Nagel: New money forms may alter policy transmission
Bundesbank President Joachim Nagel discussed how central bank digital currencies, stablecoins, and tokenized deposits could impact monetary policy transmission. Speaking at a conference in Eltville, he emphasized their potential effects on the banking sector.
Defining the digital landscape
Bundesbank President Joachim Nagel outlined three emerging forms of money: retail central bank digital currencies (CBDCs), stablecoins, and tokenized deposits.
A retail CBDC, like the digital euro, is a digital form of central bank money for everyday transactions, designed to complement cash.
Stablecoins are privately issued digital tokens aiming to maintain a stable value, predominantly against the US dollar.
Tokenized deposits represent commercial bank deposits on a programmable ledger, redeemable at par.
Currently, these instruments have limited impact on everyday payments in the euro area, with the digital euro planned for issuance in 2029.
Their potential influence on monetary policy transmission could grow significantly with wider adoption, underscoring the need for thorough analysis.
Shifting liquidity flows
Nagel emphasized that new forms of money primarily affect monetary policy transmission via the bank lending channel, which relies on banks' stable deposit funding.
Changes in deposit composition or mobility could increase bank funding costs, impacting loan supply.
Tokenized deposits are expected to have limited impact.
For retail CBDCs, design choices like holding limits are crucial to prevent disintermediation.
Stablecoins are complex, their influence contingent on reserve management and regulation, potentially redistributing deposits or shrinking bank balance sheets.
These shifts require central banks to adapt their monetary policy calibration.