EU advances with digital euro project focusing on privacy

The Eurosystem, including the European Central Bank (ECB) and national central banks of the EU area, is advancing the digital euro project aimed to modernize central bank money. Following an initial investigation phase launched in 2021, the ECB’s Governing Council approved a two-year preparation phase starting 18 October 2023 and concluding by 31 October 2025. This phase will finalise the digital euro rulebook, select potential platform and infrastructure providers, and conduct further testing, particularly its offline functionality.

A cornerstone of the digital euro project is “privacy by design” approach. Technological measures like pseudonymisation, hashing, and encryption will ensure that online transactions remain unlinked to specific individuals. Payment service providers will access only the necessary transaction data for EU law compliance, with user consent required for any additional commercial uses. The digital euro is also designed for offline use, allowing payments without an internet connection, akin to cash transactions. This offline functionality will enhance privacy and usability in areas with limited network coverage or during power outages.

Legislative and stakeholder engagement continues in parallel, with the European Parliament and Council of the European Union working on the legislative framework proposed in 2023. Stakeholder involvement ensures the digital euro meets high standards of quality, security, and usability. Fraud prevention remains a priority, with ongoing assessments indicating that current technologies can effectively detect and prevent fraud using pseudonymised information.

By the end of 2025, the ECB will decide whether to proceed further with the digital euro, contingent on the legislative process completion.