Balz on cash, digital euro as pillars of payment resilience
Burkhard Balz of the Deutsche Bundesbank discussed the complementary roles of cash and the digital euro in ensuring payment system resilience. He emphasized that both are crucial for functionality during exceptional times and in an increasingly digital world.
Cash: The proven anchor of resilience
Payment resilience ensures people can make payments even under adverse conditions, encompassing availability, robustness, and redundancy.
"Resilience is not about efficiency in normal times – it is about functionality in exceptional times," Balz stated.
Cash, as the only directly accessible form of central bank money, serves as a cornerstone due to its independence from digital infrastructure, lack of credit risk, privacy, and inclusivity.
Empirical research, including Bundesbank studies, reveals a "banknote paradox": cash demand rises significantly during crises like the global financial crisis and the pandemic, even as its use for everyday transactions declines.
This highlights its role as a store of trust.
The Bundesbank actively maintains a robust cash infrastructure, with a nationwide network of 31 branches and extensive ATM access, ensuring reliable availability.
This decentralized system, supported by cooperation with commercial banks and retailers, enhances overall resilience against disruptions.
Digital euro: Resilience by design
As digital payments grow, ensuring resilience requires thoughtful design, complementing cash with public money in the digital realm.
The digital euro is being developed as central bank money for everyday digital payments, with resilience as a core principle.
Key features include offline functionality for payments without network connectivity, and high availability, operating 24/7. Its European infrastructure, provided by the Eurosystem and private entities, reduces dependencies and ensures key functions remain under European control.
Integration with existing systems through supervised intermediaries ensures continuity, strengthening the euro's resilience against competing currencies and stablecoins.
Complementary, not competitive
The speech effectively frames cash and the digital euro as indispensable, complementary elements for a robust payment system.
This perspective moves beyond a simple either/or debate, highlighting a pragmatic approach to future-proofing financial infrastructure.
While the technical challenges of offline digital euro functionality remain, the strategic vision for diversified public money is clear and forward-looking.