Traditional banking is under threat, according to Benoit Coeuré, the director of the Bank for International Settlements’ Innovation Hub.
According to Benoit Coeuré, head of the Bank for International Settlements‘ (BIS) Innovation Hub, key pillars of today’s cryptocurrency economy, such as stablecoins and decentralized financial infrastructure (DeFi), pose a danger to the world’s central banks.
DeFi, also known as decentralized finance, is a collection of cryptocurrency products that duplicate many popular activities in traditional finance, such as lending and borrowing, but do so without the use of banks or brokers and instead rely on lines of code.
The ability to offer price stability and financial stability is a task that central banks must perform, and this requires that they maintain their ability to do so. It will take years for central bank digital currencies to be implemented, whereas stablecoins and crypto assets are now available,” Coeuré is reported to have said.
Coeuré is a fervent believer in the importance of central banks and the role they play in the economy and society.
Because of this, he strongly supports central bank digital currencies (CBDCs), as opposed to stablecoins or other types of cryptocurrencies, as an alternative to fiat money.
The Bank of International Settlements (BIS) stated in a research issued earlier this year that stablecoins “attempt to import credibility by being backed by real currencies.” Stablecoins, according to the research, are only as good as the governance that underpins the promise of the underlying asset.
However, Coeuré is not quite as contemptuous of the situation.
Adding, “Make no mistake: global stablecoins, DeFi platforms, and big tech firms will continue to challenge banks’ business models regardless.”
The CBDC’s current status report
When it comes to the implementation of a central bank digital currency, China is often regarded as the world’s most advanced country in this regard.
This year, the Chinese government suggested a digital yuan, which will go into experimental testing in April 2020. Since October of last year, the People’s Bank of China (PBOC) has sent millions of digital yuan to residents all throughout the country as part of a pilot experiment to evaluate the technology.
When the Beijing Winter Olympics take place in February 2022, China aims to expand the use of the digital yuan to accommodate the influx of visitors to the country during that time.
China has handed a series of blows to the cryptocurrency industry in recent months, with a crackdown on crypto mining adding to an already-existing prohibition on cryptocurrency trading that has been in effect since 2017.
