Central banks should review the business model, accept CBDCs — ECB member

The future of central banks depends on their business model and the rapid adoption of central bank digital currencies (CBDCs), said Joachim Nagel, president of the Bundesbank and member of the European Central Bank.

Nagel warned of uncertainty surrounding central banks during a May 6 panel session at the Bank's Innovation Summit for Global Settlements.

“If you had asked me whether the central bank business model 20 years ago was going to collapse, I wouldn't have,” he said in Basel, Switzerland. Nagel continued:

“Now I'm not sure anymore – and that's why we're sitting here. We need to work on our business model. And DLT is a tool to help us get to that point.”

The head of the Bundesbank emphasized the importance of integrating distributed ledger technology as physical money loses its appeal. “We have to speed up all this […]. If a segment of your core product is losing appeal, you need to think about a new core product, Nagel said.

French ECB member Francois Villeroy de Galhau discusses central banks and new technologies. Earlier at the BIS conference, Galhau suggested that banks should consider using digital currencies for wholesale and retail transactions.

“The way we get central bank money must be designed for the 21st century to keep central bank money in its fundamental role: not as a primary means of payment, but as a stable anchor for the financial system. That's why sooner or later, we'll need a central bank digital currency for both wholesale and retail purposes.” I believe.

The ECB is currently finalizing the research phase to determine the design and technical specifications of the digital version of the euro. The ECB expects to complete the project by October 2025.

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