The European Central Bank (ECB) finalizes the second phase of preparations for the potential pilot launch of the digital euro (CBDC), tentatively scheduled for the fall of 2023.
The ECB representatives published a report on the results of the CBDC prototype. In the course of research, various options for using the digital euro were modeled, the results of which were found satisfactory.
The tests were conducted within the Eurosystem’s preparation for the launch of the CBDC pilot project. They started in July 2022 and were completed in February 2023. In particular, they tested:
- offline payment implementation;
- interoperability with existing financial infrastructure;
- the use of non-custodial digital wallets.
In addition, the Eurosystem created the N€XT centralized settlement mechanism based on the UTXO peer-to-peer model, which is used, for example, on the Bitcoin and Ethereum networks. This approach preserves user privacy by being identical for depository and non-custodial wallets.
The technical feasibility of implementing a secure offline payment solution is questionable for the project’s authors in the next five to seven years. Existing hardware and software combinations don’t guarantee reliable protection against double spending and other risks. At the same time, the researchers concluded that online and offline CBDC prototypes may be “interoperable even if based on different data models and technical designs.”
The European Central Bank representatives also published a short report on the results of the survey, which focused on user queries regarding the future implementation of the digital euro. Thus, the majority of respondents would prefer to use near-field communication, Bluetooth interfaces, or QR codes for making offline transactions.
Earlier, the European Banking Federation (EBF) shared its vision of the digital euro ecosystem, which uses options of wholesale and retail CBDCs. And Christine Lagarde, President of the European Central Bank, admitted that the authorities plan to have “limited control” over the financial operations of the Europeans by means of the digital euro.
