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During a speech on Monday at a symposium in Frankfurt focused on settlements, Fabio Panetta, an executive European Central Bank (ECB) board member, stated that the ECB is considering options for integrating distributed ledger technology (DLT) into current payment settlement systems.
According to Panetta, the ECB will consider building bridges between current European real-time payment systems or its own digital euro if stablecoins and central bank digital currencies are more widely utilized.
Due to the current difficulties of cross-border and cross-currency payments, bankers believe that stablecoins have the greatest potential in large everyday retail transactions that occur between banks internationally, Panetta added. However, he pointed out that the ECB, which is responsible for maintaining the stability of the euro in part, is concerned of the fact that significant blockchain networks are concentrated mostly outside of Europe, as this “raises concerns about strategic autonomy.” He added:
“But despite the uncertainties surrounding DLT’s potential, we want to be prepared for a scenario where market players adopt DLT for wholesale payments and securities settlement.”
ECB is also working on CBDC
Notably, in August, ECB declared that central bank digital currencies (CBDCs) are the better choice over Bitcoin for cross-border payments, as TheCoinRise reported.
Panetta made the implication that a key factor deciding the ECB’s direction is how extensively stablecoins or CBDC are used in payments. The current research efforts of the central bank are primarily concentrated on maintaining the euro as a stable currency by being prepared to better connect current payment rails to stablecoins, CBDCs, or more decentralized networks, as necessary.
Real-time payments, a key selling point of stablecoins, already exist in the European financial system, according to Panetta, who also emphasised that blockchain-based payments will need to “prove” that they are stronger than other conventional methods.
The ECB is increasing resources devoted to digital currencies and applications for them. In July 2021, it began a two-year inquiry on the digital euro, and in early September same year, it announced the partners in the prototype development. As TheCoinRise reported, ECB believes that CBDCs have the ability to fight market dominance from big technology giants.
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