The Bank for International Settlements (BIS) in Basel, Switzerland is the bank for global central bankers. It’s the stodgiest of stodgy institutions, in other words, and it’s been slow-moving when it comes to cryptocurrency. Now it appears to be picking up the pace, however, spurred by Facebook’s announcement this month that it plans to issue a digital currency called Libra.
In March, BIS chief Agustín Carstens said that central banks were “not seeing the value” in creating a central bank digital currency. Now, Carstens is doing an about face. The BIS on June 30 issued its annual report, with an entire chapter (pdf), of four in total, devoted to the role of big tech in finance. Carstens also told the Financial Times (paywall) that the BIS is working with central banks that are developing digital currencies. “Many central banks are working on it; we are working on it, supporting them. And it might be that it is sooner than we think that there is a market and we need to be able to provide central bank digital currencies.”
The BIS report expresses concerns about big tech’s entrance into finance in recent years, noting that the amount of data that giants like Facebook, Google, Amazon, and Alibaba amass pose a threat to privacy and disadvantage big banks, thereby also potentially globally undermining economic stability. Given the companies’ increased interest in finance—tech firms are involved in everything from offering credit to lending money to issuing currencies—they are a force to contend with, it adds.
In light of this, the BIS is planning to start an innovation hub for financial technology. Switzerland, Hong Kong, and Singapore, in collaboration with their respective monetary policy officials, will all set up fintech innovation hubs to explore the territory, SwissInfo reports. Sweden’s central bank is already working on developing a digital currency, and Carstens is apparently supporting the move.
Facebook announced Libra on June 18, saying it will be a “stablecoin” with a value tied to a basket of currencies and assets. The company has not yet revealed specifics, but as Quartz’s Matthew De Silva puts it:
With 2.7 billion customers across its platform (that includes Instagram, Messenger, and WhatsApp), Facebook has a user base like no other. Unlike most crypto projects, Facebook doesn’t have to convince people to sign up: It has them, and Libra will be integrated into apps that are already a part of their daily lives.
The announcement spurred excitement in crypto markets and has driven renewed interest in bitcoin and other digital currencies. It also appears to have central bankers especially worried about getting in on the action before big tech dominates the field.
Still, it’s not clear when, if ever, central banks will roll out their own crypto. Carstens isn’t totally sold on the viability of digital coins just yet: “There needs to be evidence for demand for central bank digital currencies and it is not clear that the demand is there yet.”
In the meantime, Facebook is racing ahead with plans for Libra that could change the landscape for central banks.