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In the second part of a wide-ranging interview, VIXIO spoke with Rita Soares, the Banco de Portugal’s payments chief, about how the regulator is helping with the development of a central bank digital currency (CBDC) and what it is doing to adapt to crypto’s rise.
As a euro-area country, it is all but inevitable that CBDC plans at the EU level is high on the agenda of Portugal's central bank.
“We are currently approaching the first full year of the investigation phase of the digital euro project, in which the design and distribution model of a future digital euro are being defined,” Soares said.
She argues that the digital euro has the potential to deeply transform the current payments ecosystem, creating the possibility for everyone to use a riskless payment alternative for digital retail payments.
Banco de Portugal is actively involved in this project as a member of the Eurosystem. It is also a priority under the Banco de Portugal’s Strategic Plan for 2021-25.
“In addition to our participation in the Eurosystem’s work, in the different digital euro project’s decision structures and at the committees’ level, Banco de Portugal has undertaken initiatives, at a national level, to support its participation in the digital euro project,” Soares said.
For example, this year, the central bank set up a market contact group. This includes representatives from consumer associations, merchants, payment service providers, payment infrastructure providers, card schemes, academia and law societies, to get their views on the main challenges of the digital euro for the national payments market.
“We have also had, and will continue to organise, sessions on the digital euro project with market representatives and relevant stakeholders,” she said.
The digital euro is a response from the European Central Bank to the rise of crypto-assets, which Soares acknowledged.
“Among the most relevant developments in the payments landscape in recent years is the increasing popularity of the so-called crypto-assets, which have reached impressive values in terms of market capitalisation.”
Soares pointed out that the central bank is closely monitoring the situation, even if the only regulatory means at the moment is via anti-money laundering legislation.
“This means, for instance, that there is no consumer or investor protection framework applicable in spite of their high risk of loss to consumers,” said Soares.
“Crypto-assets are not issued, regulated or supervised by any public authority. There is no guarantee that they will be accepted as a means of payment, nor of redemption in case the crypto-asset issuer is insolvent.”
To tackle these risks and acknowledge their increasing use and popularity, the European Commission has proposed the Markets in Crypto-Assets regulation (MiCA).
MiCA will establish a dedicated framework for crypto-assets and for related activities and/or services in the EU and has now been agreed by the three co-legislators: the European Commission; European Council; and European Parliament.
Once on the statute books, this will include a complete set of rules addressing consumer protection, transparency and disclosure on the issuance of crypto-assets, as well as requirements regarding authorisation and supervision of crypto-assets services providers and issuers.
Payment discrimination
Crypto is not the only area of payments where better consumer protection is needed. Many Portuguese consumers still face problems when they try to make a payment or set up a direct debit if their bank account is based in a different member state.
According to the SEPA Regulation, any entity located in a member state should be able to initiate/receive payments from/to an account with an IBAN from any other member state.
However, recent warnings from fintechs such as Wise and TrueLayer, as well as the 2017 report from the Commission to the European Parliament and the Council on the application of SEPA Regulation, have shown that there are problems with the full application of these rules.
“Banco de Portugal has received several complaints related to direct debit payees that do not allow their customers to pay with direct debit if they indicate payment accounts with non-Portuguese IBANs,” Soares said.
According to Soares, there have also been reports of credit transfer originators not allowing their beneficiaries to indicate accounts with a Portuguese IBAN.
“Banco de Portugal has determined the correction of these situations and direct debit payees and credit transfer payers changed procedures in order to overcome these restrictions,” she said, adding that the central bank also raises awareness regarding IBAN discrimination through the country’s Payment Systems Forum.
If you missed it, read VIXIO’s interview with Banco de Portugal about how it is dealing with fraud, open banking and PSD2.
