Representatives of the EU-CB believe that the current year will be a key year for this structure. After several years of research on the digital EUR, the organization reports its completion. Accordingly, since October of this year, the direct production of such currency can begin. Traders of the USA and Great Britain are especially active about it. But for EU citizens such a possibility is more of a concern than an opportunity to get additional income.
Let’s try to understand in detail why the introduction of the digital Euro has caused fears and what the effect may be after the introduction of this version of the currency.
What is stated in the reports?
This study was conducted by representatives of the EU-CB back in May of this year. However, the results were published relatively recently. Officials believe that a critical moment for the digital version of the currency is coming. Many crypto companies for sale of digital currencies took such information as a hint to launch a pilot project for the production of the digital Euro.
The research was conducted on:
- external and internal functions;
- online and offline use of the currency;
- studying the range of applications of digital Euro format, etc.
As a result, the reports can be summarized into sections on making payments, interface performance, and offline usage. Each of these sections deserves separate attention.
Payments may be confidential
The EU Central Bank staff divided their study according to the mosaic principle. In the report, all the stages of creating the digital euro are divided into certain parts. The uppermost part represents the calculations for the creation of the currency. This section is called N€XT. It specifies the digital payment processing capabilities and the possibility of refunds after a failed transaction.
By selecting the data model for the withdrawal of unspent transactions, the user gets the opportunity to study the mechanism of application of this currency. The Central Bank explains that UXTOs are tools for spending digital assets, but only for one payment. In other words, they are the digital analog of banknotes. This approach is very different from instruments where spending is generated based on completed transactions.
Analysts are very concerned about the privacy of payments. In their opinion, such a model will allow them to generate a one-time address and conduct transactions without information about the recipient and their wallets. However, the Central Bank notes that a retention limit of 3,000 Euros will be introduced for such a transaction.
Successful interface
EU-CB officials confirm the successful interface of the digital-Euro with CBDC. The report indicates that 5 use cases for this currency format were explored, among them:
- conducting peer-to-peer payments;
- utilizing peer-to-peer networks;
- operating in e-commerce.
As a result, it was checked that the digital-variation could be combined with the server part. This is important because incompatible variants cannot be used for contactless payment or when conducting a transaction by QR code.
In addition, options were explored to create wallets that could store this format of currency. The DeFi space was used for testing and the combination was almost perfect. The representatives of the organization have stated that it is necessary to work out certain moments with the services of storing the keys, but in general, everything was successful.
They also tested a prototype for user verification separately. it will help consumers get certain levels in the system. Depending on the level, they will have different tolerances for dealing costs and handling of certain transactions (including wider transaction`s limit, etc.). It is assumed that the more information a consumer provides about themselves when registering, the higher the access they will be granted.
Challenges of using offline mode
Despite certain successes spelled out in this report, working with the offline variation of the digital Euro is considered impossible by analysts. This feature is critical in establishing CBDC and 49% of banks that participated in the study said that offline payment processing is critical. According to many experts, offline payments will ensure the stability of the currency and directly affect its availability on the market.
However, representatives of the EU Central Bank have not yet given a final answer to the question of whether it is possible to use an offline variation of the digital Euro. According to their specialists, this question is still open. At the same time, representatives of the organization say that thanks to the research they were able to create a prototype program for offline payment processing. It will update consumers’ balances after connecting to the Internet. However, it is still impossible to unambiguously launch it for mass use because of the differences in the work of platforms and cell phone providers.
Also, the EU-CB notes that the limitations of available technologies and not elaborated security standards may also affect the autonomous functioning of the digital Euro. Nevertheless, the organization is confident that these problems can be overcome, but the regulator’s representatives have not yet provided an exact deadline for the launch of the digital-Euro.