European Central Bank Aims to Launch Digital Euro by 2029

The European Central Bank (ECB) has indicated its intention to continue its work on the digital euro beyond the current preparation phase, which concludes this month. A potential launch for the digital currency is now being eyed for 2029.

Officials are scheduled to convene this week in Florence, Italy, to deliberate on extending the preparatory phase. However, the continuation and ultimate success of this phase are contingent upon the European Union reaching an agreement on a comprehensive legal framework for the digital euro.

Europe’s Digital Currency Initiative Faces Political Obstacles

The ECB initiated the preparation phase of the digital euro project in 2023, with an expectation that the European Parliament and national governments would have enacted the necessary legislation to formalize the digital euro by this point. Nevertheless, the legislative process has encountered delays due to significant disagreements among lawmakers.

A primary source of opposition stems from the European People’s Party. Members of this party advocate for private entities to develop digital payment solutions rather than having the central bank take the lead. This protracted delay has raised concerns among officials who believe Europe's current reliance on American payment giants like Visa, Mastercard, and PayPal makes the region vulnerable. They argue that a European digital currency could significantly enhance the region's autonomy over its financial infrastructure.

Concerns Over U.S. Stablecoins Heighten Urgency

An additional concern is the potential for dollar-backed stablecoins to gain widespread adoption within Europe. This possibility has injected a new sense of urgency into the ongoing discussions. ECB President Christine Lagarde has publicly urged for accelerated progress on the digital euro initiative.

Piero Cipollone, a member of the ECB's Executive Board, has suggested that "the middle of 2029 could be a fair assessment" for the projected launch of the digital euro.

The development of the digital euro has progressed through distinct stages. It began with an initial two-year investigation phase, followed by the current preparation stage. Beyond its focus on retail use, the ECB has also intensified its efforts on developing a wholesale version of a central bank digital currency.

In July, the ECB approved a strategic plan that will enable transactions utilizing distributed-ledger-technology (DLT) to be settled using central bank money. This development represents a significant step toward integrating blockchain systems into Europe's established financial infrastructure.