ECB advances CBDC platform amid US ban
The European Central Bank (ECB) is expanding the development of a wholesale central bank digital currency (CBDC) payment system to settle transactions between institutions.
The announcement, made on February 20, outlines a phased approach to establishing the new system.
According to the ECB, the first phase involves developing the CBDC settlement platform.
The second phase includes deeper integration into existing ECB systems, such as foreign currency exchange markets.
ECB executive board member Piero Cipollone, who oversees the wholesale CBDC initiative, stated that the program aims to achieve “a more harmonised and integrated European financial ecosystem.”
Since 2020, the ECB has been exploring CBDCs in different capacities, including a consumer-facing retail digital euro and wholesale cross-border settlement between central banks.
CBDCs have faced criticism regarding privacy concerns, potential threats to individual autonomy by centralised state entities, and the lack of fundamental change in the inflationary mechanics of digitised fiat currency.
Meanwhile, in the United States, President Donald Trump signed an executive order on January 23 prohibiting the development of a CBDC and commissioning a working group on digital assets.
Yifan He, founder of blockchain firm Red Date Technology, told that Trump’s order likely impeded all CBDC projects worldwide.
Following Trump’s ban, Cipollone reinforced the EU’s need for a digital euro to compete with privately issued stablecoins.
He added that the growth of privately issued cryptocurrencies and stablecoins could further disintermediate commercial banking institutions and central banks.
During a press conference on January 30, ECB president Christine Lagarde expressed confidence that central banks under the eurozone system would not adopt Bitcoin as a reserve asset.
Lagarde suggested Bitcoin (CRYPTO:BTC) was too volatile, illiquid, and unsafe for Europe’s banking institutions.
The ECB is also exploring ways to settle blockchain-based transactions in central bank money.
Jürgen Schaaf, Adviser for Market Infrastructure and Payments at the ECB, discussed timelines, goals, and the role of banks in the new ecosystem in a Deutsche Bank Research webinar.
The BIS now sees the likelihood that central banks will issue wholesale CBDCs by 2030 exceeding the likelihood of retail CBDC issuances.
Disclaimer: The content of this article solely reflects the author's opinion and does not represent the platform in any capacity. This article is not intended to serve as a reference for making investment decisions.
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