EBF proposes digital euro, wCBDC, bank tokens

The European Banking Federation (EBF) has published a paper outlining its vision for the future digital money ecosystem, in particular the retail digital euro. The carefully worded paper expressed the values and concerns of commercial banks regarding the digital euro.

The 28-March-released report highlighted the bank’s core values, such as stability and confidentiality. It called for a closer partnership between the public and private sectors in introducing the digital euro.

The paper stated, “There is currently no dialogue to address the fundamental changes and risks to the monetary and financial systems.” Concurrently, a framework for permanent high-level engagement is required.

The EBF ecosystem vision emphasized the private sector’s role in all aspects, beginning with infrastructure, where Europe must reduce its reliance on external “actors.”

This ecosystem would include three components: the digital euro, a wholesale central bank digital currency (CBDC), and money tokens issued by banks.

In the EBF’s view, the digital euro should have three levels: a role for the European Central Bank and two industry levels, the first of which would interact with the Single Euro Payments Area and the second of which “would be developed and operated by the private sector in accordance with the principles established in the previous layers.” These principles are not yet fully developed:

“The European market needs the authorities to clarify the interaction of different and converging policy objectives, especially when it comes to the development of pan-European payment solutions at the Point of Sale / Point of Interaction.”

The paper was careful to only mention blockchain technology in relation to a subset of its anticipated ecosystem. It was assumed that a wholesale CBDC market, where interoperability is essential for facilitating cross-border transactions with central bank money, would utilize distributed ledger technology (DLT).

Moreover, bank-issued money tokens played a crucial role in the EBF’s vision for “business requirements such as automated industrial processes that run on DLT and use smart contracts.” Apparently, these tokens correspond to Industry Level B of the digital euro scheme.

The paper noted that additional standardization would be required for these solutions as well.The EBF represents 33 national banking associations and 3,500 individual financial institutions.