Fabio Panetta, Member of the Executive Board of the European Central Bank (ECB), has a speech in which he touts the opportunity for central bank digital currencies (CBDCs) to enhance payments.
He said there have been numerous disruptions like FinTechs and crypto which have shown a need to “preserve – at all times – an anchor of stability for the monetary and payments systems.” That will come with a need to make sure central bank money is always available, in both physical and digital forms.
He says there are changing preferences which include a need for more digital money. But he said wholesale CBDC has “existed for decades” providing digital infrastructures for settling transactions between banks in central bank money.
Wholesale CBDC refers to a settlement of interbank transfers and other wholesale transactions in central bank reserves. It’s different from retail CBDC because they both address different needs — retail CBDC helps offer convenient, secure payment methods for the public.
Because of that, Panetta posits that there’s a need to focus on the ways to improve wholesale payment systems, necessary to help market participants to be able to always settle transactions with central bank money, which is “the safest and most liquid settlement asset” and can help cut down on risks.
He said the ECB is looking into how the needs for wholesale settlement services could change, and what new technologies could be used for.
PYMNTS wrote recently about the various processes surrounding CBDC developments, including how the ECB is looking at the distributed ledger technology (DLT) underpinning blockchains.
Read more: US Not Hurried on Digital Dollar as ECB Targets Tech Infrastructure
Panetta, in his speech, said the ECB has been engaging with market players working with payments. He said many have already been using DLT and think it will see more usage in the finance industry. He said the ECB was exploring how DLT could help with CBDCs in the future.
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