The European Central Bank (ECB) is moving ahead with its plans to launch a digital version of the euro. To this end, the regional banking regulator said it will collaborate with five companies to test “user interfaces” for the central bank digital currency (CBDC).
Each of the five companies will be tasked with focusing on one use case of the digital euro, with Amazon testing the application of e-commerce payments. Nexi and EPI will focus on point-of-sale transactions initiated by the payer and the payee, respectively, while CaixaBank and Worldline will cater to offline/online peer-to-peer payments.
In a statement, the ECB noted that the purpose of the prototyping exercise is “to test how well the technology behind a digital euro integrates with prototypes developed by companies.” The bank aims to simulate transactions in a real-world environment and says that all transactions will be processed using the Eurosystem’s interface for a realistic experience.
In April, the ECB made a call for fintech companies to apply for the prototyping exercise, and 54 firms expressed their interest. According to the report, the ECB narrowed down the list to five based on the specific capabilities in the chosen areas and “appreciates the wide interest shown in the prototyping exercise.”
“The future will be built on new technologies that enable modern, fast, and inexpensive payments,” said Maxwell Bardon, Amazon’s Vice President of Payments, after his company was selected by the ECB.
The digital euro is inching forward
The digital euro is making significant progress, although the ECB is adopting a cautious process. The simulation exercise forms part of the investigation stage to determine the viability of a regional CBDC that began in October 2021 and will terminate in October 2023.
At the end of the two-year exercise, the ECB “will decide whether to start developing a digital euro” or abandon plans. The investigation involves the central banks of all participating countries with interested private firms sharing opinions on the proposed general direction of the process.
“We will analyze how a digital euro can be designed and distributed to retailers and the public,” the ECB said. “Our analysis will also look at how a digital euro can impact the retail payments market and what changes to European legislation might be needed.”
The participating nations already agree that the CBDC should be environmentally friendly and possibly capped. Specific interest has been given to privacy, with surveyed individuals saying that their identities should not be shared with third parties or the central banks.
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