Fabio Panetta, Member of the Executive Board of the European Central Bank (ECB), delivered a keynote speech at the National College of Ireland on the topic of the digital euro. Panetta emphasized that the digital euro is a collective European project and expressed gratitude for the collaboration with Commissioner McGuinness and President of the Eurogroup, Mr Donohoe. He highlighted the importance of engaging with stakeholders and society to ensure the success of the digital euro.
Impact of Cross-Border Central Bank Digital Currencies on Bank Runs and Capital Flow Volatility
This paper examines the potential effects of cross-border central bank digital currencies (CBDCs) on capital flows and financial stability in an open economy. It focuses on the presence of a credible foreign central bank that issues an interest-bearing CBDC to nonresidents. The study suggests that having a foreign CBDC as an international safe asset could raise the risk of financial disintermediation in the domestic banking sector. This could lead to increased and more unpredictable capital flows. These findings highlight the need for careful consideration of the implications of CBDCs on domestic financial systems and global capital movements.
Conversation with La Stampa
Fabio Panetta, Member of the Executive Board of the ECB, discussed the economic challenges facing Europe in an interview. He highlighted that the war in Ukraine has exacerbated global shocks, such as surging energy prices and supply bottlenecks, leading to rising inflation and slowing economic activity. Panetta emphasized the need for a comprehensive understanding of the war’s impact on demand and growth before making any decisions. He stated that monetary policy alone cannot tame inflation and called for support to end the war and reduce tensions in international markets. Panetta also stressed the importance of European cooperation in areas such as energy and food imports to respond to global tensions. He mentioned the possibility of gradually reducing monetary accommodation and ending negative rates and net asset purchases, but emphasized the need for data-driven decisions. Panetta also discussed the importance of closer coordination at the European level and the need for a common fiscal action to address global challenges. He highlighted the role of Italy in promoting European cohesion and fiscal capacity. Panetta also called for the regulation of crypto assets and the development of a digital euro to meet the growing demand for digital assets and payment immediacy.
Ellipse: Streamlining Regulatory Reporting and Enhancing Data Analytics
Project Ellipse is a proof of concept (PoC) launched by the Bank for International Settlements Innovation Hub. Its aim is to explore how supervision can become insights-based and data-driven using an integrated regulatory data and analytics platform. The prototype combines structured and unstructured sources of data to provide supervisors with early warning indicators, analytics, and prudential metrics. Phase 1 of the project focused on machine-executable digital reporting using a cross-border common data model. Phase 2 integrated existing large exposures regulatory data with unstructured data, applying advanced analytics such as machine learning and natural language processing. The Ellipse platform allows supervisors to monitor risk correlations, analyze sentiment, and identify possible systemic risks to the banking system. The project presents an opportunity for authorities to test and explore new solutions and for the regulatory community to collaborate on future-proofing data and analytical capabilities. For more information, visit the BIS Open Tech and Data and Knowledge Platform websites.
ECB releases findings on payment trends in digital currency study
The European Central Bank (ECB) has released the findings of its research on citizens’ payment habits and attitudes towards digital payments. The report reveals that users in Europe are seeking universally accepted payment methods that can be used both online and in physical stores. Participants expressed a preference for convenient, fast, and easy-to-use payment solutions, particularly those that offer instant and contactless person-to-person transactions. Safety and security were identified as crucial factors, with participants desiring protection against fraud and hacking, as well as reliable payment authentication methods. Biometric payment verification methods, such as iris scan technology, received widespread support. Participants also highlighted the importance of flexible privacy settings. While respondents had limited knowledge of the digital euro, they believed that banks and/or central banks would be the safest providers. The research will contribute to the ongoing investigation phase of the digital euro project, which is expected to conclude in October 2023. The qualitative research involved input from the general public, technology experts, merchants, and individuals with limited access to banking services or the internet. For media inquiries, please contact Georgina Garriga Sánchez at +49 69 1344 95368 or Alexandrine Bouilhet at +49 69 1344 8949.
