ECB may launch wholesale CBDC trials in 2024

The European Central Bank (ECB) “new technologies for wholesale settlements contact group” held its first meeting on June 21, 2023, marking the start of the Eurosystem’s exploratory work on how wholesale financial transactions recorded on distributed ledger technology (DLT) platforms could be settled in central bank money. Exploratory work is expected to begin in 2024 with trials or experiments to launch later in 2024. Initially, three types of interoperability solutions will be explored; the Deutsche Bundesbank’s trigger, Banca d’Italia’s TIPS Hash-Link, and the Banque de France’s wholesale central bank digital currency (CBDC) based full-DLT interoperability solutions. [Read more at the ECB]

It is notable that the ECB meeting minutes discussed above don’t mention the word “central bank digital currency” anywhere, although Rosa Giovanna Barresi made the good point that the ECB prefers to call what has become popularly known as “wholesale CBDC” “central bank money (CeBM) made available on a distributed ledger”. The reticence to calling it “wholesale CBDC” is evident in a September 2022 speech by the ECB’s Fabio Panetta, which points out that wholesale CBDC is nothing new:

There is a widespread misconception that wholesale CBDC does not yet exist. In fact, central bank money (CeBM) has been available in digital form for wholesale transactions between banks for decades. This misconception is fueled by the commonly held assumption that wholesale CBDC needs to be operated using DLT. But wholesale CBDC is not synonymous with DLT, as it can be based on any digital technology. In the euro area, the Eurosystem offers banks the possibility of settling wholesale digital transactions through its TARGET Services using a centralized ledger.

Italian banks are cooperating in a wholesale CBDC project

And speaking of Banca d’Italia, according to ThePaypers, Associazione Bancaria Italiana (ABI) has brought together 18 commercial banks to “collaborate” with the central bank in a CBDC pilot. In this Project Leonidas the banks use a shared private ledger to streamline interbank payments using a pretend DLT-based wholesale CBDC. This sounds very similar to the ABI’s Project Spunta, a DLT-based platform now in production that  is used to settle small interbank transactions, with Project Leonidas being a scaled up version to handle large interbank transactions. However, it doesn’t actually seem to be CBDC-based, even though it’s been accepted into the Banca d’Italia’s Milano Hub innovation facilitator. In other words, the “wholesale CBDC” used is not tokenized CeBM. [Read more at the Paypers]

Fidelity refiles for spot bitcoin ETF

Asset manager Fidelity has refiled with the US Securities Exchange Commission (SEC) paperwork for its Wise Origin Bitcoin Trust spot bitcoin exchange-traded fund (ETF), weeks after BlackRock submitted paperwork for its iShares Bitcoin Trust, also a spot bitcoin ETF. Fidelity had originally applied to launch the Wise Origin Bitcoin Trust in 2021, but that effort it was rejected by the SEC in 2022. [Read more at CoinDesk]

Mastercard introduces ‘Multi-Token Network’ (MTN)

MasterCard introduced its Multi-Token Network, effectively an app store powered by blockchain technologies for building regulated financial applications. The platform will provide a range of tools that Mastercard has developed, including a private version of the Ethereum blockchain, for developers to build innovative interoperable applications. The first phase of the applications will be powered by tokenized bank deposits. [Read more at MasterCard]

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*For those interested in intra-day updates, check out my searchable Diigo Fintech developments database, which is also a good place to go to query for past developments: https://www.diigo.com/user/kiffmeister/ART.

Upcoming conferences, webinars and speaking engagements:

• I’ll be participating in Currency Research’s in-person Global Payments Summit in Cape Town from June 28 to 30. [Register here]
• I’ll be lecturing at the Digital Euro Association (DEA) Digital Money Academy on July 27, 2023. [Register here]

Kiffmeister’s global central bank digital currency monthly monitor

Just a reminder that I produce a monthly digest of central bank digital currency (CBDC) developments exclusively for the official sector. So for any of you out there who work for a central bank, ministry of finance or international financial institution who would like to receive it by email on the first business day of every month, please DM me on LinkedIn or email me at chronicles@kiffmeister.com.

The Sovereign Official Digital Association (SODA) is a technology-agnostic firm offering advisory services at the intersection of central banking, digital finance and the web3 industry, aiming to make public digital money a reality. SODA believes institutions in the existing financial ecosystem should have access to the tools and resources they need to move from discussion to action. SODA offers ‘real life’ use cases to help test digital money and drive adoption as central banks and other public institutions explore the future of a more financially inclusive world powered by interoperable blockchain-based networks. SODA would love you to join us on this journey – please get in touch (chris@sodapublicmoney.org).

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