Joachim Nagel, the president of Germany's central bank Bundesbank and a member of the European Central Bank (ECB), has urged central banks to revise their business models and embrace central bank digital currencies (CBDCs). Nagel expressed these views during a panel discussion at the Innovation Summit hosted by the Bank for International Settlements (BIS) on May 6th in Basel, Switzerland.

Nagel warned about the uncertainty surrounding the future of central banks if they do not adapt. He acknowledged that 20 years ago, he would have considered the central bank business model as indestructible, but now he is not so sure. Nagel stated, "If you would have asked me 20 years ago if the central bank business model was destroyable or not, I would have said no. Now I am not so sure anymore — and that is the reason why we are sitting here. We need to work on our business model. And distributed ledger technology is just a means, an instrument that could help us here to get to that point."

The Bundesbank chief emphasized the importance of integrating distributed ledger technology as physical money loses its appeal among the public. He pointed out that central banks need to act quickly if a core product like physical cash is becoming less attractive. Nagel said, "We need to speed up on all this. If part of your core product is losing attractiveness, then you have to think about another new core product."

Francois Villeroy de Galhau, another ECB member from France, also discussed the role of central banks and emerging technologies during the BIS conference. Galhau suggested that central banks should consider using digital currencies for both wholesale and retail transactions. He stated, "The way we make central bank money available has to be geared to the 21st century to ensure that central bank money maintains its fundamental role: this role is not to be the dominant means of payment, but a stability anchor for the financial system. This is why I believe that, sooner or later, we will need a central bank digital currency for wholesale as well as for retail purposes."

The ECB is currently in the process of developing a digital version of the euro currency. After completing the investigation phase to determine the design and technical details, the ECB expects to finalize the project by October 2025. The calls from Nagel and Galhau highlight the increasing pressure on central banks to adapt and modernize their operations by embracing digital currencies and blockchain technology.