At the Deutsche Bundesbank conference in Germany, Fabio Panetta, executive board member of the European Central Bank (ECB) stated it is currently exploring ways to incorporate distributed ledger technology (DLT) into existing payment settlement systems.
Panetta also stated it requires a wholesale central bank digital currency (CBDC) because market participants anticipate it.
In regards to DLT, Panetta is likewise not totally convinced. He noted, “Experiments conducted by both private firms and central banks must still prove that DLT can offer more benefits than existing technologies.”
The ECB has thus far concentrated its efforts on developing a customer-facing or retail CBDC. Panetta said that the central bank has begun to consider whether or not to permit a wholesale CBDC for the settlement of DLT-based securities transactions between institutions.
Multiple anonymous sources note that the ECB has been asking banks about this recently.
In order to tokenize assets like security tokens or use blockchain for post-trade settlement of transactions, many institutions are considering the use of DLT platforms.
To solve this issue, the European Union also developed rules to assist the EU DLT Pilot Regime.
Many of these players anticipate considerable DLT adoption in the banking sector, Panetta added.
A central bank payment using the current method to settle DLT-based transactions was previously tested by the German central bank using Europe’s TARGET 2.
Even while this might be a good beginning point, many people think that there must be currency on the ledger in order to completely benefit from DLT’s efficiencies.
Panetta argued that the ECB will not enter the market first and will instead watch to see how extensively stablecoins and central bank digital currencies catch on.
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According to Panetta, the ECB will consider building bridges between current European real-time payment systems or its own digital euro if stablecoins and central bank digital currencies are more widely utilized.
Due to the current difficulties of cross-border and cross-currency payments, bankers believe that stablecoins have the greatest potential in huge everyday wholesale transactions that take place between banks abroad, Panetta added.
But he pointed out that the ECB is suspicious of the fact that significant blockchain networks predominately operate outside of Europe, which raises concerns concerning strategic autonomy.
Panetta concluded by saying “But regardless of the technology used by market participants for their wholesale payments and securities transactions, our goal will always be the same: e
