German central bank head against digital currencies

The president of Deutsche Bundesbank Jens Weidmann feel digital currencies could destabilize financial systems and worsen bank runs. He said at a symposium the widespread use of digital central bank money could have serious consequences and should not be introduced without being well thought through. For instance, said he, easy access to digital money could exacerbate bank runs in times of crises. In a crisis, financial stability may be more vulnerable than it is today, with digital central bank money very liquid and secure investment alternative. Therefore, both ‘escape to safety’ in general and a digital bank run in particular could take place faster and to a greater extent than in the past, he said. Even in the good times, a central bank digital currency could bring a fundamental shift in the business models of banks, as well as in intermediation of the financial markets, he added.