Bundesbank: cryptocurrencies issued by central banks bear destabilization of the financial system

The widespread use of cryptocurrencies issued by central banks can have “serious consequences” and should not be allowed without careful preparation. This was stated by the president of the German Federal Bank Jens Weidman, writes CoinDesk .

Weidman's speech took place on May 29 at the opening of the Bundesbank Symposium in Frankfurt, but the transcript of his speech was published just now.

In his opinion, cryptocurrencies issued by central banks can destabilize financial systems and worsen the work of banks, especially in times of crisis.

“In a crisis, financial stability can be more vulnerable than today, since cryptocurrency of central banks is a very liquid and reliable investment alternative. Therefore, the launch of digital banks can be faster and more active than in the past, ”said Jens Weidman.

He also pointed out that high demand for cryptocurrencies can have a negative impact on the central bank balance sheet and contribute to a fundamental shift in the business model of banks.

“I believe that we are obliged to offer citizens modern and fast means of payment, including via the Internet. The idea is to develop solutions that meet the latest technologies, without subjecting unnecessary risks to financial stability, ”the head of the German Central Bank said.

Weidman also spoke about a joint project of the Bundesbank and the Frankfurt Stock Exchange (Deutsche Börse) on the use of the blockchain for settlements with currencies and securities. However, he noted that the development of DLT solutions is still time consuming and requires a lot of money.

“There is no real breakthrough in the application of technology, ” he added.

Recall that in September 2017, representatives of the Bank for International Settlements stated that ignoring cryptocurrency by central banks could create risks for the global financial system.

According to the April report of the World Economic Forum, more than 40 central banks are considering issuing their own digital currencies.

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