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European Central Bank Considering Digital Currency – Cryptocash

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.”

Richard Kasteleinhttps://www.the-blockchain.com
In his 20s, he sailed around the world on small yachts and wrote a series of travel articles called, 'The Hitchhiker's Guide to the Seas' travelling by hitching rides on yachts (1989) in major travel and yachting publications. He currently lives in Groningen, the Netherlands where he has set down his anchor to raise a family and write. Founder and publisher of industry publication Blockchain News (EST 2015) and director of education company Blockchain Partners (Oracle Partner) – Vancouver native Richard Kastelein is an award-winning publisher, innovation executive and entrepreneur. He has written over 2500 articles on Blockchain technology and startups at Blockchain News and has also published in Harvard Business Review, Venturebeat, Wired, The Guardian and a number of other publications. Kastelein has an Honorary Ph.D. and is Chair Professor of Blockchain at China's first blockchain University in Nanchang at the Jiangxi Ahead Institute software and Technology. He has over a half a decade experience judging and rewarding some 1000+ innovation projects as an EU expert for the European Commission's SME Instrument programme as a startup assessor and as a startup judge for the UK government's Innovate UK division. Kastelein has spoken (keynotes & panels) on Blockchain technology at over 50 events in 30+ cities.
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