Pompliano slams Cœuré for ignoring Bitcoin

The chief of the Bank of International Settlement Innovation Hub – Benoît Cœuré – deliberately ignored cryptocurrency during his keynote speech at the 23rd Geneva Conference on the World Economy.

The address, dubbed ‘Finance Disrupted’ was intended to deliver a number of insights into how central banks were thinking about new digital technologies.

“We hear every day about businesses, industries, and governments being disrupted. And, of course, our private lives have been disrupted by the pandemic,” he commented before adding there was, however, a specific type of disruption arising from technological innovation in the financial sector.

He went on to say that technological progress, and the subsequent disruption, can be both positive or negative.

“They tell us that technological innovation and associated disruptions can be good or bad,” he said.

“New technologies can foster greater efficiency, financial stability and inclusion. But they can also do the opposite, spawning financial instability, loss of privacy, and financial exclusion.”

Lack of importance put on decentralised network

Investor and advisor Anthony Pompliano says the first thing that jumped out at him from Cœuré’s keynote was the lack of any mention of cryptocurrency.

“The speech spends considerable time on CBDCs, but it never acknowledges the $1 trillion market cap asset that is now held by 100+ million people globally, almost every large financial institution, and has recently become legal tender in a nation-state,” Pompliano said.

He added he was not sure if the omission of Bitcoin in the conversation was a sign of ignorance or malice, but it was a “stunning revelation into the lack of importance that these legacy organisations put on the digital, decentralised, open monetary network”.

“If ‘hyperbitcoinisation’ ever occurs, historians will point back to speeches like this to highlight how the central bankers were asleep at the wheel,” he added.

Cœuré also suggested the stability and use of money needed to be protected by the public sector.

“This is why so many central banks around the world are working on central bank digital currency, or CBDC – essentially, to ensure that the next generation of money continues to serve the public interest,” he said.

Pompliano, however, argued that both statement were wide of the mark.

“Assumption that private actors always choose profits over stability and assumption that central banks always act in the best interest of the public are both incorrect,” he claimed.

“A great example is the last 18 months in the United States.

“Through both monetary and fiscal policy decisions, the bottom 45% of Americans are drastically worse off than they were before. Official CPI numbers are over 5% and unofficial numbers are close to 10% inflation.

“The goal of central banks is to have a stable currency and achieve full employment. We have neither in the United States. Approximately 40% of all dollars in circulation were created in the last 24 months and unemployment stands at more than 5% officially.

“The central bank is not achieving their goals, while also hurting the most vulnerable in our society.”

Giving central banks more data is net negative – Pompliano

Cœuré also said that financial companies collect enormous amounts of data about preferences, spending habits and payment history.

“By using artificial intelligence and machine learning to study a treasure trove of data – typically more than 1,000 data points – they can determine how much we can borrow and repay,” Cœuré noted.

“And they do it in part by using information that until recently did not have much financial value, like the model of a smartphone someone has, or their browsing habits.”

He added that technology – by giving supervisors access to a lot more data, structured, unstructured, with better quality and granularity than ever before – could be the gamechanger the industry needs.

“It can also give them effective means to extract, query and analyse data,” he said.

“To perform the same cross-check review that I just mentioned, a digitally native supervisor could build integrated platforms to avoid using spreadsheets and PDFs.”

Pompliano, though, said giving the central banks more data was actually a net negative.

“It reduces financial privacy and the citizens get nothing in return,” he slammed.

“All the proposed queries, extraction, and analysis still don’t solve the first principles problem — the debasement of the currency is the only way that the system doesn’t collapse.

“The more someone wants to control something, the more sceptical I become. You can be the judge of these comments and their ultimate intentions for yourself. Just don’t wake up decades from now asking yourself ‘how did we let this happen?’ The time to pay attention is now.”