European Central Bank Considering Digital Currency – Cryptocash

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ECON Committee meeting. Nomination ECB board.

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Yves Mersch, Member of the Executive Board of the European Central Bank (ECB), spoke earlier this week at the Farewell ceremony for Pentti Hakkarainen, Deputy Governor of Suomen Pankki – Finlands Bank in Helsinki –  on how the ECB could design, issue, and manage a central bank digital currency. 

“Today I will focus on one type of digital money – Central Bank Digital Currency, or Digital Base Money (DBM). This is money that is characterised by two features: (1) like banknotes in circulation, DBM is a claim on the central bank; (2) in contrast to banknotes, it is digital.”

“…DBM held by non-banks could either be account-based – in this case, the central bank would open an account for every interested non-bank – or it would be value-based like cash. In this case, interested non-banks would need to be equipped with electronic wallets for holding and using DBM. A transfer of DBM would require that the funds be debited from the payer’s electronic wallet and credited to the payee’s device without the involvement of the central bank.”

“Whether DBM is account based or value based might matter for several reasons. Let me mention two. First, value-based and account-based DBM may require very different types of technology with specific safety features and costs. DLT may be fit for both, but in different ways. Second, anonymity towards the central bank can be achieved only with value-based DBM. These factors may influence the demand for DBM by non-banks and whether DBM would be used more to substitute cash or bank deposits.”

Mersch said that one reason why the discussion on DBM for non-banks has started is that they  now have technologies that could make it easier to issue DBM. This includes, in particular, Distributed Ledger Technology (DLT) or Blockchain.

“DLT carries great potential, but is it already advanced enough to be applied by central banks? Reputation is crucial for central banks. We cannot afford mistakes in the technologies we employ. Before the central bank can start providing DBM to non-banks, we need to be sure not only that DBM is unlikely to have negative economic side-effects, but also that the relevant systems are operationally efficient and safe.”

About Richard Kastelein

Richard Kastelein is the Founder, Publisher and Editor in Chief of industry leading online publication, Blockchain News, co-founder and director at education company Blockchain Partners and partner of token design and ICO architecture company Cryptoassets Design Group.

As a prominent keynote presenter, Kastelein has spoken on Blockchain at events in Gdansk, Amsterdam, Minsk, Dubai, Antwerp, Eindhoven, Bucharest, Munich, Nairobi, Tel Aviv, Manchester, Brussels, Barcelona. San Meteo etc, where he helped spread the cause for Blockchain technology and cryptocurrency and, consequently, has built a notable network in the scene.

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