GE Bundesbank Exploring Digital Euro
On Sep. 14, GE Bundesbank Weidmann spoke of topic in symposium.
- GE Bundesbank issued Jens Weidmann's opening speech at joint symposium with China on Fintech and the global payments landscape-exploring new horizons.
- Talked on digital Euro, recalled 2 months ago Eurosystem launched project to investigate key issues re design of central bank digital currency (CBDC) for euro area.
- The aim of the investigation is to prepare for the potential launch of a digital euro.
- Experiments already show that a digital euro is feasible using existing technologies.
- However, introducing a CBDC is not an end in itself; there are various conceivable reasons why a central bank might introduce a digital currency.
- Its intended purpose will have important implications for design: form follows function.
- Accordingly, future CBDCs may differ in form and functionality across currency areas.
- Of course, CBDCs should only be issued if perceived benefits outweigh any potential drawbacks/risks; digital euro needs to provide clear value added to euro area citizens.
- Designing CBDC involves curbing its risks; to prevent excessive withdrawals of bank deposits, it has been suggested cap on amount of digital euro each individual can hold.
- Or that digital euro holdings in excess of a certain limit could be rendered unattractive by applying penalty interest rate; these highlight difficult trade-offs central banks face.
- CBDC should be designed in a way that allows its users to reap its potential benefits as fully as possible, while keeping its risks and potential side effects at bay.
- It should be sufficiently attractive for users to accept it but at the same time a CBDC should not be too attractive since, otherwise, it might disrupt the financial system.
- The design of a potential digital euro is still vague and may not be a jack-of-all-trades.
- Gradual approach might make sense given the risks involved – that means a digital euro with a specific set of features and the option to add further functionalities later.
- Further details on this and other relevant topics like regulating big tech provided.
||B/D; Bank; CNSM; Corp; Exch; MSB
||Sp, 9/14/2021; Fintech
||Financial; Operations; Product Design; Risk; Technology
||Banking; Cryptocurrency; Deposits; Payments
|Reg. Last Update
Last substantive update on 09/15/2021