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Some of the fiercest critics of the digital euro project in Europe’s banking industry have been recruited by the European Central Bank to help test the digital currency next year.
The ECB said on Tuesday that Germany’s Deutsche Bank and DZ Bank, alongside France’s Groupe BPCE, were among 36 companies selected for a beta test planned for next year. Italy’s UniCredit, Revolut and payments processing company SumUp were also selected for the crucial pilot next year.
The announcement comes days after a landmark vote by the European parliament backing a digital euro. After years of controversial debate, MEPs last week voted to enter negotiations with the European Commission and member states over remaining areas of disagreement.
The ECB aims to launch the project in full in 2029, provided EU lawmakers approve legislation authorising the central bank to issue a digital form of cash. Current treaties allow it to issue only physical banknotes and coins.
The ECB argues that the digital euro is needed to safeguard the single currency area’s freedom and sovereignty as card and online payments in Europe are currently largely controlled by US companies such as Visa, Mastercard and PayPal. As cashless payments are becoming ever more important, the ECB has warned that Europe is at risk of losing control over key parts of its money and payments.
However, Europe’s retail banks have long been among the project’s fiercest critics as they fear consumers could shift deposits into risk-free digital euro wallets held at the central bank, depriving lenders of an important source of cheap funding. Deutsche, DZ and BPCE were among 14 large European lenders who warned last year that a digital euro may be costly, could miss its goals and undermine existing European private-sector payments initiatives.
Yet despite their reservations, the three banks were among 50 private-sector institutions that applied to participate in the planned ECB pilot that will road test online and offline payments with the digital currency.
In total, companies from 19 of the 21 countries that form part of the Eurozone will take part in the pilot, with Bulgaria and Malta staying on the sidelines for now.
During next year’s pilot, ECB staff will be able to pay using digital euros in the central bank’s canteen at its headquarters in Frankfurt. The ECB wants to test online transactions as well as direct money transfers between consumers during the trial.
“The selected payment service providers will work closely with their respective national central banks and the ECB to make the necessary preparations for the pilot exercise,” the ECB said on Tuesday, adding that the high number of applications for the pilot reflected “strong market interest and engagement”.
Deutsche Bank confirmed in a statement that it would take part and said it had “consistently advocated for a digital euro that builds on existing European market standards and is integrated into private solutions such as Wero”. Wero is a European alternative to Apple Pay.
“We will contribute our expertise and recommendations throughout the process,” DZ Bank told the FT, adding that the digital euro should “launch with a clearly prioritised set of core functionalities, be implemented in stages, and take existing payment solutions such as Wero into account.”
BPCE did not immediately respond to a request for comment.
