ECB executive board member talks about current state of digital euro CBDC research

ECB executive board member talks about current state of digital euro CBDC research

Fabio Panetta, European Central Bank executive director, gave a summary of current research by the bank on a retail central banks digital currency. He spoke Friday at the IESE Business School Banking Initiative Conference. Panetta stated that central bank digital currencies (or CBDCs) are “likely” to become a necessity, but cautioned that they should not be a source for financial disruption that could hinder the transmission of monetary policies in the euro area.

Panetta stated that allowing commercial banks to participate in the digital currency introduction is key to financial stability. The banks would be able to continue providing front-end service as the central bank benefited from their experience in customer registration and Anti-Money laundering.

In January, the United States Federal Reserve published a discussion paper that predicted a similar role in banks. In January, the United States Federal Reserve published a discussion paper that highlighted the potential role of financial intermediaries when it comes to protecting consumer privacy. Privacy issues have been addressed by the European Central Bank (ECB).

Panetta also stated that “As cash demand declines, issuing CBDCs can ensure that sovereign money remains in place to underpin confidence in money, payments,” and foster competition among banks by “reducing banks’ market power” and “improving contractual terms for customers.”

Panetta pointed out that research on the complicated interactions between CBDCs, monetary policy and monetary policy has shown the importance of CBDC design. He stated that the “CBDC Trilema” is a problem in which central banks cannot achieve their goals of financial stability, payment efficiency and price stability together.

Panetta stated that the task of creating a digital currency is difficult due to the rapid evolution of other digital assets.

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