The European Banking Federation (EBF) has released a paper detailing its vision for the digital money ecosystem of the future, and the retail digital euro in particular. The carefully worded paper expressed values and concerns about the digital euro from the perspective of commercial banks.
The paper, released on March 28, emphasized the bank’s values, such as stability and privacy. It called for closer public-private partnership in the introduction of the digital euro. “There is currently no dialogue in place to address the fundamental changes and risks to the monetary and financial system,” the paper said. At the same time, there needs to be a framework for permanent high-level engagement.
The EBF ecosystem vision emphasized the role of the private sector in all aspects, beginning with infrastructure, where Europe needs to lessen dependence on outside “actors.” That ecosystem would contain three elements: the digital euro, a wholesale central bank digital currency (CBDC) and bank-issued money tokens.
In the EBF vision, the digital euros should have three levels, with a European Central Bank role and two industry levels — the first to interact with the Single Euro Payments Area and an Industry Level B that “would be subsequently developed and operated by the private sector, in compliance with the principles set out in the previous layers.” Those principles have yet to be fully developed:
“The European market needs the authorities to clarify the interaction of different and converging policy objectives, especially when it comes to the development of pan-European payment solutions at the Point of Sale / Point of Interaction.”
The paper was careful to refer to blockchain technology only in reference to certain parts of its envisioned ecosystem. A wholesale CBDC, where interoperability is key to enable cross-border transactions with central bank money, which was assumed to operate on distributed ledger technology (DLT).
Why financial skills alone do not result in a more resilient future? @DeWitteKProfessor @FEBkuleuven & Directors @LeuvenEconomicsdiscusses the potential of behavioral-based financial education. pic.twitter.com/jqsLUNYTBV
— European Banking Federation (@EBFeu) March 21, 2023
In addition, bank-issued money tokens had a crucial role in the EBF vision for “business needs such as automated industrial processes that run on DLT and use smart contracts.” These tokens apparently correspond to Industry Level B of the digital euro scheme. More standardization would be needed for these solutions as well, the paper noted.
The EBF represents 33 national banking associations and 3,500 individual banks.