Abi at work with the ECB on digital currency
Market turmoil and the economic crisis were not enough, we also lacked the digital euro. The banking world is changing at an impressive speed. And lenders are working hard to understand how to react to the new challenges posed by technology. First of all, that of digital currency. Because of this the Italian Banking Association it has set to work alongside the European Central Bank on an issue that risks turning the tables on banking institutions and compressing their role as intermediaries.
“The digital euro project, as well as the underlying technology, could be a cornerstone of the European digital economy, especially if it manages to enable supervised intermediaries to develop innovative services on it with added value, making it possible to satisfy currently unmet needs or to simplify existing processes and to expand the offer of innovative services and products to customers” explains the ABI in an in-depth document on the digital euro theme. The dossier then gets to the heart of what the priorities are for the credit institutions which at the moment are also grappling with outstanding credits from Superbonus and a possible new wave of bad debts.
The three pillars of the ABI for a digital euro
For the Association “it is essential safeguard the intermediation role of banks for the economic system”. In other words, “it is important to maintain the role of intermediaries of the banks in the economic system. Furthermore, a two-tier architecture is needed which, alongside that of the Eurosystem, preserve the active role of intermediaries in processes such as identification, distribution of money, validation of transactions and anti-money laundering controls”. In practice, lenders are carving out a new function for themselves in the nascent digital currency market.
Thus they promote their future. “Supervised intermediaries, given their direct contact with users, are the most suitable entities to identify advanced payment services that meet customer needs. The digital euro, according to the ABI, must be functionally different from electronic payment instrumentsto complement and not compete with commercial bank money, the initiatives and investments of the banks” reads the document.
In summary for the ABI “as happens today for banknotes and coins which have a different function and “form” compared to electronic payment instruments, such that citizens can immediately notice the differencethe same should happen with the digital euro of tomorrow which will have to have different characteristics to allow for specific use cases”.
The new currency in a new world
According to the Italian Banking Association, the digital euro “must perform a role in supporting the digital economy, offering the raw material to offer innovative and value-added services. The key feature to enable this possibility is the programmability of payments realized through Distributed Ledger Technology” it reads.
All this will ensure a balanced system. “Thanks to the programmability of payments, the digital euro could ensure, on the one hand, full control and governance of the issuance by the ECB/Eurosystem and, on the other, allow banks to provide and propose new services, or existing services more efficiently. The digital euro could actually bring “added value” only if it allows to satisfy currently unmet needs or to simplify current processes, what the programmability functions can allow” concludes the document. So everyone will live better in the new digital world. Including banks.