Benoît Cœuré, the outgoing European Central Bank Executive Board Member and an individual some thought best equipped to become the President of the ECB, has been appointed to lead the newly created Bank for International Settlements (BIS) Innovation Hub. According to BIS, Cœuré will commence his new role on January 15th for a five-year term.
Since 2013, Cœuré has chaired the BIS Committee on Payments and Market Infrastructures, the global standard-setter for payment, clearing and settlement services. BIS created the new Hub to foster international collaboration between central banks and emerging Fintech technology.
The emergence of stablecoins, cryptocurrencies tied to a base-line asset such as the dollar or euro, has engendered a new debate regarding Central Bank Digital Currencies or CBDCs. The thesis is that CBDCs may remove some of the intrinsic friction in the current payments and transfer rails thus facilitating instantaneous movements of currency. It also raises new questions regarding the role of commercial banks as hubs for holding consumer deposits which, today, frequently pay negative real rates of return.
With Facebook’s attempt to create a global non-sovereign cryptocurrency, dubbed Libra, the debate regarding stablecoins and CBDCs has come to the forefront for global policymakers.
This past September, Cœuré called the emergence of Libra a “wake up call for central banks and policymakers.” In a speech, Couré stated:
“If “stablecoins” become widely used, they could also give rise to issues related to monetary policy transmission and financial stability. Where a “stablecoin” acts as a substitute for fiat currency, there may be the risk of the monetary sovereignty of countries being infringed. Furthermore, the transmission of monetary policy could be affected if “stablecoin”-denominated credit or overdraft extensions are provided. Finally, financial stability will be affected if the assets underlying “stablecoin” arrangements are not managed in a sufficiently safe and prudent manner to ensure that coin holders have confidence that their coins are redeemable at par, in good times and in bad.”
According to BIS, the Hub’s mandate is to “identify, and develop in-depth insights into, critical trends in technology affecting central banking; develop public goods in the technology space geared towards improving the functioning of the global financial system; and serve as a focal point for a network of central bank experts on innovation.”
BIS states that the Hub will operate out of three locations: Switzerland, Hong Kong, and Singapore. These three locations are well noted for their Fintech credibility. Switzerland is at the forefront of digital asset innovation. The HUB will be partnering with the Swiss National Bank, the Hong Kong Monetary Authority and the Monetary Authority of Singapore. Notably, the US has been left out of the equation – perhaps due to the slowness of Fintech innovation within the public sector. Additional locations are expected to follow in a second phase.
Agustín Carstens, General Manager of the BIS, commented on Cœuré’s appointment:
“I am delighted to have Benoît on board to advance the important mission of the Hub, which is to harness innovation to improve the functioning of the international financial system. Technology-driven innovation is driving change in many fields and can bring great benefits for anyone who makes and receives payments. The Hub reflects central banks’ commitment to share resources and lay the foundations for a bright future.”
Cœuré said he was happy to be joining BIS as the Fintech Hub lead:
“I look forward to bringing my expertise to the global central banking community at this time of rapid technological change. We must make the best use of innovation to support financial stability and promote financial inclusion. I look forward to bringing my expertise to the global central banking community at this time of rapid technological change. We must make the best use of innovation to support financial stability and promote financial inclusion.”