A director at the Bank for International Settlements (BIS) says central banks must act with a sense of urgency as crypto assets are poised to challenge traditional banking models.
Benoît Cœuré, the head of the innovation hub at the BIS, says the pandemic has expedited the move to digital currencies and that central banks must keep in step with the evolution of the payments landscape.
Cœuré spotlights the entry of crypto assets in the global payments ecosystem, which he says have the potential to disrupt current banking systems.
“Stablecoins are knocking on the door, seeking regulatory approval. Decentralized finance (DeFi) platforms are challenging traditional financial intermediation. They all come with different regulatory questions, which need fast and consistent answers… But make no mistake: global stablecoins, DeFi platforms and big tech firms will challenge banks’ models regardless.”
In order to stay relevant in a world that’s rapidly going digital, Cœuré says that it is urgent for central banks to develop and deploy their own digital currencies.
“This brings me to my second message: the time has passed for central banks to get going. We should roll up our sleeves and accelerate our work on the nitty-gritty of CBDC (central bank digital currencies) design. CBDCs will take years to be rolled out, while stablecoins and cryptoassets are already here. This makes it even more urgent to start.”
According to the BIS executive, CBDCs can play a big role in preserving existing payment systems while welcoming innovation.
“CBDC will be part of the answer. A well-designed CBDC will be a safe and neutral means of payment and settlement asset, serving as a common interoperable platform around which the new payment ecosystem can organize… A CBDC’s goal is ultimately to preserve the best elements of our current systems while still allowing a safe space for tomorrow’s innovation. To do so, central banks have to act while the current system is still in place – and to act now.”