Bundesbank Payments Symposium ©Tim Wegener

“Eurosystem should push forward with central bank digital currency”

Bundesbank President Joachim Nagel has voiced approval for the development of European payment solutions. These, he said, could help Europe to shake free from its strategic dependencies when it comes to payments. “And that’s the very reason why I’m an advocate of the Eurosystem taking a proactive approach in addressing the changing shape of money and pushing forward with its investigations into central bank digital currency,” Dr Nagel explained in his speech at the Bundesbank’s Payments Symposium. He views central bank digital currency (CBDC) and the associated infrastructure as an important complement to the existing set of ways to pay.

Organised by the Bundesbank, this event offers a platform for decision-makers in the banking industry as well as representatives from central banks and market infrastructure operators to come together to exchange views and ideas.

Decision on the introduction of a digital euro yet to be taken

Discussing the advantages of CBDC, Dr Nagel pointed out that as central bank money it would be especially immune to default and enjoyed a high level of trust. The fact that it would be accessible to all sections of the population, could be used for digital payments and could potentially open the doors to entirely new forms of use were cited as further positives. The Bundesbank President also stressed that data security would be a given when paying with a digital euro. 

October 2020 saw the Eurosystem publish a report on the possible issuance of central bank digital currency for the euro area and then launch a public consultation on the digital euro. In mid-July 2021, the ECB Governing Council decided to embark on a two-year investigation phase, starting in October 2021, to look into the possibility of a digital euro. The decision as to whether a digital euro will actually be introduced will only be made once the investigation phase is over. If the decision falls in favour of a digital euro, a roll-out phase lasting around three years would then follow.

Balz: Our chance to reshape the payments market in Europe from the ground up

At the event, Bundesbank Executive Board member Burkhard Balz outlined a vision of how the European payments market might look in the future. One aspect of that vision was instant payments. As things stand at the moment, only a small percentage of euro credit transfers are settled in real time: Mr Balz put the figure at just under 13%. In future, he said, it must be possible for credit transfers to be settled more swiftly and be initiated without the involvement of other service providers. The second aspect of Mr Balz’s vision for the future concerned the need for simplified payment processes. Europe, he noted, has a multitude of payment applications, some of which are only available at national level or in bricks-and-mortar retail outlets. Mr Balz spoke of how a pan-European solution which is as simple as possible could help push back against fragmentation in the European payments market and strengthen the hand of participating European providers as they compete against bigtech firms. “Most of the building blocks and standards are already in place. […] Now it’s up to the market participants involved to turn this vision into reality”.

Third on Mr Balz’s list for the payments market of tomorrow is the introduction of CBDC that can be used by everybody just like cash. “This will allow digital payments to be integrated more seamlessly and automatically into economic processes and our everyday lives than is possible today,” Mr Balz said. He remarked that many use cases remain to be discovered. “In future, we will need ranks of charging stations to facilitate e-mobility; a payment process could be initiated automatically whenever anybody uses one of those stations. That payment could be made with the digital euro, for example.”
ECB sees digital euro as a way of safeguarding the stability of the monetary system

ECB Executive Board member Fabio Panetta also spoke at the conference. He argued that the recent ups and downs of cryptocurrencies have shown that central banks need to preserve at all times an anchor of stability for the monetary and payment system. And safeguarding that anchor is the very essence of the digital euro project. “We want to ensure that central bank money remains available to the public to use everywhere in the euro area in their day-to-day transactions, not just in its physical form but its digital form, too.”