I can report informally that I personally am highly satisfied with the progress that the joint Basel Committee and IOSCO working groups have achieved to date, which reflects in no small way the cooperation of the industry in preparing data and responses for the discussions. I expect that the Committee will release a proposal for a six-week period of public comment next month such that the proposals can be released in final form this summer. However, intensive work will continue prior to the discussions at the meetings of the Basel Committee and IOSCO’s Technical Steering Committee toward the end of March and the beginning of April. So I cannot yet comment on the solutions that may be proposed or approved by the Committee and IOSCO. I can tell you that we set, as a guiding principle, a goal to apply Basel II to these exposures in a manner that reflects as best as possible sound practices already in use when those practices appeared to be both prudent and broadly acceptable to many kinds of banks and markets. Some industry representatives have raised concerns that finding ways to apply Basel II to trading book exposures might lead to a revision of the existing “Market Risk Amendment” to the capital framework that was approved in 1995. Understandably, those industry representatives expressed concern that this might disrupt banks’ efforts to prepare for Basel II, which addresses mainly credit and operational risk.
In effect, the mere existence of a digital euro would offer a fallback solution in the event of geopolitical tensions. Moreover, when carefully designed, a digital euro could be a catalyst for innovation at a wider scale in that it could support intermediaries’ role in developing new types of services on top of it while enjoying Pan-European reach. 1  Negroponte, N. (1995). “Being Digital”, Vintage International. Random House, New York. Cunliffe, J. (2022) “Some lessons from the Crypto Winter” (https://www.bankofengland.co.uk/speech/2022/july/joncunliffe-speech-on-crypto-market-developments-at-the-british-high-commission-singapore). 2  1  A digital euro does, however, exhibit a number of non-trivial risks as well. If, for example, anonymity was to be allowed as a means to provide the highest possible level of privacy, we would be compromising our commitment with fighting money laundering and the financing of criminal activity. What’s more, this setup would put into question the effectiveness of the tools to limit the use of digital euro as a store of value, a point on which I will come back later. In that respect, a balance needs to be struck between minimizing the Eurosystem’s and intermediaries’ involvement in the processing of users’ data and still ensuring compliance with the law. A digital euro is likely to increase as well the Eurosystem’s general operational responsibilities over the payments channels irrespective of the role it ultimately intends to play in the settlement of these transactions.