented around the middle of the decade.

The next stage will last 24 months and aims to address key issues on design and distribution, the ECB said in a statement.

It also said the decision “will not prejudge any future decision on the possible issuance of a digital euro, which will come only later. In any event, a digital euro would complement cash, not replace it.” Executive Board member Fabio Panetta said the next phase would be implementation, which would take about three years.

President Christine Lagarde has been enthusiastic about a central bank digital currency, and the ECB has warned that failing to implement one could undermine the bloc’s monetary autonomy as payment providers such as foreign technology giants gain ground.

If the ECB eventually adopts a virtual currency, it’ll likely follow in the footsteps of China, where trials have started in several cities. Eastern Caribbean islands that share a central bank, including Grenada and St. Kitts and Nevis, have already launched their own versions. The U.S. Federal Reserve and Bank of England are looking into the possibilities for their economies.

Kamran Wadud | Financial Markets Trader & Mentor