Crypto Needs Central Banks’ Pegged Fiat Currency to be Stable: Former ECB Benoit Coeure

Benoit Coeure, current head of Innovation Hub at the Bank of International Settlements (BIS), has today said in an interview with CNBC he is confident central banks partly hold the future of cryptocurrencies. The French Economist and a former executive board member at ECB was keen to highlight a that practical approach by regulators would define where to place the digital currencies.

Why stability of the global financial system requires central bank money… and why central bank money may have to evolve. My talk with ⁦⁦@MartinSoong⁩ and ⁦@cnbcSri⁩ in Singapore this morning https://t.co/kvV6af62d3

— Benoit Coeuré (@BCoeure) February 20, 2020

Benoit further expressed the reasoning behind this point of view during the interview. Notably was an advocacy for central banks being the binding factor of a stable economy given tools under fiscal and monetary policies. According to Benoit, it follows that a stable crypto ecosystem would have to be Central Bank pegged;

“It will be part of the backstop because that's what's needed for the stability of the system.”

Benoits take on Crypto Regulation

When asked whether digital assets like BTC need to evolve for them to be adopted; Benoit had an interesting answer for CNBC’s reporter. The veteran Economist said if crypto coins are presented as investment assets then it would only be prudent to regulate them under similar laws with mutual funds, ETF’s or collective schemes. On the hand, they can be regulated as payments if they tend to lean more towards this function.

Benoit also commented on tokenization of fiat currencies to serve as a back-end for crypto ecosystems. In his opinion, Central Banks are mainly concerned with economic stability hence the support for systems like RTGS. Crypto assets are therefore likely to face a similar fate as central banks will remain at the core of monetary operations;

“It might have to evolve to be part of the backstop. It might have to be tokenized, it might have to take different forms but it will remain at the core of the system.”

These sentiments were aired on the same day BIS announced two new appointees under its innovation hub. Benoit welcomed Morten Bech and Andrew McCormack to the team noting that their skills would be valuable in the BIS goal of bridging the gap between FinTech and central banks.