President of German Central Bank not keen on digital currencies

09 Jun, 2019
by David Borman
President of German Central Bank not keen on digital currencies

It is being reported by CCN that Deutsche Bundesbank president Jens Weidmann recently made statements downplaying and warning against the safety of central bank digital currencies (CBDCs). This comes after the Governor of Lithuania’s central bank, Vitas Vasiliauskas, made the case for CBDCs to the Bank of International Settlements (BIS).

Originally, Vasiliauskas made the case for CBDCs in May at a conference in Washington. When addressing the BIS, he argued that such assets could revolutionize the nature of transactions:

"A token would be a bearer asset, meaning that during the transaction the sender would transfer value to the receiver, without intermediaries. This is something fundamentally different from the current system in which the central bank debits and credits the accounts without transferring actual values."

This prompted Weidmann to respond, noting his concern that the nature of digital currencies could increase the risk banks have to things like bank runs:

"In a crisis, financial stability may be more vulnerable than it is today, with digital central bank money very liquid and secure investment alternative. Therefore, both ‘escape to safety’ in general and a digital bank run, in particular, could take place faster and to a greater extent than in the past."

That is not to say he does not acknowledge the importance of staying modern to offer customers the latest options, just not like this:

"I see ourselves [the Bundesbank] as having the duty to offer citizens modern, fast, and also internet-enabled means of payment. The idea is to develop solutions that are up to date with the latest technology without incurring unnecessary risks to financial stability."

It is unclear what modern means of payment Weidmann is referring to, but he did go on to elaborate that he is not a fan of blockchain, citing that it is slow and expensive.

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