Decoding Central Bank Digital Currency in the Wholesale Market

Fabio Panetta, Member of the Executive Board of the ECB, delivered a speech at a symposium hosted by the Deutsche Bundesbank, discussing the implications of rapid technological change for payment systems. He emphasized the need to preserve stability in the monetary and payments systems, which is the objective of the digital euro project. The digitalization of finance has led to the emergence of fintech start-ups, big techs entering the payments market, and the boom and burst of the crypto universe. Panetta highlighted the importance of modernizing the payment infrastructure to adapt to changing technologies and preferences, while also preserving the role of central bank money as a safe asset. He clarified the concept of wholesale central bank digital currencies (CBDCs), stating that they have existed for decades and are not synonymous with distributed ledger technology (DLT). Panetta discussed the potential of DLT in improving wholesale settlement services, but also highlighted the need to consider the potential drawbacks, such as energy inefficiency and governance concerns. The Eurosystem is exploring ways to ensure that central bank money retains its role as the settlement asset for wholesale transactions, including creating a bridge between DLT platforms and central bank infrastructures or launching its own DLT platform for settlement in central bank money. Regardless of the technology used, the goal remains to ensure the stability of the monetary system.

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