Economist Benoît Cœuré spent 7 years on the Executive Board of the European Central Bank. He is now in charge of the innovation division of the Bank for International Settlements. In an interview for the Swiss daily Le Temps, he explains the BIS‘ position vis-à-vis digital currencies.
Cash will not disappear
Like Christine Lagarde, Benoît Cœuré does not believe in a cashless society. He even states that citizens should be able to choose the means of payment they prefer.
„I believe that private and public money, on the one hand, and digital and physical means, on the other, will continue to coexist. »
The disappearance of coins and notes would be a factor of financial exclusion. He cites the case of those who cannot afford to buy a smartphone to use digital central bank money.
According to him, the measures taken to combat Covid-19 have favoured contactless payments. However, he points out that the likelihood of transmission of the virus through banknotes is low. This crisis therefore does not call into question the use of cash, as some had suggested.
Cryptos, an underestimated phenomenon
Facebook’s stablecoin project (Libra) has been a real shock to central banks. They would have made the mistake of „taking the cryptomoney from above“:
„Libra was a kind of alert for the central bankers, who were taking the phenomenon of cryptomoney from above. They didn’t consider them as ‚real‘ currencies. »
For Benoît Cœuré, cryptos could partly replace public money. But there is one condition: their value must be stabilised. It is then the stablecoins that form the link between the concepts of cryptomoney and central bank money. The popular craze for cryptos is a sign of a lack of confidence in the financial system:
„The attraction for cryptos reveals the mistrust of a part of society towards the traditional financial system and shows that we have not finished our work as regulators. »
Obviously, we are interested in this unfinished regulatory work. Unfortunately, Benoît Cœuré has not been very forthcoming.
The role of central banks
According to the economist, it is not a question of banning initiatives, like Libra, but of regulating them. The axes of regulation: financial stability, protection of personal data and the fight against money laundering. The balance between respect for privacy and the fight against money laundering will determine the degree of anonymity desired. This choice is not a matter for central banks, but a political decision.
There is no urgent need to create a central bank cryptomonnaie. It is above all necessary to regulate the issuance of cryptomoney and stablecoins:
„The urgency is to build a solid regulatory framework for cryptoskills and stable corners. Issuing digital central bank money is less urgent, because payment systems work well. …] The payments systems have held up very well, thanks to the support provided by the central banks. »
Benoît Cœuré refers here to the various asset buyback programs implemented in recent years. An unconventional policy, but one that is very much a saving grace. The fact that the Fed now buys corporate bonds (CMBS) is an „innovation“ for the former ECB. But it is interesting to note that he believes that the overwhelming role taken by central banks could endanger the banking system:
„If a central bank’s digital money becomes easily accessible to the general public, will citizens prefer to deposit their cash in their bank or at the central bank? This could weaken the banking system. »
Sleep well! BIS stabilises the financial system
Benoît Cœuré also mentions, in the interview, the role of the BIS Innovation Pole, that his department, created in 2019, is there to help central banks test different technologies. They do not concern all payment systems. Thus, open banking and banking supervision are at the heart of its concerns. Technologies such as artificial intelligence or machine learning will be used in the future.
The Bank for International Settlements was originally created to ensure the settlement of claims imposed on Germany by the Treaty of Versailles. Nicknamed the „truly useless bank“ in the early 1930s, its role has since changed and its power is unparalleled. The private institution now counts 62 central banks among its shareholders. It sets global financial standards through the Financial Stability Board, IADI and IAIS.
Although Benoît Cœuré is a bit of a talker, we will nevertheless remember that the priority of our supranational bodies is not to issue an MNBC/CBDC. The regulation of cryptomoney in general and of the stablecoins in particular is imminent. As for the very positive opinion of the central banks on their monetary policy, there is no doubt that the digital banknote printing plate will heat up.
