The Future of Payments in a DLT-based European Economy: A Roadmap

30 Pages Posted: 19 Mar 2021

See all articles by Alexander Bechtel

Alexander Bechtel

University of St. Gallen - School of Finance

Agata Ferreira

Warsaw University of Technology

Jonas Gross

Frankfurt School of Finance & Management gemeinn├╝tzige GmbH; University of Bayreuth

Philipp G. Sandner

Frankfurt School of Finance & Management

Date Written: December 18, 2020

Abstract

Distributed ledger technology (DLT) enables a wide range of innovative industrial use cases and business models, such as through programmable payments and the seamless exchange of assets, goods, and services. To exploit the full potential of a DLT-based European economy, it is crucial to integrate the euro into DLT networks. In this paper, we propose a framework for developing payment solutions for a DLT-based European economy. To this end, we decompose the digital payments value chain into three pillars: (1) contract execution system, (2) digital payment infrastructure, and (3) monetary unit. Based on this framework, we systematically compare account- and token-based payment solutions, including a bridge solution, e-money tokens, synthetic central bank digital currencies (CBDCs), and a central bank digital currency (CBDC). Taking into account current circumstances, we conclude that no individual payment solution will be sufficient to address all emerging use cases. Instead, a broad array of payment solutions will emerge and co-exist. These solutions will apply to a variety of different use cases and will be launched at different points in time.

Keywords: distributed ledger technology (DLT), blockchain, money, payment systems, stablecoins, digital currency, CBDC, digital euro, e-money tokens, synthetic CBDC

JEL Classification: E42, G20, O30

Suggested Citation

Bechtel, Alexander and Ferreira, Agata and Gross, Jonas and Sandner, Philipp, The Future of Payments in a DLT-based European Economy: A Roadmap (December 18, 2020). Available at SSRN: https://ssrn.com/abstract=3751204 or http://dx.doi.org/10.2139/ssrn.3751204

Alexander Bechtel

University of St. Gallen - School of Finance ( email )

Unterer Graben 21
St.Gallen, CH-9000
Switzerland

Agata Ferreira

Warsaw University of Technology ( email )

Pl. Politechniki 1
Warsaw, 00-661
Poland

Jonas Gross (Contact Author)

Frankfurt School of Finance & Management gemeinn├╝tzige GmbH ( email )

Adickesallee 32-34
Frankfurt am Main, 60322
Germany

University of Bayreuth ( email )

Universitatsstr 30
Bayreuth, D-95447
Germany

Philipp Sandner

Frankfurt School of Finance & Management ( email )

Adickesallee 32-34
Frankfurt am Main, 60322
Germany

HOME PAGE: http://www.philipp-sandner.de

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