Wholesale CBDC refers to the settlement of interbank transfers and related wholesale transactions in central bank reserves. [2] But some misinterpret “wholesale CBDC” to mean any large-value payment in central bank money, regardless of who is making and receiving the payment. Second, there is a widespread misconception that wholesale CBDC does not yet exist. In fact, central bank money has been available in digital form for wholesale transactions between banks for decades. This misconception is fuelled by the commonly held assumption that wholesale CBDC needs to be operated using DLT. But wholesale CBDC is not synonymous with DLT, as it can be based on any digital technology. In the euro area, the Eurosystem offers banks the possibility of settling wholesale digital transactions through its TARGET Services using a centralised ledger. [3] Third, wholesale CBDC is sometimes seen as a substitute for retail CBDC. But in reality they complement each other by addressing the different needs of different users. On the wholesale side, central banks supply the ultimate means of payment for financial institutions, which helps to reduce risks in the financial system. On the retail side, providing the public with highly convenient and secure means of payment helps to underpin confidence in money by enabling private forms of money to be converted, at par, into risk-free central bank money. [4] Wholesale and retail CBDC projects also differ in several ways. To begin with, they have very different starting points.
These efforts are necessary for market participants to remain confident that they can always settle systemically important wholesale liquidity and securities transactions with central bank money. Central bank money is the safest and most liquid settlement asset[5], so using it in this context helps to reduce risks in the financial system, thereby protecting financial stability. This, in turn, preserves the transmission of monetary policy and supports trust in the single currency. Over the past two decades, significant progress has been made in integrating and modernising wholesale payment systems. The transition from the national real-time gross settlement systems to TARGET in 1999, and then to TARGET2 in 2007, led to the first pan-European integrated market infrastructure for large-value wholesale payments. This enabled the rapid and reliable settlement of euro payments in central bank money. The subsequent launch of TARGET2-Securities harmonised post-trade services[6] for financial instruments, bringing an end to complex cross-border settlement procedures. And in 2018 we introduced TARGET Instant Payment Settlement (TIPS), which allows instant retail payments to be settled in real time between banks across the EU, around the clock on every day of the year. In recent years, we have been working on a new consolidated TARGET platform – a complex infrastructure that would offer the market enhanced and modernised services. We are also building a Eurosystem Collateral Management System to simplify processes that involve multiple jurisdictions, notably the mobilisation of cross-border collateral. And we are seeking to ensure that the TARGET Services remain resilient to cyber threats.