Balz outlines strategy for Europe's resilient digital financial future
Burkhard Balz of the Deutsche Bundesbank outlined a strategy for future-proofing Europe's financial system at a Brussels conference. He emphasized innovation, stability, and sovereignty in the digital age, focusing on crypto-assets, wCBDC, and the digital euro.
Taming crypto, boosting the euro
Burkhard Balz highlighted the evolving crypto-asset ecosystem, noting that while systemic risks are currently contained, their expansion into traditional finance requires vigilance.
Europe's Markets in Crypto-Assets Regulation (MiCAR) provides a harmonised framework, fostering responsible innovation and investor protection.
Balz stressed that MiCAR must remain a 'living framework' requiring ongoing monitoring and refinement as technology evolves.
He specifically addressed stablecoins, which are suitable for settlement but carry liquidity and operational risks.
A key concern is the dominance of US dollar-denominated stablecoins, potentially leading to 're-dollarisation' in digital finance and undermining Europe's strategic interests.
Balz called for conditions to develop euro-denominated stablecoins, ensuring competitive European alternatives and refining MiCAR rules for complex models like multi-issuance to maintain monetary anchor stability.
Digital euro's dual track
Balz emphasized wholesale central bank digital currency (wCBDC) for anchoring tokenized capital market settlement in central bank money, ensuring security and finality.
The Eurosystem pursues this via Pontes, bridging DLT platforms with TARGET Services (pilot H2 2026), and Appia, exploring future wholesale architecture.
For retail payments, the digital euro aims to preserve access to central bank money, fostering an integrated European payments landscape and strengthening resilience.
The ECB will launch a call for expressions of interest for piloting activities by end of February 2026, with an aim for first issuance in 2029, pending EU legislation.
Sovereignty takes center stage
Balz's speech clearly articulates Europe's strategic imperative to control its digital financial infrastructure, moving beyond mere technological adoption.
The focus on euro-denominated stablecoins and central bank digital currencies underscores a proactive stance against external dependencies.
While ambitious, the outlined initiatives provide a tangible roadmap for strengthening Europe's financial autonomy.