Yesterday the European Central Bank (ECB) opened a call to payment industry experts for digital euro use case ideas around programmable money for retail payments. It is also canvassing for input on standards and the back-end IT architecture needed.
There’s a short timeframe with submissions needed by November 18.
It’s not the only central bank exploring programmable money applications. The Monetary Authority of Singapore (MAS) launched experiments for purpose bound money, restricting digital currency usage for government purposes or applications defined in smart contracts for commercial electronic vouchers.
This is part of the ECB’s retail central bank digital currency (CBDC) research which started just over a year ago. While a formal decision has yet to be made to issue a digital euro, many would be surprised if it doesn’t proceed.
One of the latest moves is to initiate EU-enabling legislation for a digital euro in 2023.
At the end of December, the central bank provided a status report outlining a few of the decisions made so far. Most payments will be ‘validated by third parties’ or intermediated. There will be holding limits and the currency will be interest-bearing. And currently, the priority is around use cases for payment in physical stores and e-commerce. Work has commenced on creating a rulebook.
Additionally, in the last few months, interest in the development of a wholesale CBDC has increased. That’s largely driven by increasing activity in the conventional securities industry, which is exploring tokenization and needs a wholesale CBDC for settlement. The EU DLT Pilot Regime starts in March 2023 and a CBDC would enable atomic settlement with central bank money. The Banque de France has stated it wishes to be ready to support the Pilot Regime with a wholesale CBDC .