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On the third floor of the dark cylindrical tower, home of the Bank for International Settlements, I was confronted with a blink of an eye. It was a white wall.
This may not come as much of a surprise, so let me explain. The BIS is the central banker’s central bank. He is based in Switzerland, one of the world’s leading financial centers. On my previous visits, the decor was reassuringly traditional: dark wood paneling, subdued chairs, bland colors, dull art. Like most central banks, it exudes a timeless, marble-pillar-like aura of stability.
But the white walls are one sign that an interesting cultural experiment is taking place here. A year ago, BIS launched his six “innovation hubs” to host initiatives in the cryptocurrency and cyber worlds. Most notably, it has helped create a series of Central Bank Digital Currency (CBDC) projects around the world. About 114 countries are considering his CBDC by the end of 2022, 20 are in pilots and 11 have launched his CBDC, according to the Atlantic Council, a think tank on international affairs. rice field. The Bank of England, which has been considering a CBDC since late 2021, has announced it will likely need a ‘digital pound’ in the future.
So, in one corner of BIS, dark wood paneling has been replaced with whiteboards, glass and soft chairs to tap into Silicon Valley and the more familiar Fintech hubs of Sweden. As renovations progress, we’ll see the spacious Bahamian penthouse that was the headquarters of disgraced FTX founder Sam Bankman-Fried, and the graffiti-covered building in Brooklyn, home of ConsenSys, a major player in the Ethereum currency. No. But it’s clear that the new design is part of an effort to break the central bank’s stalwart image a bit.
is this a good idea? The answer from crypto enthusiasts is a resounding “no”. After all, most people who are serious about Bitcoin and Ethereum want to upend the existing financial hierarchy, believing that central banks are outdated and unable to understand the transformative power of digital assets. I’m here.
Furthermore, they argue that the only reason founding bodies such as the BIS are currently playing with CBDCs is to crush private sector tokens that could challenge traditional or “fiat currency” and that they Instead of outright banning the challengers of the Cyber Challenges by stealing cyber…clothes instead.
Conspiracy theorists are partly right. A recent meeting of central banks and regulators I attended at Basel Tower said CBDCs could replace most private tokens in the future, especially given the collapse in value of crypto assets such as Bitcoin. There was a clear belief or hope that And scandals like FTX have sparked regulatory crackdowns. In fact, Agustín Carstens, head of the BIS, said recent events mean that “the battle has been won by central banks” between cryptocurrencies and fiat currencies.
Maybe so. But not everyone inside these central bank towers thinks playing with CBDCs is necessary or wise. This innovation puts banks under control of vast amounts of citizen data and could undermine the role of private lenders. Citizens may not even get paid faster. A recent report from the House of Lords was so unimpressive that I asked if the CBDC was “the solution to the problem”, but former BoE adviser Tony Yates said: argues that “huge undertakings” are simply “worthless.” “Costs and Risks. Federal Reserve Chairman Jay Powell admits that he has not legally determined whether the benefits outweigh the costs or vice versa.”
No wonder. Despite the overlap between these two worlds of hers, tribalism is still a powerful force. Central bankers are trained to move cautiously, emphasizing stability and working within hierarchical power structures. In contrast, tech entrepreneurs driving the digital asset revolution are focused on “networks” (the power of crowds rather than hierarchies) and want to take bold steps and risks to disrupt the regime. When Facebook tried to launch its so-called Libra digital asset project in 2019, one central banker who did business with Facebook said the two cultures are completely different and they talk to each other. , which ultimately failed.
Some are trying to bridge the gap. Jeremy Allaire, founder of Circle Group, which operates stablecoins (digital currencies pegged to fiat currency, exchange-traded instruments, or another cryptocurrency), said he wanted to work with regulators, not against them. says. He wears a plain shirt and blazer, not shorts like Bankman Freed or a disheveled T-shirt. Meanwhile, the BIS is looking to hire employees from the tech industry, and some central banks are taking off their jackets. But mixing Basel tribes with Tech tribes won’t be smooth sailing.
Follow Jillian on Twitter @Gilliantette and email her gillian.tett@ft.com
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