ECB official says digital currency of wholesale central bank is "viable option"

An official of the European Central Bank (ECB) has been pronounced generally in favor of the digital currencies of the wholesale central bank (CBDC).

Vitas Vasiliauskas, member of the Governing Council of the ECB and chairman of the board of directors of the Bank of Lithuania, made these comments during a speech recently delivered at a conference in the United States , the text of which was published by the Bank of International Settlements on Monday.

Vasiliauskas said the question was whether the CBDCs should be retailers, wholesalers or both. A retail CBDC would be accessible to the general public, while a wholesale version would be limited to a restricted circle, primarily financial institutions. Between these two types, "there are also several theoretical sub-models," said the manager.

A wholesale CBDC could be used to improve the efficiency of payments and settlement of securities transactions, as well as to reduce counterparty credit and liquidity risks, Vasiliauskas said, adding:

"[A value-based wholesale CBDC] replace or supplement the central bank's reserves with a restricted access digital token. A token would be an badet, which means that during the transaction, the sender would transfer value to the recipient without an intermediary. This is something fundamentally different from the current system in which the central bank debits and credits accounts without transferring actual values. "

On the other hand, a retail CBDC could be either value-based or based on an account, he said, adding that the former might look like cash liquid, guaranteed by central banks, while the second could be in the form of an account at central banks, available to all members of society.

However, the problem with retail CBDCs is that it has substitutes and is not viable if a cost-benefit badysis is taken into account, Vasiliauskas said.

For example, he said, the Bank of Lithuania already provides a payment infrastructure called Centrolink, which supports "24/7 instant payments" and is accessible to all service providers. of payment. "Such developments limit the potential added value of the retail CBDC."

"Therefore, to badess the balance between risks and benefits from the standpoint of generally conservative central banks, the wholesale CBDC seems to be a more viable option in the future," Vasiliauskas added.

The official concluded that while the Bank of Lithuania sees potential in the CBDCs, it is currently "cautious". "At the moment, it seems like a pretty distant prospect," he said.

In addition, according to Vasiliauskas, it would be necessary to better understand theoretically the functioning of any type of CBDC and to take advantage of practical pilot experiences.

Vitas Vasiliauskas image via the Bank of Lithuania