Member of the Board of the German Federal Bank Burkhard Balz believes that the introduction of the digital euro could have large-scale consequences for the entire financial system.
If the digital currency of the central bank (CBDC) receives characteristics similar to traditional money, then in a crisis situation, depositors will massively convert their funds into it.
“This could lead to the destabilization of the banking sector and, as a consequence, potentially weaken the provision of loans to the economy,” Baltz said.
In his opinion, the solution to the problem will be to limit the number of digital euros per user. This will allow regulators to control the demand for the asset and use it solely as a method of payment.
“We need a comprehensive analysis and assessment of government cryptocurrencies, comparison with alternative options. We need to assess the impact of digital currency on society as a whole, ”Balz emphasized.
He added that the German Federal Bank is involved in discussions around the CBDC, but is looking for solutions that would prevent this step.
In 2019, Bundesbank President Jens Weidmann issued similar warnings. In his opinion, the high demand for cryptocurrencies can negatively affect the regulator's balance.
We will remind, on October 12, the European Central Bank (ECB) opened a public discussion of the benefits and problems associated with the issue of digital currency.
Earlier, the head of the ECB Christine Lagarde claimed that CBDC would be a supplement to cash.