Global Central Banks Urged to Adopt Digital Currencies

Global Central Banks Urged to Adopt Digital Currencies

BlockchainLegal

By Jakub Lazurek

07 May 2024 (2 months ago)

2 min read

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Central banks urged to embrace digital currencies to stay competitive quickly

Joachim Nagel, head of the Deutsche Bundesbank and a European Central Bank (ECB) member, recently stressed the urgent need for central banks to evolve and adopt digital currencies quickly. At the Bank for International Settlements (BIS) Innovation Summit, Nagel discussed the shifting landscape threatening traditional banking models.

Nagel reflected on the past, noting dramatic changes in banking over two decades, emphasizing that what once seemed an unbreakable business model is now vulnerable. He advocated for utilizing distributed ledger technology (DLT) as a critical tool for modernization, asserting, "We need to revise our business model, and DLT is a vital tool for reaching this goal."

Nagel also highlighted the reduced popularity of physical cash, underscoring the urgency 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 modern needs and maintain stability. The ECB plans to finalize a digital euro by October 2025, signaling a significant step 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, noted the importance of central bank money for financial stability but expressed concerns over 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 discussion at the BIS Summit shows a clear shift towards digital currencies among central banks, balancing innovation with caution as they adapt to an increasingly digital financial landscape.

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