BIS Innovate Chief Warns Central Banks To Prepare for Crypto
Cecilia Skingsley, the head of the Innovation Hub at the Bank for International Settlements (BIS), stressed the imperative for central banks to proactively adapt to the evolving landscape of digital assets and tokenization.
Speaking at the New York Fed Conference on Fintech: Artificial Intelligence and Digital Assets in Manhattan, Skingsley emphasised the BIS's commitment to staying ahead by actively engaging with emerging technologies, including cryptocurrencies.
During the discussion, Skingsley showcased the Innovation Hub's distinctive approach, which involves hands-on research and investigation into the impact of new technologies on central bank operations. This approach, she noted, sets the BIS apart from other institutions, as it actively gets involved in technology and shares its findings with the global community.
Skingsley expressed pride in the Innovation Hub's project portfolio, describing it as a testament to the organisation's commitment to understanding and reporting on the transformative potential of technology.
Despite this, Skingsley also pointed out the need to address challenges posed by the digital asset space, especially following the events surrounding Libra in 2019, which brought attention to the rapid developments in the tech space that cannot be ignored.
In the most recent report titled "BIS Blueprint for the Future Monetary System," researchers acknowledged the significant potential of tokenization in enhancing efficiency and transparency within financial markets. However, the report also critiqued cryptocurrencies, stating that while crypto and decentralised finance (DeFi) offer a glimpse into tokenization's promise, they are considered flawed systems that cannot assume the role of the future of money.
Despite reservations about cryptocurrencies, Skingsley emphasised the importance of central banks preparing for a potential future where assets are tokenized on a broad scale. She raised critical questions about the infrastructure central banks would need in a tokenized future, urging a proactive approach to address these considerations.
The BIS Innovation Hub has been in collaboration with the New York Innovation Center (NYIC) since 2021, operating under the New York Federal Reserve. The partnership focuses on addressing problems facing the global financial system, with the NYIC currently exploring the use of distributed ledger technology in enhancing cross-border payments through Project Cedar. Initial findings from the project indicate that blockchain could enable faster, simultaneous, and safer cross-border payments.
BIS concludes Project Mariana
In more recent news, the BIS successfully concluded “Project Mariana” in collaboration with the central banks of France, Singapore, and Switzerland. This project explored the cross-border trading and settlement of wholesale CBDCs using DeFi concepts on a public blockchain.
This project involved simulated trades of hypothetical Euros, SGD, and Swiss Franc CBDCs, and involved an automated market maker overseeing spot FX transactions autonomously.
Cecilia Skingsley, Head of the BIS Innovation Hub, highlighted that Project Mariana pioneers the use of novel technology for interbank foreign exchange markets. Emmanuelle Assouan from Banque de France emphasized that the project could set the stage for the evolution of cross-border payments in the future. Sopnendu Mohanty, Chief FinTech Officer at MAS, and Thomas Moser from the Swiss National Bank recognized the promising future and feasibility of such initiatives.
The collaboration aimed to balance the needs of central banks and the interests of financial institutions, providing a foundation for current wCBDC design explorations. However, it's essential to note that Project Mariana is experimental, and its success does not indicate the intention of central banks to release wCBDCs or endorse specific technology solutions.