In an effort to modernise the way financial institutions settle securities and foreign exchange transactions, the central banks of the Euro area will outline ideas for a wholesale central bank digital currency (CBDC) in the coming weeks, according to the governor of France’s central bank.
The wholesale plans seem to be progressing more quickly than a much more contentious proposal for a digital euro to be used by common people, where parliamentarians have voiced many worries about privacy and the effects on commercial banks.
At a Paris event, François Villeroy de Galhau stated, “The Eurosystem has started exploring new technologies for the settlement of central bank money, including the issuance of a first type of tokenized CBDC.” “Experiments will be implemented over the course of next year, including trials with real transactions,” according to the release, “and the eligibility criteria and the call of interest will be published in the coming weeks.”
According to Villeroy de Galhau, a permissioned network that uses smart contracts would enable central banks to continue controlling the flow of money into the economy, which they view as essential to their job of maintaining inflation and financial stability.
In addition to its own exclusive Distributed Ledger for Securities Settlement System, DL3S, the central bank would also be investigating “alternative protocols and blockchains,” he said.
According to a recent research by proponents of traditional banking, automated financial markets driven by distributed ledger technology might save $100 billion annually by releasing collateral and streamlining back-office operations.
Earlier this year, the European Central Bank had a number of industry meetings, where proposals for a wholesale CBDC were already put forth. These plans appear to be moving more quickly than those for a retail CBDC, where parliamentarians are already wrangling with legislation that has faced strong political resistance.
The letter, which was written on September 26, was signed by Michiel Hoogeveen of the Netherlands, Johan van Overtveldt, a former finance minister of Belgium, and Markus Ferber, the economics spokesman for the European People’s Party, the EU’s largest center-right political party.