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Business & Finance

ECB's digital euro could run on instant payment platform, Visco says

  • Like banknotes, digital euros would give holders a direct claim on the central bank, making them safer than deposits at commercial banks.
  • "TIPS could be one of the pillars for the possible implementation of a digital euro," the report said.
Published January 29, 2021

ROME: The European Central Bank is exploring ways to launch a digital version of its euro currency, ECB policymaker Ignazio Visco said on Friday, using existing systems alongside new technology.

The ECB is among major central banks around the world studying digital versions of their currencies to address demand for electronic means of payment and fend off competition from private tokens such as Bitcoin and Facebook's proposed Diem.

Like banknotes, digital euros would give holders a direct claim on the central bank, making them safer than deposits at commercial banks.

Visco said a digital euro, if and when it launches, could run on the existing Target Instant Payment Settlement (TIPS) system, which already offers pan-European real time fund transfers.

"In conjunction with the European Central Bank, trials are also under way to explore the possibility of using TIPS as a possible technical solution for introducing a digital euro," Visco, the governor of the Bank of Italy, said while presenting a report on the system.

"TIPS could be one of the pillars for the possible implementation of a digital euro," the report said.

HYBRID STRUCTURE Other Bank of Italy officials said they were carrying out a digital euro trial using a combination of TIPS and distributed ledger technology (DLT) - a decentralised digital system for recording transactions between parties in multiple places at the same time, such as a blockchain.

The hybrid system allows thousands of payments per second to be processed at any time of day or night, key requirements of a digital currency, they added.

Initial results from the trial will be submitted to the Eurosystem High-Level Task Force on central bank digital currency by end-March. The ECB governing council will then consider whether to proceed with an investigation to assess the feasibility and costs of the project, the Bank of Italy said.

An investigation would start in April and last 18 months, it added.

ECB President Christine Lagarde said in a recent interview with Reuters she hoped a digital euro would launch within five years.

But Bundesbank President Jens Weidmann, whose native Germany is among the euro zone countries where cash use is most prevalent, has said launching a digital currency would "be an immense logistical and technical endeavour and, therefore, would be bound to take time".

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