Focus
ECB to focus on P2P and E-commerce in the rollout of a digital euro
(Kitco News) - The European Central Bank (ECB) has published a new document on its website that outlines the “rollout approach for the digital euro,” which recommends an initial focus on facilitating peer-to-peer (P2P) transactions and E-commerce.
The slideshow from the digital euro project team, which was created for a meeting that took place on Wednesday, identified other use cases for the e-euro including paying taxes, use for payment in physical stores, and receiving welfare disbursements.
A staggered approach to rolling out the digital euro was recommended as it can help maximize the balance between “market relevance, Eurosystem's policy considerations, and technical and implementation aspects.”
“Multiple use cases are required to address the variety of end-user needs and market gaps across EA countries, responding to a landscape with diverse payment behaviors and preferences,” the document said.
To achieve this, the team recommended offering “a sufficiently broad and impactful set of use cases from the start,” as opposed to a single use case. Utilizing a staggered approach would “ensure a smooth end-user payment experience and reduce the implementation of complexities” associated with a widespread rollout.
To that end, the initial release of a digital euro would begin with P2P transactions and E-commerce as they have the greatest ability to generate network effects, have less complexity (one-sided integration with intermediaries), are fast-growing market segments, and include “no central bank money usage.”
Rollout approach proposal for the digital euro. Source: ECB
Each product release will be preceded by a piloting exercise to ensure that it has been designed optimally, and some products will be piloted in parallel “to optimize the release path.”
According to the roadmap provided, the focus of Q1 2023 is on the creation of a compensation model, providing access to the ecosystem, exploring value-added services and advanced functionalities, and reviewing the prototyping results.
Digital euro roadmap. Source: ECB
In Q2, the ECB intends to focus on user requirements to access the system and prepare for “possible project realization phase decision making.” Q2 will also see the “finalization of Eurosystem views based on the outcome of Eurosystem committees’ consultation,” and will include discussions with external stakeholders and “further internal analysis.”
The finalized plan will be brought to the Governing Council in Q3, at which point they will make a decision on the possible launch of the realization phase.
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A separate document from the same meeting suggested that the digital euro “should be widely available and usable anywhere in the euro area to make and receive payments.”
The project team said that using the digital euro for basic applications like making payments should be free for private individuals, “consistent with the context of cash, which is a public good as well, where people can pay, be paid, and have access free-of-charge.”
Payment service providers (PSPs) that distribute the digital euro and offer wallet and account management services to private individuals should also be given economic incentives, the project team said, in order to “ensure an effective distribution of a public good like the digital euro.”
The investigation into the creation of a digital euro has been a slow and methodical process for the ECB. At times, controversial proposals have been put forward, including a proposed monthly limit of 1,000 transactions and a possible €50 cap on transactions due to money laundering concerns.
In December, the ECB released a report that outlined how credit institutions and payment service providers will become supervised intermediaries responsible for all end user-facing roles in the digital euro ecosystem. Their responsibilities will include offering a variety of user-facing services including opening accounts or wallets, completing KYC/AML checks, providing payment instruments, and client onboarding and offboarding. They are also tasked with providing devices or interfaces to pay with digital euros in physical stores, online or person-to-person.
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