The digital euro needs to start small to avoid disrupting the banking sector, the head of Germany’s central bank said Tuesday (Sept. 14).
During a conference in Frankfurt, Bundesbank President Jens Weidmann cautioned against moving too quickly on the digital euro, Reuters reported.
“A gradual approach might make sense given the risks involved — that means a digital euro with a specific set of features and the option to add further functionalities later,” he said.
One of Weidmann’s worries is that, during a crisis, consumers could panic and convert bank deposits into central bank money, disrupting the financial system by withdrawing an important source of funding.
The European Central Bank approved the digital euro earlier this year and has it under design, but has said the official launch of the currency could be years off.
Last week, the head of the Bank for International Settlements’ Innovation Hub cautioned the world’s central banks to start moving on creating a digital currency or risk falling behind initiatives like the ones undertaken by Facebook and its stablecoin.
“The time has passed for central banks to get going,” said Benoit Coeure, addressing the European Financial Forum.
“We should roll up our sleeves and accelerate our work on the nitty-gritty of CBDC [central bank digital currency] design,” Coeure said. “CBDCs will take years to be rolled out, while stablecoins and crypto assets are already here. This makes it even more urgent to start.”
A number of central banks in Europe, as well as the U.S. and the U.K., have considered setting up a digital currency. Meanwhile, India has begun putting together the framework for digital currency, with plans to launch a trial for a digital rupee in December.