- CBDC is to be used only as a method of payment and nothing else.
- Digital currencies could potentially weaken the purpose of bank credit.
Burkhard Balz, a German politician and executive board member of the nation’s central bank, stated in a speech on 20th October that it was pivotal to control how the digital euro is used once it’s set up.
The German legislator stressed that the central bank digital currency (CBDC) should only be used as a method of payment and nothing else.
If CBDC is treated in the same manner as time-honoured money, depositors could take out money in an emergency by changing it to digital euros. This would make the central bank legally responsible for the money. Balz explained that the act could undermine the service of bank credit to the economy. To stop this, central banks could put a cap on the number of digital euros one can possess at a particular time.
The executive board member claims that the Deutsche Bundesbank is considering other digital payment options to ward off CBDC and its unpleasant consequences for banks.
Central Banks’ stance on CBDC
The Deutsche Bundesbank has not spoken favourably of CBDC in the past. Last year Jens Weidmann, president of Deutsche Bundesbank, stated that CBDC would weaken financial structures. Regarding blockchain technology, he deemed it slow and costly. Weidmann attempted to incorporate blockchain, but it was to little avail.
Dr Johannes Beermann, who is also part of the executive board of the Deutsche Bundesbank, claimed last year that there is minimal room for change and advancement. He also acknowledged that the transition to digital currencies is not as simple as it may appear.
In Germany and most of Europe, cash circulation is still rocketing, which implies that the cash infrastructure is still a worthwhile venture.