Home Altcoin ECB not close to deciding on CBDC implementation - Yves Mersch

ECB not close to deciding on CBDC implementation – Yves Mersch

Yves Mersch, Vice-Chair of the Supervisory Board at the European Central Bank has come out to express indifference as regards the ongoing trend of Central Bank Digital Currency (CBDC). 

Mersch is of the opinion that the digital currency could affect the whole financial ecosystem and could wipe out the banking system.

He also said at the sidelines of the BAFT Global Annual Meeting, in an interview that ECB is testing products to see what would be possible. 

We are testing different technological products to see what would be possible, what would be technically feasible for us and what would be legally feasible for us. And there is a huge variety of possibilities in Central Bank digital currency, which would have more or less revolutionary consequences he said. 

In previous reports, President of the European Central Bank (ECB) Christine Lagarde announced that the ECB has assembled a task force to look into and analyze the feasibility and potential outcome of establishing a CBDC. 

According to Lagarde, the research was aimed at ensuring the European Central Bank plays an active role in fostering cheap and speedy payment transactions, likewise exploring the benefits of having a CBDC. 

However, Vice-Chair of the Supervisory Board at ECB fears that the CBDC could have an adverse effect on the economy like affecting the whole financial ecosystem and wiping out the banking system.

While discussing that the CBDC could threaten the banking sector by phasing it out he said Then: who will issue the economy with loans? If it is not the banks who have the deposits that they transfer into loans, they would need to raise money somewhere else. That will increase their funding costs in order to cover it, they need to take more risks and so on. 

Lagarde, however, ECB president explained that traditional banks are frequently critiqued for their ‘outdated’ processes in terms of settlement and payments.  She said certain transactions take days to complete; however, with Distributed Ledger Technology (DLT), transaction speed increases drastically.

Mersch also revealed that while the ECB has been assessing the space to increase knowledge from the technical and academic standpoint, the central bank is very far away from a political decision on any implementation.

Previously, the ECB had pointed out the shortcomings in terms of “speed, cost, and inclusiveness,” in existing retail payments, however, ECB has plans according to a document to explore the potential of global stablecoins, while also revealing that the ECB plans to launch an ‘innovative and efficient’ payment solution, much like the Single Euro Payments Area [SEPA] for pan-European countries.

The document read, the ECB will also continue to assess the costs and benefits of issuing a central bank digital currency [CBDC] that could ensure that the general public will remain able to use central bank money even if the use of physical cash eventually declines. 

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Muhaimin Olowoporoku
Muhaimin is a journalist and a crypto enthusiast. He believes in the Africa project and sees blockchain technology as a possible solution alongside developmental journalism

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