The European Central Bank’s Rulebook Development Group (RDG) recently published an update report on the draft rulebook that will eventually set the standards and procedures for the digital euro. The report provides an insight into the technical aspects of the EU’s CBDC design, and the RDG is encouraging feedback on the draft to help shape the process going forward.

“Based on the feedback received as part of this process, the RDG will consider making adjustments to this first draft as required,” the central bank said. “The draft rulebook will be sufficiently flexible to accommodate any future adjustments and will be updated in accordance with the outcome of the digital euro legislative process.”

The feedback process may help ease some of the tension in the banking community, which has raised alarms over the possibility of disintermediation due to the widespread use of the retail CBDC. In March 2023, the Association of German Banks urged the ECB to allow commercial banks to lead in developing the digital euro.

The development group, which includes representatives of industry advocacy groups and national central banks, has been working on the rulebook since January 2023. Its brief is “to define the roles of all actors involved in a digital euro ecosystem, including end users, vendors and acquirers, in order to ensure a satisfactory payment experience while fostering further innovation and competition.”

The RDG also aims to produce a single set of rules, standards, and procedures “for the standardisation of digital euro payments across the euro area.”

In November 2023, the ECB began its mandatory preparation testing phase for the digital euro to explore the technicalities and operational procedures, and it is expected to formally begin its experiments in the second quarter of 2024.

While the ECB finalizes rules, runs experiments, and gathers feedback, the accompanying legal and legislative framework is also being prepared by the ECB Governing Council.

The RDG said the first draft of the rulebook is an intermediate version that covers the functional and operational models, including the end-to-end flows describing the functioning of all use cases and services relating to a digital euro; the high-level architecture and standards, which should potentially be considered in a digital euro landscape; and the adherence model setting out the rights and obligations of members in accordance with the draft legislation.

The ECB also issued a call for applications to work on individual components of the digital euro. It is looking for vendors to target the alias lookup—which would facilitate payment transactions by users and intermediaries using simple aliases instead of long account numbers—the fraud and risk management, the app and software development kit, the offline services, and the secure exchange of payment information components.

In the meantime, ECB and RDG preparations will continue with an eye on a 2026 launch date.

To learn more about central bank digital currencies and some of the design decisions that need to be considered when creating and launching it, read nChain’s CBDC playbook. 

Watch: How CBDCs on Bitcoin should work

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