As institutions, central banks are best placed to provide trust in money in the digital age. This was stated by the CEO of the Bank for International Settlements (BIS) Agustin Carstens, reports CoinDesk.
Speaking at the conference “Data, Digitalization, Decentralized Finance and CBDC: The Future of Banking and Money” of the Goethe University Institute of Law and Finance in Germany, the financier said:
“The soul of money does not belong to tech giants or an anonymous ledger. The soul of money is trust.”
Central banks are key institutions for building trust, he said, and alternatives often end badly.
Carstens noted that private stablecoins and DeFi services could be “interesting innovations,” but without proper oversight, have the potential to fragment the monetary system.
“It is undesirable to rely solely on private money. Paying with a stablecoin from a big tech company can be convenient. But in doing so, users can hand over the keys to our monetary system to private enterprises driven primarily by profit. Such an agreement could undermine trust,” he stressed.
The financier recalled a recent BIS study, in which experts concluded that the decentralization of DeFi services is illusory. According to the report, blockchain consensus mechanisms tend to concentrate power, allowing a small number of stakeholders to make important decisions.
“DeFi is subject to the same vulnerabilities that are present in traditional financial services. This includes high levels of leverage, liquidity distortions and links to the formal financial system, which could affect stability more broadly,” Carstens said.
He proposed several plausible scenarios for the future of money. In one financial services for all will be provided by several technology giants. In another, a decentralized system could replace people and institutions with “blockchains and algorithms.”
Carstens sees the third opportunity as building a global monetary and financial system that uses technology for the benefit of all.
“In the third scenario, old players, big technology companies, and new entrants compete in an open market that guarantees interoperability, backed by central bank public goods. End users can seamlessly interact between different providers – both within the country and abroad, ”the head of BIS believes.
In his opinion, central banks should work with other government agencies and private stakeholders to make the latest version a reality.
Recall that earlier BIS came to the conclusion that for the effectiveness of the CBDC system, cooperation between public and private sectors is necessary.
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