Digital banking
project, which is being undertaken in partnership with yet another Spanish bank, CaixaBank, as the only European institution involved in prototyping the new digital currency.
“CaixaBank has extensive experience and leadership in the field of innovation and means of payment,” notes Mariona Vicens, CaixaBank’s head of digital transformation and advanced analytics. “This, combined with the level of quality of its services, internal capacities in project development, and market coverage have been some of the aspects valued at the selection process carried out by the ECB.”
The change in Spain
CBDCs could soon be rolled out across the world, and expressed at its simplest they represent digital banknotes. At the moment, most money is held electronically, though only large financial institutions hold deposits with central banks. CBDCs, however, would extend this facility to businesses and consumers.
Part of the thinking here is that deposits held with banks are at some risk. Banks can collapse – as the recent Credit Suisse disaster has proven – and customers are also bound by a bank’s commercial policies and charges. CBDCs would, however, theoretically remove that risk if a bank were to fail. Using blockchain technology, a CBDC could provide the benefits of a cryptocurrency – including banking the unbanked by incentivising the opening of accounts to access digital wallets – without the downside of extreme volatility. Furthermore, it would wrest more control over financial transactions away from big tech companies. The control, security, flexibility and supposed stability of digital currencies are why they are becoming popular with central banks. In the UK, the government and the Bank of England have expressed the view that a digital pound will be necessary at some point in the future, while Spain’s central bank is set to experiment with wholesale CBDCs, even as the ECB’s project is gathering momentum. Australia recently began a trial of a digital dollar back in August, and the Bank of Thailand is working on a pilot programme for a digital baht. That’s echoed by broader enthusiasm. A 2021 survey of central banks conducted by the Bank for International Settlements (BIS) found that 86% are actively researching the potential for CBDCs, 60% were experimenting with the technology – and 14% were already deploying pilot projects. In Madrid, meanwhile, the Bank of Spain is for its part seeking collaboration proposals from local finance and technology institutions to simulate the movement of funds, experiment with the liquidation of financial assets – as well as analyse the potential benefits of introducing a wholesale CBDC into
Future Banking /
www.nsbanking.com
Mariona Vicens, head of digital transformation, CaixaBank.
David Puente, global head of client solutions, BBVA.
its current processes and infrastructure. For the digital euro project, moreover, CaixaBank is responsible for producing a prototype for peer-to- peer (P2P) online payments using the currency and has already delivered the technical framework to the ECB for review. As Vicens explains: “If a digital euro were to be issued, it would not replace cash or other existing payment methods but instead complement them by becoming another payment option, ultimately contributing to advancing financial inclusion and accessibility.” “The proposal had to involve a digital solution via mobile application that simulates the steps individuals will need to follow to transfer digital euros to their account and/or transfer digital euros to other individuals,” she continues. “Ensuring that this could be done in a seamless and secure way, while also complementing other solutions that already exist in the market, was a main priority.” So far, tests of the technology are reported to have been very successful, though it must still undergo ECB validation. That success, and CaixaBank’s involvement, should be no surprise when considering the bank’s extensive experience and leadership in the field of innovation and payment methods. Technology and innovation have long been at the heart of the bank’s philosophy, and it has more than 11 million users of its digital banking service, the largest customer base in the Spanish financial sector.
86% 60% 14%
The percentage of central banks that are actively researching CBDCs.
The percentage of central banks experimenting with CBDC technology.
The percentage of central banks deploying pilot projects with
CBDC technology. Bank of International Settlements
15
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