SPEECH
The digital euro: our money wherever, whenever
we need it
Introductory statement by Fabio Panetta, Member of the Executive
Board of the ECB, at the Committee on Economic and Monetary
Affairs of the European Parliament
Brussels, 23 January 2023
Our investigation into a digital euro started more than a year ago.
Closely involving the European Parliament in the investigation phase has been a priority for the ECB from
day one.
1 ]
Over the course of 2022, we regularly discussed key design options in this Committee.[ Your views
provided valuable input to our work and, together with the feedback from other public and private
2
stakeholders[ ], allowed us to make steady progress.
Such interactions are essential in ensuring that public money addresses the preferences and needs of
citizens and businesses in an ever-evolving digital landscape.
People's payment behaviour is changing at an unprecedented speed: over the past three years, cash
payments in the euro area have dropped from 72% to 59%, with digital payments becoming increasingly
3 ]
popular (Chart 1).[ In the Netherlands and Finland, for example, cash is used only in one fifth of the
transactions. At the same time, people appreciate the option to pay with public money. Most see it as
important or very important to always have that choice.
Chart 1: Digital payments further on the rise but cash remains an important option
A digital euro would respond to this growing preference for electronic payments by making public money
available also in digital form. Together with cash, a digital euro would offer Europeans access to means of
payment that allow them to pay everywhere in the euro area, free of charge. Being easily accessible and
convenient to use would support adoption and financial inclusion.
In my remarks today I will discuss how the digital euro could help enable us to use our money whenever,
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wherever we need it throughout the euro area.[
I will conclude my remarks with the work agenda for 2023, when we will conclude our investigation phase
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and the European Commission will present its legislative proposal.[
A convenient digital payment solution, giving people control over their money
The ECB is at the global forefront of the efforts by central banks to design state-of-the-art digital payment
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solutions for both retail and wholesale transactions.[
Payments are part and parcel of everyday life: we all usually carry at least one payment instrument, be it
coins, banknotes, a credit card or a mobile phone.
Our priority for the digital euro project has always been clear: to preserve the role of central bank money in
retail payments by offering an additional option for paying with public money, including where this is not
possible today, for example in e-commerce.
The digital euro would not replace other electronic payment methods, or indeed cash. Rather, it would
complement them. And by doing so, it would safeguard our monetary sovereignty while strengthening
Europe's strategic autonomy.
The initial releases would focus on enabling access to the digital euro for euro area residents, namely
7 ]
consumers, firms, merchants and governments.[
A digital euro should be easily accessible and usable throughout the euro area, like cash today. We
8 ]
believe this would be best achieved with a digital euro scheme.[ By providing a single set of rules,
standards and procedures, a scheme would allow intermediaries to develop products and services built on
a digital euro.
The scheme would also ensure that citizens can always access certain core services, no matter which
9 ]
intermediary they have their account or wallet with.[
The digital euro would be a public good. It would therefore make sense for its basic services to be free of
10 ]
charge - for example when using the digital euro to pay another person, as is the case for cash.[
But on top of the basic services, people could choose to make use of any additional services offered by
11 ]
participating intermediaries on a voluntary basis.[
Conditional (or programmable) payments are often mentioned as one such innovative service - however,
there is some confusion about the term, and this may raise concerns.
Our definition of conditional payments is that people could decide to authorise an automatic payment
12 ]
where pre-defined conditions of their own choosing are met.[ For example: the payer could decide to set
13 ]
an automatic monthly payment in digital euro to pay their rent.[ But the payee would not face any
limitations as to what they can do with this money they receive every month.
We believe supervised intermediaries, who are in direct contact with users, are best placed to identify use
14 ]
cases for conditional payments and any other advanced payment services.[
But let me be clear: the digital euro would never be programmable money. The ECB would not set any
limitations on where, when or to whom people can pay with a digital euro. That would be tantamount to a
voucher. And central banks issue money, not vouchers.
We are also aware of some people's concerns that a digital euro could harm the confidentiality of their
payment data.