Balancing the Needs of the Public with a Digital Euro
Fabio Panetta, Member of the Executive Board of the ECB, provided an update on the digital euro project during a meeting with the Committee on Economic and Monetary Affairs of the European Parliament. He highlighted the importance of making the digital euro attractive to both citizens and merchants in order to achieve the broad policy objectives. The findings of focus groups revealed that the ability to “pay anywhere” and instant, easy, contactless payments were the most valued features of a digital payment instrument. The focus groups also confirmed the concept of “rational inattention,” where people do not distinguish between the digital euro and private digital means of payment. Panetta discussed the potential use cases for the digital euro, including payments in physical stores, e-commerce, person-to-person payments, and payments between governments and individuals. He emphasized the need to balance privacy with other EU policy objectives, such as anti-money laundering and combating the financing of terrorism. Panetta outlined options to ensure privacy while addressing these concerns, including supervised intermediaries managing the onboarding process and limiting the visibility of transaction data to what is strictly necessary. He also discussed the possibility of providing greater privacy for lower-value payments and offline functionality for digital euro payments. Panetta concluded by emphasizing the importance of stakeholder engagement and dialogue with co-legislators in the design and implementation of a digital euro.
Collaboration between Bank of England and Massachusetts Institute of Technology for Central Bank Digital Currency
The Industrial Revolution was a period of major industrialization that took place during the late 18th and early 19th centuries. It marked a significant shift in the way goods were produced, as traditional hand production methods were replaced by machines and new manufacturing processes. This revolution began in Britain and soon spread to other parts of Europe and North America. The development of new technologies, such as the steam engine and the spinning jenny, played a crucial role in driving this industrial transformation. The Industrial Revolution had far-reaching effects on society, including urbanization, the rise of the factory system, and the growth of the middle class. It also had significant impacts on the global economy and led to increased trade and colonization. Overall, the Industrial Revolution was a period of immense change and innovation that laid the foundation for the modern industrialized world.
Feedback on the Bank of England’s Discussion Paper on innovative digital currency types
The Bank of England’s primary objective is to maintain monetary and financial stability in the United Kingdom. One way they achieve this is by ensuring that people have confidence in the money they use for transactions and as a store of value. This is done through the issuance of banknotes and central bank reserves. However, the use of banknotes for transactions is decreasing, and there is an increasing reliance on privately issued forms of money. In response to these changes, the Bank of England has sought feedback on its thoughts regarding new forms of digital money. These new forms, whether publicly or privately provided, have the potential to improve the speed, cost, and efficiency of payments, as well as enhance financial inclusion. However, they also pose risks.
“Dunbar Project: Global Transactions with Multiple Central Bank Digital Currencies”
The collaborative initiative known as Project Dunbar joins forces among the Reserve Bank of Australia, Bank Negara Malaysia, Monetary Authority of Singapore, and South African Reserve Bank, partnering with the BIS Innovation Hub. Its primary objective is to pilot the application of central bank digital currencies (CBDCs) in international settlements. By leveraging multi-CBDCs, the project aims to streamline cross-border payments, rendering them more cost-effective, expeditious, and secure. Throughout the endeavor, we address and overcome pivotal hurdles in crafting a shared settlement platform for multi-CBDCs.
Summary of the CBDC Engagement Forum Meeting – February 2022
On 9 February 2022, the CBDC Engagement Forum held its second meeting, chaired by Charles Roxburgh and Jon Cunliffe. They acknowledged the Bank and HM Treasury’s previous announcement on 9 November 2021, which outlined the forward plan for exploring a UK CBDC and the expected release of a CBDC Consultation Paper in 2022. Additionally, they mentioned the House of Lords Economic Affairs Committee report on CBDC. The Bank of England provided a summary of the Technology Forum meetings that occurred in November and January following the first Engagement Forum meeting. The Bank’s presentation focused on CBDC “use cases” and highlighted their importance for various stakeholders, including UK authorities, private sector intermediaries, and end users. Different types of CBDC were discussed, each with specific features and requirements. The Bank also raised the question of whether CBDC should be designed with one or multiple primary use cases or if it should aim to be a flexible platform, leaving use case development to the private sector. Finally, the Bank sought input from members on the information and mechanisms that could assist the private sector in developing their understanding of use cases.