The European Central Bank (ECB) will carry out a series of experiments with a digital euro while holding a public consultation, as the Frankfurt institution tries to stay ahead of the rapidly developing digital currencies technology.

The institution "should be prepared" to possibly launch a digital currency, president Christine Lagarde said Friday.

In a newly published report, the ECB said a digital euro could help where citizens have abandoned cash, foreign forms of electronic money have taken over, or other means of payments have become unavailable.

It will launch a three-month public consultation from October 12.

A decision on whether to move ahead with a virtual currency project is expected around mid-2021, the ECB said.

"Our role is to secure trust in money... We should be prepared to issue a digital euro, should the need arise," Lagarde said in a statement.

This digital currency would "complement cash, not replace it," the statement added.

The move comes as consumers increasingly pivot towards cashless payments, and the ECB is wary of falling behind so-called cryptocurrencies issued by private players like Bitcoin and Facebook's yet-to-be-launched Libra.

The ECB applied to trademark the term "digital euro" late last month, according to Bloomberg.

Central banks have become increasingly interested in the digital currencies. Sweden's Riksbank has been testing its e-krona for months; the Chinese central bank started experimenting with digital currency in four cities in April.

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Proponents of cryptocurrencies say they allow for faster and cheaper payments, especially across borders, as they cut out the staff, administration and the high costs needed in traditional banking and investment.

Governments in Europe have insisted that any digital currency would require careful supervision.

"A digital euro would support Europe's drive towards continued innovation. It would also contribute to its financial sovereignty and strengthen the international role of the euro," ECB executive board member Fabio Panetta said.

He warned that many hurdles remained, including concerns about privacy and the impact on traditional banking and financial stability.

"But a properly designed digital euro could address these risks," Panetta said.

The COVID-19 pandemic has accelerated the shift towards electronic payments, as customers avoid notes and coins over fears that they might spread the coronavirus.

(With input from agencies)