The Italian Banking Association (ABI), made up of over 700 Italian banking institutions, has kickstarted a phase of experiments to consider the merits of minting a ‘digital euro’. Additionally, the industry group said it wants to participate in projects and trials of a central bank digital currency (CBDC), which would be equivalent to an electronic banknote backed by the ECB.
In cooperation with its research arm, ABI Lab, Associazione Bancaria Italiana announced its plans to pilot a digital euro, aimed for interbank settlements, back in June. The experiments will both revamp interbank settlements and aim to improve the execution of cross-border payments, as well as revisit how it would make a CBDC available.
ABI prioritised the need for a framework to be fully compliant with EU regulations and to protect the personal data privacy of their citizens.
The ABI says that most banks in Italy are already operating with distributed ledger technology, via the Spunta project, which integrates blockchain to speed up the processing of interbank settlements.
“The experimentation project is divided into two work areas: one involving the infrastructure and distribution model to analyse technical feasibility, and the second focusing on programmability to experiment with use cases that can differentiate the central bank’s digital euro from the electronic payments already available,” the ABI explains.
An ECB-Backed Digital Euro in the Works
According to the banking association, an ECB-backed digital currency would revamp the traditional banking system like P2P transactions, machine-to-machine transactions, and better manage exchange rate and interest rate risk thanks to the programmable capabilities of crypto-like currencies.
The launch of a digital euro has been debated for almost two years now, but the bloc countries and its respective regulators are no closer to launching a unified cryptocurrency for its citizens. The European Central Bank said it would start with an investigation phase to decide whether to pursue or abandon plans to issue a digital euro toward mid-2021.
The European Commission published in September its EU legislative framework for crypto assets, which came as part of the broader policy initiative on digital finance. The proposal offers a bespoke legislative regime for markets in crypto-assets and relevant service providers not covered elsewhere in the EU financial services regime.
Most recently, the German Finance Minister said he rejects privately-issued digital currencies like Facebook’s Libra and JPMorgan Coin. Furthermore, Berlin said earlier it will work closely with its European and international allies to prevent cryptocurrencies from becoming alternative currencies.