- Central banks must develop innovative infrastructures to protect consumers, says Bank of International Settlements chief Agustin Carstens
The turmoil in crypto markets has erased the Bank of International Settlements’ belief that there is any hope that stablecoins would be the future of money, according to the financial institution’s chief, Agustin Carstens. Yet, he sees central bank digital currencies and tokenized deposits as essential for innovation in finance.
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“CBDCs replicate existing forms of money in a technologically superior way,” Carstens said in a speech at the Monetary Authority of Singapore. The Swiss-based global institution for financial regulators is also actively experimenting with tokenized deposits, which are meant to replicate the role of commercial bank money, he noted.
When it comes to stablecoins, however, the BIS top dog said that the events of the last year “have cast serious doubts” on their reliability as a form of money. The collapse of Terra’s algorithmic stablecoin in May 2022 turned regulators’ heads and broke down their already feeble trust in the non-governmental fiat-backed currencies.
See Related: What is the Bank for International Settlements(BIS)?
Carstens still imagines that the technological developments from crypto will form the basis of the financial future. A “unified ledger” would allow the different parts to work together “seamlessly.” He noted that “CBDCs and tokenized deposits would appear in separate partitions in the unified ledger. Because they share a common ledger, they can be brought together and used in an efficient way, through smart contracts.”
Carstens also said, “it is incumbent upon central banks to make sure they contribute to developing an infrastructure that meets these demands: if central banks do not innovate, others will step in.
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