The European Central Bank is working on a "retail central bank digital currency" as part of an investigative task force, according to a member of its Executive Board.
Yves Mersch, who also serves as vice chair of the ECB's Supervisory Board, made the remarks during an early-morning keynote address for CoinDesk's Consensus 2020 conference. In a published version of his speech, Mersch talked about the task force and the work it is conducting, mostly notable the retail CBDC versus a "wholesale" focused one.
Mersch acknowledged that such work is taking place against the backdrop of an economy in which the vast majority of euro area transactions – some 76% – are in the form of cash. And to that end, "[t]he ECB’s debate on CBDCs is therefore mainly analytical," he noted.
"The lack of a concrete 'business case' for a CBDC at present should and does not stop us from seriously exploring 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," he went on to say. "To this end, we have set up a task force on a CBDC within the Eurosystem."
He went on to say (emphasis added):
"Most of the money issued by central banks is in fact already digital, albeit not called CBDC. This is true for the bulk of the money issued through our wholesale credit operations with our counterparties. At present, access to the central bank balance sheet offers the possibility to access digital central bank money. What could change in the future is the scope of the parties eligible to access our central bank balance sheets. Indeed, this lies at the heart of the discussion on CBDCs. 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."
Remarking that the "legal basis" for such an initiative will take a great deal of effort, Mersch notably suggested that "a retail CBDC could be based on digital tokens, which would circulate in a decentralised manner – that is without a central ledger – and allow for anonymity towards the central bank, similar to cash."
"Some argue that a token-based digital currency might not guarantee complete anonymity. If that proved to be the case, it would inevitably raise social, political and legal issues," he continued.
A January report from the Bank of International Settlements – considered by many to be "the central bank of central banks" – found that many of the world's central banks are pursuing digital currency-related efforts. Still, that study found that many such initiatives have yet to progress beyond the earliest stages. Still, as the report noted: "Nonetheless, their plans appear to be accelerating compared with earlier expectations."