A German central bank Bundesbank official has suggested central banks be cautious when considering central bank digital currencies, Reuters writes.
Bundesbank President Jens Weidmann claims the introduction of CBDC could cause destabilisation of the financial system if there were a crisis. Weidmann is worried the introduction of central bank-issued digital assets would change the business model banks operate on even during prosperous times. In times of crisis, however, they could contribute to the early collapse of lenders, Weidmann said.
Weidmann believes CBDC could also make the demand for digital money more volatile. Since CBDC would offer greater safety than traditional money, people wouldn’t use it that much, which would, in turn, limit commercial banks’ lending ability.