The German central bank has reaffirmed its strong support for a digital euro, arguing that Europe needs a public digital currency to safeguard monetary sovereignty and financial stability amid rising geopolitical uncertainty and rapid crypto market growth.
Speaking at the OMFIF Future of Payments Forum in Frankfurt on December 4, Fritzi Köhler-Geib, a member of the Executive Board of the Deutsche Bundesbank, said digitalisation and geopolitical fragmentation are reshaping the global financial system and forcing central banks to rethink their policy tools.
Köhler-Geib warned that Europe is operating in an environment marked by trade fragmentation, heightened geopolitical risk, and heavy dependence on non-European digital infrastructure. According to Bundesbank analysis cited in the speech, geopolitical shocks such as Russia’s invasion of Ukraine have increased volatility, widened credit spreads, and reduced lending, underlining the need for greater European financial resilience.
Crypto assets and stablecoins raise new policy risks
While crypto markets remain relatively small compared to the global financial system, Köhler-Geib said their rapid growth warrants close monitoring. She noted that crypto assets currently account for less than one percent of global net financial assets, but stablecoins are becoming increasingly relevant due to their expanding use and growing regulatory clarity.
Stablecoins, which are typically pegged to central bank currencies and backed by reserve assets such as government bonds, are already creating links between the crypto ecosystem and traditional finance. Köhler-Geib warned that doubts about the quality or availability of these reserves could trigger runs, fire sales in securities markets, and sudden liquidity pressures on banks.
According to figures cited in the speech, adjusted stablecoin transaction volumes are estimated to reach nearly $10 trillion by the end of November 2025, while global stablecoin market capitalisation has grown to more than $300 billion. Much of these reserves are invested in short-term US government debt, increasing the systemic importance of large stablecoin issuers.
She also highlighted risks to monetary policy transmission. Academic research referenced by the Bundesbank shows that widespread use of foreign currencies or crypto assets for payments can weaken a central bank’s ability to influence domestic economic conditions through interest rates.
Digital euro seen as strategic response
Against this backdrop, Köhler-Geib presented the digital euro as a strategic response to multiple challenges. A retail digital euro, she said, would make the euro area more resilient to emerging private forms of money, improve the efficiency of European payments, and reduce reliance on non-European card schemes and big tech providers.
The digital euro is intended to complement cash, not replace it, and would be accepted across the entire euro area. However, Köhler-Geib stressed that EU lawmakers must first establish the necessary legal framework before any launch can take place.
The Bundesbank is also exploring wholesale central bank digital currency solutions for interbank payments and capital market transactions. These could enable faster, cheaper, and more transparent settlement, including through smart contract-enabled payments.
As part of this work, the Eurosystem is developing technical solutions to link distributed ledger technology platforms with existing central bank payment infrastructure, with the aim of supporting a future tokenised financial market ecosystem.
Köhler-Geib concluded that the digital euro, alongside expanded research into crypto assets, non-bank financial intermediaries, and artificial intelligence, will play a key role in ensuring that Europe remains financially sovereign and resilient in an increasingly digital and fragmented global economy.