15 ]
When it comes to the central bank, we propose that we do not have access to personal data.[
And it will be for you, as co-legislators, to decide on the balance between privacy and other important
public policy objectives like anti-money laundering, countering terrorism financing, preventing tax evasion
or guaranteeing sanctions compliance. On our side, we have been working on solutions that would
16 ]
preserve privacy by default and by design, thereby giving people control of their payment data.[ To this
end, we are also closely engaging with the European Data Protection Supervisor and the European Data
Protection Board.
Using a digital euro easily and everywhere in the euro area
As public money, a digital euro would be a European public good which all citizens and firms should be
able to access and use without barriers. This should be the case regardless of who their intermediary is or
which Member State they are located in.
Offering universal accessibility and usability would be key for a digital euro to play its role as a monetary
17 ]
anchor and to fulfil people's expectations. Feedback from citizens[ reflects the value of having a
payment instrument which is always an option for the payer. Citizens may not always pay with cash, but
they like to always have the option to do so. The same logic applies to a digital euro.
As co-legislators, you can adopt regulatory measures that would ensure widespread acceptance of the
digital euro in payments while ensuring that citizens have broad access to the digital euro.
But while these two factors are vital foundations for the digital euro, they alone are not sufficient. Attractive
functionalities and convenient user experience would be equally key for widespread adoption.
We therefore want to design a digital euro with online and offline functionalities. These will allow it to serve
18 ] 19 ]
different use cases[ and offer users different benefits. For example, an offline functionality[ would give
payments a level of privacy that is close to that of cash. It would also increase resilience as it would work
without internet access.
We are also envisaging two options for conveniently using a digital euro.
First, supervised intermediaries could integrate the digital euro into their own platforms. In this way, users
could easily access the digital euro through the banking apps and interfaces they are already familiar with.
20
Second, the Eurosystem is considering a new digital euro app[ ], which would include only basic payment
functionalities performed by intermediaries. The app would ensure that no matter where you travel in the
euro area, the digital euro would always be recognised and you would be able to pay with it.
21 ]
The first releases are likely to offer contactless payments, QR codes and an easy way to pay online.[ As
the technology evolves, other forms of payment may become available in the future. When it comes to the
hardware, people could pay either with mobile phones, physical cards or possibly other devices like
smartwatches.
A convenient user experience requires close cooperation with all sections of the market: consumer groups
who know best about consumer needs; intermediaries who would provide services to their customers; and
merchants who want to offer a convenient payment solution.
22 ]
We have started work on the digital euro scheme rulebook[ to ensure a harmonised and user-friendly
[ 23 ]
solution that works everywhere in the euro area.
The work agenda for 2023
Let me conclude with the work agenda for the next months.
24 ]
We will continue our investigation phase in 2023 and regularly involve this Committee in our work.[
Together with the European Commission, we are still analysing a possible compensation model for the
digital euro. In parallel, we are reviewing all the design options to bring them together in a high-level
design for the digital euro in the spring.
25 ]
We are also finalising our prototyping[ work and seeking input from the market to get an overview of
26 ]
options for the technical design of possible digital euro components and services.[
I will discuss all these topics with you in the upcoming months, before the Governing Council endorses
any design and distribution options.
In the autumn our investigation phase will come to an end. Only at that point will the ECB Governing
Council decide whether to move to the realisation phase.
Chart 2: Digital euro project timeline
Let me emphasise, once again, that moving to the realisation phase does not mean issuing the digital
euro. During this phase we would develop and test the technical solutions and business arrangements
necessary to eventually provide and distribute a digital euro, if and when decided.
The possible decision by the Governing Council to issue a digital euro would be taken at a later stage and
only after the Parliament and the Council of the EU have adopted the legislative act.
The digital euro project is a truly European initiative. And it is not just a technical project: it has a clear
political dimension in view of its broad societal implications. All European policymakers must thus play
their part, bearing in mind our respective roles and mandates. And we must always seek broad support
from European citizens.
I thus look forward to further fruitful cooperation with European co-legislators and I am personally
committed to continuing our regular exchanges in this Committee.
I now look forward to your questions.
1.
See ECB (2022), Progress on the investigation phase of a digital euro , September; ECB (2022), Progress
on the investigation phase of a digital euro - second report , December; and ECB (2022), Letter from Fabio
Panetta to Ms Irene Tinagli on progress on the investigation phase of a digital euro . The first report covers
topics such as the transfer mechanism, privacy and tools to control the amount of digital euro in
circulation. The second report focuses on the roles of intermediaries, a settlement model, funding and
defunding and a distribution model for the digital euro.
