Key Takeaways
- Benoit Coeuré, the head of the BIS’ innovation hub, has called on central banks to act quickly in response to the rise of cryptocurrencies.
- Coeuré warned that “stablecoins and DeFi will challenge banks’ models.”
- The BIS is now more actively encouraging CBDC development by central banks.
The head of the Bank for International Settlments’ innovation hub has stated that “global stablecoins, DeFi platforms, and big tech firms will challenge banks’ models” in a speech delivered at the Eurofi Financial Forum.
BIS Warns Central Banks of Stablecoins
Benoit Coeuré, head of the innovation hub at the Bank for International Settlements (BIS), has warned central banks that they must act quickly in response to the rise of cryptocurrencies and decentralized finance.
Coeuré was invited to speak at the Eurofi Financial Forum, a European think tank dedicated to financial services. The event took place in Ljubljana Friday.
In the speech, Coeuré called on central banks to step up their efforts to develop central bank digital currencies (CBDCs) in the face of competition from stablecoins and decentralized finance platforms.
While acknowledging the difficulties of CBDC implementation, Coeuré also delivered a stark warning to central banks:
“Banks are worried about the implications of CBDCs for customer deposits. Central banks are mindful of these concerns and are working on answers… But make no mistake: global stablecoins, DeFi platforms, and big tech firms will challenge banks’ models regardless.”
Coeuré also outlined several goals for a potential CBDC, including privacy, security, and broad usability.
Today’s speech is not the first time the BIS has put forward proposals for CBDC development. In July, the BIS innovation hub, the International Monetary Fund (IMF), and the World Bank released a 34-page report outlining designs for a globally interoperable CBDC to rival existing stablecoins such as Tether (USDT) and USD Coin (USDC).
However, it appears that central banks are digging their heels in, as only 8% were considering stablecoins that could be used beyond domestic boundaries.
In the past, the BIS has expressed a negative view of cryptocurrencies, commenting that Bitcoin “has few redeeming public interest attributes,” citing its occasional use in criminal activities and environmental concerns.
However, judging by the content of Coeuré’s latest speech, it seems the BIS is now more actively encouraging CBDC development. The BIS and other financial institutions have frequently stated fears that private stablecoins may develop as closed ecosystems or “walled gardens,” creating financial fragmentation and threatening monetary sovereignty.
Disclaimer: At the time of writing this feature, the author owned BTC, ETH, and several other cryptocurrencies.
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