Among the priorities established by the Bank of Spain in its Strategic Plan 2024 are the study, research and possible development of a CBDC digital currency and the adoption of new technologies for the digital transformation of the current financial system.
Recently, the Bank of Spain, the body that acts as the national central bank in Spain, published its 2024 Strategic Plan, which includes the entity's analytical and research priorities for the healthy development of its competencies during the period 2020-2024. In the report, the entity points out a set of proposed objectives that will allow it to evaluate the design and effectiveness of its monetary policy to guarantee the country's financial stability, as well as the analysis and research of new technologies, as a challenge to be adopted by the bank to promote and guarantee the digital transformation of the banking and financial sector.
In its fifth objective, the entity raises the need to analyse and study in depth the digital transformation of the financial system and its effects on monetary policy and financial stability in Spain, as well as monitoring existing banking risks when implementing emerging technologies within this sector.
On the other hand, the Bank of Spain also intends to study the possibility of introducing a central bank digital currency, known as CBDC, which will allow the entity to improve and optimize its services, although it points out that an in-depth study is essential before any decision is made.
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Objectives for digital transformation
For some time now, the Bank of Spain has been showing great interest in the development of emerging technologies, especially for the creation of a CBDC digital currency. The adoption of these new technologies represents a great challenge for current banking and financial institutions, but also represents a major step towards the evolution and optimization of their systems and services.
The momentous change that these technologies are causing in current systems is not lost on many organizations and government entities, which are beginning to recognize the need to adopt new innovations as an essential part of their future. Current technological developments will be an essential part of today's banking and financial industry, and those who do not recognize this reality run the risk of being left out of the industry.
The Bank of Spain is therefore considering the need to promote new avenues of research that will help it discover and understand the potential of new technologies and their implications within its current services. Similarly, the Bank of Spain recognises its obligation to develop new methods of analysis to study the development of the economy in real time, thereby ensuring its capacity to make decisions in times of stress; in addition to the early and timely identification of the concerns of investors and bank customers, and the analysis of the communication policies that the Bank of Spain implements with other banking and financial institutions.
CBDC, a priority for the entity
In Europe, the European Central Bank is considering issuing a cryptoeuro, and in fact, is conducting pilot tests in several countries in the region, including Spain. Therefore, the country's bank is promoting research in relation to this topic. Spain is prioritizing research related to the introduction of a CBDC digital currency into the country's financial and banking system, as well as its implications within its economy as a whole, considering the different design proposals based on various technologies, such as blockchain y DLT, in addition to the inclusion of digital identity for customers and users.
Research on CBDCs, marked as “a priority” in its Strategic Plan, will be developed during 2020 and will extend until the end of 2021, since the entity considers that the use of these technologies can significantly improve the services provided by the central bank, such as those related to payment methods and retail payments. Likewise, although the director of the Bank of Spain, Juan Ayuso Huertas, has shown itself to the world as a staunch defender of CBDC digital currencies and has collaborated with the European Central Bank to prepare the presentation report for the digital euro, many experts consider it unlikely that Spain will be able to issue its own sovereign CBDC, especially considering that this country is part of the Eurozone.
In search of the digital euro
As already mentioned, the European Central Bank is currently testing the potential issuance of a digital euro, and recently launched a public consultation to find out citizens’ opinions and level of acceptance regarding the issuance of a digital currency for the region, since with the plans announced by China, Japan, South Korea, and several other countries to issue their own digital currency, it is evident that CBDCs are becoming a global trend, which may put the politics and monetary sovereignty of some countries at risk.
Therefore, the integration of a digital euro will allow the economic, banking and financial system to enjoy greater solidity, efficiency and security, while facilitating citizens' access to these systems. Furthermore, as the Bank of Spain report also indicates, the digital transformation of the economy and society, and the new possibilities provided by these technological advances, imply important challenges and improvements both for the banking and financial sector, as well as for the internal functions carried out within banking entities, which are encouraged to implement new technologies to optimize their services.
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