The European Banking Federation (EBF) shared its vision for a Digital Euro Ecosystem that uses wholesale and retail CBDCs and bank-issued money tokens.
The European Banking Federation (EBF), which includes 33 national banking associations and more than 3,500 individual commercial banks, presented a document outlining the future pan-European digital asset system. The core of the system is to be the digital euro (CBDC) in retail and wholesale versions, supplemented by tokens from private banks.
The Digital Euro Ecosystem envisages three layers:
- The European Central Bank level. This includes issuance, technical support, and convertibility, as well as the definition of AML, KYC, and other standards for market participants.
- Level A. This is similar to the Single Euro Payments Area (SEPA) for CBDCs. A pan-European circuit that involves all EU industry bodies and ensures interoperability with other central bank digital currency systems.
- Level B. The private sector, which operates and offers innovative value-added services based on the standards, regulations, and rules established in the first two levels. In particular, this level envisions the development of payment solutions for digital assets.
The system’s main values, according to the EBF, should be stability and confidentiality. It’s also intended to ensure that government agencies and the private sector work more closely together to respond to “the fundamental changes and risks to the monetary and financial system.” The document particularly emphasizes the role of the private sector in developing appropriate infrastructure where Europe is dependent on foreign actors.
Blockchain is only mentioned in the context of a wholesale CBDC, which will be based on a distributed ledger (DLT) and enable cross-border transactions. However, bank-issued money tokens are expected to play a crucial role for business needs. Specifically, they’ll enable the use of smart contracts and automate various industrial processes. The document notes that additional standardization will be required for bank-issued money tokens.
It should be noted that the idea of developing the digital economy with bank-issued money tokens is already being actively worked out by the Swiss Bankers Association (SBA), considering them as an alternative to stablecoins. JPMorgan Chase analysts also suggest using deposit tokens as a basis for “stable digital money” and commercial banking based on blockchain technology.
