According to Benoit Coeure, both the world and the financial system as we know it is currently in an “age of disruption” The head of the Bank for International Settlements’ (BIS) has said that instead of letting “disruption run its course,” central banks should “harness the power of innovation” so that the best element of the current financial system can be preserved.
Coeure spoke at the Geneva Conference on World Economy on Thursday. In his speech, Coeure said that “cryptocurrencies, the rapid rise of decentralized finance (DeFi), and digital ID systems” are all disrupting legacy systems at the moment.”
The BIS official did acknowledge that new technologies can “foster greater efficiency” but, he also said that these technologies have the power to spawn “financial instability, loss of privacy and financial exclusion.”
Despite his claims, decentralized cryptocurrencies might do the opposite and offer greater financial privacy and inclusion. Whatever the case, Coeure pointed out the risk that he sees from stablecoins, particularly “global stablecoins” such as Facebook’s Diem project.
Coeure said, “They are promoted as a way to provide faster and cheaper cross-border payments and deeper financial inclusion. And they do,” before warning that they “pose significant risks.”
A risk to financial stability
The BIS head also warned that stablecoins may present risks for financial stability itself. To overcome this, Coeure suggested that stablecoins should follow international standards for payment, clearing and settlement systems. If found to be significantly important.
Coeure has previously been a board member of the European Central Bank. Given his past experience, he said that the history of private money “is not a happy read,” and that “private issuers have always chosen profits” whenever there were conflicts between financial stability and making money.
Coeure did state that a “well-designed” central bank digital currency (CBDC) could become a safe and neutral means of payment and settlement in the uncertain times ahead. He then went on to admit that the current financial disruption is more complicated than it might seem.
The BIS- often referred to as the ‘central bank of central banks’- is an international financial institution headquartered in Basel, Switzerland. BIS is owned by 62 central banks from around the world and is led by former Banco de Mexico Governor Agustin Carstens.
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