Fabio Panetta, a member of the Executive Board of the European Central Bank (ECB), spoke at a panel discussion on central bank digital currencies (CBDCs) at the US Monetary Policy Forum. Panetta emphasized the need for CBDCs in a digital world to preserve the role of central bank money in the payments system and safeguard monetary sovereignty. He explained that central bank money, backed by the state, provides confidence and stability in the monetary system, while private money relies on the convertibility into central bank money. Without central bank money, confidence in private money would be undermined, leading to instability in the payments system. Panetta also highlighted the risks of relying on private payment solutions like stablecoins, which could lead to a concentration of power and potential threats to monetary sovereignty. He discussed the benefits of CBDCs, such as improved confidentiality of digital payments, increased choice and reduced costs for users, and enhanced financial inclusion. Panetta acknowledged the challenges of designing a successful CBDC and mentioned that the ECB is actively working on the technical and governance aspects of a digital euro. He concluded by emphasizing the importance of central banks adapting to the digital age and collaborating with other central banks to navigate the potential shifts in the financial landscape.
Celebrating 20 Years Since the Introduction of Euro Banknotes and Coins
Christine Lagarde, President of the European Central Bank (ECB), delivered a speech at the plenary session of the European Parliament on 14 February 2022. She highlighted the significance of the introduction of euro banknotes and coins in 2002, which marked a major milestone in European history and represented the world’s largest monetary changeover. The euro has become an integral part of European identity, fostering a sense of shared identity among citizens. It has simplified the lives of Europeans by supporting the free movement of people, goods, and services, as well as facilitating cross-border trade and economic ties. The euro has also strengthened Europe’s role and autonomy, becoming the second most important currency globally and being increasingly used in key markets. Lagarde emphasized the ECB’s role in safeguarding the supply of euro cash and ensuring its security, as well as exploring innovative forms of payment such as the digital euro. The ECB has launched the digital euro project to investigate its potential as a convenient and risk-free means of payment, complementing cash. The redesign of euro banknotes is also underway to ensure their continued security, acceptance, and efficiency as a means of payment, with input from citizens and a final decision expected in 2024. Lagarde emphasized that euro banknotes and coins serve as a tangible reminder of the euro’s success and the shared endeavor of European integration.
Discussion with Redaktionsnetzwerk Deutschland
In an interview with Christine Lagarde, President of the European Central Bank, she confirms that she still does her own grocery shopping and pays her own bills. She acknowledges that she is aware of the rising prices and expresses concern about the impact on her family’s business. Lagarde explains that the ECB’s role is to maintain price stability and take action if it is in danger. However, she emphasizes the need to understand the source of the price increases, such as energy prices and supply bottlenecks, before taking any action. She dismisses the idea of raising interest rates as a solution, as it could weaken the economy and jeopardize jobs. Lagarde reveals that the ECB has already taken measures, such as discontinuing the pandemic emergency purchase program, and will continue to analyze inflation figures before deciding on further actions. She defends the ECB’s cautious approach compared to other central banks, stating that the euro area’s economy is not overheated like the US and UK economies. Lagarde also addresses concerns about “greenflation” and the impact of decarbonization on prices, stating that the current impact is minimal. She discusses the potential threat of second-round effects, such as higher wage settlements, but notes that wage demands are currently moderate. Lagarde mentions the ECB’s plans to redesign euro banknotes and suggests portraying famous Europeans as a way to showcase European identity. She also discusses the introduction of a digital euro, stating that it would provide an answer to private cryptocurrencies and strengthen Europe’s sovereignty in digital payments. Lagarde concludes by stating that the ECB will remain the guardian of the euro, whether digital or analogue, and that cash will continue to exist alongside digital payments.
Summary of the CBDC Technology Forum Meeting – January 2022
Tom Mutton, the Chair, welcomed the Members to the third CBDC Technology Forum meeting. He mentioned the recently published House of Lords Economic Affairs Committee report on CBDC. The Bank presented a summary of the survey results conducted with Forum Members after the previous meeting on November 30, 2021. The survey aimed to gather additional structured thoughts from Members on the topics discussed. At the last meeting, Members found it beneficial to comprehend the pursued objectives and potential use cases for a future CBDC, which would facilitate more detailed technical discussions in the Forum. To support this, the Bank proposed a hypothetical CBDC vision solely for informing the scope of the Forum’s conversations. This vision does not reflect Bank of England policy and may change over time to accommodate other technology discussions. The Bank then provided an overview of account and token-based CBDC systems to set the stage for the discussion. The objective of the session was to compare different ledger data structures across various design areas and understand the advantages and disadvantages of each.
Parliamentary Committees Conference on Union Affairs (COSAC)
Christine Lagarde, President of the European Central Bank (ECB), delivered a speech at the meeting of the Conference of Parliamentary Committees for Union Affairs of the Parliaments of the European Union (COSAC). Lagarde began by honoring the memory of President David Sassoli and highlighting his commitment to Europe. She then discussed the progress made in the past 20 years since the introduction of the euro currency, despite facing various crises. Lagarde emphasized the need to retain unity and direction as Europe moves into the next phase after the COVID-19 pandemic. She identified three key directions for progress: providing stability, strengthening supply, and ensuring strategic autonomy. Lagarde highlighted the ECB’s role in stabilizing the economy during the pandemic and its commitment to price stability. She also emphasized the importance of strengthening the supply side of the economy, particularly in the context of the green transition and digital revolution. Lagarde called for investment in renewable energy and the development of a robust EU financial sector. Lastly, she discussed the need for Europe to enhance its strategic autonomy in the digital realm and mentioned the ECB’s work on the digital euro project. Lagarde concluded by emphasizing the importance of acting together and making decisions that will allow Europe to master future challenges. She expressed her willingness to further discuss these matters with parliamentarians and highlighted their essential role in this endeavor.
