Through a long career as an advisor in his own business, in renowned consulting companies and banks, including Norges Bank, Lasse Meholm has a solid background in sharing analyses and views related to the financial systems of the future. In this blog post, Meholm shares his thoughts about Central bank digital currencies (CBDCs, DSP in Norwegian), Digital Euro (D€), Stablecoin and tokenization. Meholm also provides readers with a summary from the “Digital Euro Conference” in Frankfurt in March.
Lasse Meholm has been working with crypto, Blockchain and DLT since 2015. First at Nordea, then at DNB, then at EY before becoming coordinator and sub-project manager at Norges Bank for the project Digitale Sentralbank( DSP). Since the start of 2024 as a consultant in his own company Finansit. Lasse is also involved in initiatives of the European Central Bank (ECB) and the “Digital Euro”.
Earlier in 2024, Meholm was also The video interview by Kaupr on digital central bank money (DSP), hinting that Stablecoin may make DSP redundant. Now a year later, it may seem even more likely, Meholm believes.
Below is Meholm's new blog post.
The market value of USDT and USDC has increased tremendously over the past year. USDT (early April 2025) alone had a market capitalization of over US$140 billion while USDC had a market capitalization around $60 billion. Circle (instead of USDC) established EURC stablecoin in Euro last year that is MICA approved, which now amounts to an estimated 4% of USDC value.
After Donald moved into the White House, it is clear that Stablecoin is being helped in the United States and that digital central bank money is not being introduced. At least not for the next 4 years. By contrast, Donald has scared both Europe and Asia into stepping up the pace of both digital central bank money, what's called Central Bank Digital Currency (CBDC) in English and lighter regulations for Stablecoin, so we'll see where this ends.
In Europe, several banks, such as the French Societe Generale, have issued stablecoins in Euro and more banks and other regulated companies are likely to arrive shortly after MICA regulation is introduced in the EU and some European banks are MICA approved. Other countries such as Hong Kong and Singapore have also introduced new Stablecoin-friendly regulations in the past 12 months. In the Middle East, with Dubai in the lead, there is a lot going on with both crypto and CBDCs and AI.
In the past year, a lot has happened in the crypto market as well. First, bitcoin and crypto have become more stooerent as a speculation asset. There is a separate euphoria among Bitcoin enthusiasts about the day. Bitcoin wavered around $60,000 a year ago, now it's around $80,000 (early April 2025) which is just over 30% return in one year. That's pretty bad compared to, for example, Kongsberg Gruppen on the Oslo Stock Exchange, which has risen 111 percent last year. It is even inferior to physical gold. There are many stocks and other speculations that are smarter than Bitcoin, if the intention is good returns.
Second, the US has got a far more crypto-friendly administration. And it's not just Donald Trump. Among other things, there has been talk of a strategic crypto reserve that will help an indebted United States. Federal debt in the United States is now $35,000 billion, up about $1,100 billion in 2024 alone. The crypto market has a total value of about $3,000 billion. Let's assume that the US buys 25% of the entire market, that is, for $750 billion, even if they can't afford it. With a continued 30% increase in cryptocurrencies each year, the crypto gain covers that debt is still increasing, only slightly slower — but the risk increases significantly as the speculation necessarily becomes loan financed. But it is also suggested that the United States should not buy, just refrain from selling seized crypto. In Sweden, too, someone in the Riksdag has written to the Ministry of Finance about the same thing.
Many regulated companies such as banks and mutual funds have been given the ability to issue crypto-based speculations such as ETFs and other. That makes investor protection better as issuers are regulated and followed by the FSA in their home countries. The speculation is getting safer for many more. Is it conceivable that DeFi will become a challenger to the established financial market? There is still a VERY long way to go before competition becomes noticeable for banks, and it is unlikely that the financial supervisors in most countries will contribute. Banks are important to society, and the risk is great enough as it is without crypto on the balance sheet. But there is a movement and the maturity of the DeFi market over the past year.
The last time anyone was going to challenge the banks it was Fintech that was going to take away the banks customers. It didn't quite turn out that way, and it's unlikely to be that way with DeFi either. DeFi services are likely to become more user-friendly and the content more relevant to a larger group of customers, but will probably always be niche products for a small group.
Virtually all central banks in the world are working on such projects, and have been doing so for many years. Sweden put its project on hold in 2023 and at Norges Bank there is very little activity now. Denmark concluded that DSP is not needed and Finland is a Euro country. But in the EU and the ECB (the European Central Bank) it's full speed by the day. Leading politicians in the European Parliament and the European Commission have repeatedly argued that Europe needs to be made less dependent on US companies such as VISA, MasterCard and PayPal. There must be a European solution and the Digital Euro (D€) can be the solution.
