Germany’s Deutsche Bundesbank (BBk) President Spreads Caution About Crypto Asset Risks

  • President Jens Weidmann of Germany’s BBk warned against introducing crypto assets to central banks.
  • Weidmann added that

Every country in the world is working to establish their stance on the cryptocurrency market, guiding them to the regulations that will govern it within their region. In Germany, the President of the Deutsche Bundesbank (BBk), Jens Weidmann, advised the central banks about the many risks associated with digital currencies and introducing them to the infrastructure.

Weidmann stated that adopting digital money within the central banks has the power to disrupt the stability of the financial system, specifically in a situation involving crisis. Lenders could collapse at a rapid pace by allowing the public to have easy access to cryptocurrencies, due to the high volatility to the market. With this volatility, the banks would have a hard time maintaining their balance sheets.

The Deutsche Bundesbank is known as the most influential entity involved with the European System of the Central Banks, due to the size of the institution. It is reportedly the first central bank in the region to establish full independence, which is why it has the name Bundesbank model for the type of central bank it is. This model has been integrated as the euro system’s entire base for the European Central Bank (ECB).

Reports yesterday indicate that the government has yet to see or report any market manipulation or other “cyber incidents” happen on the crypto platforms that have been established in Germany. Contradictory to today’s warning, one official at the ECB spoke about the benefits of allowing the central banks to establish their own cryptocurrencies, though they were still advised to remain cautious.

As the official puts it, implementing CBDCs could provide a store of value, a form of payment, and a medium of exchange within the banks. Still, the official reminded the public and the local banks that the use of these currencies could still cause financial exclusion to increase.

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