The European Central Bank (ECB) has invited selected bidders to tender to become the third party provider for its ‘digital euro’ CBDC.
In its second progress report on development of the digital euro, the ECB revealed that it had concluded its call for applications for third party digital euro partners.
This call for applications has led to a selected group of companies being chosen to tender for the partnership. This could be a significant opportunity for the chosen company, which will be announced in 2025.
Launch of a digital euro has been a key objective of the ECB for some time. The EU’s central bank sees a CBDC as a logical next step in the digitisation of payments and offering greater freedom of choice for European consumers.
Becoming a third party provider to a country’s central bank is a significant opportunity for fintech companies, chiefly those involved in blockchain. Helping develop a CBDC for use across the 20 countries of the Eurozone could be particularly lucrative.
Progress made but digital euro not set in stone
Separate to the tender announcement, the ECB detailed progress on the development of a rulebook for usage of a digital Euro. This rulebook would cover the minimum user experience standards, risk management and implementation specifications.
A draft for the rulebook is expected during the preparation phase of the digital euro, including comments from the RDG interim review. The ECB views this rulebook as ‘essential to ensure the digital euro payments are accepted throughout the euro area’ in the same way cash payments are.
The bank is also undertaking user research and experiment to assess user preferences and informed discussion making, with findings to be published in mid-2025. An outcome report from a call for evidence with merchants, payment service providers (PSPs), fintech companies and universities is also slated for July 2025.
Also set for 2025 is the publication of the findings of a consultation with eurosystem national banks to develop a methodology for setting holding limits, balancing user experience with monetary policy,and financial stability implications.
“The digital euro project is a European initiative being developed for the benefit of millions of citizens across the euro area,” the ECB summarised its stance and progress on development of the digital euro.
“Engagement with external stakeholders, ranging from policymakers and market participants to the general public, is a key priority. The ECB is committed to continue working closely with all stakeholders involved and to regularly communicate project developments to the wider public, engaging with all euro area citizens.”
Despite all these developments, the launch of a digital euro is still not a guaranteed outcome. The ECB’s Governing Council will only decide on a possible launch once relevant legislation has been established.
This will require the MEPs of the European Parliament to be onside and convinced of its benefits, something that the ECB has been putting a lot of effort into achieving.
The EU’s central bank is not the only one to eye up the potential of a CBDC. The Bank of England and Bank of Japan have been undertaking their own research and projects, though the picture in the world’s largest market, the US, is somewhat different.
Doanld Trump’s victory in the presidential election last month could finally nip any talk of a digital dollar in the bud. The outspoken politician has been vocal in his opinions against CBDCs, though he has more favourable views of privately issued and held cryptocurrencies.
