Germany’s central bank chief pushes for a sovereign digital euro and still sees Bitcoin (BTC) as ‘digital tulip’

Bundesbank President Joachim Nagel believes the European Union requires state-controlled digital money to prevent private sector domination in global banking. 

Joachim Nagel, the president of Germany’s central bank, is adamant that a digital euro will help Europe maintain financial independence.

Speaking at an OMFIF event at the London School of Economics, Nagel emphasised the European Central Bank’s prudent monetary policy, characterising Bitcoin (BTC-0.97%) as “more like an asset class” and “the opposite of transparent.” He also referred to the cryptocurrency with a $2 trillion market cap as a speculative bubble, comparing it to a “digital tulip.” 

In response to proposals from some central banks to start holding Bitcoin as a reserve currency, Nagel stated that central banks should remain sceptical. 

Instead, Nagel contended that a digital euro would help Europe stand hard against private sector dominance, as central bank digital currencies “will play a role in future resilience [of Europe].” The Bundesbank head also cautioned that foreign payment systems could be “used in a digital environment as a form of weapon,” but provided no further details. 

At the DZ Bank Capital Markets Conference in 2024, Nagel stated that financial institutions and other payment service providers processing digital euro payments “would not be allowed to use personal and transaction-related data for commercial purposes.” He did, however, state that this restriction would only be withdrawn if consumers gave explicit approval. 

Europe divided over Bitcoin as a reserve asset

Ales Michl, the governor of the Czech central bank, proposed utilising Bitcoin as the central bank’s reserve asset in late January of this year. The concept piqued the interest of some cryptocurrency enthusiasts, but not all policymakers. Christine Lagarde, president of the European Central Bank, shut it down, stating that “reserves must be liquid, secure, and safe.” 

Following Michl’s proposal, the Czech National Bank’s board requested a study of Bitcoin as a reserve asset. However, sources now suggest the study could take many months to complete. Even if it backs Bitcoin purchases, the CNB’s exposure is expected to remain below 1% of total reserves, far from the first suggested 5%. 

Buy and sell crypto in minutes with 0.20% trading fees at Bitdenex  Exchange