From PayPal to Libra: Massive Tech compelled central banks to get up to CBDCs, says Benoit Coeure
According to Benoit Coeure, head of the Bank for International Settlements (BIS) innovation center, the scales were the final wake-up call for central banks that sparked serious considerations about issuing digital currencies.
In an interview with the French newspaper L’Express, published on the BIS website on Friday, Coeure admitted that the central banks had rested on their laurels on payment advances. Thirty years ago he said: "The banking world was innovative."
However, increasing digitization and the emergence of technologies such as PayPal, Apple Pay and smartphone payments brought a “revolution” to the industry. Even so, these advances were limited to the user interface and did not fundamentally disrupt payment channels.
According to Coeure, the "real trigger" for the move to central bank digital currencies (CBDCs) was the reveal of the Facebook-initiated Libra project, which offered more than just a step forward in the user interface.
"(Libra) is a global, closed and self-sufficient project, as there is simultaneously a means of payment, a storage mechanism with a wallet and a global network that makes it possible to ensure transfers from one place to another without going through the central bank settlement systems", he said.
Acknowledging that the project is user-friendly, Coeure also warned that "the emergence of closed payment channels dominated by technology giants poses both competition and privacy risks".
Still, as the public moves away from cash and online transactions (especially with the COVID pandemic), "we can see the numbers, it's impressive."
"Central banks need to rethink their software and review their role in this new environment," he said.
Quoting a recent report published by the BIS along with seven central banks, Coeure said, "We need to move forward with the digital currencies that are part of the solution," although individual nations should act at "their own pace".
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On the question of whether such a launch would happen on a blockchain, the technology was "not mandatory," he said, highlighting the prospect of hybrid solutions where "relationships" between central banks and commercial banks would use a blockchain, one However, digital currency will be available to the public "through more traditional channels".
"Anything is possible," he said.
In a statement recently published for CoinDesk, Coeure announced that the BIS Innovation Hub, in collaboration with the Swiss National Bank, will launch its first CBDC proof-of-concept in wholesale. "This will pave the way for experimentation with the building blocks of a retail CBDC, which could include links to existing payment systems, sales application programming interfaces, digital identity rails and more," he said.
In his interview with L’Express, Coeure said that one day a CBDC will be "the safest currency there is, issued by a public institution," but there will be other options. "If you want to pay with Bitcoin, why not? If you and the trader understand and assume the risks associated with this active crypto. "