D€ is a digital version of cash, issued and guaranteed by the central bank for use by individuals and businesses. D€ is credit risk free unlike the money we have in the bank. D€ should be able to be used both online and offline. Offline is payment even if both the payer and the recipient are not online. It has been suggested that payment by D€ can be completely anonymous for smaller amounts, as cash is. Payment should be free for users (no “gas fee”). The ECB is also discussing whether there should be a maximum limit on how much D€ a user should be able to keep in their wallet. This last has something to do with financial stability, as banks lose deposits and thus the ability to provide loans to their customers.
However, there are several years until D€ can possibly be launched and around 2030 has been mentioned by several. Since Norway all uses the European settlement system for payments, it is conceivable that we will get digital central bank money based on the D€ technology sometime in the future. It seems relatively clear that if the EU and everyone around us introduces CBDC, it will be difficult for Norway not to do so. In the rest of the world, there are a small handful of countries that have introduced CBDC such as the Bahamas and Nigeria. In China, there are more than 200 million users, but daily transaction volume accounts for only about 0.5% of all payments. The UAE has introduced WCBDC (payments between banks) and plans to introduce rCBDC (for private and corporate) later this year, as does Russia. India has a pilot going, as have Brazil and a couple of other countries. Then we have the BRICS countries (Brazil, Russia, India, China and South Africa) who have become many more countries in the past year and have a reinforced desire to get rid of dollars as the settlement currency, which could accelerate the work of CBDCs.
There is a lot of discussion about the tokenization of real assets such as stocks, bonds, real estate, machinery and other, what in English is called RWA (Real World Asset). If assets are tokenized, the money should also be tokenized to take advantage of the benefits of DLT/Blockchain (such as atomic swap), which is often used as an argument for crypto, stablecoin, and CBDC. I said it all 10 years ago that anything that can be tokenized is going to be tokenized. But that is not so far, and it is unlikely to be. The challenges, especially in the Nordic region which is very digitally mature, is that a lot works well as it is. Property is registered centrally and securely with Kartverket and data is used by real estate agents, tax authorities, banks, municipalities, the press and many others.
Switching to a tokenized dataset is costly, risky, and seems pretty irrational to me. The same applies to stocks and bonds on stock exchanges and other things that have a well-functioning solution today and where the value chain with stockbrokers and supervision is regulated. On the other hand, new needs such as carbon credit, green investments, WEB 3.0, the Metaverse and others can be advantageously based on a tokenized solution. There is a saying in the United States, “If it's not broken, don't fix it.”
When Bitcoin was introduced by Satoshi in October 2008 it was in the midst of the financial crisis and the purpose was to create digital cash that can be paid with without the “terrible” banks being involved. In the United States, paper checks were the norm for large payments and payments over distances in addition to cash for physical in-store payments. Digital payments account to account and credit cards were slow, costly because banks were well paid and unaccountable. While Bitcoin has remained dormant and largely become an asset for speculation rather than a widely used means of payment, digital payments from bank accounts have had a rapid development. More than 100 countries have introduced instant payments, account to account in seconds. Fees have been reduced and transparency has been increased.
The EU has introduced TIPS (Target for Instant Payment System) which are cross-border instant payments. In Asia, a number of countries' central banks have joined forces on the Nexus project of BIS IH and are conducting instant payments cross-border, better than TIPS in Europe. In South America, Brazil is the driver of border-crossing instant payments. The US is lagging behind even though FedNow (instant payments) have been introduced. In Norway, the entire ecosystem around payments has been developing in recent years, something that “Open Banking” and “Open Finance” have contributed to how completely new services and Fintech contribute. The effect of improvements to existing payment infrastructure reduces the need for a revolution, as was the case in 2008.
An estimated 300 participants physically in Frankfurt and certainly at least as many digitally.
Good to be at a conference without standing on stage, this time just to soak in the mood surrounding digital central bank money (DSP/CBDC) in the world. A lot happens and almost weekly there are news that will hit us in Norway at some point. I will here give a brief summary of a day filled with information.