Exploring Project Helvetia: Investigating the Integration of Tokenised Assets with Central Bank Money through Multiple Phases
Project Helvetia, initiated by the BIS Innovation Hub in collaboration with the Swiss National Bank (SNB) and financial infrastructure operator SIX, embarked on a multi-phase examination. This investigation delved into the potential for central banks to provide settlement in central bank money within a landscape featuring increased tokenized financial assets built on distributed ledger technology (DLT). The project concentrated on addressing operational, legal, and policy considerations surrounding this future scenario.
Recap of the CBDC Technology Forum – November 2021
Tom Mutton, the Chair, opened the second CBDC Technology Forum meeting by acknowledging the recent joint announcement by the Bank and HM Treasury regarding the exploration of a UK Central Bank Digital Currency (CBDC). The Bank provided a brief summary of the first Engagement Forum meeting, in line with the published minutes. They introduced the main models of CBDC, including the platform model, pooled account model, intermediated token model, and bearer instrument model. The purpose of the discussion was to gather Members’ perspectives on the technological implications of these models.
Initiative Jura: Enhancing Cross-Border Transactions with Wholesale CBDCs
Jura endeavors to investigate the direct transfer of wholesale central bank digital currencies (wCBDCs) denominated in euro and Swiss franc between commercial banks in France and Switzerland. This is facilitated through a single distributed ledger technology (DLT) platform managed by a third-party operator. The platform ensures secure and efficient settlement of tokenized asset and foreign exchange trades utilizing payment versus payment (PvP) and delivery versus payment (DvP) mechanisms.
Conducted in an environment closely resembling real-world conditions, the experiment involves transactions with actual value and adheres to existing regulatory standards. This initiative represents a collaboration between public and private entities, including the Banque de France, the BIS Innovation Hub Swiss Centre, the Swiss National Bank, and a consortium from the private sector.
The Argument for Central Bank Digital Currencies by the ECB
In a blog post, Fabio Panetta, a member of the Executive Board of the European Central Bank (ECB), discusses the potential decline of cash in a digital economy. As people increasingly prefer digital payments and online shopping, the use of cash in payments is decreasing. In fact, half of consumers in the euro area now prefer cashless means of payment. If this trend continues, cash could lose its pivotal role. This poses implications for the key role of central bank money in payments. While central bank money is currently used for consumer transactions in the form of cash and for wholesale transactions in the form of electronic deposits, the rise of digitalization and new technologies challenges the role of cash. To maintain its role as the anchor of the monetary system, central bank money needs to adapt to evolving needs. This is where central bank digital currencies (CBDCs) come into play. The ECB is focused on developing a digital euro, which would allow everyone to use central bank money for digital retail payments. Some argue that CBDCs would be redundant given the availability of private digital means of payment. However, Panetta believes that the smooth functioning of payments, critical for monetary and financial stability, depends on sovereign money continuing to play its anchoring role in the digital era. Confidence in private money is based on its ability to be converted into central bank money, the safest form of money. Without central bank money as an undisputed monetary anchor, the singleness of the currency would be undermined, potentially leading to crises. The primary objective of a digital euro would be to ensure that public money remains widely accessible and usable for daily transactions. Additionally, Panetta discusses the challenge of wholesale CBDCs and the need to continually assess and upgrade the services offered for the settlement of wholesale transactions. By ensuring that central bank money remains the anchor of the payment system, financial stability and trust in the currency can be supported, preserving the transmission of monetary policy and protecting the value of money.
Creating a digital euro for the future of retail payments landscape
Fabio Panetta, Member of the Executive Board of the ECB, addressed the ECON Committee of the European Parliament to provide an update on the investigation phase of the digital euro project. He emphasized the importance of issuing a digital euro to maintain the role of central bank money in the digital age. While private digital means of payment already exist, central bank money is the safest form of money as it is backed by the strength and authority of the State. Panetta highlighted the need to ensure that people continue to have access to central bank money in the digital era, especially as the use of cash declines and non-European payment providers and big tech companies enter the financial services sector. He also mentioned that a digital euro would provide new business opportunities and act as a catalyst for technological progress and innovation. The ECB is working on the design and distribution of a digital euro, aiming to strike a balance between different priorities, such as efficiency, financial stability, and privacy. The ECB plans to engage extensively with the public, merchants, and other stakeholders to gather their preferences and ensure the digital euro is attractive to consumers. Panetta emphasized the importance of close alignment with European authorities and institutions and the role of the European Parliament in any changes to the EU legislative framework for introducing a digital euro. He concluded by stating the need for forward-thinking and careful consideration to ensure that central bank money remains an anchor of stability in the evolving payment and financial system.