BIS changes stance on CBDCs

Benoît Cœuré, head of the Bank of International Settlements (BIS) Innovation Hub, recently discussed the role of central bank digital currencies (CBDCs) in an address to World Economic Forum (WEF) delegates in Davos last week.

The prominent French economist, who has previously served as France’s chief economist and co-chair of a G20 working group on banking, shared his opinion on CBDCs during a WEF panel.

The panel, called ‘Creating a Credible and Trusted Digital Currency’, discussed several scenarios for the implementation of a widely circulated CBDC to meet the needs of banking providers and the public.

Discussing these requirements, Cœuré shared that in his opinion, the needs of those who will be transacting most often with CBDCs are more important than the underlying technology, and that is where the discussion surrounding CBDCs should focus.

He also discussed the need for “international coordination” to create a viable CBDC solution, as cooperation would be critical to its role as a cross-border payment method.

Cœuré explained that the bank wasn’t looking to rush into CBDCs, stating that the development of fiat-based digital currencies would be a “long journey”, but did reiterate the need to start exploring CBDCs now.

Cœuré also shared that innovation for CBDCs is more likely to come from the private sector rather than the public sector, explaining that the BIS would be looking at solutions which bring stability to new digital currencies.

The official BIS Twitter account also shared snippets from the panel:

However, while BIS officials may now be looking at the role of CBDCs in cross-border payments, the organisation hasn’t always been so welcoming of blockchain technology and cryptocurrencies.

Pro-CBDCs, anti-crypto?

In 2018, the BIS published a lengthy report called ‘Cryptocurrencies: looking beyond the hype’, which was a particularly scathing review of cryptocurrencies and to some extent blockchain technology itself.

The report claimed that while cryptocurrencies promised to replace trusted institutions, it was “hard to identify” any specific economic problem which cryptocurrencies could solve.

Instead, the bank argued that transactions made through crypto were slow and costly and couldn’t meet scaling requirements.

In March 2019, the BIS reiterated its stance on blockchain financial solutions, with BIS chief Agustin Carstens claiming that CBDCs had “no value” in the current monetary system.

However, in the two years since the report was published, it seems that many of the issues cited by the BIS researchers have been addressed, paving the way for functional CBDCs and finally attracting the interest of BIS officials.

You can read more about CBDCs here.