Bundesbank’s Burkhard Balz flags big tech risk to central banks

In a recent speech, member of the Executive Board of the Deutsche Bundesbank, Burkhard Balz, discussed the involvement of big techs in payment systems, identify areas of concerns.

One of the issues, which he described as going “to the very heart of European monetary sovereignty and financial stability”, referred to a situation in which a large share of the population starts paying with private stabelcoins held in digital wallets provided by large platforms, citing Meta (former Facebook) in particular.

“Even if such arrangements were properly regulated in Europe…a number of concerns would still need to be addressed,” he noted.

“Such a stablecoin could have an impact on the market structure, and on the business models and profitability of incumbent banks and smaller fintech players. In addition it could lead to lower deposits at many banks and potentially reduce their ability to lend. Stablecoin issuers could influence financial markets and, ultimately, may have an effect on the capacity of the central bank to steer monetary conditions, especially if those were not denominated in euro. But even large euro-denominated stablecoins could impact on the conduct of monetary policy, for instance if their issuers held huge amounts of bonds and other securities,” Balz said.

At the same time, he noted that stablecoins have stimulated the debate about issuing central bank digital currencies, such as a digital euro: “Such a digitial euro would not only provide a state-of-the-art means of payment for the digital age, but also support the universality of money in open ecosystems” as an economy backbone.

Balz also commented on the “walled gardens” created by bit tech firms, and regulatory actions to avoid them: “As a central bank, we are convinced that interoperability, open standards and harmonized interfaces will help bridge the walls of these gardens”, with one step being to force large platforms to share certain data with others, such as payment service providers, among other data sharing and technology alternatives.

Read his full remarks

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