Central banks need to expedite the development of central bank digital currencies (CBDCs), or risk being overtaken by private payment platforms.
At a financial forum in Ljubljana, Slovenia, Former European Central Bank rate-setter Benoit Coeure said that new payment services providers could potentially come to dominate the market, crowding out commercial banks.
“We should roll up our sleeves and accelerate our work,” Coeure said. “CBDCs will take years to be rolled out, while stable coins and crypto assets are already here. This makes it even more urgent to start.”
He believes CBDCs’ ultimate goal should be to retain the best elements of the current system while still enabling future innovation. “Central bank money has unique advantages: safety, finality, liquidity and integrity,” Coeure said. “As our economies go digital, they must continue to benefit from these advantages.”. Coeure now runs the Innovation Hub at the Bank for International Settlements (BIS).
Recently, BIS had reiterated a similar warning that central banks need CBDCs to ensure that governments retain control of money. It believes that without CBDC digital money would become increasingly dominated by big tech firms. This could happen primarily by them leveraging their enormous social media user base. The loss of control over sovereign money, “that is a place where you don’t want to be, where governments don’t want to be,” Coeure has said earlier.
Additionally, BIS discussed the potential for CBDCs in a chapter in its latest Annual Economic Report. While applauding advancement in the payment systems, it added that their benefits would depend on their structure and governance. On the one hand, the technology could enable a “virtuous cycle” of broader access, lower costs, and better services.
However, the report notes the potential for a “vicious cycle” of data silos, market power, and anti-competitive practices. “CBDCs and open platforms are the most conducive to a virtuous circle,” the report notes.