The European Central Bank (ECB) provided a status report on the work of its central bank digital currency (CBDC). Key decisions on the digital euro so far include:

• most payments will be validated through third parties. In other words, mediated
• the digital euro will have holding limits and will generate interest
• the prioritization of use cases in physical stores and e-commerce payments.

Today ECB board member Fabio Panetta also presented a plan for a digital euro scheme involving a set of rules, practices and standards with plans to start work on a rulebook.

As for the digital euro transfer mechanism, most payments will be executed online with third-party validation by intermediaries or payment companies. When payments are made offline, there will be peer-to-peer validation. However, offline payments will only be allowed for low value, low risk, and proximity transactions. Peer-to-peer validation of online transactions has been dismissed as too experimental.

It was previously reported that the ECB planned to have digital euro holding limits to prevent too large a movement of bank deposits in the CBDC. When those limits are reached, any excess balance will be transferred to a bank account. Today he confirmed that there would also be remuneration or interest. That is likely due to a shift to times of higher interest rates, and the lack of interest payments could make a digital euro unattractive.

In terms of use cases, the priority is payments in physical stores, followed by e-commerce and person-to-person payments.

The document reiterated the ECB’s longstanding stance that complete anonymity is not being considered. For low-value, low-risk transactions, the intermediary will only be able to see limited details, but there will be identity checks when a consumer onboards to a digital wallet.

No decision has been made regarding the technology, and distributed ledger technology (DLT) is still on the table. Panetta stated that for the decision, “we will consider efficiency, safety and integration with customer-oriented services, as well as environmental impact.”

The next set of papers covers decisions about the settlement model, the distribution model, the role of intermediaries, including their compensation, and financing/definancing.

As previously reported, the legislation for a possible digital euro will be presented next year. And there are also moves to explore a wholesale digital euro.