A senior European Central Bank (ECB) official has said that the European Union (EU) could issue a digital euro within four years, with peer-to-peer payments among the first applications.
The timeline for the central bank digital currency (CBDC) has been repeatedly pushed back due to concerns over the Russian war in Ukraine and the rise of private stablecoins such as Facebook's now-discontinued Libra.
"The idea would be that in, say, four years, ideally we would be ready to issue the digital euro," Fabio Panetta, a member of the European Central Bank's Executive Board, said Monday at an event at the National College of Ireland. "It's a very complex project that has never been done before ... I'm a little optimistic that in four years we will be ready."
Peer-to-peer (P2P) payments, which allow transactions among friends, could be the first testing ground for the new technology before it spreads to other areas such as payments in stores or online, Panetta suggested.
"A P2P payment solution covering a large number of users across the euro area could provide fertile ground for the launch of a digital euro," he said, pointing to research showing that this application would gain the greatest early acceptance.
In October 2021, the ECB launched a two-year study phase to assess which use cases should be prioritized, and no final decision on issuance has been made. Panetta has already said that a realization phase, scheduled to begin late next year, could take three years.
In March, ECB President Christine Lagarde said sanctions in the wake of the war in Ukraine were a reason to speed up plans - but other EU officials indicated Monday they would take their foot off the gas pedal.
"There was a sense of urgency some time ago because there was concern about what might happen to private providers," EU Financial Services Commissioner Mairead McGuinness said at the same event. "No one is in a hurry...we need to act quickly, but not in a hurry."
The idea of the EU issuing its own cryptocurrency first surfaced after a Facebook-led industry consortium proposed its own cryptocurrency, Libra, which was later renamed Diem before being abandoned.
But recent meltdowns in the private crypto market could be another reason to pursue the project, Panetta said.
Stablecoins don't have the regulatory safety net offered to banks and are therefore vulnerable to runs, he said, referring to last week's "crash" of terraUSD (UST), which is backed by the Luna Foundation Guard.
"Just last week, the world's largest stablecoin temporarily lost its peg to the dollar," he added, referring to the tether value (USDT).