A digital euro

Preparations towards a digital euro

The European Central Bank (ECB) is preparing for the possible issuance of a digital euro in the near future. Currently it is involved in an experimentation phase evaluating all possible design options, carrying out technical tests and listening to the views of the general public and interested parties.

According to the Central Bank, in the digital age we are living today, a digital euro would ensure that citizens and companies in the euro area could continue to have access to a simple, costless, universally accepted, reliable and risk-free means of payment.

The ultimate goal of the digital euro would be to drive financial innovation, facilitate modern digital payments, provide consumers with a wider choice and create more opportunities in financial services.

In parallel, the Spanish financial sector is preparing for the possible future launch of adigital euro, experimenting with the practical and technical aspects of its distribution and use, as well as with the different design options proposed, through a sectoral proof of concept called Smart Money. This initiative has been led by Iberpay, with the participation of the 16 main Spanish banks and Banco de España as observer.

We need to make sure that our currency is fit for the future. Inaction is not an option". Fabio Panetta, Member of the Executive Board of the ECB



"The euro belongs to Europeans and our mission is to be its guardian. We should be prepared to issue a digital euro, should the need arise."

Christine Lagarde, ECB President





A digital euro

According to the ECB's definition, "the digital euro would still be a euro: like banknotes but digital. It would be an electronic form of money issued by the Eurosystem that all citizens and companies could use. It would not replace cash, but would complement it".

The Eurosystem has announced that it will continue to ensure that all citizens have access to banknotes and coins across the euro area. A digital euro would provide with an additional choice in how to pay and make it easier to do so, contributing to accessibility and inclusion. The main difference with other current forms of digital money is that it would be issued and backed by a central bank, which guarantees and protects its value.


Benefits of the digital euro

The European Central Bank intends for the digital euro to act as an engine for continuous innovation in retail payments, accelerating the digitization of the European economy and providing many advantages for European society, including:

  • To offer an effcient complement to cash, both in cost and in terms of its environmental impact.
  • To combine the efficiency of a digital payment instrument with the security of money backed by a central bank.
  • To contribute and facilitate financial inclusion of certain population, offering an alternative to cash.
  • The possibility of making digital payments without internet connection between end users, a very useful option in contingency situations, as in the case of a possible failure of current payment systems.
  • Programmability of payments, which allows the automatic execution of payments between different parties in a commercial relationship when certain conditions stipulated and programmed in smart contracts are met.
  • Its application in the Internet of Things (IoT), by facilitating a programmability of payments between digital objects connected through the internet.
  • Potential improvement of international payments, as long as their interoperability with digital currencies issued by other central banks with different currency areas is guaranteed, such as, if deemed feasible in the future, the digital dollar or the digital yuan.


Smart Money initiative: the tests carried out by the Spanish banking sector

In 2019 and in the field of blockchain technology and DLT networks, the Spanish financial community carried out a first sectoral proof of concept, led by Iberpay, called Smart Payments. This initiative aimed at verifying the viability of executing payments initiated in blockchain/DLT networks, by connecting the Red-i (interbank blockchain network managed by Iberpay that currently already has 19 nodes from the main Spanish banks, Iberpay and Banco de España) with the Spanish Payment System, managed by Iberpay.

The Smart Payments initiative concluded with great success and with the execution of over 20,000 instant credit transfers programmed from the Red-i.

In response to the Report on the digital euro published by the ECB in October 2020 and its call for experimentation and tests, Iberpay and the Spanish financial community have been working hand-in-hand since November 2020 on the Smart Money initiative, focused on the experimentation of practical and technical aspects and design options for the distribution of a digital euro.

A Smart Money & Payments Working Group, formed by top-level experts from banks in the areas of payments, innovation, blockchain, public policy and legal, was set up and has been contributing to the project decisively with their knowledge and experience, providing a multidisciplinary, sectorial and collaborative approach to the initiative.

Iberpay's Report on digital euro tests by the Spanish banking sector outlines the main conclusions of the Smart Money proof of concept.


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