The European Banking Federation (EBF) has published a paper where it shared its views of the digital euro as well as that of the European digital money ecosystem at large. Released on March 28, the paper scrutinized the digital euro from the angle of stability and privacy – two highly-significant value points for commercial banks.
European Banking Federation Prioritizes the Role of the Private Sector
According to the EBF, there first must be a public-private partnership in the introduction of the digital euro. The agency emphasized the fact that the private sector has a huge role to play in its vision for Europe’s digital ecosystem. For example, it cited infrastructure as one key area where Europe must look inwards and reduce its dependence on outside “actors”.
The paper also acknowledged the lack of a proper framework that will ensure that fundamental changes are made to the monetary and financial system, such that risks are mitigated.
According to the EBF, its envisioned ecosystem would be made up of three elements. They are: the digital euro (retail), a wholesale central bank-issued digital currency (CBDC), and bank-issued money tokens. However, the digital euro in itself is designed to operate in a scheme of three separate but interconnected levels. The levels include; the European Central Bank (ECB) level, Industry Level A, and Industry Level B.
ECB will deal with the issuance, convertibility, and maintenance of the digital euro. Industry level A will see to payment rules and interoperability. Whereas, at level B, the private sector would oversee the creation of innovative solutions and other value-added services.
The paper also mentioned the need for a wholesale CBDC for the settlement of interbank transfers. It also noted the reason why a wholesale CBDC is necessary. Per the paper, not all the policy objectives laid down by the ECB can be achieved with a retail digital euro. Therefore, the CBDC is expected to further strengthen the monetary sovereignty and strategic autonomy of the EU.
Lastly, the third part of the EBF digital ecosystem vision is the bank-issued money tokens. According to EBF, these tokens will be a big part of business needs. The paper also noted a similarity between the money tokens and Industry Level B of the digital euro scheme. However, it also admits that there is still more standardization to be put in place.
The EBF is made up of 33 national banking associations and about 3,500 individual banks.
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