The European Central Bank said Wednesday it is launching a two-year investigation on whether to introduce a digital version of the euro that would complement cash, taking a cautious step toward introduction as central bankers around the world eye digital currencies and their potential impact on policy and the financial system.

The ECB said in a statement that the digital euro must be able to meet consumers' needs while helping prevent illegal activity such as money laundering and must not have an adverse impact on financial stability and monetary policy.

Digitalization “is reaching all areas of our lives,” Fabio Panetta, a member of the ECB's executive board, wrote in a blog post. “The coronavirus (COVID-19) pandemic has shown just how fast such change can happen. And this is affecting the way we pay. We are increasingly buying digitally and online.”

He said that there were many questions to be answered and that “a decision about whether or not to issue a digital euro will only come at a later stage.” If the idea gets a green light at the end of two years, it would take three more to actually develop the digital euro.

The central bank for the 19 countries that use the euro is launching the in-depth study after already gathering input from citizens and financial professions. The U.S. Federal Reserve is also looking into the implications of issuing a digital currency.

In simple terms, a central bank digital currency would be a digital banknote. It could be used by individuals to pay in shops, or each other. The Bank for International Settlements, an international association of central banks, says digital currencies issued by central banks could promote diversity in payment options, make cross-border payments faster and cheaper, increase financial inclusion for people without bank accounts, and possibly facilitate fiscal stimulus transfers in times of economic crisis, such as a pandemic.

A BIS survey showed that 86% of central banks were researching the potential for digital currency, 60% were experimenting with the technology and 14% were deploying pilot projects.

They would be different from cryptocurrencies such as Bitcoin because central bank digital currencies would be legal tender and thus usable for any transaction, and their value would remain stable. Panetta said they would also be more environmentally friendly, since they would use less electricity than “mining” or creating Bitcoin.