After a two-year investigation, the European Central Bank (ECB) governing council declared it will begin the "preparation phase" for the digital euro project.

The ECB stated in a notice dated October 18 that it intends to "start laying the foundation for the possible issuance of a digital euro" starting on November 1.

The ECB added that the creation of a central bank digital currency (CBDC) was not guaranteed. The announcement came after a 44-page report on the distribution and design of a potential digital euro was published.

The two-year "preparation phase," as the ECB calls it, will focus on finalizing the rules for the digital currency and choosing potential issuers.

According to officials, the following phase will involve "testing and experimentation" in accordance with user feedback and central bank requirements.

The Governing Council will decide after two years whether to advance to the next stage of preparations, opening the door for potential future issuance and roll-out of a digital euro, according to the ECB.

“The launch of the preparation phase is not a decision on whether to issue a digital euro. That decision will only be considered by the Governing Council once the European Union’s legislative process has been completed.”

The European Commission unveiled a legislative framework for the digital euro in June, with the goal of enabling users to access the CBDC through their banks.

A member of the ECB's executive board named Fabio Panetta reiterated his desire to have a digital euro that shares many of the same privacy features with cash.

In a parody video where she pretended to be speaking to Ukraine President Volodymyr Zelensky, ECB President Christine Lagarde made the statement that a digital euro could be used to regulate user payments, drawing criticism from many in the cryptocurrency community.

Given that there will be elections for the European Parliament in June 2024, regulators and policymakers are likely to pay attention to the introduction of any digital euro.

Sources:

https://cointelegraph.com/news/ecb-preparation-phase-digital-euro

https://www.ecb.europa.eu/press/pr/date/2023/html/ecb.pr231018~111a014ae7.en.html

https://www.ecb.europa.eu/paym/digital_euro/investigation/profuse/shared/files/dedocs/ecb.dedocs231018.en.pdf