The European Central Bank (ECB) published an occasional paper on the functional scope, pricing, and controls of Central Bank Digital Currency (CBDC) as well as an opinion on the proposal for a regulation to extend traceability requirements to transfers of crypto-assets. This opinion is in response to requests from the European Parliament and the Council for an opinion on the proposed regulation. In its opinion, ECB welcomes the initiative of the European Commission (EC) to extend traceability requirements to crypto-assets by means of the proposed regulation, which forms part of the Anti-Money Laundering/Countering Financing of Terrorism (AML/CFT) package adopted by EC in July 2020. ECB also welcomes the proposed regulation as a means of leveling the playing field for crypto-asset service providers.
Regarding the scope of the proposed regulation, which involved proposals for a regulation on information accompanying transfers of funds and certain crypto-assets, ECB understands that scope is not intended to cover crypto-assets issued by central banks acting in their monetary authority capacity. However, for the sake of legal certainty and to fully align the scope of the proposed regulation with that of the proposed Markets in Crypto-Assets (MiCA) regulation, ECB proposes to explicitly indicate this in the recitals and provisions of the proposed regulation. The proposed regulation contains references to the term "fiat currencies." In accordance with the Treaties and Union monetary law, the euro is the single currency of the euro area. Nowhere do the Treaties refer to the euro or the member states’ currencies as "fiat" currencies. Against this backdrop, it is not appropriate to make reference in a Union legal text to "fiat currencies." Rather, the proposed regulation should refer instead to "official currencies." In its opinion, ECB also highlighted that aligning the date of application of the proposed regulation with that of the proposed MiCA regulation would be helpful from a systemic and financial stability perspective in order to ensure that the proposed regulation applies to crypto-asset transfers sooner rather than later.
Additionally, the ECB paper on CBDC discusses success factors for such a currency and how to avoid the risk of crowding out. After examining ways to prevent excessive use as a store of value, the study emphasizes the importance of the functional scope of CBDC for the payment functions of money. The paper also recalls the risks that use could be too low if functional scope, convenience, or reachability are unattractive for users. The paper notes that three key success factors of a CBDC will be merchant acceptance; the willingness of intermediaries to distribute it and interact as needed with users; and an attractive value proposition for individuals and firms to use it for payments. This also raises the question of a business model for a CBDC; for example, the incentives for front-end service providers. While there can be little doubt about the merits of CBDC and the need for central banks to follow the change in retail payments habits and technology to continue servicing individuals and firms, this paper has illustrated the complexity of the technical challenges ahead. Designing CBDC to achieve its objectives in a controlled manner will require giving deep consideration to both the economic nature of money as a means of payment and a store of value, and to the rich ecosystems of digital retail payments, the paper concludes.
Keywords: Europe, EU, Banking, Securities, Opinion, MiCA Regulation, CBDC, Digital Currency, Crypto-asset Regulation, Crypto-assets, ECB
Next ArticleNBB Renews O-SII Designation of Eight Belgian Banks
The European Commission (EC) published the Delegated Regulation 2022/25, which supplements the Investment Firms Regulation (IFR or Regulation 2019/2033) with respect to the regulatory technical standards specifying the methods for measuring the K-factors referred to in Article 15 of the IFR.
The Bank of International Settlements (BIS) published a paper that assesses the ways in which platform-based business models can affect financial inclusion, competition, financial stability and consumer protection.
The European Supervisory Authorities (ESAs) published the list of identified financial conglomerates for 2021.
The Australian Prudential Regulation Authority (APRA) granted license to Barclays Bank PLC and Crédit Agricole Corporate and Investment Bank to operate as foreign authorized deposit-taking institutions under the Banking Act 1959.
EU published, in the Official Journal of the European Union, a corrigendum to the Delegated Regulation 2015/35, which supplements Solvency II Directive (2009/138/EC).
The European Banking Authority (EBA) published an Opinion on the scale and impact of de-risking in European Union and the steps that competent authorities should take to tackle unwarranted de-risking.
The French Financial Markets Authority (AMF) published its 2022 work priorities, along with the supervisory priorities for 2022.
The U.S. Department of the Treasury issued a determination on a request for an exemption, by RBC US Group Holdings LLC, from certain requirements of the rule implementing the qualified financial contracts (QFC) recordkeeping requirements under the Dodd-Frank Act.
The Financial Conduct Authority (FCA) announced that publication of 24 LIBOR settings has ended and that, going forward, the 6 most widely used sterling and Japanese yen settings will be published using a changed methodology.
The People’s Bank of China (PBC) formulated the recently issued Fintech Development Plan (2022 to 2025) under the Outline of the 14th Five-Year Plan (2021-2025) for National Economic and Social Development and the Long-Range Objectives through the Year 2035.