 You're listening to the ECB podcast, bringing you insights into the world of economics and central banking. My name is Katie Ranger. Today, we're continuing our conversation on the digital euro. In the last episode, I spoke to Evelyn Vidlocks, the project manager for the digital euro here at the ECB. We spoke about what a digital euro would be, how it would work and why we need it. I want to talk now about the issue of privacy and what having a digital euro would mean politically for Europe. We'll end the episode with a look then at the next steps in the digital euro project. Evelyn, nice to speak to you again. Thank you. It's a pleasure being here again. Now one issue that's very important for many across Europe is privacy and the use of data. Actually, when we asked Europeans about this in relation to the digital euro, they considered it privacy to be the most important feature of what a digital euro would be. Evelyn, will people's privacy be safe with a digital euro? Will the ECB be able to see what people are buying with it? Let me first say that indeed we have gotten this feedback that privacy is of the utmost important. We take this as a very important feature in the whole design. We are designing a digital euro with the highest levels of privacy that we can think of. Then I think it's important in privacy that there are two elements to that. One is what can the central bank see and that's also something that you ask. What we are committed to is that we design the digital euro in a way that the ECB or the central bank will see as little as possible. We're even trying to completely get it out of the design, personal data. That will mean that anyway we will design it in a way that we cannot track that you have been to the bakery or whatever, which are the concerns of people that might be there. But we really design it with privacy at the core. The other element of privacy is more the whole end-to-end part. There we think that the digital euro has an advantage over the solutions that are there because with the digital euro we just want to provide a safe means of payment and we have no interest at all in data or data monetization. We will make sure that the only data that is known in the system is used to fight fraud because that's of course important as well. So with that I think you can rest assured. Please of course follow us in the design but we will design it in a high privacy level. Okay so at the moment for example on my social media I get a lot of targeted ads which are extremely well aligned with things that I've bought online. So that won't be the case for example with the digital euro. We'll make sure it's not connected to your payment. There are other ways that they can find you but it's not connected to the payment. Okay so talking about the digital euro and security matters, we've unpacked how we'll make sure that payments will be safe for individuals and also for their data. But there's also a bigger picture when we talk about security and it's actually a concept that our executive board member Fabio Panetta has been talking about quite a lot and it's what we call monetary sovereignty. Evelyn can you explain what that concept is all about for our listeners? Yes so payments is like to take a very concrete example like water and electricity. So you use it in everyday lives and it makes sure that your everyday life can be as it is but it's not a given and we should be aware that for the retail payments what we're talking about is going to a shop and doing payments or doing small payments between two citizens. We are heavily dependent on non-European players. We find this for something so essential for society, a risk that we are so dependent. And if you look to things that have been happening over the last years, you see some examples where you see that payments are used in a political sphere. So for example, when there were the sanctions on Iran, you might recall, then there were sanctions on payments. So in that sense, we cannot always trust that it's not politicalized. I'm not sure if I pronounce it well, but I think you understand. And therefore we find it really important that we have a retail payment solution and infrastructure that is European. OK, so it's about kind of developing that European autonomy and sovereignty in payments also from a safety perspective, basically. Yes, yes. I'm preserving it, I would say. It's not that we are completely unsafe now, but we think going forward. And as I said, with digitization moving on, it's important to strengthen that. There's also a global aspect to this, though, I guess. I mean, the euro is the second most important currency worldwide after the US dollar. How would having a digital euro affect that? How is it linked to that? Yeah, that's a very good question. So what we see is that almost all central banks, so 90 percent of the central banks are considering a CBDC, which stands for Central Bank Digital Currency, and we call it digital euro here. So I think that's easier. So there is already a China is quite well advanced, but for example, also the Bahamas, but also a large economies like the UK, Canada, even the US is looking into this topic. So we're really not the only ones looking at it. No, almost all these central banks in the world. Yes, yes. So it's really something that is happening and we find it important that we also make sure that we have a place there. We're in what we call the investigation phase of the digital euro project. What are the next steps? Yes, so maybe let me say something on the investigation phase. So in July 2021, the governing council of the ECB has decided to start this investigation phase, which last two years. So we started really in the last quarter of last year. October. Yes, October 2021. And we are aiming to deliver a report in September, October 2023. So roughly a year from now. And the report should give an advice whether or not to go to the next phase, to an implementation phase. And if the advice would be positive, then also to come with an implementation plan. And of course, if you have an implementation plan, you need to know how the design looks like. Therefore, you see that in the investigation phase, we're really detailing out the design of a potential digital euro. And some of the elements we discussed today, we are not doing this on our own. So it's the ECB together with the national central banks that have set up this project. It's a joint project. But we work also closely together, for example, with the European Commission and the European Parliament. But maybe even more importantly, we have a lot of interaction with the market, so with citizens and with merchants and with banks to understand what would be their views on certain design topics of the digital euro. We also have the focus groups. So we did an exercise at the beginning in December last year. And we are now preparing one for the end of this year, beginning of next year, as a real input and to test our ideas for the digital euro and to really get it back from the end users, so from both citizens and merchants. Yeah, because they're the people that are going to be using it at the end of the day, so they need to be on board. Yes, so that's very important. And we're very happy with the feedback and the cooperation that we have with them so far. So that means that by the end of that year, then we will take a decision to go for an implementation phase or not at the end of 2023. Yes, and then the decision to really issue a digital euro will come only later. Okay, so indeed, that was going to be my next question. I think the big question that a lot of people are wondering, when will I be able to pay with a digital euro? That's something for the future, I mean, in a few years then. Yeah, so the president of the ECB has put an ambition. So she said, we hope that after the finalization of the investigation phase, it would take, say, roughly three years to implement. So if we'll manage to do that, and we're testing this with the implementation plan, that then in 2026, there should be a digital euro. Okay, well, that's all very exciting, Evelyn. Thank you so much for being on the podcast and for explaining literally everything we need to know about a digital euro. Thank you, it was a pleasure being here. Now, Evelyn, before we wrap up and before you can go, we do always have a question that we ask all our guests on the podcast. And that's for a hot tip, linked to the topic that we're discussing today. Evelyn, have you thought of something to inspire our listeners? Well, I've been working in payments for over 25 years. So payments is, well, the core of my working life. And I've been captured by the topic, but I understand that for most people, payments is something that is invisible, and we sort of trust that it always works. So I found the book, The Payoff, by Librand and De Terrain, a very interesting book. It really opens the world of payments for you, also for people that are not so deep into the topic, and it really shows what a complex, interesting, but also important topic payments is for society. Brilliant, I'll definitely be checking that out, because as you said, payments is something that we kind of just expect to be there, and we take it for granted, and we don't really know a lot of what's going on behind the scenes. So I think that's a great hot tip. Thank you so much, Evelyn. Thank you. Well, that brings us to the end of this episode. I want to thank Evelyn Vidloks, who is leading the digital euro project here at the ECB for joining the conversation. Check out the show notes for further reading on this topic. You've been listening to the ECB podcast with Katie Ranger. If you like what you've heard, please subscribe and leave us a review. Until next time, thanks for listening.