Europe’s seen a spate of significant developments around big institutions exploring central bank digital currency (CBDC) efforts in recent months. Now, De Nederlandsche Bank (DNB), the central bank of the Netherlands, wants its country to be a key locale in these efforts.
On Tuesday, April 21st, the DNB published a report titled “Central bank digital currency: Objections, conditions, and design choices.”
In an associated press release covering the report’s top findings, the DNB said that programmable CBDC tech posed new kinds of opportunies and risks for the Eurosystem.
The advantages of state-backed digital money, the DNB argued, centered around the tech’s ability to optimize cross-border payments and “promote diversity in the payments market,” while on the flip side the DNB asserted that CBDCs “can also exacerbate the risk of a bank run.” Such trade offs would need to be extensively considered going forward, the major Dutch institution said.
At the end of its new report, the Dutch central bank concluded the bank intended to actively participate in any related policy discussions around a European CBDC in the future. Moreover, the bank concluded that if Europe’s leadership did decide to decisively move forward on a CBDC trial, the Netherlands would be an excellent sandbox for early initiatives:
“The DNB is prepared to play a pioneering role. A CBDC does not yet exist and so all the implications cannot be thought through in advance. That is why a gradual introduction is obvious … This can be experiments in a controlled setting but also experiments involving issuing CBDCs to the public. The Netherlands offers good opportunities for these efforts due to its status as a progressive testing ground for digitization efforts.”
Major Europrean CBDC Activity Lately
The Netherlands has one of the world’s top 20 economies, so the DNB’s CBDC report is certainly no small matter. The notable development is also only the latest CBDC-linked headline to make waves in Europe.
For example, last fall more than 200 German banks came together to call for European collaboration on a programmable, digital euro. The Association of German Banks said:
“[A] programmable account and crypto-based digital euro should be created and its interoperability with book money ensured. The condition for this is establishing a common pan-European payments platform for the programmable digital euro.”
Then in December 2019 François Villeroy de Galhau, the Governor of the Bank of France, said the French central bank would be advancing its CBDC explorations to become a first-mover in the arena but wouldn’t rush the efforts.
“I see an interest in rapidly advancing the issuance of at least one wholesale central bank digital currency in order to be the leading issuer internationally and derive the profits earmarked for a reference central bank digital currency,” de Galhau said at the time.
Just days after the governor’s remarks, the European Central Bank (ECB) President Christine Lagarde argued at her inaugural press conference in that position that Europe “better be ahead of the curve” when it comes to stablecoins, or fiat-pegged cryptocurrencies.
All these remarks show the digital tide is turning in Europe, though it’s still unclear how all the pieces will fall into place. In the very least, from what we’ve seen so far it will likely be the continent’s most influential nations — Germany, France, the Netherlands, etc. — that will pave the way as euro CBDC first-movers.
The growing attention to CBDCs in Europe comes at a time when such digital currencies have also been picking up considerable steam in Asia. Perhaps China will be the first country out of the gates when it comes to a CBDC, but it’s increasingly seeming like the European Union will be hot on the Asian superpower’s heels.