Vitas Vasiliauskas, who is the Chairman of the Board of the Bank of Lithuania and a member of the ECB Governing Council, spoke at the Reinventing Bretton Woods Committee conference in Washington DC about the bank's stance on the central bank digital currencies (CBDCs). He stated that "the Bank of Lithuania is part of the Eurosystem. For us, any significant step in the field of CBDCs would require action at the ECB level. For now, this seems like quite a distant prospect." However, according to him, the wholesale CBDC seems like a more viable option going forward, as opposed to the retail CBDC.
While speaking at the conference, Mr. Vasiliauskas described what a CBDC is and mentioned that a CBDC would be "fundamentally different from private crypto assets. This is because it would be- money! ... CBDCs represent one of the most intriguing and complex ideas in current discussions ... ." However, he added that the Bank of Lithuania is generally "fond of financial innovation" and has plans to open a new generation technological sandbox for testing blockchain solutions (called LBChain). Therefore, the bank does not "reject the potential that CBDCs carry. Yet at this point we remain cautious." According to him, the bank's future position in this domain will be based on a rigorous cost-benefit analysis, after considering the possible alternatives. For instance, the Bank of Lithuania already provides an effective payments infrastructure titled Centrolink. The system supports 24/7 instant payments and is accessible for all payment service operators, including fintech companies.
He concluded that, after assessing the balance between risks and benefits from the perspective of generally conservative central banks, the wholesale CBDC seems like a more viable option going forward, as opposed to the retail CBDC. "However, we feel the need to acquire a better theoretical understanding of the way any sort of CBDC would function and learn from practical pilot experiments. Notably, research and monitoring carried out by international organizations, such as the IMF or standard-setting bodies, could play an important part in finding an optimal future design."
Related Link: Speech
Keywords: Europe, EU, Lithuania, Banking, CBDC, Crypto Assets, Distributed Ledger Technology, Wholesale CBDC, Digital Currencies, Fintech, Bank of Lithuania, BIS
Previous ArticleBCBS Updates FAQs on Basel III Monitoring in May 2019
APRA has concluded its review of the comprehensive plans of authorized deposit-taking institutions for the assessment and management of loans with repayment deferrals.
ESAs (EBA, EIOPA, and ESMA) published the first joint report that assesses risks in the financial sector since the outbreak of the COVID-19 pandemic.
BoE and HM Treasury confirmed that the COVID Corporate Financing Facility (CCFF) will close for new purchases of commercial paper, with effect from March 23, 2021.
ECB published a decision allowing the euro area banks under its direct supervision to exclude certain central bank exposures from the leverage ratio.
ESAs launched a survey seeking feedback on the presentational aspects of product templates under the Sustainable Finance Disclosure Regulation (SFDR or Regulation 2019/2088).
ECB published input of the European System of Central Banks (ESCB) into the EBA feasibility report on reducing the reporting burden for banks in EU.
EC adopted a decision determining, for a limited period of time, that the regulatory framework applicable to central counterparties, or CCPs, in the UK and Northern Ireland is equivalent to the requirements laid down in the European Market Infrastructure Regulation (EMIR or Regulation 648/2012).
EBA has decided to phase out the guidelines on legislative and non-legislative moratoria of loan repayments, in accordance with the earlier specified end of September deadline.
EBA published an Opinion addressed to EC to raise awareness about the opportunity to clarify certain issues related to the definition of credit institution in the upcoming review of the Capital Requirements Directive and Regulation (CRD and CRR).
ECB finalized the guide on assessment methodology for the internal model method for calculating exposure to counterparty credit risk (CCR) and the advanced method for own funds requirements for credit valuation adjustment (A-CVA) risk.