The European Central Bank has launched a two-year project to prepare for the potential issuance of a digital euro. The central bank digital currency would be supported by an underlying architecture with a negligible environmental impact compared to Bitcoin’s hugely energy-intensive blockchain.
Fast facts
- The ECB has begun the investigation phase of a digital euro design process, according to a press release. That phase is expected to last for two years, during which time the Eurogroup — an informal grouping of eurozone finance ministers — will design a CBDC with a focus on usability, guided by technical advice from merchants and intermediaries.
- The ECB tweeted: “Our experimental work has already allowed us to identify possible ways to protect privacy. It has also shown that the energy needs of the infrastructure would be negligible compared with the energy consumption and environmental footprint of crypto assets, such as Bitcoin.”
- Bitcoin’s carbon footprint has become a growing concern for environmentally-conscious investors, to the extent that the most recent crypto market crash began when Tesla founder Elon Musk suddenly declared that the electric car maker would no longer accept Bitcoin as payment due to environmental concerns.
- The ECB also said it had identified a number of ways to proceed with designing a digital euro that would protect citizens’ privacy, in compliance with General Data Protection Regulation requirements.
- The news comes as France is calling for more stringent Europe-wide crypto regulations. French markets regulator the Autorité des Marchés Financiers has proposed that EU governments give the responsibility of regulating cryptocurrencies to the Paris-based European Securities and Markets Authority rather than national regulators.