European Banking Federation reveals plans for digital euro

A report outlining the European Banking Federation’s (EBF) vision for the retail digital euro in particular and the future digital money ecosystem, in general, has been launched. The carefully designed report articulated commercial banks’ ideals and worries regarding the digital euro.

The paper, which was published on March 28, highlighted the bank’s values, including security and confidentiality. In order to introduce the digital euro, it advocated for a deeper public-private partnership. The document stated that,

“At this time, there is no conversation in place to address the fundamental changes and risks to the monetary and financial system. In addition, a structure for ongoing, high-level interaction is necessary.”

The EBF ecosystem vision placed a strong emphasis on the private sector’s contribution to all areas, starting with infrastructure, where Europe needs to rely less on foreign “actors.” The digital euro, a wholesale central bank digital currency (CBDC), and bank-issued money tokens would be the three components of that ecosystem.

European Banking Federation vs CBDC

According to the European Banking Federation’s vision, there should be three levels to the digital euro, including a role for the European Central Bank and two industry levels, the first of which would interact with the Single Euro Payments Area and the second of which “would be subsequently developed and operated by the private sector, in compliance with the principles set out in the previous layers.” It is worth noting that these ideas have not yet been completely developed.

The report took care to solely mention blockchain technology in relation to specific elements of its hypothetical ecosystem. It was believed that a wholesale CBDC would run on distributed ledger technology, where interoperability is essential for enabling cross-border transactions with central bank money (DLT).

Furthermore, the European Banking Federation’s vision for “enterprise demands such as automated industrial processes that run on DLT and use smart contracts” placed a high priority on bank-issued money tokens. These tokens appear to correspond to Digital Euro Scheme Industry Level B. The article emphasized that these methods would also require more standardization.

The EBF represents 3,500 different banks as well as 33 national banking organizations.