The European Central Bank will focus more on the release of retail CBDCs than any other business aspect attached to it. Yves Mersch, one of the bank’s board members, revealed the development on Monday during the virtual Consensus 2020.
According to Mersch’s statement, the central bank’s plan to release a digital currency is originally not an effort to meet up with the latest trends. However, the bank said it is looking to launch a CBDC because they ought to be ready.
Retail CBDCs are a game-changer
Moving forward, the board member of ECB admitted that the bank does not see any “business case” with the release of its digital currency. Their primary focus is channeled towards retail CBDC, as a wholesale CBDC means that the digital currency will be limited to some financial counterparties. This will mean business, according to Mersch.
On the other hand, Mersch explained that retail CBDCs could be considered as a game-changer, given that such digital currency will be equally accessed by the entire public. Meanwhile, certain factors need to be addressed before the development of retail CBDCs.
ECB to still work on optimal CBDC
Among these things include the need to address the relationship of bank-issued digital currency, and the European coins as well as banknotes. There is also a need to state the currency’s legal tender status, including the process of converting one to the other.
To reduce the potential risk of bank digital currencies on the existing financial system, Mersch also mentioned an option of incentivizing non-banks in order to depend more on market-based alternatives, instead of relying on a bank deposit. This can be achieved by remunerating the digital currencies at a below-market rate. Another method is by adopting a tiered remuneration system
The lack of a concrete’ business case’ for a CBDC (Central Bank Digital Currency) at present should and does not stop us from seriously exploring the optimal design of a CBDC so that we will be well prepared should we ever take (that) policy decision.