coingeek.com
Central bank digital currencies (CBDCs) and distributed ledger technology (DLT) could save the central banks’ business model as cash usage continues to dwindle, members of the governing council at the European Central Bank (ECB) said.
Speaking at an event hosted by the Bank for International Settlements (BIS), they expressed concern that central banks’ role is under threat if they fail to adapt to changes in the financial landscape.
“If you would have asked me 20 years ago if the central bank business model [was] destroyable or not, I would have said no. Now I am not so sure anymore,” stated Joachim Nagel, the president of German central bank Deutsche Bundesbank.
Nagel, a member of the ECB governing council, urged European central banks to “work on our business model. And DLT is just a means, an instrument that could help us here to get to that point.”
Nagel has been a vocal supporter of the digital euro. He believes that Europe must offer its citizens digital payment options or risk losing out to American and Asian solutions, as it has done with artificial intelligence (AI). Last month, the Bundesbank announced a partnership with the Massachusetts Institute of Technology (MIT) to research digital euro privacy.
One crucial reason to launch a digital euro is the diminishing role of cash in payments. Germany stands out as one of the most cash-loving nations among the major economies alongside Japan. However, even in Germany, digital payments are gradually taking over, especially with the young population.
“If part of your core product [cash] is losing attractiveness, then you have to think about another new core product,” he stated. “We need to speed up on all this.”
Nagel shared the stage with Fabio Panetta, his fellow board member at the ECB and the Governor of the Bank of Italy. Panetta is also an outspoken digital euro supporter who previously stated that the CBDC would provide “an anchor of stability for the payments market.”
At the event in Basel, Panetta revealed that more central banks are exploring wholesale CBDCs as they carry less risk and would be easier to implement and monitor than their retail counterparts.
“We see a sharp increase in the number of wholesale experiments. Moreover, the likelihood for central banks to issue a CBDC within the next six years is now higher for wholesale than for retail,” he told the attendees.
For Francois Villeroy de Galhau, the French central bank governor, it is not important which version launches first: Europe just needs a CBDC.
“…I believe that, sooner or later, we will need a central bank digital currency for wholesale as well as for retail purposes.”
To learn more about central bank digital currencies and some of the design decisions that need to be considered when creating and launching it, read nChain’s CBDC playbook.
Watch: The state of play and what’s to come with CBDCs