ECB Official: Central Banks Must ‘Speed Up’ CBDC Adoption

Bundesbank’s president said central banks must speed the adoption of digital currency to remain viable.

“If you would have asked me 20 years ago if the central bank business model” were “destroyable or not, I would have said no,” Joachim Nagel said on Monday at a Bank for International Settlements Innovation Summit. 

“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,” said Nagel, whose comments were reported by Bloomberg News. 

“And DLT is just a means, an instrument that could help us here to get to that point,” he added, referring to distributed ledger technology.

Nagel is also a member of the European Central Bank (ECB) Governing Council. The Bloomberg report noted that the ECB last year advanced to the next stage of its digital euro project, getting ready to issue the currency in the years to come, although a final decision has yet to be made.

He told the conference that “it’s a necessity to really get there” on the digital euro. “We need to speed up on all this,” including DLT.

In other news from the conference, the Swiss National Bank (SNB) revealed it was conducting a pilot project using wholesale CBDC, and successfully settled four tokenized bond issuances and one secondary market transaction.

Project Helvetia III, which launched in December, is testing tokenized central bank money for wholesale use and lets participating banks to use Swiss franc wholesale CBDC to settle transactions with tokenized bonds on a regulated trading and settlement platform for tokenized assets, SIX Digital Exchange (SDX), Thomas J. Jordan, chairman of the governing board of the Swiss National Bank, said at the conference.

“Settlement in central bank money is crucial for two reasons,” Jordan said. “First, it eliminates credit risk and minimizes liquidity risk in settlement, thereby contributing to financial stability. And second, it reinforces the role of central bank money as the anchor for the monetary system.”

Last month, Jordan warned the risks of issuing a CBDC for the general public would outweigh any potential benefits.

Speaking during an event in Zurich, Jordan said consumers and businesses have access to a range of private sector payment instruments, with no need for a retail CBDC. He added that a wholesale CBDC could facilitate the safe and efficient settlement of tokenized assets.