The European Banking Federation (EBF) has released a paper detailing its vision for the future digital money ecosystem, and specifically the retail digital euro. The paper carefully articulates the value and concerns of the digital euro from the perspective of commercial banks.
The paper, which was released on March 28, emphasizes the bank’s values, such as stability and privacy. It calls for a closer public-private partnership in the introduction of the digital euro. “There is currently no dialogue to address fundamental changes and risks to the monetary and financial system,” the paper said. At the same time, there is a need for a framework for permanent high-level engagement.
The EBF ecosystem vision emphasizes the role of the private sector in all aspects, starting with infrastructure, where Europe must reduce its dependence on external “actors”. The ecosystem will contain three elements: a digital euro, a wholesale central bank digital currency (CBDC) and bank-issued money tokens.
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In the vision of the EBF, the digital euro should have three levels, with the role of the European Central Bank and two industrial levels – the first in relation to the Single Euro Payments Area and Industrial Level B which “will be developed and operated by the private sector, in line with the established principles in the previous layer. The principle has not been fully developed:
“The European market needs authorities to clarify the interaction of different and convergent policy objectives, especially regarding the development of pan-European payment solutions at the Point of Sale / Point of Interaction.”
The paper carefully refers to blockchain technology only in reference to specific parts of the ecosystem it envisions. A wholesale CBDC, where interoperability is key to enable cross-border transactions with central bank money, is considered to work on distributed ledger technology (DLT).
Why don’t financial skills alone result in a more resilient future? @DeWitteKProfessor @FEBkuleuven & Director @LeuvenEconomicsdiscuss the potential of financial education based on behavior. pic.twitter.com/jqsLUNyTBV
– European Banking Federation (@EBFeu) March 21, 2023
In addition, the money tokens issued by the bank play an important role in EBF’s vision for “business needs such as automated industrial processes running on DLT and using smart contracts.” The token corresponds to Industry Level B of the digital euro scheme. More standardization is also needed for these solutions, the paper notes.
EBF represents 33 national banking associations and 3,500 individual banks.
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