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What is the digital euro?

The European Central Bank (ECB) announced last week it has plans to investigate and create a digital euro. ECB President, Christine Lagarde, said “it has been nine months since we published our report on a digital euro. In that time, we have carried out further analysis, sought input from citizens and professionals, and conducted some experiments, with encouraging results. All of this has led us to decide to move up a gear and start the digital euro project”. So what does this all mean?    

How could it work? 

Because the ECB is still in the investigation phase, the details of how it will work remain unclear. 

Unfortunately, we don’t have a real-world example to look to – the closest model is found in China, where a digital currency is being trialled. Basically, European users would be provided with digital forms of banknotes and coins. So think real-life money and wallet, but on your phone – it’s different from Apple Pay in the sense that it’s actual money, like cash notes and coins. Apple Pay is linked to a bank account, whereas the digital euro would be in your possession, and could be stored in a digital wallet. The ECB has made it clear that if the digital euro was to proceed, it would not replace all physical money, but work alongside. 

Would it function the same as cryptocurrencies like Bitcoin?  

Yes and no.

Yes: because the currency will be digital, the same as Bitcoin. 

No: because Bitcoin is a decentralised currency, it is not regulated by one authority. The digital euro would be centralised. It is controlled and backed by the ECB. 

When will it be ready? 

The design and investigation stage is expected to take two years, and the implementation could take a further two years, so the currency will not be around for a while yet.  

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