Bundesbank President Jens Weidmann has drawn attention to the dangers of issuing digital central bank money, and urged caution. “Any introduction of central bank digital currencies needs to be carefully considered,” he commented at this year’s Bundesbank Payments Symposium in Frankfurt am Main, adding that such currencies, if widely accessible, could fundamentally alter banks’ business models. He went on to highlight the risks they pose for financial stability, pointing out that “In a crisis, the threat to financial stability could possibly be even more severe than today.” This is because central bank digital currency would represent an additional, highly liquid and safe alternative for investors. Both a “flight to safety” in general, or a bank run in particular, could then occur faster and more extensively than in the past.

Yves Mersch states that bitcoins and crypto-assets are suitable solely as a vehicle for speculation

In his speech, ECB Executive Board member Yves Mersch focused on crypto tokens, such as bitcoins, explaining that these “self-proclaimed currencies” are merely of use for speculative purposes. As he argues, “Bitcoins and other crypto assets claim to need neither trust nor the backing of a sovereign”. But these “currencies” have not fulfilled their purpose and well implemented central bank policies remain the only reliable instrument for maintaining stability.

Need for greater activity and thought at the European level

Mr Mersch used his speech to comment on the intense global competition among payment providers. “In times of upheaval in global payment markets, it is all the more important for Europe to close ranks”, he opined. Regarding the further mergers to be expected down the road, aping those effected recently in the United States in order to deliver economies of scale, he stated that “Further mergers among important payment settlement providers will have an impact on Europe”. 

Burkhard Balz, the Bundesbank Executive Board member responsible for payment systems, likewise called for greater activity and thought on the part of German providers. In his speech, he warned that, “If we are to keep up with the competition, German providers absolutely need to consider the European dimension each time they redesign and reform their products”, adding that, to this end, the Bundesbank supports the notion of upgrading established means of payment like the Girocard on a Europe-wide basis. “But that is just for starters. More steps need to follow, aimed at finding pan-European solutions that are simultaneously efficient and globally competitive,” he concluded. As a first step, this could entail the facilitation of cross-border card payments, achievable soon via the newly available instant payment channels.

Restrained use of instant payment tools

But as Jens Weidmann pointed out, up to now banks have been reluctant to engage in real-time payment, commenting that “It would be good to see instant payments reach critical mass more quickly”. Real-time payment systems look set to become the standard in Europe over the medium term.