Frankfurt (dpa) – The head of Germany’s central bank, Jens Weidmann, has warned against introducing a digital central bank currency without properly considering the consequences of such a move.
“I don’t believe in always calling in the state. In a market economy, it’s first and foremost up to the companies to develop an appropriate offer that meets customer’s wishes,” Weidmann told the Friday edition of the Handelsblatt business daily.
He was reacting to the debate over whether central banks such as the Bundesbank or European Central Bank should create their own answer to digital currencies such as Bitcoin or Facebook’s planned Libra.
“First of all, it’s important to understand the positive and negative sides of a digital central bank currency. Then it can be decided whether it is needed, and whether the risks can be controlled,” he said.
ECB President Christine Lagarde has called the emergence of digital currencies a challenge, and said in September that the question was whether central banks should issue them. Lagarde wants a thorough strategy review, which is set to begin in January, at the bank.
Weidmann believes in the effects of competition between banks: “For example, the credit industry’s initiative to offer a better, Europe-wide payment system was prompted due to new competitors.”
Banks, said Weidmann, would have to counter Facebook’s plans with their own efforts.
Since the announcement of Libra, Facebook has repeatedly come up against regulator and government concerns that, given the social media platform’s huge user base, with 2.4 billion active monthly users, Libra could threaten national currency sovereignty and cause major financial market disruption.