BIS Innovation Hub Head: COVID-19 Has Revealed Importance of DLT

Benoît Cœuré, the head of the BIS Innovation Hub, recently stated that the central bank digital currencies, or CBDCs, and DLT have been brought “into sharper focus” during the COVID-19 pandemic.

Speaking on a webinar hosted by Accenture, the ReReinventing Bretton Woods Committee, and the Chamber of Digital Commerce on April 17, Cœuré said that “the crisis has exposed the value of technologies which enable the economy to operate at arm’s length.”

He also said that the Bank of International Settlements, or BIS, is researching tokenization as a possible solution for empowering sectors of the economy during the lockdown.

Coronavirus pandemic boosts decline of cash

The Innovation Hub head underscores the possible decline of cash-based payments amid the COVID-19 pandemic, maintaining that the current economic climate has presented a major cause for discussions around CBDC:

“The current discussion on central bank digital currency also comes into sharper focus. Whether Covid-19 will accelerate the demise of cash is an open question. But already, it highlights the value of having access to diverse means of payments, and the need for any means of payments to be resilient against a broad range of threats.”

Cœuré states that “payments have been at the forefront of technological change recently,” postulating that “a rapid shift towards digital payments can improve cost, transparency, and convenience for billions of consumers.”

BIS seeks DLT solutions for post-lockdown financial landscape

However, Cœuré notes that ”Covid-19 will accelerate the digital transition beyond payments,” asking: “Will customers find their way back to banking branches when lockdowns are lifted and economies restart? Will this accelerate the shift towards virtual banking?”

With this in mind, Cœuré asserted that the BIS Innovation Hub will proceed with researching “technological trends in finance” and their implications for central banks and regulators.

“Issues such as tokenization, open banking, and using technology to support regulatory and supervisory compliance (‘regtech’ and suptech’) are high on our agenda,” he added.

At the beginning of April, the BIS released a bulletin stating that CBDCs can mitigate the risk of coronavirus transmission with banknotes. However, the report stated that CBDCs may impact the elderly and the unbanked.