The Bank of International Settlement (BIS) held its Innovation Summit in Basel on May 6, 2024. Bundesbank president Joachim Nagel called central banks to review their business models during the summit.
Nagel says central banks should adopt digital currencies, noting that their future depends on the speedy adoption of CBDCs.
Joachim Nagel Sees CBDCs as The Future of Finance
During the Innovation Summit held in Basel on May 6, Joachim Nagel warned the banking sector about the uncertainty surrounding central banks. Nagel, also a member of the European Central Bank (ECB) and an advocate of digital currencies, says that CBDCs are vital to the future of central banks.
According to Nagel, things have changed, and the Central Bank needs to review its model to align with the technological changes. Unlike today, he wouldn’t have found any flaw with the central bank business model 20 years ago.
“If you would have asked me 20 years ago if the central bank business model was destroyable or not, I would have said no,” Nagel revealed.
Nagel believes now is the time to restructure central banks’ business models. He highlighted the importance of integrating distributed ledger technology as physical currency becomes less appealing. He also noted that if part of the core product is losing its attractiveness, you must search for a new core product.
Furthermore, during the BIS summit, French ECB member Francois Villeroy de Galhau shared his thoughts on central banks and emerging technologies. He says central bank money should be geared towards maintaining its core role in the 21st century.
According to Galhau, central bank money should not just be a means of payment but also maintain the financial system’s stability. He believes a central bank digital currency will soon be helpful for both wholesale and retail transactions.
According to a BIS survey, over 90% of central banks are exploring the possibility of a CBDC, focusing more on retail than wholesale. Notably, the public’s focus has been mainly on retail CBDCs, where consumers can enjoy direct access to digital central bank money.
However, the Governor of the Bank of Italy, Fabio Panetta, noted that wholesale CBDCs are gaining popularity. Panetta believes that most central banks can issue a CBDC within the next six years. However, he says wholesale CBDCs will likely enjoy more adoption than retail.
Reserve Bank of India Developing Offline CBDC
The Reserve Bank of India is working to make its digital currency available without being dependent on internet access, according to Governor Shaktikanta Das https://t.co/sRPTMgKjkp
— Bloomberg (@business) May 7, 2024
Meanwhile, the Indian central bank wants its digital currency (CBDC) to be available offline. The Reserve Bank of India (RBI) Governor Shaktikanta Das said one of the main features of money is its ability to work offline. Therefore, he stated that the authorities are working on making the CBDC transferrable even while offline.
Remarkably, India is one of the few economies currently testing a central bank digital currency. According to Das, India has expanded the use of its digital currency and now has approximately 1.3 million customers. About 300,000 merchants now rely on the CBDC in India for their transactions.
India is testing both wholesale and retail CBDCs. However, the Governor believes that more transactions must be conducted to discover the actual effect of CBDCs on the economy.
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