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.
  • Overview
  • 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.

Regulators GE Bundesbank
Entity Types B/D; Bank; CNSM; Corp; Exch; MSB
Reference Sp, 9/14/2021; Fintech
Functions Financial; Operations; Product Design; Risk; Technology
Countries China; Germany
Products Banking; Cryptocurrency; Deposits; Payments
Regions EMEA
Rule Type Guidance
Rule Date 9/14/2021
Effective Date 9/14/2021
Rule Id 115830
Linked to N/A
Reg. Last Update 9/14/2021
Report Section EU

Last substantive update on 09/15/2021