ECB and Digital Currency?
Yves Mersch, a Member of the European Central Bank’s Executive Committee and former Governor of the Central Bank of Luxembourg gave a speech this week in Helsinki, describing some of the opportunities and challenges that central banks face as they consider the possibility of issuing an official digital currency. A fiat version of a bitcoin, if you like.
Some of the technical issues are clear and are being researched by a number of central banks around the world. Mr Mersch argues that “If a more efficient, but absolutely safe, technology for central banking operations can be found, introducing it could reduce costs for both the central bank and users, and therefore for society as a whole.”
His speech covers a number of other areas that will need to be considered. Should a digital currency be more like cash, where value is settled by its movement from one person to another, anonymously? Or should settlement be more like an electronic account, and involve recording the movement from one account holder to another, monitored by the central bank itself? DLT might be able to deal with either scenario.
He also asks whether digital currency on deposit with a central bank should be remunerated – should it be interest bearing? There are important issues for monetary policy as well as, arguably, commercial bank safety and stability, depending on the answers to these questions.
Well worth a read for policy makers and regulators that are preparing for the future, as well as technologists and Fintech professionals that are exploring these fields.
At XBRL International we are working through an update to the Units Registry which is an extensive and authoritative guide to reporting units such as currency codes, and is used to help check the validity of digital reports. The updates will take into account Bitcoin and other kinds of cryptocurrencies. But we don’t expect that fiat digital currencies of the sort being described in this article will be added in the immediate future.
Why? Just in case this speech has you running to the local gold market in fear, don’t panic quite yet. Mr Mersch is quick to point out that in Europe, notwithstanding the near universal use of EFTPOS and other kinds of card facilities in the north, the demand for cold hard cash in the Eurozone overall continues to soar.