A gradual approach is needed for the digital Euro
Bundesbank President Jens Weidmann believes that a gradual approach should be deployed in terms of launching the capabilities of the digital Euro. This comes as central banks around the world start developing and issuing their central bank digital currencies (CBDCs).
The European Central Bank has pointed out that it is interested in rolling out the digital Euro, a move that is expected to eliminate the stablecoins in the market and ensure central banks remain in control of the financial markets.
According to a Reuters report today, Weidmann stated that "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."
The ECB has given the approval to research and develop a central bank digital currency. However, it could take a few years before the CBDC is available to Europeans to use. "Among his key concerns, Weidmann argued that in times of crisis, consumers could rush to convert their bank deposits to central bank money, destabilizing the financial system as they withdraw a key source of funding," the report added.
Central banks in various parts of the world are either researching ways to develop their CBDCs or have actually started developing them. China is one of the countries that has already launched its CBDC.
The Digital Yuan is currently in a testing phase, with the government working on determining how best to deploy the digital currency. The need for CBDCs became stronger due to the rise of stablecoins.
Private financial companies have been rolling out stablecoins to serve as the digital alternative to fiat currencies. Facebook's entry into the game drew a lot of criticism as the governments became concerned that tech companies like Facebook could control the monetary system if allowed to do so.