By CCN: Deutsche Bundesbank president Jens Weidmann has added a dampener to discussions on central bank digital currencies (CBDC), claiming they would destabilize financial systems and worsen bank runs.
The president of Germany’s central bank said, in a speech in Frankfurt, Germany, that widespread use of digital central bank money could have “serious consequences.”
CBDCs have become a popular topic recently. Lithuania’s central bank, Governor Vitas Vasiliauskas recently talked up the viability of CBDCs to the Bank of International Settlements (BIS).
The sentiment from the BIS, Vasiliauskas, and Weidmann is that there is merit in digital tokens; however, they condemn decentralized cryptocurrencies, like Bitcoin.
Vulnerable financial stability
CBDCs have been described as a new, more efficient, offering from central banks that would form a third ‘type’ of money. Through potential use of distributed ledger, a CBDC could operate without intermediaries and be far more accessible across the globe.
“Some argue it could be run on a distributed ledger,” expressed Vasiliauskas in describing their merits. “In such a case, it would replace or complement reserves at the central bank with a restricted-access digital token.”