European Central Bank Moves to Phase 4 of Digital Euro Sandbox Testing

The ECB's preparation phase for the digital euro is now in its most operationally intensive stage. The architecture preserves a two-tier intermediation model - commercial banks continue to distribute and service the CBDC - while introducing offline functionality and tiered holding limits to manage disintermediation risk.

Privacy is the design tension that defines the program. The ECB's stated position is that the digital euro will offer cash-like privacy for low-value transactions, with KYC obligations rising in line with transaction size. Implementations of this principle vary across pilots, and the political debate around it is far from settled.

For banks, the operational implications are concrete: wallet integration, liquidity provisioning, and dispute handling all sit on the bank's side of the two-tier model.