Central banks should pursue applications of distributed ledger tech, a senior European Central Bank official said this week – but not at the expense of their reputation.
Yves Mersch, a member of the ECB’s executive board, gave remarks during an event in Helsinki on Monday during which he discussed the prospects of central bank-issued digital currencies.
Mersch has given speeches on the subject a number of times in the past, including an appearance in December during which he disclosed that the ECB is working with Japan’s central bank on blockchain research.
Tech aside, Mersch said that before any applications can be brought to market, potential bugs need to be rooted out. Otherwise, he warned, the ECB could do lasting damage to itself as an institution.
He told event attendees:
“DLT carries great potential, but is it already advanced enough to be applied by central banks? Reputation is crucial for central banks. We cannot afford mistakes in the technologies we employ.”
Arguing that central banks have an interest in pursuing technology solutions that cut costs, he suggested that institutions like the ECB need to tread lightly during any possible roll-out.
“Before the central bank can start providing digital base money (DBM) to non-banks, we need to be sure not only that DBM is unlikely to have negative economic side-effects, but also that the relevant systems are operationally efficient and safe,” he said.
The ECB is one of a growing number of central banks worldwide that are exploring the tech for potential applications.
Central banks in the UK, Canada and Russia, among others, have all launched research and development efforts in recent months.
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