The most recent progress report describes digital euro settlement and distribution alternatives. More components of the prospective system are being filled in as the ECB continues its inquiry into the digital euro. Still, no commitment to blockchain technology or its issuance has been made.
The terms of the settlement
The European Central Bank (ECB) has provided documentation (1) of the ongoing progress on developing a digital euro in a second progress report that details design and distribution alternatives recently authorized by its governing council. The study considers four significant challenges, approximately following the schedule the ECB established for itself, which is expected to decide whether to go from the inquiry to the realization phase of work in Q3 2023.
The study describes the functions of the Eurosystem and brokers and stipulates that supervised intermediates should perform all management and user-facing responsibilities inside the system. The Eurosystem's central banks would confirm and record transactions, fix any mistakes made throughout the process, and be accountable for their correctness. However, according to the paper, "the digital euro would be built so that it minimized Eurosystem participation in the processing of user data."
Validated digital euros might be used in offline peer-to-peer transactions settled in a digital storage device and afterward "confirmed and documented using security components in hardware devices."
The Limitations and Future objectives
Paper (2) states that the ECB is not committed to blockchain technology. The Eurosystem may use distributed ledger technology, conventional technology, or none for settlement functions. The Eurosystem hasn't yet made a decision. A choice of the technology most appropriate for a digital euro. The methods for handling transactions that exceed the restrictions imposed on digital currency accounts with automatic access to users' bank accounts should be included in the funding and defunding (changing money to and from digital form) processes.
The paper claims that a "system" of pan-euro laws, norms, and practices would be required for the fair allocation of the digital euro. The plan's objective will be to open their digital euro accounts or wallets or their place of origin; end users should always have the option to pay in digital euros. After a year of effort, the ECB released its first digital euro progress report in September.