Building a unified digital Euro standard
,The ING-led initiative includes CaixaBank, Banca Sella, KBC, Danske Bank, DekaBank, UniCredit, SEB and Raiffeisen Bank International. In conversation with Finextra, Lugt reveals that there is a need for “one European standard, and the best way to do so is to do that with a consortium of banks. It’s an open consortium, so we start with nine, but more banks are welcome to join us.”
,While reluctant to reveal the banks and fintech firms that will join the next tranche of the consortium, Lugt stresses the importance of a unified, regulated digital Euro standard to unlock blockchain’s benefits for clients. The project’s aims are to create a trusted, interoperable payment instrument, with governance shared among participating banks.
,Tokenised royalties: a new frontier for stablecoins
,Beyond traditional finance, Lugt highlights how tokenising intellectual property rights, such as music royalties, could automate payments, increase transparency, and create new liquid markets. In turn, showcasing the far-reaching potential of stablecoins and blockchain technology.
,Lugt dives deeper: “Streaming platforms need to make royalty payments to the musicians who own the intellectual property rights. And while that sounds fairly straightforward in that you would just need to keep a database of which songs you’ve streamed and make the right payment, in practice, a payment like that is complex because there are multiple parties involved.”
,The ING digital asset lead goes on to explain that in most cases, it can take between six to nine months for musicians to receive payment and occasionally, the transaction amount is incorrect. Lugt’s solution: “By tokenising these intellectual property rights, you can automate related payments in a transparent way, much quicker and more cheaply.” The added benefit: after rights are tokenised, you are left with a tradable asset and a new liquid market.
,Lugt reiterates here that this is just one example of a new opportunity that may emerge, not one that they are thinking of in depth at the moment, and more than likely not the first step that will be taken. However, this example provides a view into what steps will be taken, how they intend to develop over the long term and create new opportunities that are more difficult to foresee currently.
,MiCAR: enabling strategic innovation
,Strategic thinking such as this was made possible by MiCAR, the Markets in Crypto-Assets Regulation, that has created a harmonised regulatory framework for crypto-assets and related services across all member states.
,By regulating crypto-asset issuers and service providers, transparency and disclosure requirements are set, investors and consumers are protected, and market abuse prevented. MiCAR fosters innovation in a previously unregulated environment while ensuring financial stability and a safe, clear framework for the entire crypto-asset market.
,Alongside the implementation of MiCAR, ING recognises that “stablecoins are very suitable to become that trusted payment instrument that we could, in principle, issue as individual banks. But, if you do that, you get a fragmented market. So, you need to make all these stablecoins interchangeable and that takes away from a lot of the benefits from blockchain technology.” This is where the consortium comes in.
,Complementing the ECB’s digital euro
,One another element to consider is that the consortium’s stablecoin is designed for blockchain-based programmability and new applications. The European Central Bank is also working on a digital euro that is not blockchain-based and targets traditional payments. The two are seen as complementary.
,Speaking at a summit this week, executive board member Piero Cipollone said that “discussion at the level of member-states is going very well” regarding the CBDC, adding that a potential launch date of “the middle of 2029 could be a fair assessment.”
,On this, Lugt highlights that “the philosophy behind the digital euro is different from ours. We really focus on the benefits of that technology that we want to make available for our clients, whereas the digital euro is more concerned with the day to day payments, for which there are existing solutions already.”
,Unlocking diverse blockchain applications
,In fact, with blockchain technology, the consortium’s stablecoin will enable instant, peer-to-peer payments for diverse applications, including supply chain automation, e-commerce split payments, cross-border transactions, and tokenised financial assets. Moreover, as Lugt explains, this stablecoin “should be seen as a general means of payment on chain and serve the use cases that become popular or are needed, or for which service is demanded from clients, whether that’s in B2C or B2B.”
,The next major milestone is the launch in the second half of next year. Key steps include hiring management and staff, developing the technical and operational framework, and obtaining an e-money license, but achieving agreement on common infrastructure and moving the ecosystem to new technology remain major challenges.
