Should consumers have their own account at a central bank if central banks also manage digital money in the future? What are the critical issues to be considered and why are we having this discussion at all? In a SAFE Policy Web Panel hosted by the Leibniz Institute for Financial Research SAFE, Markus Brunnermeier from Princeton University and Benoît Cœuré from the Bank for International Settlements (BIS) addressed these questions moderated by SAFE Senior Policy Fellow Hans-Helmut Kotz – as well as numerous other aspects raised by the audience during the discussion.
BIS representative Benoît Cœuré began the online event by emphasizing the pace of technological change, which has so far involved more than just cashless options and mobile user-friendly payment interfaces. Likewise, he said, cryptocurrencies, walled gardens and private-sector currencies such as Libra from U.S. industry giant Facebook, which is set to be replaced by the digital currency Diem later this year, can also be found on the market. “Central banks have been waking up to this perspective,” Cœuré said. Despite a recent surge in demand for cash, particularly in the euro area and China, central banks are increasingly adapting to the fact that digital money opens up a new bandwidth for payments, including for individuals and households.
Central bank money as an anchor of stability
Although deposit accounts and payment solutions for commercial customers are not business areas for central banks, Cœuré continued, “central bank money is a super-safe settlement asset allowing finality of payments, an enabler of outside liquidity provision and therefore crucial for financial stability,” the head of the BIS Innovation Hub found. Moreover, central banks are “commercially neutral” and, unlike big tech companies, do not profit from consumers’ data. If digital central bank money were now launched, the complexity would increase: the technology was not yet perfect, and future development was therefore uncertain, while at the same time people demanded maximum privacy. "We want a system that is fast, secure and open at the same time, but to ensure all that, we have to rely on international solutions,” Cœuré said. If we waited too long to do this, the big-tech companies could fill the gap.
