Bank of Italy Proposes Tokenised SEPA Payments for EU Financial Innovation
Bank of Italy's Vision for Tokenised Payments in the EU
By Valentina Za
Evaluating Tokenised Payment Systems
MILAN, May 4 (Reuters) - The European Union should evaluate working on a tokenised version of its payments system to help it keep up with technology changes, a senior Bank of Italy official said on Monday.
Innovation in finance is raising the prospect of the role of central banks being called into question, with implications for monetary stability and inflation control.
Central Bank Perspectives on Digital Innovation
"As money becomes increasingly digital ... it is tempting to focus on what new technology can enable: speed, programmability, efficiency, or new forms of settlement," Bank of Italy Deputy Governor Chiara Scotti said in the text of a speech.
The Bank of Italy operates parts of the euro area payments infrastructure, while Italian ECB Executive Board member Piero Cipollone oversees payments and digital euro work.
The Value and Trust in Money
"But these are attributes of the payment instrument ... not the source of its value. What makes something money has not changed: it is accepted because it is trusted, and it is trusted because credible institutions and rules stand behind it."
The Evolution of SEPA and Financial Innovation
A few years after launching the single currency which allowed cash payments in euros to be made throughout the monetary union, the EU started building the Single Euro Payments Area (SEPA) to allow also cashless euro payments to be made uniformly across SEPA countries.
Financial innovation has led to new forms of private money, such as electronic money tokens, or to bank deposits in the form of digital tokens recorded on distributed ledgers - both of which undermine the role of traditional banks.
Infrastructure and Monetary Control
Scotti said designing infrastructure that allowed public and private forms of money to interact was a priority if central banks were to retain monetary control, without hindering innovation.
Digital Euro and the Future of Payments
At the retail level, to preserve the relevance of central bank money the ECB has been working on the introduction of a digital euro, Scotti said, calling for action also on other fronts.
Tokenisation and SEPA's Evolution
"With tokenization becoming more relevant, attention should turn... also to how Europe's existing payment arrangements could evolve in that direction. From this perspective, a tokenised extension of SEPA could become an important area for reflection," she said.
(Reporting by Valentina Za; Editing by Toby Chopra)
