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Crypto-assets and payments

Context

Although an increasing number of countries have payment systems that provide inexpensive and near instant domestic payments, challenges in current payment services remain for addressing consumers’ emerging needs. In particular cross-border payments remain slow, expensive and opaque, especially for retail payments. In this context web-based technologies, notably blockchain (or Distributed Ledger Technologies – DLT), enable to provide new payment services be they business-to-consumer or peer-to-peer may prove more attractive.

However, these approaches have to address specific weaknesses, and many regulators consider that stable coins are at this stage, far more fragile. Their value in particular is not entirely stable and may offer no complete guarantee of a refund in the event of fraud. In addition, they often are only partially regulated and often lack of a formal governance structure.

Similarly, DLT is told to have useful applications in particular for securities and their settlement. Transforming securities into digital tokens – representations of value not recorded in accounts – could make ownership records more transparent and settlement much faster.

Here too, tokens challenge investor protection and market integrity, in addition to their management challenges. Finally, increased speed also increases the possibility of settlement failures.

However, according to the ECB Internal Crypto-Assets Task Force the ECB, crypto-assets do not currently pose an immediate threat to the financial stability of the euro area. Their combined value is small relative to the financial system, and their linkages with the financial sector are still limited.

This emerging sector nevertheless requires continuous careful monitoring. Certain specific areas should also deserve updating regulation notably to provide these digital assets with further legal predictability.

Yet, should certain players eventually step in, e.g. Central Banks issuing digital currencies or certain closed loop arrangements notably those benefit from BigTechs global reach, which favour the development of supranational stable coins, may trigger deep evolutions in the financial industry land scape and challenge EU sovereignty, unless regional (cross border) payment schemes rapidly catch-up.

Contributions to the policy debate

Extracted from the main Eurofi publications (Regulatory Updates, Views Magazines and Conference Summaries)

Public and private
sector views

Public authority views

J. Ayuso - Banco de España - A European strategy for retail payments - April 2021 new

B. Balz - Deutsche Bundesbank - Are crypto-tokens the future of money? - April 2021 new

B. Balz - Deutsche Bundesbank - Securing the future of European payments - April 2021 new

D. Beau - Banque de France - Taking the cross-border payments roadmap forward - April 2021 new

U. Bindseil - European Central Bank (ECB) - The G20 cross-border roadmap – The foundations of a future-proof global payments ecosystem - April 2021 new

B. Cœuré - Bank for International Settlements (BIS) - Central banks and trends in digital innovation - April 2021 new

G. Grande - Banca d’Italia - Cross-border payments: more access, less compliance costs - April 2021 new

M. Haag - DG for Financial Stability, Financial Services and Capital Markets Union, European Commission - Crypto assets – reaping the benefits while addressing the risks - April 2021 new

M. Haag - DG for Financial Stability, Financial Services and Capital Markets Union, European Commission - Shaping the payments landscape of the future: the Commission’s Retail Payments Strategy - April 2021 new

T. Rice - Committee on Payments and Market Infrastructures (CPMI) - Building the cross-border payments ecosystem for the 21st century - April 2021 new

F. Van Echelpoel - European Central Bank (ECB) - The retail payments strategy in Europe - April 2021 new

M. Velentza - DG Competition, European Commission - Towards a competitive and innovative European payments market - April 2021 new

S. Yon-Courtin - Committee on Economic and Monetary Affairs, European Parliament - Retail payment strategy: three pillars for the future - April 2021 new

B. Balz - Deutsche Bundesbank - Forming a competitive European payments market that benefits society at large - April 2020

D. Beau - Banque de France - Crypto-assets, acknowledging the potential benefits, tackling the actual challenges - April 2020

U. Bindseil - European Central Bank (ECB) - Key requirements for a future-proof European retail payments market - April 2020

Y. Kawai - Bank of Japan - Covid-19, digitalization of payments, and the crypto assets - April 2020

S. Yon-Courtin - European Parliament - The pan-European payments market: innovative competition and protective autonomy - April 2020