burkhard balz : central bank digital currencies – the acceptance and adoption challenge keynote speech ( virtual ) by mr burkhard balz, member of the executive board of the deutsche bundesbank, at the virtual european payments conference, “ key trends in the european payments landscape ”, 4 may 2022. * * * 1 introduction ladies and gentlemen, thank you for your warm welcome and thank you for giving me the opportunity to deliver the keynote speech for the panel on central bank digital currencies ( cbdc ) at this year ’ s european payments conference. i can remember quite vividly last year ’ s european payments conference. it was a time of positive outlooks. almost one year later at this year ’ s conference, i am again speaking to you in a virtual, digital format. at the same time with the ongoing russian war on ukraine, the geopolitical as well as economic prospects have radically changed and worsened compared to last year. we have come together today, however, to discuss trends in european payments, with regard to cbdc and a digital euro in particular. at least in this field we see some rather positive prospects : a potential digital euro would offer a huge array of opportunities. and, whilst it also comes with considerable challenges for central banks as well as the financial industry, there are promising avenues which could be pursued in order to mitigate the associated risks. in my speech, i will shed some light on the challenges ahead and lay the groundwork for the subsequent panel discussion. 2 cbdc initiatives worldwide central banks worldwide are evaluating the opportunities and challenges associated with the introduction of a central bank digital currency. the status of the initiatives on cbdc varies, however : few countries have already launched a cbdc, with the nigerian e - naira as the latest example. 1 other central banks are in the pilot stage and preparing a possible full launch. the chinese ecny ( e - yuan ) certainly is the most prominent example here. 2 with the aim of strengthening the position of the cny in a digital future as well as making electronic payments more resilient, china most recently carried out field tests during the olympic winter games in beijing. by the end of 2021, 140 million respective digital wallets had already been issued according to people ’ s bank of china representatives, although it remains unclear, how many of these are used regularly. 3 by integrating the e - yuan as a payment option into wechat – the dominating digital payment service in china

be made available to the public as a complement to cash, we would have to think the consequences through very carefully. there are various challenges to be addressed and i will name some of the key aspects : central banks and supervisors have to address the associated risks to financial stability and monetary policy. one important aspect to consider is the role that banks and other payment service providers play as intermediaries in the financial system. when discussing different design options for a cbdc, the effects on the balance sheets of commercial banks as well as the central banks need our full attention. an outflow of deposits from the banking sector must be avoided, as well as sudden, uncontrolled shifts of bank deposits to central banks ’ balance sheets. possible countermeasures could be, for example, maximum amounts or graduated interest rates, which could also result in negative interest rates above a certain level. but it should also be taken into account that acceptance of a cbdc could suffer if parameters were set without keeping an eye on the user experience. a cbdc expecting to gain widespread adoption has to be sufficiently scalable and secure. cybersecurity risks are one key aspect in this context. in order to ensure broad acceptance, we will have to make a cbdc accessible to all groups of society, without barriers, but in a secure way. in this respect, central banks face a balancing act between two opposite key risks : first, being too ambitious could lead to a crowding out of private payment solutions and a potential 2 / 5 bis central bankers'speeches disintermediation of the banking sector. second, creating an unattractive product would result in non - acceptance by consumers and enterprises. therefore, central banks aim to strike the balance : the level of adoption of a cbdc should neither be too high nor too low – an “ acceptance and adoption challenge ”. lastly, the effective prevention of money laundering and terrorist financing is on our list of challenges ahead. in the digital euro project, the eurosystem is moving forward swiftly but thoroughly to address these challenges. 4 the digital euro project in july 2021, the ecb governing council decided to set up a formal project on a digital euro. in the eurosystem, projects generally start with an “ investigation phase ”. experts from the ecb and the national central banks have been working together since october 2021 in an investigation phase that will last 24 months. at this stage, the focus lies on aspects such as : possible use cases involving consumers,