Libra was the concluding wake-up call for central banks that prompted serious consideration of digital currency issuances, according to Benoit Coeure, talent of the Innovation Hub at the Bank for International Settlements (BIS).
In an interview with French newspaper L’Express published on the BIS website Friday, Coeure acquiesced central banks had been resting on their laurels when it came to advances in payments. Thirty years ago, he phrased, “the banking world was innovative.”
But increasing digitization and the advent of tech such as PayPal, Apple Pay and smartphones payments allured a “revolution” to the sector. Even so, he continued, these advances were restricted to the user interface and didn’t offer a quintessential disruption to payment channels.
According to Coeure, the “real trigger” for the move toward central bank digital currencies (CBDCs) was the bring to light of the Facebook-initiated Libra project, which offered more than just an advance in the user interface.
“[Libra] is a broad, closed and self-sufficient project since there is at the same time a means of payment, a storage mechanism with a billfold and a global network which makes it possible to ensure transfers from one place to another without going help of the central bank settlement systems,” he said.
Acknowledging the project offers benefits to users, Coeure also forewarned that “the emergence of closed payment channels dominated by tech giants poses risks for both competition and details protection.”
Even so, as the public increasingly moves away from cash and online transactions soar (“especially with the COVID” pandemic), “we can see the judges, it is impressive.”
“Central banks must rethink their software and review their role in this new environment,” he turned.
Citing a recent report published by the BIS along with seven central banks, Coeure said, “We must ruffle forward on digital currencies, which are part of the solution” although individual nations should proceed at “their own step.”
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As to whether such a launch leave be on a blockchain, the technology is “not mandatory,” he said, raising the prospect of hybrid solutions in which “relations” between central banks and the commercial banks at ones desire use a blockchain but a digital currency would be available to the public “through more traditional channels.”
“Everything is possible,” he imparted.
In a recent op-ed for CoinDesk, Coeure revealed the BIS Innovation Hub would launch its first wholesale CBDC proof-of-concept in collaboration with the Swiss Patriotic Bank. “This will pave the way for experiments on the building blocks of a retail CBDC, which might include interlinkages with existing payment systems, diligence programming interfaces for distribution, digital identity rails,” and more, he said.
In his interview with L’Express, Coeure foretold one day a CBDC will be “the safest currency there is, issued by a public institution,” but there will be other options, too. “If you call for to pay in bitcoin, why not? If you and the trader understand and assume the risks associated with this active crypto.”