The symposium organised by the Capital Markets Union Foundation Project provided valuable insights into the impact of new technologies such as blockchain in connection with the potential introduction of Central Bank Digital Currencies (CBDC), in particular a digital euro. Experts shed light on technological, economic and regulatory aspects as well as the potential for stability and growth in the financial system.
Digital transformation harbours opportunities, but also new challenges
Prof Ferdinand Mager from EBS University hosted the event and led through the agenda. In his opening speech, Bert Staufenbiel, Senior Manager Digital Transformation, KfW, gave an introduction to the traditional financial markets and explained how central securities depositories in particular operate. Distributed Ledger Technology (DLT) is creating a paradigm shift: DLT enables decentralised, transparent processing of transactions and offers potentially more secure, efficient processes without the need for intermediaries.
Annabelle Schindera and Wilram Schmidt, students at EBS University, explained blockchain technology, which solves the ‘double-spending’ problem through decentralisation and cryptographic verification. Blockchain enables fast, transparent and scalable transactions. However, the discussion of the blockchain trilemma showed that not all of these aspects can be realised equally during implementation. However, solutions such as layer 1 and layer 2 technologies should help to alleviate these problems.
Examples from practice
Two practical examples underlined the potential of blockchain: Prof Raša Karapandža, EBS University and NYU, presented a project to promote economic development in disadvantaged areas of Ghana through community cryptocurrencies. Dr Yuliya Plyakha Ferenc, MSCI – Equity Solutions Research, presented ‘Datonomy’, a taxonomy for digital assets to improve handling and understanding in the financial sector. This should help standardise an increasingly confusing range of assets, products and services based on different blockchains and ensure market integrity.
New dynamics expected in payment and goods transactions?
Both Dr Jan Greitens, DIHK – Head of Corporate Finance, and Dr Heike Winter, Deutsche Bundesbank – Head of the ‘Analysis, Policy and Ecosystem’ unit in the D€ central division, shed light on the opportunities and risks of a digital euro. According to Dr Greitens, this could ensure the stability of the two-tier monetary system in Europe, especially in crisis situations. However, the benefits for the retail sector remain unclear, while the potential for companies and the business customer segment (B2B) has not yet been sufficiently analysed. Dr Winter weighed up the pros and cons between tokenised commercial bank money and B2B solutions through CBDC. She emphasised that a digital euro could serve as a building block for a new financial market infrastructure and enable substantial improvements in payment transactions and securities settlement.
Conclusion: All that glitters digitally is not gold
The symposium showed that blockchain and the digital euro can bring about far-reaching changes. While the opportunities for increasing efficiency and financial market stability became clear, challenges such as high energy consumption, regulatory uncertainties and the blockchain trilemma remain. In this context, a digital euro could give the digital transformation a further boost, but many questions regarding its implementation still need to be clarified.
Many thanks to all participants for a successful foundation conference at EBS!
to the event page of the symposium of the foundation project with agenda and photos