Published: 05.10.2022 Updated: 04.06.2024

Reinis Vecbaštiks, Emīls Dārziņš, State-of-the-art Payment Experts at Latvijas Banka 

It has been almost one year now since the Eurosystem launched the digital euro investigation phase. During the study, the European Central Bank (ECB) closely cooperated with the euro area member states and market players to decide on the technical and practical aspects of the digital euro. During this stage, decisions on the design or the technical solution and the functional framework of the digital euro are made, as well as on its added value for the current electronic payments. It is expected that the investigation phase will complete in October 2023, and then a decision will be made on launching the practical introduction of the digital euro.   

The ecosystem already has a mixed payment model where the central banks ensure the monetary foundation (deposits to commercial banks and cash to people), while the private sector offers payment solutions to its customers (payment cards, digital apps, etc.). These solutions are based on the financial means of commercial banks (deposits).  

An important element of this model is the opportunity at any time to convert private money (provided by commercial banks) into public money or the money of the central bank 1:1, as well as to use this public money to make payments. The guaranteed convertibility contributes to and maintains the trustworthiness of the private and public money. This model ensures that the currency functions as a single payment system. Thus, the money of the central bank serves as a monetary anchor that maintains a functioning payment system and ensures the financial stability and trust in the currency.  

Currently, the money of central banks is available to the public in the form of cash. Therefore, during the digital age, when the share of the digital money is on the rise, cash becomes less relevant as a means of payment.

If there is no stable monetary foundation for digital payments, the growing demand results in challenges to the European strategic autonomy and monetary independence, including due to the fact that most electronic payment solutions are offered by companies headquartered in third countries. Global technological companies are able to rely on their huge customer base to introduce stable crypto coins that might theoretically destabilise the current financial system and increase the risk of the payment market being dominated by third-country solutions and technologies.  

The digital money of central banks (central bank digital currency or CBDC) is a hot item not only in Europe, as a large number of central banks in the entire world work on such projects. Moreover, several countries have already reached the practical implementation stage or have already introduced the CBDC. Nigeria is one of such countries, as in October 2021 it became the first African nation to emit its CBDC: eNaira. As to countries of particular importance for the global economy, China was the first to start practical testing of the national digital currency as early as in 2020.

In Europe, Sweden takes the lead concerning the introduction of CBDC: it started the research phase for the digital krona already in 2017 and has already reached the stage of technical testing.

Digital euro not only aims to improve the efficiency of digital payments but also to maintain the local and international competitiveness of the euro, assuming that the payment digitisation trend, as well as the range of external supply will keep growing. However, it is too early to claim that practical introduction will start after the investigation phase of the digital euro. It will depend on the results of the research, as well as the final decision of the European Union (EU) policy makers.  

Public interests are given priority in shaping the digital euro during the investigation phase. To achieve this goal, the ECB studies the public opinion and wishes concerning the introduction of the digital currency of central banks. 


In April 2021, the results of the public consultation on the digital euro project were published. The report concluded that the respondents considered easy use of the digital euro in the entire euro area and privacy of payments its main functional features.  

Privacy is one of the fundamental rights, thus, in developing the design of the digital euro, the Eurosystem strives to meet the highest possible standards. During the investigation phase, various tools to ensure comparable functionality of the digital euro and cash are assessed. However, privacy is also considered in the context of several other EU policy targets, in particular for the purposes of AML/TCF.   

For the digital euro to succeed, during the investigation phase it is important to thoroughly review the potential impact of the digital euro on the monetary policy, financial stability and financial intermediation services. Any unwanted consequences for the monetary policy and financial stability should be precluded already in the design stage.  

For example, one such area is deposits, thus, options to prevent their outflow after the introduction of the digital euro are considered. Quantitative restrictions on individual deposits are considered as one of potential instruments to avoid the use of the digital euro as a means of financial investment. In addition, dissuasive conditions for deposits in the digital euro are also considered if they exceed a specific threshold.   

At the same time, by developing these tools the Eurosystem aims to ensure simplicity both in technically implementing the digital euro, as well as from the point of view of user experience. As the private sector is the most important source of innovation and efficient products and services for customers, the Eurosystem expects that monitored financial services providers will play a significant role is distributing the digital euro to end users.  

At the same time, a compromise will have to be achieved in deciding about the legal framework of the digital euro since it has several objectives: e.g. the right to privacy and public interest in maintaining a certain degree of supervision to eliminate unlawful activity. The design of the Eurosystem digital euro also aims to efficiently balance the advantages of extensive use of the digital euro and the need to provide financial intermediation services and stability.   

From the point of view of use, several options of the digital euro are considered during the investigation phase, e.g. mobile apps and online banking, as well as individual digital wallets. The digital euro should also benefit the part of the society that has  limited access to the financial services to make and receive digital payments and contribute to financial inclusion. We still have to discuss and agree on a specific solution for the digital euro, and how it will reach every person and every business.

Finally, the introduction of the digital euro would give the euro area residents access not only to  cash but also to the digital money of the central bank that guarantees its security and efficiency in daily use. Remember that cash is not in danger and that the Eurosystem has undertaken to continue its use. The digital euro does not aim to replace any other type of money (cash or non-cash), but to complement them and offer new opportunities.

The investigation phase of the digital euro will continue until October 2023, and then the final decision will be made on whether to begin the implementation of the digital euro project. Following the adoption of this decision, testing and development may also start.

We invite you to follow the progress of the investigation phase also on the ECB website.

The economic conference hosted by Latvijas Banka on 3 November 2022 will also discuss more widely the future of money, including digital currencies. All those interested are invited to follow the conference online on