The last intervention by Benoît Coeuré has great interest because it transmits the vision of central banks on the revolution of digital money and payment systems that is being deployed around the world.
Benoit Coeuré (BC). It has a privileged observatory as it directs the BIS innovation hub, an institution that is playing a key role in trying to coordinate the work of central banks on access to all citizens of public digital money (CBDC)
And the vision of central banks It is very important because, until this matter has been discussed in democratic institutions, they are the only institutions that are maintaining the defense of public interests in the debate on this reform.
This intervention by BC is of interest not only because of the vision it provides but also because it conveys the "feelings" that central banks are experiencing at this time. The feeling right now is that they have stopped stepping on solid ground:
BC: the financial system is changing under our feet.
Y events are unfolding with extraordinary rapidity:
BC: Big tech is expanding its presence in retail payments. Stablecoins are knocking on the door, seeking regulatory approval. Decentralized finance platforms (DeFi) are challenging traditional financial intermediation. They all come with different regulatory questions, which need quick and consistent answers.
Central banks they have capital doubts about himor what to do:
Will the new players complement or displace commercial banks? Should central banks open accounts to these new players and under what regulatory conditions? What kind of financial intermediation do we need to finance investment and green transformation? How should public and private money coexist in new ecosystems? For example, should central bank money be used in DeFi instead of private stablecoins?
Y there is no much time to find the answers:
We urgently need to ask ourselves these kinds of questions about the future. This is the distant horizon for the financial system, but we are approaching it more and more quickly. Central banks need to know where they want to go when they embark on their CBDC journey.
No more time can be wasted. It is urgent to answer these questions because, While work is being done to design a near-perfect CBDC for the future, stablecoins are already here, in the present:
The time has passed for central banks to get going. We should roll up our sleeves and accelerate our work on the core issues of CBDC design. CBDCs will take years to roll out, while stablecoins and crypto assets are here. This makes it even more urgent to get started.
CBDC is not all there is to it:
BC: CBDC will be part of the answer.
And presents a good definition of the essential features that the CBDC must meet:
BC: A well-designed CBDC will be a secure and neutral payment and settlement medium, serving as a common interoperable platform around which the new payments ecosystem can organize itself. A CBDC that enables an open financial architecture that is comprehensive while welcoming competition and innovation. And maintain democratic control of the currency.
Finally, there is a very important change in the message to banks. Until now they have been reassured by telling them that central banks would help banks to avoid losses on deposits, for example, by setting a remuneration that was worse than that of deposits or even including limits on the use of public money. Benoit Coeuré has introduced a very interesting change of tone and content: he tells the banks that although central banks will continue to care about them, they have to realize that their business model will also be questioned by stablecoins and by the other payment service providers they contact.will allow to offer its services in competition with banks:
BC: The commercial banks are concerned about the implications of CBDCs for customer deposits. Central banks are aware of these concerns and are working to find answers ... But make no mistake: global stablecoins, DeFi platforms and big tech companies will challenge banks' business models no matter what.
In my opinion, Benoît Coeuré already clearly recognizes that it is essential to give a role to Stablecoins, Defi and Bigtech in the new system. Regarding commercial banks, there is a change in attitude, but not enough. At some point central banks will realize that commercial banks will also have to be given a role in the new system but not to help them continue doing what they do now.
The digital currency that we use now (deposits in private banks) does not meet any of the essential characteristics that the new money and payments system must meet. Helping banks may be justified, but it should be done in a way that helps them compete with new providers and not to hinder or impede competition in payment services, as this is the essential objective of the reform.