ECB's Digital Euro Plan Faces Lawmaker Skepticism After T2 Outage

The European Central Bank (ECB) has set its sights on launching a digital euro by October 2025, pending the enactment of necessary legislation. ECB President Christine Lagarde has expressed the central bank's eagerness to move forward with this initiative, highlighting the importance of a digital euro for both wholesale and retail levels. However, recent concerns raised by lawmakers have cast a shadow over the project's timeline and feasibility.

Lawmakers have expressed reservations about entrusting the ECB with the management of a digital euro, citing an outage in the Target 2 (T2) payment system last month. The T2 system, which handles large transactions, experienced a disruption that prevented it from settling transactions for an entire day. This incident has raised questions about the ECB's ability to ensure the reliability and stability of a digital euro system.

Despite these concerns, the ECB remains committed to the digital euro project. An ECB official has stated that the digital euro would function similarly to the ECB's instant payments system, TIPS, which operates 24/7 and handles smaller transactions. This comparison aims to reassure stakeholders about the system's reliability and accessibility.

Fabio Panetta and Piero Cipollone, key figures on the ECB Board, have been leading the effort to accelerate the digital euro's development. They, along with a dedicated team, are working to engage with various stakeholders, including the European Parliament, European Council, and European Commission, to ensure the project's success. A decision on whether to issue a digital euro will be made by the EU's Governing Council, which includes Lagarde, Panetta, other ECB board members, and the governors of national central banks.

The digital euro, as a central bank digital currency (CBDC), has garnered mixed reactions over the years. While some countries, such as Spain, have previously expressed skepticism about the need for a digital euro, Lagarde has emphasized its critical importance. She believes that the digital euro is more relevant and imperative than ever, given the evolving landscape of digital payments and the need for a secure, efficient, and widely accessible payment system.

If the EU proceeds with the digital euro, it will join other countries like the Bahamas, Jamaica, and Nigeria, which have already launched their CBDCs. This move would position the EU as a leader in digital currency innovation, contrasting with the U.S.'s current stance on