Global: ECB Member Urges Central Banks to Embrace CBDCs, Revise Business Models

Joachim Nagel, the president of Bundesbank and a member of the European Central Bank (ECB), emphasized the necessity for central banks to overhaul their business models and swiftly adopt central bank digital currencies (CBDCs) during the BIS Innovation Summit.

Nagel stressed the uncertainty surrounding central banks’ future during a panel session at the Innovation Summit held by the Bank for International Settlements on May 6.

Reflecting on the evolving landscape, Nagel remarked, “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 — 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.”

Highlighting the importance of embracing technological advancements, Nagel emphasized the integration of distributed ledger technology (DLT) as physical currency diminishes in popularity. He stressed the need for urgency in adapting to these changes, stating, “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.”

Meanwhile, French ECB member Francois Villeroy de Galhau also addressed the topic of central banks and emerging technologies during the BIS conference. Galhau proposed that central banks consider utilizing digital currencies for both wholesale and retail transactions to ensure the stability of the financial system.

Galhau explained, “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.”

Currently, the ECB is in the process of developing a digital version of the euro, having completed its investigative phase to determine its design and technical specifications. The ECB aims to finalize the project by October 2025, signaling a significant step towards embracing digital currencies in the central banking arena.