ECB’s Nagel: ‘Ideally, the Digital Euro Would Be Interoperable with Other CBDCs’

14 October 2024

By Marta Vilar – MADRID (Econostream) – European Central Bank Governing Council member Joachim Nagel said on Monday that central banks should ensure interoperability in their CBDCs from the very beginning.

Speaking at a conference on ‘Central Banking at Crossroads’ in New Delhi, Nagel, who heads the German Bundesbank, said, ‘Ideally, the [digital euro] would be interoperable with other CBDCs from the very start, for example, for person-to-person payments or commercial payments from or to firms outside the euro area.’

One of the benefits obtained from a CBDC should be the facilitation of cross-border payments, according to Nagel.

‘However, to be able to reap the benefits for cross-border payment, interoperability between CBDCs must be ensured early on’, he said. 'In my view, we have a historic opportunity to vastly improve cross-border transactions by making different CBDCs interoperable from the very beginning.'

Acting unilaterally would entail risks of inefficiency as well as of leaving central banks in situations in which currencies suffer from upside risks in price and replacement threats.

‘Also, the balance sheet of the CBDC-emitting central bank could strongly expand. A knock-on effect may be that domestic monetary policy in countries that suffer from increased currency substitution becomes less effective’, he stated.

A strategy which includes ‘holding limits’ could help attenuate these threats, he noted.

‘Once we have accomplished a digital euro for all users within the euro area, it will, in my view, be worth considering making it accessible to users outside the euro area as well’, he said.

It would depend on legislatures for the CBDC to be accessible from other parts of the world, according to Nagel.