European Central Bank official suggests multiple uses for a bank-issued digital currency

European Central Bank official Vitas Vasiliauskas discussed the advantages of adopting a central bank digital currency (CBDC) at a conference on Monday, saying it could positively impact financial stability.

According to Vasiliauskas, a CBDC could serve as a medium of exchange, similar to money issued by central banks today. He suggested CBDCs could work as “retail, or wholesale-only currencies, or perhaps both." For instance, digital tokens could be used to transfer value between external or retail parties as a form of bank-issued digital cash.  Or, he noted a wholesale CBDC could contribute to (or replace) a central bank’s reserves.

Vasiliauskas also pointed out that some central bank-operated wholesale payment systems are in need of replacing as they’re “at the end of their technological life cycles.”

“The amount of cash in circulation is declining in some countries. This could mean that one day—even if it seems like a distant prospect—every single person will have to have an account with a private entity just to make payments,” said Vasiliauskas.

Still, he stressed a CBDC is neither a conventional reserve account nor a conventional decentralised crypto asset, hinting at potential push-back from both communities.