What does the rise of artificial intelligence (AI) among firms mean for the financial industry and financial supervision? Are central banks prepared for a breakthrough in quantum computing, especially with regard to cyber risks? How is the increasing digitalisation of payments affecting the financial industry? And what changes would a digital euro bring? At BaFinTech, a two-day industry conference co-hosted by the Bundesbank and BaFin in Berlin, representatives of the two authorities discussed digital innovations and the associated risks and rewards with both the financial sector and experts from academia and industry.

Bundesbank Executive Board member Michael Theurer talked to BaFin President Mark Branson on the topic of “Regulation in the digital financial age – the balance between innovation and stability”. Mr Theurer addressed the risks to financial stability posed by technology-driven business models and stressed that these models are highly dependent on the technology behind them. However, he explained, operational risks such as IT and reputational risks, dependencies on third-party providers (such as big tech firms) and geopolitical risks also play a role here.

At the same time, Mr Theurer highlighted the opportunities that using AI technologies can provide, such as process automation and an improved customer experience. It would equally be a risk to turn away from technological developments, he said.

Asked about the supervisory response to digitalisation blurring the lines between the financial sector and other sectors, for example through embedded finance (the integration of financial services into companies’ platforms), he replied: “If value chains break down, it is important from a supervisory perspective that responsibilities are not diluted.” Overall, he continued, regulation needs to manage a balancing act between promoting innovation and maintaining stability. He explained that he considers some manner of regulatory framework necessary, but stressed that it should be flexible and technology-neutral in order to keep pace with dynamic developments.

Digitalisation of payments and the digital euro

In his speech, Executive Board member Burkhard Balz addressed the digitalisation of payments and the increase in digital payments, although cash is still used for 50 % of transactions in Germany. According to Mr Balz, the increase in digital payments, especially via smartphones, is placing new demands on security and data protection. Central banks face the challenge of creating a stable and trustworthy framework for digital payments. He explained that the digital euro, as both a retail and a wholesale variant, could contribute to the digital future of the payments landscape and strengthen Europe’s economic sovereignty. Wholesale central bank digital currency, or wholesale CBDC for short, refers to the settlement of DLT-based transactions between commercial banks in central bank money. The digital euro would couple the growing popularity of digital payments with the advantages of central bank money. It would strengthen the importance of the euro and the euro area relative to competing currencies and new forms of money by securing the anchor function of central bank money, Mr Balz said. The digital euro should also work offline and thus offer resilience in times of crisis. Bundesbank expert Heike Winter discussed this with her guests in the subsequent panel.

As the second variant of CBDC, wholesale CBDC, is of interest to the financial market, the Bundesbank and the Eurosystem are working on the interoperability of DLT platforms with established Eurosystem payment systems. On 1 July 2025, the ECB unveiled a dual-track strategy for DLT-based transaction settlement. A short-term track will initially be provided allowing DLT platforms to be linked to TARGET Services by the end of 2026.

Panel on quantum computing

BaFin President Mark Branson discussed the impact of quantum computing on cybersecurity with David Faller (IBM Deutschland), Esther Recktenwald (Bundesbank) and Günther Welsch (Federal Office for Information Security). The experts highlighted how this technology is challenging existing security protocols and creating a need for new security measures. The panellists agreed that it is necessary to monitor developments in quantum computing and make appropriate adjustments to the cybersecurity strategy to ensure protection against potential threats.

MiCAR 2.0 and the international comparative perspective

Rupert Schäfer (BaFin), Karlheinz Walch (Bundesbank), Ivan Keller (European Commission) and Daniel Resas (Placehodlr/UPenn) discussed a possible MiCAR 2.0 in their plenary session. The aim of the EU MiCAR Regulation is to establish a harmonised European regulatory framework for crypto-assets. In the wake of the EU Regulation, the United States and the United Kingdom are now following suit with their own draft legislation to regulate crypto-assets. Participants discussed what Europe can learn from this and what the EU needs to do to respond to dynamic developments in the crypto market.

Digital money for tomorrow

Alexandra Hachmeister (Bundesbank) discussed wholesale CBDC as digital money for tomorrow’s capital market with Eva Wimmer (Federal Ministry of Finance), Thomas Wißbach (Deutsche Börse) and Bert Staufenbiel (KfW). In a short presentation, Ms Hachmeister gave an overview of the progress made in the Eurosystem in the field of wholesale CBDC. Key aspects and advantages of, as well as perspectives on, wholesale CBDC were identified in the subsequent panel. The policy perspective on achieving the objectives of the digital capital markets union and the savings and investments union through wholesale CBDC was also a topic of discussion.

From regulating to implementing instant payments

With Matthias Schmudde (Bundesbank) in the moderator role, Sarah Röttgermann (DZ Bank), Felix Strassmair-Reinshagen (BaFin) and Florian Haagen (finAPI) were part of a panel discussing the opportunities and challenges associated with the introduction of instant payments. The event offered an insight not only into regulatory requirements but also into the strategic potential for banks, fintech firms and consumers. The vast majority of the audience believed that instant payments would become the “new normal” within the next five years.