Dutch Central Bank (DNB) Offers to Lead the EU in CBDC Development & Integration
The central bank of Netherlands (DNB) has published a report pitching for the country to become a CBDC test ground within the European Union. This comes as talks around central bank digital currencies (CBDC) gain momentum despite the coronavirus pandemic.
According to the report, DNB noted that the use of physical cash has largely declined in the Netherlands to the benefit of digital payment ecosystems. Notably, the country’s 17 million population is the least likely to pay in cash compared to their European counterparts as per a 2017 EU report. The COVID-19 pandemic has further spurred a move towards digital payments which also motivated the DNB to propose a deep dive into CBDC integration. This report reads,
“A question that naturally springs to mind is whether central banks should provide a new type of money that is better attuned to the needs of citizens and firms.”
Dutch Central Bank CBDC Proposition
DNB said that a gradual CBDC implementation will particularly diversify the EU digital payment networks and build trust in uncertain times given the regulators involvement. Though the Netherlands is yet to pioneer its own CBDC, they have since indicated an intention to lead the EU zone in this innovation,
“If the decision should be taken within the eurosystem to experiment with some more concrete type of CBDC, we are ready to play a leading role. The Netherlands provides a suitable testing ground for such an experiment.”
While most crypto advocates hail DLT networks like Bitcoin’s, the DNB noted that a smart contract approach for proof makes more sense for regulators of its nature,
“A smart contract system with complex logic potentially increases the demand for CBDC and offers opportunities to reduce transaction costs.”
The DNB report went on to further state that full decentralization like that of Bitcoin is more resource intensive and complex in consensus. It, therefore, makes no sense for a CBDC to make such sacrifices given central banks’ fundamental oversight role to caution against market risks which means a certain amount of control. However, the bank acknowledged a need for anonymity within the CBDC design due to the data exposure accompanied by the possibility of banks selling this information.
CBDC Progress Around the Globe
As mentioned earlier, this area of innovation is gaining a lot of traction from central banks. According to a recent study by the Bank of International Settlements (BIS), close to 80% of the world’s monetary authorities are looking to launch their own CBDC.
The BIS is also currently working with five prominent central banks towards a detailed research on digital currencies. They include Bank of England, Bank of Japan, Bank of Canada, the ECB and Swiss National Bank. Asian countries led by China are, however, ahead of the curve with a recent beta launch of the Chinese digital yuan. South Korea is also in the progress of developing a CBDC although they are yet to announce on a possible release date.