2.
Further information on stakeholder engagement and project governance is available on the ECB's
website.
3.
ECB (2022), Study on the payment attitudes of consumers in the euro area (SPACE) , December. For
further information, see also ECB (2023), " Digital euro - stocktake ", presentation to the Eurogroup, 16
January.
4.
Panetta, F. (2022), " Building on our strengths: the role of the public and private sectors in the digital euro
ecosystem ", introductory statement at the Committee on Economic and Monetary Affairs of the European
Parliament, Brussels, 29 September.
5.
Further information on this proposal is available on the European Commission's website .
6.
In recent years, the Eurosystem has been working on a new consolidated TARGET platform - a complex
infrastructure that would offer the market enhanced and modernised services - in addition to developing a
Eurosystem Collateral Management System that will simplify processes involving multiple jurisdictions,
including the mobilisation of cross-border collateral. The Eurosystem has also been working to ensure that
TARGET Services remain resilient to cyber threats as well as considering potential changes in the needs
of its wholesale settlement services users and whether new technologies could make settlement in
wholesale digital central bank money more efficient and secure. In particular, the Eurosystem has been
assessing the potential of distributed ledger technology (DLT) and the extent to which it could improve its
services. See also Panetta, F. (2022), " Demystifying wholesale central bank digital currency ", speech at
the Symposium on "Payments and Securities Settlement in Europe - today and tomorrow" hosted by the
Deutsche Bundesbank, Frankfurt am Main, 26 September.
7.
Non-residents, including visitors, may also have access to the first releases of the digital euro, provided
they have an account with a euro area payment service provider. Subsequent releases may enable
access for individuals and businesses in the European Economic Area (EEA) and selected third-party
countries. Permanent access should always be based on an agreement with the authorities of that
jurisdiction.
8.
Panetta, F. (2022), " Building on our strengths: the role of the public and private sectors in the digital euro
ecosystem ", introductory statement at the Committee on Economic and Monetary Affairs of the European
Parliament, Brussels, 29 September.
9.
The core end-user services include user management (opening and closing an account, onboarding and
offboarding users, know-your-customer checks, payment instrument management, linking digital euro
holdings to a commercial bank account and user lifecycle management processes), liquidity management
(funding, defunding and waterfall options) and transaction management (initiation, authentication and
confirmation or rejection notifications). For more information, see Euro Retail Payments Board (2022),
Core, optional and value-added services for the digital euro , December.
10.
See ECB (2020), Report on a digital euro , October. The scope of digital euro basic services is yet to be
defined but should be similar in nature to the basic services that credit institutions are to provide under the
Payment Accounts Directive (PAD). They could therefore include such features as the free opening of
digital euro wallets/accounts, making payments between individuals as well as the funding and defunding
of digital euro accounts/wallets.
11.
Examples of these additional services include (i) an account information service, which would enable a
third party to integrate digital euro information into their own account information services, thereby
providing end users with an overall view of their financial situation across different intermediaries at any
given moment; (ii) recurring payments, which would support conveniently paying for ongoing services (e.g.
electricity bills or digital service subscriptions); (iii) pay-per-use enabled via pre-authorisation, which would
support certain payment contexts in which the payment amount is unknown but funds need to be reserved
until the final amount is authorised by the consumer (e.g. when paying for fuel at the petrol station); and
(iv) a payment initiation service, which would enable payment service providers not holding end users'
digital euro accounts to trigger payment initiation.
12.
It will nonetheless always be for the user to decide whether they want to use conditional payments and, if
they do, which conditions they want to apply to their payments.
13.
Additional examples of conditional payments include (i) a payment vs. delivery option, where the payment
instruction is triggered by a third party other than the payer or payee, for instance the postal service
responsible for delivery of a product that the payer purchased online; (ii) automatic reimbursement, where
upon the sale of a subsidised product a request to pay for the subsidised amount would be automatically
sent from the merchant to the company or authority subsidising it; or (iii) pay-per-use services (see
footnote 11).
14.
The Eurosystem can support the market-led development of these services via standards in the scheme
rulebook and/or by providing necessary back-end functionalities that enable the provision of such services
by intermediaries. For instance, the reservation of funds in digital euro could be enabled in the back-end
infrastructure.