Stablecoins
There was a lot of Stablecoin in several of the talks. It was pointed out from several that Stablecoin is here now. Stablecoin also makes it efficient to pay cross-border, which is important for new forms of money. Although politicians in Europe obviously want a European solution without the near-monopoly of US companies (VISA, MasterCard, Paypal) one must realize that USD is also going to play a role in the future, so interoperability with USD based stablecoins is important. The reason the USD has such a large recovery (USDT and USDC) has a lot to do with the fact that crypto assets like Bitcoin are priced in USD.
There were several who brought up the unpredictability and instability as a result of Donald's move into the White House. One of the panelists asked whether it is conceivable that the US authorities could require VISA and Mastercard to share payment information about European customers with them. Geopolitics has long been important for the Digital Euro project (“retail” digital central bank money in Europe) and is after recent months becoming even more important. Several believed that the Digital Euro (D€) project is largely a political project, a solution with reduced US participation such as VISA, Mastercard and PayPal.
The representative from EuroCommerce (association of European trading companies) pointed out that the payment solutions that will be using today are largely American solutions and that we must not saw over the branch too quickly, but also that a lot of strange things have come from the United States lately. It was pointed out from several on the same panel that the D€ project must integrate seamlessly with the rest of the ecosystem and that banks must be given a relatively simple process to participate in the project.
The representative from EY (Ernst & Young) in one of the panels claimed that the D€ project is going to cost between 6 and 7 billion Euro to implement. (This matches up relatively well with a previous blog from me). That could result in some banks, especially the smaller ones, not going to have the money to make necessary investments. He quickly received comments from others on the panel that Europe cannot afford not to introduce D€, the consequence of not being even greater.
Return to Stablecoin. Many believed this could replace the DSP/CBDC as it is a so-called carrier instrument. Tokenized bank deposits (TB) in combination with Wholesale CBDC (wCBDC) there were also some that highlighted. TB entails that a private bank issues the token as a representative of a bank deposit, which is a claim on the bank, same as deposits. But TB needs to have a mechanism for settlement between banks. Today it happens with central bank reserves, but may in the future happen with WCBDC. There were several people who spent time at WCBDC for a number of reasons. At the same time, there was a consensus that the WCBDC is not for domestic payment, but for cross-border payments. The settlement systems of central banks today are good enough, and it handles gross payments fine.
Technology was also discussed in several panel debates. Everyone who discussed technology started from a DLT/blockchain technology. Especially related in “permissioned” or “non permissioned” networks, private or public network. SIX, which operates large parts of the financial market in Switzerland, believed that there must be one and only one ledger for all assets, both tokenized money and tokenized assets such as stocks and bonds. SIX participates in several Wholesale CBDC (WCBDC) projects with several Central Banks in Central Europe. They believe WCBDC reduces liquidity risk and settlement risk especially in cross-border payments between banks and financial institutions. Also, the European Central Bank (ECB) mentioned what they call “shared ledger” on a couple of occasions. But I had a conversation with the ECB after they went off stage where I brought up this topic and where the ECB representative said there was possibly more talk about different ledgers and technologies being on the “same platform,” whatever that means.
When can we expect Digital Euro and CBDC from a Western country? The IMF representative pointed out that the issuance of CBDC is an extensive and lengthy process over a very long period of years. It was suggested that the ECB plans to spend 2 years after the end of 2025 getting ready for issuance, meaning an estimated 2028. Others thought it was going to take longer. Accenture said bluntly that central banks do not have the expertise to deliver tokenized money and are going to have to get private ones to do so if the CBDC is to be a success. In any case, it is the case that a central bank alone does not have what is required. Brazil has a slightly different technological approach in that they bring together different technologies in a common basket “basket”. I know that for example they use Hyperledger Besu which is an Ethereum based private network. Swift with several mentioned “interoperability” as crucial to success, that multiple ledgers and technologies “talk together”.
There was also room for a panel talk on crypto regulation in Europe and MICA. Circle believed the EU spent too long launching MICA after close to 7 years of work. In recent years almost no change to proposed regulation occurred and MICA should have been introduced 2 years earlier. After a brief discussion about MICA, the conversation turned to the lack of regulation of DeFi, which thus took most of the time.
At the end of the day there was a short panel discussion about digital identity and the eIDAS 2 project. Digital identity for both individuals and businesses is crucial for digital money. eIDAS project is the EU's project for digital identity in Europe. It is planned to be put into production by the end of 2026 and actors such as banks must accept this ID by the end of 2027. When I talk to those working on the eIDAS projects, there seems to be a consensus that implementation will take somewhat longer, estimated around 2030. It will be a question for us in Norway about how this will affect BankID and other local variants.