BIS chief says central banks are the best source of trust in money in the digital age

Central banks, as institutions, are best placed to ensure trust in money in the digital age, BIS General Manager Agustín Carstens said, according to CoinDesk.

Speaking at the conference “Data, Digitisation, Decentralised Finance and CBDC: The Future of Banking and Money” at Goethe University’s Institute of Law and Finance in Germany, the official said:

“The soul of money does not belong to tech giants, nor to an anonymous registry. The soul of money is trust.”

According to him, central banks are key institutions for ensuring trust, and alternative options often end poorly.

Carstens noted that private stablecoins and DeFi services may prove to be “interesting innovations,” but without proper oversight they could potentially fragment the monetary system.

“It is undesirable to rely exclusively on private money. Paying with a stablecoin from a large technology company may be convenient. But users may hand over the keys to our monetary system to private enterprises driven primarily by profit. Such arrangements could undermine trust,” he stressed.

The financier recalled BIS recent study, in which experts concluded that decentralisation in DeFi services is illusory. The report notes that blockchain-consensus mechanisms tend to concentrate power, allowing a small number of interested parties to make key decisions.

“DeFi is subject to the same vulnerabilities as traditional financial services. This includes a high level of leverage, liquidity imbalances and ties to the formal financial system, which can affect stability in a broader sense,” Carstens said.

He proposed several plausible scenarios for the future of money. In one, financial services for all would be provided by a few tech giants. In another, a decentralised system could replace people and institutions with “blockchains and algorithms.”

A third possibility, Carstens suggests, is building a global monetary and financial system that uses technology for the public good.

“In the third scenario, old players, large tech companies and new entrants compete in an open market that guarantees interoperability, drawing on the central bank’s public goods. End users can interact seamlessly across providers—domestically and abroad,” the BIS head says.

In his view, central banks should work with other government bodies and private stakeholders to turn the final version into reality.

Earlier, BIS concluded that cooperation between public and private sector actors is necessary for the CBDC system to work effectively.

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