European Central Bank Allocates $1.3 Billion for Digital Euro Development

According to CoinDesk, the European Central Bank (ECB) has sent out five calls for applications seeking providers to build services around a potential digital euro. Over half of the $1.3 billion contract budget is designated for offline payments development. The ECB aims to allocate as much as 1.2 billion euros ($1.3 billion) to potential contractors for a range of features, including risk management, information security, and a user application. More than half of this amount is earmarked for the offline payments service. The 27-nation European Union is showing particular interest in preparing for a central bank digital currency (CBDC) as around 100 economies worldwide consider issuing one. The ECB has been exploring the issuance of a digital version of the euro for the past few years, with the bloc's executive arm proposing legislation for the digital currency in 2023. Although ECB officials have stated that work on a digital euro is not a commitment to issue one, the calls for providers suggest that legislative proposals could be putting pressure on the bank to deliver. Enabling offline payments is considered one of the most important challenges in implementing CBDCs. The ECB is planning two digital euros for retail payments, with one exclusively for offline use and holdings held offline. Building a user-friendly product that enables both versions may be a challenge. It remains to be seen which providers the ECB will choose to build these services, but it may opt for traditional finance players with a presence in Europe.