Bundesbank Board Member Balz: Digital Euro Must Not Create Stability Risks

9 March 2021

By David Barwick – FRANKFURT (Econostream) – German Bundesbank Board member Burkhard Balz on Tuesday said that if the Eurosystem introduced a digital euro, it would do so in such a way that risks to financial stability did not result.

In an interview with German quarterly Wirtschaftskurier, Balz noted that anyone holding a digital euro would have a claim on the Eurosystem, rather than only on commercial banks as with standard bank accounts. The question of whether commercial banks would consequently become less attractive as a place to store money ‘is one of the questions we are dealing with in the working group’, he said.

‘When the digital euro comes, it must not create financial stability risks’, he said. ‘The commercial banks must continue to have their place.’

Balz doubted that the Bundesbank, which he noted had the second largest gold holdings in the world, would ever hold bitcoin as a reserve currency. ‘We want to have reserves that retain value and are liquid and, if necessary, quickly available in an emergency’, he said. ‘Bitcoin cannot offer that, unlike gold and foreign currencies like the US dollar or the yen.’

The fact that bitcoin has appreciated considerably since introduced ‘doesn't change the fact that it is a speculative object where everything is possible up to and including a total loss’, he said.