Yves Mersch, Member of the Executive Board of the European Central Bank, spoke at the Deutsche Bank Transaction Bankers’ Forum on 25 April 2016. Transcript here.
The ECB considered the implications of the Central Bank issuing Euros on a distributed ledger. Questions such as the level of access of Central Bank money, should it just be available to banks, what about PSPs or even individuals? Regarding individual access, the ECB said that “citizens would have the choice to hold commercial bank deposits with banks or digital currency at the central bank”. The ECB expressed concern of how the “monetary transmission mechanism [would] work and the economy at large if the basic business model of many banks could be impaired?”. In summary the ECB is hesitant about the level of disruption blockchain may cause relating blockchain to a hammer that “shatters glass yet can forge steel”.
But with disruption comes some direct benefits for the regulator. ECB gives the example of a distributed ledger network where “central bank’s oversight or supervisory function could be used to cover the data requirements of the overseer and ease the reporting burden of the overseen entity.” The beauty of a shared ledger is that it can be shared with the regulator taking away the hassle of reporting and standardising oversight.