Burkhard Balz: The digital euro - how CBDC can shape tomorrow's payments landscape

Keynote speech by Mr Burkhard Balz, Member of the Executive Board of the Deutsche Bundesbank, at the School of Economics, Cape Town, 30 June 2023. 

The views expressed in this speech are those of the speaker and not the view of the BIS.

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1 Introduction

Ladies and gentlemen,

Distinguished guests,

I am delighted to be here with you today at this esteemed university in beautiful Cape Town. I am looking forward to discussing with you a topic of immense significance that may be shaping the future of our financial systems – central bank digital currencies, or in short: CBDCs.

The idea of CBDC is far from new. But only in the last few years, the theoretical concept has gained traction, with central banks entering into more practical experiments and prototyping. Why is that?

In recent years, the financial landscape has been undergoing a rapid transformation, driven by technological advancements and changing consumer preferences. Cashless payments are becoming increasingly popular, new digital payment solutions are emerging, and providers of innovative payment services have entered the scene. With digital payments on the rise, central banks – as the sole issuers of public money – need to respond adequately to these new challenges, as they relate to our statutory mandate to ensure safe and efficient payments.

A key development in this regard is the growing interest in CBDCs among central banks around the world. CBDCs are basically digital representations of a nation's fiat currency, issued by the central bank. That distinguishes them from crypto-assets, such as Bitcoin, sometimes also referred to as "cryptocurrencies". However, we do not use this term, mainly because these assets are unable to serve as a store of value due to their high level of volatility. 

Around the globe, central banks are initiating projects with the aim of issuing their own CBDC. The goal is not to introduce another separate currency, but to create a new, digital form of central bank money in existing currency areas. While a few countries have already launched a CBDC, other central banks are at the stage of piloting theirs, most prominently in China. A survey by the Bank for International Settlements (BIS) showed that nearly 90% of all responding central banks are conducting some kind of CBDC research.