Several countries, such as China and Sweden, are already experimenting with central bank digital currencies, also known as CBDCs. The use of this new type of money requires a number of aspects, including the advancement of technology and specific regulation. According to an important official from the European Central Bank, the biggest challenge for CBDCs is more philosophical than technological.
Yves Mersch, a member of the ECB’s executive board, discussed CBDC issues again in a “Ask me what” meeting organized by Consensus: Distributed on Monday. At the meeting, the ECB executive affirmed that the central bank continues to deal with issues related to CBDCs and is working closely with the global community of central banks in developing CBDCs.
CBDCs deal with “a philosophical limitation in the way you run your society”.
Mersch gave a keynote address today on global CBDC issues. The ECB official said that one of the potential designs for CBDCs in the euro area would require the ECB to manage a large number of accounts: from 300 million accounts to 500 million accounts. To date, the ECB only operates around 10,000 accounts, said Mersch.
At the last AMA meeting, Mersch was confident that the ECB can process up to 300 million accounts thanks to modern technology. When AMA host Aaron Stanley questioned the feasibility of such a large ECB account increase, Mersch said the main obstacle to the introduction of the CBDC was more philosophical than technological.
“I am surprised that as a technology fanatic you say that with modern technology it is not possible to create 300 million bank accounts. It is undoubtedly an operation and a great challenge. But theoretically it is not a technological limitation, a philosophical limitation, how to do it Society leads. “
The ECB hopes to start implementing the CBDC soon
During the meeting, the ECB executive also presented a rough plan of how the central bank would work to implement the CBDC. According to Mersch, the ECB is on the verge of moving from the CBDC’s analytical exploration phase to policy decisions and testing. The official said that the ECB wants to be ready to implement the CBDC before consumer demand increases in the future.
“At this time, we want to be ready. And that’s why we don’t just study. What we’re doing is in the analytical phase, we want to be ready to move into the political phase very quickly and make political decisions.” […] We will also start with experiments based on the different scenarios […] for the next couple of months. “
The Monday before, Mersch had determined that cash is still one of the most popular payment methods in Europe. 76% of all transactions in the euro area are settled in cash. Mersch emphasized the ECB’s focus on the implementation of the CBDC for retail customers and assured that the central bank would do everything in its power to provide the CBDC solution when needed. “When and when the time comes, we want to be prepared and I assure you that we will be,” he said.
The CBDC issue was the focus of another AMA for Consensus 2020, which was dedicated to the digital dollar project. During the meeting, J. Christopher Giancarlo, former chair of the Commodities and Futures Trade Commission, raised some concerns about human rights violations in China and its proposed digital renminbi.
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