For the ECB, the main obstacle to a cryptocurrency is not technical

After the analysis, the European Central Bank is ready to quickly begin a political and testing phase of a cryptocurrency or CDBC. But for Yves Mersch, director of the ECB, the main obstacle to overcome is philosophical.

Several EU member states have moved from study to experimentation. This is the case, for example, with Sweden. At the European Central Bank (ECB) level, this stage has not yet been reached. This will not be long, however.

During the online edition of the Consensus conference, an ECB executive took stock of progress in the CBDC sector. However, there is no question of going it alone in this matter, underlines Yves Mersch, member of the executive board of the central bank.

Retail CDBC “would be a game-changer”

Especially since the latter seems to want to favor a retail CDBC, to be distinguished from a wholesale digital currency. Mersch considers that the second category would fall under “business as usual”.

In comparison, “a retail CBDC, accessible to all, would be a game-changer. This is why we are now focusing on a central retail digital currency, "said the ECB representative.

This choice marks a difference from the policies followed so far by central banks. These favor the wholesale CBDC, intended for exchanges between banks and central banks. The reason is simple for Yves Mersch: the risks for the entire financial system.

But if the ECB is engaged in the implementation of such a cryptocurrency, launch and adoption depend on other factors. The member of the executive board thus recalls that citizens remain very attached to cash in Europe.

Imminent tests of a cryptocurrency in Europe

Despite exceptions, as in the north of the continent, up to 76% of transactions in the euro area are carried out in cash. Cash therefore accounts for more than half of the total value of payments.

Precipitation is therefore not required. The challenge for the European Central Bank is therefore to be ready when consumer demand is expressed. The ECB is thus preparing to switch from the analytical phase of exploring the CBDC to political decision-making and the launch of tests.

Technologically, a CDBC would require the ECB to process 300 to 500 million accounts, compared to around 10,000 to date. However, such a change of scale would not be a problem according to Yves Mersch.

According to the representative of the central bank, the issue is not technical. "In theory, it is not a technological constraint, it is a philosophical constraint on the way you manage your company" he advances.

Whether the obstacles are technical or political, the ECB must for the moment initiate the experiments. Yves Mersch said that the experiment, based on different scenarios, will be initiated over the next two months.