Central bank group BIS taps Benoit Cœuré to lead digital currency push
Benoît Cœuré has been picked to head a new unit of the Bank for International Settlements (BIS) charged with producing public alternatives to private digital currency initiatives such as Facebook’s Libra coin.
Mr Cœuré comes to the role from the European Central Bank, where he has been a member of the executive board with oversight of payments systems since January 2012. His eight-year term expires on December 31.
The Basel-based BIS, owned by 60 central banks, will unveil its initiative to tackle private sector monetary and payment innovations. The Innovation Hub will have unprecedented power to add to the stock of public monetary goods.
The first task facing Mr Cœuré, who starts in January and will serve a five-year term, will be to co-operate with the Swiss National Bank to create a central bank digital currency for wholesale use between banks, safeguarded by so-called distributed ledger technology (DLT).
BIS officials believe central banks should pool their resources to fend off potentially disruptive competition from much better funded private sector competitors.
Facebook’s Libra project, which has lost seven of its founding partners since its announcement in June, is feared to lock users in publicly unaccountable walled-gardens. Though questions remain over the project’s future as it prepares to launch in 2020, the growing popularity of privately issued and internationally distributed stablecoins has prompted the BIS to take action on a joint approach.
Stablecoins, which draw their stability from the fiat-denominated collateral that backs them, are often distributed across DLT or cryptocurrency blockchain systems.
“We’re not just here to make money, we’re here to make sure we serve the public interest, a global public interest,” said Hyun Song Shin, BIS economic adviser and acting hub head. “It’s a role that needs to be done. And it’s the right moment because we’re on the cusp of a huge leap.”
The announcement this summer of Facebook’s Libra project sparked global consternation in public policy circles owing to fears it could undermine monetary sovereignty and introduce new money laundering risks into the global financial system.
This has increased pressure on central banks to offer a co-ordinated alternative solution to the sort of payment frictions Libra aims to combat and which fintech specialists say can no longer be ignored.
“From 2017 on, developments have been very fast. The hype about bitcoin brought to the fore a lot of forces in the market and society,” said Agustín Carstens general manager of the BIS.
With the new hub, the BIS is hoping to strike a balance between the private and public sector on the firm belief that some public goods ought to be provided by public bodies but that other features, such as those focused on customer service and usability, are better provided to the market by private players.
In Hong Kong, the hub will work with local monetary authorities on ventures to solve supply chain problems. And in Singapore, it will look to apply its resources to so-called “suptech” — regulation and supervision innovation — utilising big data and artificial intelligence.
“In some cases the problem is not technological, so why try to force a technology solution where things are working? We need to be smarter about where we devote our resources,” said Mr Carstens. “We don’t want to sacrifice what we have that works well.”
The rollout of further international centres in the Americas and Europe is expected in the hub’s secondary phase.
During his testimony to Congress last month, Mark Zuckerberg, chief executive of Facebook, warned legislators that the creation of an international digital currency was “too important for any single company to undertake on its own” and that if the US did not innovate its financial leadership could not be guaranteed as China was moving much more quickly.
Thus far, central banks have mostly been experimenting independently on DLT and fintech projects.