A blog post by The European Central Bank (ECB) is analyzing the importance of resistant payment mechanisms. The report focuses on legacy systems, but also mentions new blockchain-based technologies like the digital euro.
This is highlighted in the report published on April 28 and written by Fabio Panetta, member of the bank’s executive board The continuity of payment systems is an important task for the central bankespecially in times of crisis.
The traditional competitor of blockchain technology
The report focused primarily on praise for the Instant Target Payment System (TIPS) released in November 2018. This instant payment network, launched by the ECB, offers commercial banks a settlement layer.
With a large-scale takeover, businesses and individuals could do business with one another instantly and without restrictions on weekend or business hours. Panetta wrote:
“TIPS was developed to handle a regular load of more than 43 million instant payment transactions per day and can handle up to 2,000 transactions per second at peak times.”
The system is still new and only the Swedish central bank has promised to implement it by 2022. Panetta also mentioned similar large banking systems, called Target2, and Target2 Securities. These systems are currently used to process financial transactions in Europe and have had relatively stable performance as demand increased due to the market crash caused by corona virus in March.
The digital euro as the nationalization of online payments
Panetta noticed that Isolation made cost-effective, secure electronic payment solutions even more important than before.
The European financial system relies heavily on banks to carry out peer-to-peer money transfers. Despite the improvement in cross-border friction with the single euro payment area (SEPA), they suffer from all the disadvantages of a traditional system.
Payment services for private customers are offered by US companies such as Visa, MasterCard and PayPal. The ECB appears to be disturbed by this dominance, and Panetta notes:
“Before the pandemic broke out, the ECB stressed that Europe must be able to autonomously provide basic services such as electronic payments.”
This statement also reflects Facebook’s mistrust of the Libra and triggers a wave of hostile reactions from European regulators.
With this in mind, the European Central Bank is examining solutions that can be used to create local systems that handle both physical and e-commerce payments.
The digital euro is being evaluated as part of this initiative, and Panetta says that the experience with Covid-19 will be taken into account when considering its feasibility.
However, Panetta emphasized this The digital euro “must not discourage or suppress market-driven initiatives to introduce private electronic means of payment.”
It remains to be seen whether this statement is intended for decentralized cryptocurrencies or more traditional companies. V.It should be noted that the EU has been relatively lenient in dealing with cryptocurrency regulations, but the introduction of cryptocurrencies is likely seen as an even greater threat to financial sovereignty.