Key pillars of today’s cryptocurrency industry—like stablecoins and DeFi—pose a threat to the worlds’ central banks, according to Benoit Coeuré, head of the Bank for International Settlements’ (BIS) Innovation Hub.
DeFi, or decentralized finance, is a suite of crypto products that replicate many common services in traditional finance, like lending and borrowing, but replaces banks and brokers with lines of code.
“Central banks have a job to do—delivering price stability and financial stability—and they must retain their ability to do it. Central bank digital currencies will take years to be rolled out, while stablecoins and crypto assets are already here,” Coeuré reportedly said.
“This makes it even more urgent to start,” he added.
The age of CBDCs
Coeuré is a firm believer in central banks and the role they play in society.
Consequently, he is a firm believer in central bank digital currencies (CBDCs) as opposed to stablecoins or other kinds of cryptocurrencies.
In a report published earlier this year, the BIS said stablecoins “attempt to import credibility by being backed by real currencies.” The report added that stablecoins “are only as good as the governance behind the promise of the backing.”
Bitcoin Has ‘Few Redeeming Public Interest Attributes’: BIS
The Bank for International Settlements (BIS) has slammed Bitcoin in its Annual Economic Report, suggesting that the cryptocurrency has very few things going for it. In a chapter from the report released ahead of its full publication on June 29, the BIS argued that cryptocurrencies are “speculative assets rather than money,” singling them out for their role in facilitating “money laundering, ransomware attacks, and other financial crimes.” In addition, the BIS singled out Bitcoin for its high en...
Coeuré on the other hand is not quite as dismissive.
“Make no mistake: global stablecoins, DeFi platforms, and big tech firms will challenge banks’ models regardless,” he added.
The CBDC progress report
China is predominantly seen as the world’s leading nation when it comes to rolling out a central bank digital currency.
China’s digital yuan was first proposed in 2017 and entered the pilot stage in April 2020. Since October of last year, the People’s Bank of China (PBOC) has airdropped millions worth of digital yuan to citizens across the country as it tests the project.
China's Digital Yuan vs Bitcoin
Today, over 80 governments around the world (representing 90% of global GDP) are exploring or experimenting with central bank digital currencies (CBDCs). As of July 2021, only five countries have launched CBDCs. They’re all Caribbean island nations: the Bahamas, Saint Kitts and Nevis, Antigua and Barbuda, Saint Lucia, and Grenada. Out of all major economies, China has advanced the furthest towards a fully-fledged CBDC with its digital yuan, also known as the e-RMB or the Digital Currency, Electr...
In February 2022, China plans an additional roll-out of the digital yuan when tourists flock to the country for the Beijing 2022 Winter Olympics.
Meanwhile, the crypto industry in China has been dealt blow after blow—with a crackdown on crypto mining adding to a pre-existing ban on crypto trading that’s been in place since 2017.
