The European Central Bank (ECB) has opened contracts worth more than €1.1 billion to develop services associated with the digital euro.

ECB Opens €1.1B Contracts for Digital Euro Development. These contracts focus on five main components: risk and fraud management, application and software development kit (SDK), offline solution, secure exchange of payment data, and alias search. The total budget for these five components is €1.1 billion, excluding the central bank digital currency settlement system (CBDC), which they’ll develop in-house. The ECB would decide to launch the digital euro once they complete the legislative process.

The digital euro contracts would last four years from January 2025. The digital euro aims to provide digital services through mobile apps and online platforms and will allow users to make payments using aliases such as phone numbers, email addresses, or account numbers without being associated with a specific payment provider. Some expect the contracts to have an important impact on the European economy by facilitating faster and more secure transactions and promoting digitization and financial inclusion.

Components of the digital euro

The calls for applications focus on funding the following essential components for the operation of the digital euro:

Alias lookup: would facilitate payment transactions by users and intermediaries through simple aliases instead of long account numbers.

Risk and fraud management component: would provide additional support to intermediaries to identify fraudulent transactions.

Software development kit (SDK): consists of a digital euro application and SDK to assist intermediaries in the provision of digital euro services through their own mobile applications and online interfaces.

Offline services component: includes engineering and development services to provide a payment instrument to the bearer offline.

Secure exchange of payment information: supports the conversion of transactional information (e.g., the amount of a transaction) and sensitive information (e.g., the payment instrument used) into a secure form at the request of an intermediary.

Applicants who meet the eligibility criteria detailed in the calls for proposals must submit their applications within the respective deadlines indicated in the various calls for proposals. You should submit any questions related to these calls for applications through the ECB’s eTendering platform. Following the evaluation of each call for applications, the ECB will invite the highest-ranked respondents to submit bids in a subsequent invitation to tender (ITT), having until February to submit their respective proposals.

The ECB’s objectives

Recall that the ECB took a further step in the preparation phase of the digital euro last November 1, 2023. It did so after a two-year research phase in which it analyzed the benefits, risks, and challenges of introducing a digital central bank currency in the euro area. During this phase, the ECB plans to carry out several activities, including:

• Develop the technical and functional design of the digital euro, considering the perspectives of citizens, businesses, legislators, and market participants
• Conduct tests and experiments to evaluate its performance, security, and interoperability with existing payment systems.
• Establish an appropriate legal and regulatory framework in collaboration with European and international authorities.
• Prepare the necessary infrastructure and resources for its launch, including contracting of service providers.
• The ECB has indicated that the final decision on introducing the digital euro will be taken around mid-2026, following a thorough assessment of the results of the preparation phase and a consultation with the European Parliament and the Council of the European Union. If the decision is positive, the ECB estimates that the digital euro could be operational by 2028.

Impact of the digital euro on the European economy

The digital euro could have a significant impact on the European economy, both at the micro and macro levels. At the micro level, the new CBDC could offer consumers and businesses several benefits:

• Greater accessibility, inclusion, and financial diversity by providing all citizens and businesses with a universally accepted digital payment method, free of additional costs and without the need for a bank account.
• Greater efficiency, speed, and security in transactions, reducing settlement times, operational costs, and risks of fraud, counterparty, and cyber-attacks.
• Increased privacy and data protection by ensuring that the ECB and national central banks do not collect or store personal information of digital euro users, except as required by law.
• More innovation and competition in the payments industry, by providing an open and neutral platform that facilitates interoperability and integration of value-added services offered by private providers.

At the macro level, this development could help strengthen the euro’s role as an international currency. It should increase its attractiveness and use in cross-border trade and investment. In addition, the digital euro could improve the ECB’s ability to implement monetary policy by expanding the scope and effectiveness of its instruments and facilitating the transmission of its signals to the real economy. Finally, the digital euro could increase the resilience and sovereignty of the euro area in the face of potential external shocks by reducing dependence on foreign payment systems and preserving Europe’s strategic autonomy in digital finance.