ECB Executive Board Member Provides An Overview Of Bank’s Current Research On CBDC
Fabio Panetta – a member of the European Central Bank (ECB)’s executive board – presented an outline of the research up till now on a retail CBDC (central bank digital currency) on Friday, while appearing at the finance and technology-focused IESE Business School Banking Initiative Conference. Panetta stated that the release of CBDCs would potentially turn into an inevitable move, however, cautioned that they should be permitted to play a significant part in financial disruption as the monetary policy’s transmission might get impaired in the euro zone.
The main thing behind the sustenance of financial stability while introducing digital currency, in the words of Panetta, would count as the provision of a key role to the commercial banks in this respect. Hence, the banks would be permitted to carry on offering front-end facilities like central banks taking advantage of their experience related to Anti-Money Laundering as well as consumer onboarding.
A discussion paper released on the behalf of the Federal Reserve of the United States this January witnessed an analogous part to be played by the banks. The paper described them as financial intermediaries to preserve customer privacy. The ECB has additionally talked about the privacy problems.
Apart from this, Panetta disclosed that with the decrease in demand for cash, CBDCs’ release could guarantee that autonomous currency keeps on playing its part in sustaining the confidence in payments and money while elevating struggle among banks via minimizing the market power of the banks along with advancing the contractual conditions for consumers. Research regarding the multifaceted potential communications between monetary policy as well as CBDCs elaborates on the significance of a cautious CBDC structure, as noted by Panetta.
As per Panetta, there is a requirement for them to solve the trilemma of CBDC which hinder the achievement of price stability, financial stability, as well as payment efficacy simultaneously. The mission of developing a digital currency counts to be difficult by a swift evolution of the rest of the digital assets’ types which have risen in parallel to fiat money during some of the previous years with an enormous impact.
Nevertheless, the insufficiency of an appropriate central bank digital currency to bring balance to other digital assets’ influence would pose threats to monetary autonomy as well as the financial stability of the central banks, Panetta concluded.
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