Italy and Korea Forge Partnership on CBDC and RTGS Technology Innovations

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The Bank of Italy and the Bank of Korea have signed a memorandum of understanding (MOU) focused on exchanging expertise in technologies supporting Real-Time Gross Settlement (RTGS) systems and central bank digital currencies (CBDCs). Their approaches to CBDCs, however, differ significantly.

The Bank of Korea is exploring a wholesale CBDC aimed at enhancing tokenized bank deposits, with initial trials focusing on programmable payments and voucher-style tests. This contrasts with its earlier retail CBDC trials. Meanwhile, Italy is actively participating in the European Central Bank’s (ECB) retail CBDC experiments. With the ECB progressing towards a preparation phase, Europe, following China, may soon introduce a retail CBDC.

In terms of wholesale CBDC solutions, Italy stands out with its proposal for distributed ledger technology (DLT) interoperability using hash linked contracts. This is part of Europe’s broader exploration of settling DLT-based security transactions with central bank funds. Italy’s method, which involves an API to link payment systems with securities DLT platforms for seamless transaction settlement, is one of three approaches being considered in Europe, alongside proposals from the Banque de France and Germany.

Italy’s proposal, distinct from a traditional wholesale CBDC, is designed to streamline securities transactions without necessitating central bank integration with multiple DLTs. It offers a potential interim solution to achieve many of the goals of DLT integration.

Additionally, the Bank of Italy is experimenting with a wholesale CBDC for interbank settlement in a DLT sandbox, in collaboration with the ABI, the Italian banking association. The ABI has already developed a novel DLT solution for daily interbank reconciliations.

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