The European Central Bank is stepping up its efforts to build a blockchain-based payments system, a move which could pave the way for a digital euro. Announced on Thursday, the initiative will unfold in two phases. The first phase will involve developing a platform for settling transactions in central bank money through a link with the TARGET system, which already facilitates payments across the eurozone.

The ECB plans to explore a more integrated, long-term blockchain solution for processing central bank money transactions in the second phase. Executive Board member Piero Cipollone described the project as a step towards improving European financial markets through innovation. The ECB believes this approach could strengthen Europe's monetary system while reducing dependence on non-European payment providers.

The push for a digital euro aligns with the ECB's broader goal of unifying Europe's capital markets. Since 2021, the bank has been studying how to design and distribute a central bank digital currency (CBDC). As it refines its blockchain-based system, the ECB will consult with public and private stakeholders to ensure it meets the needs of European citizens. The full timeline for implementation will be announced at a later stage.