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The European Banking Federation (EBF), which represents 33 national banking associations and 3,500 individual banks, has released a paper detailing its vision for the digital money ecosystem of the future.
The paper expressed values and concerns about the digital euro from the perspective of commercial banks.
The EBF emphasized the role of the private sector in all aspects of the ecosystem, beginning with infrastructure. In the EBF vision, the ecosystem would contain three elements: the digital euro, a wholesale central bank digital currency (CBDC), and bank-issued money tokens.
The paper was careful to refer to blockchain technology only in reference to certain parts of its envisioned ecosystem.
Priorities and concerns
The paper, released on March 28, emphasized the bank’s values, such as stability and privacy. It called for closer public-private partnership in the introduction of the digital euro. The paper also stated that there needs to be a framework for permanent high-level engagement.
The EBF ecosystem vision emphasized the role of the private sector in all aspects, beginning with infrastructure, where Europe needs to lessen dependence on outside “actors.”
The paper called for the authorities to clarify the interaction of different and converging policy objectives, especially when developing pan-European payment solutions at the point of sale/point of interaction.
Digital euro with three levels
In the EBF vision, the digital euro should have three levels: a European Central Bank role and two industry levels. The first level would interact with the Single Euro Payments Area and an “Industry Level B” that “would be subsequently developed and operated by the private sector, in compliance with the principles set out in the previous layers.” Those principles have yet to be developed fully.
Wholesale CBDC and bank-issued money tokens
The wholesale CBDC, where interoperability is crucial in enabling cross-border transactions with central bank money, was assumed to operate on distributed ledger technology (DLT).
Bank-issued money tokens were vital in the EBF vision for “business needs such as automated industrial processes that run on DLT and use smart contracts.”
These tokens correspond to Industry Level B of the digital euro scheme. The paper noted that more standardization would be needed for these solutions.
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The need for public-private partnership
The paper concluded by reiterating the need for closer public-private partnership in the introduction of the digital euro.
“There is currently no dialogue in place to address the fundamental changes and risks to the monetary and financial system,” the paper said.
The EBF believes that introducing the digital euro is an opportunity to strengthen it’s role in global payments and create a more competitive and innovative digital payments market in Europe. At the same time, it stated that a framework for permanent high-level engagement must be provided.