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- Benoit Coeure, head of the BIS Innovation Hub, urged central banks to speed up their work on digital cash.
- In a speech in Ljubljana, he said digital currencies should ensure price and financial stability.
- He said they must up the pace because "stablecoins and crypto assets are already here".
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The Bank for International Settlements is urging central banks to crank up their efforts in developing their own digital currencies while the current financial system is still in place, because stablecoins and cryptocurrencies are already a reality.
Benoit Coeure, who is head of the BIS Innovation Hub, said central bank digital currencies (CBDCs) should be easy to use, low cost, convertible, offer instant settlements, continuously available and offer a high degree of security, resilience, flexibility and safety.
But they're competing with cryptocurrencies like bitcoin and ether, as well as stablecoins, which are pegged to the likes of the dollar, or gold, and central banks will need years to develop digital cash that is fit for purpose, he said.
"The time has passed for central banks to get going. We should roll up our sleeves and accelerate our work on the nitty-gritty of CBDC design. CBDCs will take years to be rolled out, while stablecoins and crypto-assets are already here. This makes it even more urgent to start," Coeure said in a speech at the Eurofi Financial Forum in Ljubljana.
Cryptocurrencies like bitcoin and stablecoins, such as tether, have surged in popularity recently, prompting concern among central banks over the risk these assets may pose to the stability of the financial system. And so many are actively looking into, and even developing, their own CBDCs.
"Banks are worried about the implications of CBDCs for customer deposits. Central banks are mindful of these concerns and are working on answers. They see banks as part of future CBDC systems," Coeure said. "But make no mistake: global stablecoins, DeFi platforms and big tech firms will challenge banks' models regardless," he said.
China is already trialling a digital version of the yuan, while the Bahamas have issued the "sand dollar" and Nigeria this week said it would pilot its "e-naira" next month. Major central banks such as the Federal Reserve, the Bank of England and the European Central Bank are still very much at the exploratory stage.
The BIS innovation hub, which focuses on "critical trends in technology affecting central banks", and the central banks of Australia, Malaysia, Singapore and South Africa announced they are working on "Project Dunbar", which will run trials of cross-border payments in CBDCs.
"A CBDC's goal is ultimately to preserve the best elements of our current systems, while still allowing a safe space for tomorrow's innovation. To do so, central banks have to act while the current system is still in place - and to act now," Cœuré, who previously served on the executive board of the European Central Bank, said.