European Central Bank (ECB) Says It will Put More Focus on Its Retail CBDC

The Consensus 2020 crypto event has just kicked-off. However, this year due to the COVID-19 situation, this will be a completely virtual conference for the first time. The entire focus of the ECB was on executive board member Yves Mersch who stressed on the benefits of having a retail central bank digital currency (CBDC).

In his opening speech at the conference, Mersch said: “A wholesale CBDC, restricted to a limited group of financial counterparties, would be largely business as usual. However, a retail CBDC, accessible to all, would be a game-changer, so a retail CBDC is now our main focus.”

In his larger focus for retail CBDC, Mersch cited a report by the Bank for International Settlements (BIS) that showed that nearly 80% of all its member 66 banks are working on CBDCs with the ECB also being among them.

Speaking about ECB’s support for having a CBDC, Mersch said: “We have to be ready. Ready to embrace financial technological innovation which has the potential to transform payments and money faster, and in more disruptive ways, than ever before”.

Mersch also added that cash still dominates as a preferred mode of payment capturing nearly 76% of all transactions across Europe. The total bank note circulation in March 2020 reached a peak of €19 billion.

Speaking at the five-day conference, “The ECB’s debate on CBDCs is therefore mainly analytical. Whether and when it becomes more of a policy debate will largely depend on the preferences of households”.

So far, there’s no serious use-case for the CBDC, however, the ECB continue to explore “the optimal design of a CBDC so that we will be well prepared should we ever take a policy decision to issue a digital currency.” 

However, he also stated that the implementation of retie CBDC would take some time as other usual businesses do. He added: “You may wonder why central banks have not chosen to provide retail access to central bank money despite access to the technology so far […] The main reason is that introducing a retail CBDC could have major consequences for the whole financial system.”

Several countries across the globe are working towards establishing their own CBDCs with China taking the most accelerated position. The Asian economic giant wants to reduce its dependency on the U.S. Dollar and thus has initiated some measures with Digital Yuan.

Europe, with its fragile economic condition is working on a similar alternative. Recently, the Dutch government said that it can play a leading role in establishing a pan-Europe digital currency called the Digital Euro.