Bundesbank President: Passionate plea for the digital euro

Bundesbank President Joachim Nagel spoke out vehemently in favor of the introduction of a digital euro at the monetary policy dialogue of the Bundestag's Finance Committee on Wednesday. He wants to be "in the driver's seat" when it comes to digital payments, the central banker explained at the joint meeting with the parliament's Budget and European Affairs Committee. He emphasized that Europe must become "more resilient and independent" of non-European payment providers. Relevant applications are systemically relevant. It could therefore only be in the interests of all banks for Europe to reduce its dependence on non-European payment infrastructures. So far, however, there is no special European cloud architecture for payment systems in Europe.

Nagel began his campaign for the digital euro, whose added value is controversial, a few hours before his speech in the Bundestag with a speech on central bank money in the 21st century at the DZ Bank Capital Markets Conference 2024 in Berlin. "The digital transformation has radically changed the payments landscape," the economist explained there. Many new players such as start-ups from the FinTech sector or large tech companies such as Apple and Google have successfully entered the payments market and have already taken "a prominent position" there. At the same time, cash is being used less and less: "It cannot be used for digital payments and is also being used less in retail."

Cash is currently the only form of central bank money available to the general public, said Nagel, explaining the need for a digital euro: "Cash is public money." All other means of payment available to citizens in the eurozone are issued by commercial providers who are more or less trustworthy. Public money is "a cornerstone of our financial system". It is not just a unit of account: "In conjunction with the appropriate regulation, public money also ensures that one euro literally equals one euro, regardless of who has issued the means of payment." In a digital world, it is therefore only logical for central banks such as the ECB to consider "providing a digital alternative to cash".

Physical cards as an additional option

At the same time, Nagel asserted at the conference and in front of MEPs that the digital euro would protect citizens' privacy. In contrast to many commercial payment service providers, the Eurosystem has no interest in monitoring people's payment behavior. It would not be able to identify users on the basis of payments made. The 57-year-old assured: "We would only see very little data that is necessary to fulfill the tasks of the Eurosystem, such as settlement." Banks and other payment service providers would not be allowed to use personal and transaction-related data for commercial purposes with the digital euro unless users expressly agreed to this. However, they would have limited access to this information "where required under anti-money laundering and anti-terrorist financing regulations". Offline payments would therefore be limited to small-value payments.

Citizens could use the digital euro either via their bank's app or via a Eurosystem application "equipped with basic functions", Nagel explained. Another option would be physical cards. These would be suitable for people who do not want to use their cell phone for payments or do not have a smartphone or bank account. However, cash would remain "the cornerstone of payment options". It is not a question of abolishing this anonymous means of payment. The central banker tried to refute the concerns of commercial banks that the digital euro could become an attractive substitute for bank deposits by pointing out that there would be no interest, but a "holding limit". The digital euro is "not intended as a store of value".

(vbr)