• A ‘urgent’ solution is required as cryptocurrency challenges traditional banking models, according to a central banker

  • According to a director at the Bank for International Settlements (BIS), central banks must act quickly as crypto assets threaten traditional banking models.

    According to Benoît Curé, head of the BIS’s innovation hub, the pandemic has accelerated the shift to digital currencies, and central banks must keep up with the payments landscape’s evolution.

    Curé highlights the entry of crypto assets into the global payments ecosystem, which he believes has the potential to disrupt existing banking systems.

    “Stablecoins are banging on the door, looking for regulatory approval. Platforms for decentralized finance (DeFi) are posing a threat to traditional financial intermediation. They all have different regulatory questions that require quick and consistent answers… But make no mistake: global stablecoins, DeFi platforms, and large tech firms will continue to challenge bank models.”

    Curé believes that central banks must develop and deploy their own digital currencies in order to remain relevant in a world that is rapidly becoming digital.

    “This brings me to my second message: the time for central banks to get started has passed. We should roll up our sleeves and get down to business on CBDC (central bank digital currencies) design. CBDCs will take years to implement, whereas stablecoins and cryptoassets are already available. This makes it even more important to get started.”

    CBDCs, according to the BIS executive, can play a significant role in preserving existing payment systems while encouraging innovation.

    “CBDC will be a part of the solution. A well-designed CBDC will be a secure and neutral payment and settlement asset, serving as a common interoperable platform around which the new payment ecosystem can be organized… The ultimate goal of a CBDC is to preserve the best elements of our current systems while still providing a safe space for future innovation. To do so, central banks must act while the current system is still in place – and act immediately.”

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