ECB President Christine Lagarde Confirms Wholesale CBDC Considered

At a conference hosted by the Banque de France, European Central Bank (ECB) President Christine Lagarde believes that distributed ledger technology is an important part of the payments infrastructure if adopted.

In addition, at the conference, EU Commissioner Mairead McGuinness said that the Commission plans to propose legislation for a ‘possible’ digital euro in 2023 to enable parliament and the European Council to debate it.

The digital euro project is now at the prototype stage, and Banque de France Governor François Villeroy de Galhau confirmed that a decision on whether to proceed will be taken by the end of 2023, with a possible launch date of 2026 or 2027.

While work on a euro central bank digital currency (CBDC) has been concentrated on the retail side, the ECB stated earlier this week that it is also investigating a wholesale CBDC for interbank payments.

President Christine Lagarde said:

“If commercial banks expect distributed ledger technology to be part of improved payment infrastructure, then we should certainly be open to it and be prepared to endorse distributed ledger technology as part of this infrastructure mechanism.”

A significant distinction between a wholesale CBDC and a retail CBDC is that central banks currently distribute digital money to commercial banks, albeit without using blockchain. As a result, there are no regulatory obstacles to a launch.

Talking about the timing of a CBDC, the French central bank Governor stated:

“This time could come sooner than expected with the upcoming entry into application of the so-called European Pilot Regime in early 2023. This new regulation offers a unique opportunity for the Eurosystem.”

He was alluding to legislation that allows for securities tokenization pilots, which allow for the waiver of certain requirements. These include limitations on exchanges that interact directly with customers and the elimination of the separation of trading and post-trade operations, which can both occur on the same ledger.

For two years, the Banque de France performed nine tests with wholesale CBDC and recently announced that it will do more. Today, Governor Villeroy de Galhau announced three more wholesale CBDC trials. Two will concentrate on cross-border payments, such as CBDC interoperability and liquidity management solutions that employ DeFi or automated market making (AMM).

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