BIS opens innovation hub in London in push for digital currencies
The Bank of International Settlements (BIS) has opened its fourth innovation hub in London in a push for upgraded infrastructure and for the study of central bank digital currencies (CBDC)
The BIS already has innovation hubs in Singapore, Hong Kong, and Switzerland. These innovation hubs are into different areas of study but their main focus is on CBDCs and the opportunities offered by them for the banks and also for the users.
“If this comes to pass, it will be one of the most fundamental innovations in the history of central banking. It will move us into a new era,” the BoE Governor Bailey said. He was impressed by the work done by the various innovation hubs on this front.
The hubs have other areas of study that include the use of innovation to improve regulation and supervision, improving and upgrading financial market infrastructure to make it ready for the next-gen, open finance, cybersecurity, and green finance.
Welcoming the London opening, UK Chancellor of the Exchequer Rishi Sunak, says: “The UK is known for pushing the boundaries of digital finance so it’s great to have the new Innovation Hub opening here. Its work will help central banks to support safe innovation, and boost our efforts to capture the extraordinary potential of technology.”
We have already reported on the studies undertaken by several central banks on CBDC as they begin to realise that these are the next-generation currencies and they can no longer be ignored. It is also important that the banks upgrade their legacy systems to handle the new wave of digital payments and currencies and the hubs are focussing on the study of all these areas so that they can help the various central banks and also carry out their own tests on these as the financial system across the world prepares itself for this next wave.
Along with the digitalisation, there needs to be changes and upgrades to handle the various practices and processes that are likely to come into existence and it is expected that these hubs would advise the various central banks on how such practices need to be regulated and supervised as the new rules need to blend the processes of both legacy and digitalization systems.
The other important area that is likely to become the focus in the coming years is green banking. As the global resources become depleted, it falls upon every institution to take care of the environment and bring in processes to help the Earth stay green and for them to stay carbon neutral in the long run. With digital currencies expected to guzzle electricity, it remains to be seen how the banks are going to handle this new developing situation.
