“Research about central bank digital currencies (CBDCs) is much more than just a game,” said Fabio Panetta, a member of the Executive Board of the European Central Bank (ECB). According to him, careful design of CBDCs is crucial to maximizing the benefits of the emerging technology behind central bank digital currencies.
Last year, the European Central Bank launched the investigation phase of the Digital Euro project to address the key issues regarding the design and the distribution of the Digital Euro. Panetta noted that the ECB is planning to combine the efficiency of digital payments with the safety of the central bank money through the Digital Euro.
“CBDC research has made important strides. In just a few years, researchers have moved from the first definitions of CBDC to studying its effects on the financial system and monetary policy, and now to empirical work on its potential design features. This research is an essential part of the analysis that will guide the decisions of policymakers,” Panetta said.
Just like the ECB, several other prominent central banks around the world have increased their efforts for the development of CBDCs. In March 2022, the Bank of England (BOE) and MIT announced a partnership to explore opportunities within the CBDC ecosystem.
CBDC Framework
While Panetta highlighted the growing popularity of CBDCs, he outlined the need for a secure and careful CBDC framework.
“These advances lead me to conclude that, while CBDCs have a number of potentially far-reaching implications for the monetary and financial system as a whole, the careful design will be crucial in allowing us to maximize the benefits of CBDCs and manage any unintended consequences. Research is already providing valuable insights for the ongoing investigation phase of our digital euro project, where we are looking at key issues regarding design and distribution,” he explained.
