Central banks’ future depends on a revision of their business model and speedy adoption of central bank digital currencies (CBDCs), said Joachim Nagel, president of the Bundesbank and member of the European Central Bank (ECB).
Nagel reportedly warned about the uncertainty surrounding central banks during a panel session at the Innovation Summit hosted by the Bank for International Settlements on May 6.
“If you would have asked me 20 years ago if the central bank business model [was] destroyable or not, I would have said no,” he reportedly stated in Basel, Switzerland. Nagel continued:
“Now I am not so sure anymore — and that is the reason why we are sitting here. We need to work on our business model. And DLT is just a means, an instrument that could help us here to get to that point.”
The Bundesbank chief stressed the importance of integrating distributed ledger technology as physical money loses its appeal. “We need to speed up on all this [...]. If part of your core product is losing attractiveness, then you have to think about another new core product,” Nagel stated.
French ECB member François Villeroy de Galhau also discussed central banks and emerging technologies. Earlier during the BIS conference, Galhau reportedly suggested the banks consider using digital currencies for wholesale and retail transactions:
“The way we make central bank money available has to be geared to the 21st century to ensure that central bank money maintains its fundamental role: this role is not to be the dominant means of payment, but a stability anchor for the financial system. This is why I believe that, sooner or later, we will need a central bank digital currency for wholesale as well as for retail purposes.”
The ECB is currently developing a digital version of the euro, having completed its investigation phase in order to determine its design and technical details. The ECB expects to complete the project by October 2025.
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