Libra was the final wake-up call for central banks that prompted serious consideration of digital currency issuances, according to Benoit Coeure, head of the Innovation Hub at the Bank for International Settlements (BIS).
In an interview with French newspaper L’Express published on the BIS website Friday, Coeure acknowledged central banks had been resting on their laurels when it came to advances in payments. Thirty years ago, he said, “the banking world was innovative.”
But increasing digitization and the advent of tech such as PayPal, Apple Pay and smartphones payments brought a “revolution” to the sector. Even so, he continued, these advances were restricted to the user interface and didn’t offer a fundamental disruption to payment channels.
According to Coeure, the “real trigger” for the move toward central bank digital currencies (CBDCs) was the unveiling of the Facebook-initiated Libra project, which offered more than just an advance in the user interface.
“[Libra] is a global, closed and self-sufficient project since there is at the same time a means of payment, a storage mechanism with a wallet and a global network which makes it possible to ensure transfers from one place to another without going through the central bank settlement systems,” he said.
Acknowledging the project offers benefits to users, Coeure also cautioned that “the emergence of closed payment channels dominated by tech giants poses risks for both competition and data protection.”
Even so, as the public increasingly moves away from cash and online transactions soar (“especially with the COVID” pandemic), “we can see the figures, it is impressive.”
“Central banks must rethink their software and review their role in this new environment,” he said.
Citing a recent report published by the BIS along with seven central banks, Coeure said, “We must move forward on digital currencies, which are part of the solution” although individual nations should proceed at…