A popular figure in the German central bank has said the decision to launch a digital Euro is more politically motivated than the technical value proposition. Burkhard Balz was speaking at the Europe-Asia conference where he made the remarks. These sentiments coincide with a spike in CBDC interest, especially in Europe, where the ECB has zeroed in on the possibility of a digital Euro in recent months.
According to Balz, this move would be more politically motivated, given the fiat domination dynamics when it comes to reserve currencies. He went on to suggest a more detailed assessment based on this opinion,
“Introducing CBDC is a political decision rather than a technical decision. Therefore, a comprehensive conceptual analysis and assessment of CBDC relative to alternative options is necessary – especially in terms of the fulfillment of our mandate, but also regarding its impact on society as a whole.”
Nonetheless, he also highlighted the need to move swiftly, given the current progress to maintain Euro confidence if a virtual monetary policy shift is inevitable. Balz believed that a collaborative international approach would yield better results in developing seamless ecosystems to support global payment networks’ growth.
As for the risks associated, Balz mentioned that a CBDC could set precedence for ‘digital bank runs’ in a situation where these digital assets are held as a store of value instead of being used for payments. On the issue of stablecoins, he was adamant that they should be issued with the blessings of monetary bodies and regulatory authorities,
“I believe that it is in the interest of the global central bank community that new payment arrangements, like stable coins, with potentially global reach, should only be offered if appropriately regulated and supervised.”
With such ongoing discussions, it might not take long before a particular jurisdiction officially launches its own CBDC. Currently, China’s digital yuan is the most progressive in the pilot phase for a couple of months. Other Asian giants like Japan and South Korea are planning to follow suit with their pilot CBDCs scheduled for next year. Europe has also filed for a digital Euro trademark as discussions hit upon its viability.