Digital Euro Project Moves to 'Preparation' Phase

• The preparation phase starts November and will last for two years.
• It will be used to finalize a digital euro rulebook, select providers to develop a platform and conduct further testing.
• The ECB won't take a decision on whether to issue the CBDC until relevant EU legislation has been completed.

The European Central Bank (ECB) is moving its digital euro project to a preparation phase, which could pave the way for a "potential future decision" to issue one.

Although a decision on whether to issue a central bank digital currency (CBDC) for retail use in the European Union was due at the end of the two-year investigation phase that is just concluding, the ECB has faced mounting criticism over its plans, including from lawmakers, targeting privacy issues and even veering into conspiracy theories.

The preparation phase – previously called the "realization phase" – is due to start in November. It is also set to last two years and will be used to finalize a digital euro rulebook, select providers to develop a CBDC platform and conduct further testing.

Following that, the bank's governing council "will decide whether to move to the next stage of preparations, to pave the way for the possible future issuance and roll-out of a digital euro," a Wednesday announcement said.

The move to a preparation phase is not a decision to issue a digital euro, the bank said. A decision "will only be considered by the Governing Council once the European Union’s legislative process has been completed." The European Commission in June published legislative proposals for a digital euro, but that's only the first step of a complex process that could take years to complete.

Moving forward with the project also doesn't "pre-empt such a decision or prejudge the outcome of the ongoing legislative process," outgoing ECB Executive Board Member Fabio Panetta, who heads the bank's work on the digital euro, said in a Wednesday statement.

The move is not without its critics. It may be premature, given the ECB "has not been able to clearly communicate the added value of the digital euro," said Markus Ferber, member of the European Parliament’s economic affairs committee and a CBDC skeptic.

"It would have been smarter for the European Central Bank to wait with its preparation phase until the European legislator has concluded its deliberations," Ferber said in a Wednesday statement. "There is a good chance that the European legislator will make major tweaks to the proposed legal framework. If that is the case, the ECB’s preparatory phase could easily be for the birds."

On a more diplomatic note, he added that the two-year phase may also provide a chance for the ECB to tweak the CBDC to deliver on "the promises of a digital currency."

A report published alongside Wednesday's statement says the ECB designed a digital euro that would be "widely accessible to citizens and businesses through distribution by supervised intermediaries, such as banks."

Read more: Digital Euro at Least 2 Years Away, ECB’s Lagarde Says

Jack Schickler contributed reporting.

UPDATE (Oct. 18, 15:57 UTC): Adds comments from MEP Markus Ferber, ECB official Fabio Panetta and details throughout.