At the launch of the Bank for International Settlements (BIS) fourth innovation hub in London, Governor Andrew Bailey expressed positivity about the Bank of England’s current work on central bank digital currencies.
Bailey said: “I am very encouraged by the progress on this [CBDC] front and the fact that we are tackling this crucial innovation. If that happens, it will be one of the most fundamental innovations in central bank history, it will bring us into a new era. “
Discussion throughout the morning covered multiple topics related to payments, cross-border payments, open banking, open finance, regtech, suptech, payment standards such as ISO 20022, currencies digital technologies, all linked to the fundamental desire to leverage technology and innovation made available in the private sector to strengthen public sector infrastructure.
“As a central bank, we have always recognized the importance of innovation to the global financial system, and we seek to support it wherever possible in the safest way. Of course, the private sector can create technological and business innovation, this is a comparative advantage and expertise. But in the public sector, we have a very important role to play in enabling and channeling its development so that it can provide efficient but also secure financing for consumers and businesses across the country.
Bailey added that collaboration and cooperation have a clear advantage in many areas, especially in areas such as those covered by the BIS Technology Hub. Focusing on a key theme raised in the Kalifa review earlier this year, Bailey pointed out that although the Innovation Hub will be based in London, it will proactively use the entire fintech industry and financial expertise. UK.
With a significant development currently underway in global financial innovation, Bailey noted that there is “intense” cooperation from the international public sector on issues such as the development of stablecoins. There is also close work between financial regulators to understand how developments in these markets might affect financial stability, in addition to the BoE’s own work on the central bank’s digital currency.
“The innovation agenda that the BRI has defined is at the heart of this central global cooperation. It focuses on future financial market infrastructures, central bank digital currency, digital currencies in general, open finance on regulatory technology, supervisory technology, cybersecurity, which unfortunately is also at the center. of what we need to do and need to protect, and also green finance. So if you put all of these things together, you can see how ambitious and important this is. “
Benoît Cœuré, head of the BIS Innovation Hub, confirmed that digital payments and CBDCs are an important part of the BIS agenda. In fact, half of BRI’s current projects are CBDC-related, spanning the wholesale, retail, and interoperability of multiple CBDCs.
“Our portfolio spans across our centers in Hong Kong, Singapore and Switzerland, and is initially focused on wholesale CBDCs, although we have a few projects on retail CBDCs. Exploring the potential of next generation multilateral cross-border payment platforms for wholesale CBDCs is also a key objective. “
Other BoE heavyweights added their take on the matter, with Deputy Governor Jon Cunliffe explaining that the bank has been focusing on new types of digital currency for some time, such as stablecoin and also CBDC. .
“It’s been a big week for developments in the FinTech space, as we released a discussion paper on Monday, outlining many of the key issues for central banks, that these new types of digital currency potentially raise… The CBDC, if adopted, could represent one. of the greatest innovations, one of the greatest developments of the central bank, since the central bank itself began centuries ago.
David Ramsden, also deputy governor of the central bank, followed, adding: “I would expect that given the work that we are focusing on here at the Bank of England, and more broadly in the sector of UK fintech, which we kind of hinted at With some of what we posted earlier this week, we’ll be focusing on the areas of payments and CBDC, regtech, suptech, data and open finance as obvious priorities.
After the morning session, Bradley Rice, financial regulation partner at law firm Ashurst, said: “This is another pivotal moment in the inevitable transition to digital assets and new advancements in digital finance. It is also an important market for UK ambitions to continue to influence FinTech developments on a global scale.
“As private capital markets transform and innovate, and private coins and cryptocurrencies continue to grow, it is essential that central banks innovate. Many are well advanced on this journey with the launch or advanced stages of central bank digital currencies. But innovation waits for no one. Now is the time for central banks, regulators and lawmakers to coordinate responses and clarify matters for industry players to facilitate the Fourth Industrial Revolution. “