In November 2023, the European Central Bank (ECB) launched the preparation phase for a potential digital euro. Just over a year later, the ECB has issued its second progress report, detailing significant advancements and outlining future steps toward the possible issuance of the digital currency.

Key Developments in the Preparation Phase

1. Updated Digital Euro Scheme Rulebook
   The ECB has revised its digital euro scheme rulebook to standardize digital euro payments across the euro area. The updates incorporated feedback from the Rulebook Development Group, which includes consumer, retailer, and payment service provider representatives, alongside contributions from seven specialized workstreams established in May 2024. These workstreams focused on user experience standards and risk management frameworks.
2. Call for Service Providers
   A January 2024 call for potential providers of digital euro components concluded with selected bidders invited to tender. The results of this process will be publicly disclosed in 2025.
3. User Research and Experimentation
   The ECB has intensified efforts to understand user preferences through surveys and interviews targeting groups like small merchants and vulnerable consumers. Insights from these studies will influence decision-making and will be published in mid-2025.

Collaboration and Innovation

The digital euro project remains a collaborative initiative involving policymakers, market participants, and the general public. A notable November 2024 call invited stakeholders—including merchants, payment providers, fintech firms, and academic institutions—to form innovation partnerships. These partnerships will test conditional payments (e.g., automated payments tied to predefined conditions) and explore other innovative use cases for the digital euro. An outcome report is expected by July 2025.

Policy and Methodology

To address monetary policy and financial stability concerns, the ECB is working with national central banks and competent authorities to develop a methodology for digital euro holding limits. This process includes consultations with market participants via the European Retail Payments Board and analysis of granular banking data. Initial findings will be tested in 2025.

Next Steps

The ECB’s Governing Council will decide on the issuance of a digital euro only after the adoption of relevant legislation. Continuous engagement with stakeholders and regular updates to the public will remain central to the project as it progresses.

Timeline Highlights

• Mid-2025: Publication of user research findings.
• July 2025: Release of the innovation partnerships outcome report.
• 2025: Testing of the holding limits methodology and publication of service provider selection outcomes.

The digital euro project represents a pivotal effort to modernize payments infrastructure across the euro area, balancing innovation with regulatory prudence.