Joachim Nagel, head of the Deutsche Bundesbank and a member of the European Central Bank (ECB), recently emphasized the critical importance for central banks to promptly adapt and adopt digital currencies. Speaking at the Bank for International Settlements (BIS) Innovation Summit, Nagel discussed the evolving landscape posing challenges to traditional banking models.
Reflecting on the past two decades of banking transformations, Nagel highlighted the vulnerability of once stalwart business models. He advocated for leveraging distributed ledger technology (DLT) as a pivotal tool for modernization, stating, ”We need to revise our business model, and DLT is a vital tool for reaching this goal.”
Nagel also underscored the waning popularity of physical cash, emphasizing the pressing need for central banks to innovate. ”We must accelerate our efforts to innovate as the appeal of our primary product diminishes,” he suggested.
Similarly, Francois Villeroy de Galhau, Governor of the Bank of France, supported the integration of digital currencies to meet contemporary demands and ensure stability. The ECB aims to finalize a digital euro by October 2025, signaling a significant stride toward embracing digital currency.
Meanwhile, the Swiss National Bank (SNB) cautiously explores digital currencies through Project Helvetia III. Thomas J. Jordan, Chairman of the SNB, stressed the importance of central bank money for financial stability but voiced concerns about retail CBDCs potentially destabilizing the financial system.
He argued that wholesale CBDCs are preferable for the secure settlement of tokenized assets, emphasizing their benefits over the potential risks of retail CBDCs. This discourse at the BIS Summit reflects a clear inclination towards digital currencies among central banks, striking a balance between innovation and prudence as they adapt to an increasingly digital financial landscape.
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