15.
For more information on foundational privacy options see Panetta, F. (2022), " A digital euro that serves the
needs of the public: striking the right balance ", introductory statement at the Committee on Economic and
Monetary Affairs of the European Parliament, Brussels, 30 March, and ECB (2022), " Digital euro - Privacy
options ", presentation to the Eurogroup, 4 April.
16.
Ibid.
17.
This feedback applies to both a digital euro and cash. See: Kantar Public (2022), Study on New Digital
Payment Methods , March, and ECB (2022), Study on the payment attitudes of consumers in the euro area
(SPACE) , December.
18.
For more information on the use cases see Panetta, F. (2022), " A digital euro that serves the needs of the
public: striking the right balance ", introductory statement at the Committee on Economic and Monetary
Affairs of the European Parliament, Brussels, 30 March.
19.
Offline payments are payments where payer and payee are not connected to the internet and need to be
in physical proximity to each other - like when paying in cash. An offline functionality would allow holdings,
balances and transaction amounts to remain unknown to anyone but the user. The Union legislator will be
responsible for ensuring this is enabled in relevant legislation.
20.
A euro area app with a homogeneous look and feel would facilitate a standardised approach to connecting
end users to intermediaries. The app would enable the initiation of payments by intermediaries for the
prioritised use cases. The underlying objective behind making such an app available is to provide the
market with the minimum required development, ensuring that intermediaries - including smaller ones who
may not want to bear the investment costs of setting up their own payment interface - keep their roles in
digital euro distribution. At the same time, the app would respond to the preferences of certain end users
who have called for an independent access channel in which basic functionalities are available, as
expressed by consumer's associations and market surveys. See, for instance, the feedback provided by
consumer associations on the 4th ERPB technical session on digital euro. The dual approach of an
integrated option plus a digital euro app would yield the best results in terms of providing value for end
users, as they would have greater choice. This also applies to intermediaries, since they would be able to
build their integrated solutions and attract customers through value-added services, whilst overall ensuring
a speedy time to market for the digital euro. It would also strengthen the position of the digital euro as a
payment solution that provides support for the monetary anchor policy objective and pan-euro area reach.
21.
In terms of technological options for payment initiation, the ECB has considered specific ideas to address
the prioritised use cases, whilst also following the key objectives for the digital euro. The ECB would
prioritise the use of QR codes for all use cases (peer-to-peer, e-commerce and point-of-sale), "alias/proxy"
functionality for peer-to-peer and e-commerce (including app-to-app redirection) and NFC (near-field
communication) for the point of sale.
22.
As communicated in a letter to Ms Irene Tinagli, the ECB appointed a rulebook manager in December
2022. The ECB also published a call for market participants to join the Rulebook Development Group in
January 2023. The aim of the Group is to support the drafting of a scheme rulebook, obtain market input
and gain an industry perspective.
23.
Panetta, F. (2022), " Building on our strengths: the role of the public and private sectors in the digital euro
ecosystem ", introductory statement at the Committee on Economic and Monetary Affairs of the European
Parliament, Brussels, 29 September.
24.
See ECB (2022), Letter from Fabio Panetta to Ms Irene Tinagli on progress on the investigation phase of a
digital euro .
25.
Developing a prototype is a learning activity in an experimental environment.The ECB is testing the extent
to which the Eurosystem's back-end functionalities - namely the settlement infrastructure working in the
background to record transfers and digital euro positions - can be smoothly integrated with the existing
front-end payment solutions available to the public. As mentioned in a letter to Ms Irene Tinagli, the ECB
published a technical onboarding package and also made it available to all companies across the euro
area in December 2022. The ECB will also report on the findings of the prototyping exercise in the second
quarter of 2023.
26.
As pre-announced in a letter to Ms Irene Tinagli, the ECB is inviting relevant parties to take part in market
research to assess options for the technical design of possible digital euro components and services.
Participation in the market research will not be remunerated and will not influence eligibility for future
procurement procedures related to a digital euro or any other procurement procedures. Nor will it imply
any pre-selection for a potential subsequent tender. The ECB intends to announce the findings of the
market research in the second quarter of 2023.