As the crypto industry faces increased regulatory scrutiny, Joachim Nagel, the president of Germany's central bank (Bundesbank) and a member of the European Central Bank (ECB), believes that central banks need to rethink their business models and embrace central bank digital currencies (CBDCs) to remain relevant.

Speaking at a Bank for International Settlements conference, Nagel expressed concerns about the evolving financial landscape and the declining use of physical cash. He admitted that 20 years ago, he would not have questioned the resilience of central banks' business models, but today he sees potential vulnerabilities that require adaptation.

Nagel specifically mentioned distributed ledger technology (DLT) as a crucial tool that could help central banks revamp their operations. Another ECB member, Francois Villeroy de Galhau from France, echoed similar sentiments, advocating for the inclusion of digital currencies in both wholesale and retail banking sectors.

Galhau argued that updating the method of making central bank money available is essential for the 21st century and to ensure that it continues to serve as a stability anchor for the financial system.

The ECB is actively working on developing a digital euro and has completed the investigative phase to finalize its design and technical specifications. The project is expected to be completed by October 2025.

In essence, central bankers recognize the need to adapt to the changing financial landscape, particularly the rise of digital currencies and blockchain technology, to maintain their relevance and ensure the stability of the financial system.