This morning, the BIS Innovation Hub held an event ahead of the early 2022 opening of the European innovation center locations in Paris and Frankfurt. The BIS has already launched five hubs in Hong Kong, Singapore, London, New York and Switzerland where central banks collaborate on new technology.
Christine Lagarde, President of the European Central Bank (ECB), was asked to share her vision of what the future might look like. She speculated that the BIS Innovation Hub could be a future profit center.
Mme Lagarde suggested that Europe could identify innovations that could be used beyond its borders and envisioned a future that includes central bank digital currency (CBDC), AI and Quantum computing.
“I think that it will also give birth to a group of unicorns possibly,” said Lagarde. “That would actually pick up some of those ideas and develop them further and give them the scale that they need. And with the profit generated by the BIS Innovation Hub then we would be able to fuel scholarships or support for young researchers or young innovators that would continue populating this gigantic virtual radar screen on which everybody collaborates.”
We asked the BIS about its plans for turning the BIS Innovation Hub into a profit center. It responded that the Innovation Hub in its current format is producing prototypes that will be made available to the central banking community as a public good.
However, the reference to ‘current format’ could be interpreted as an alternative is being considered.
Another interesting point made by Mme Lagarde is that the European Hub could be particularly productive because the 19 participating central banks and the ECB are accustomed to collaborating.
Innovation and stability are complementary
The ECB President had some competition when it came to sound bites from the Governor of the Banque de France, François Villeroy de Galhau who argued that innovation and stability are complementary.
“Innovation without stability will lack trust and will not be sustainable,” said the central bank Governor. “And stability without innovation will be regressive. Will be probably inefficient in the long run.”
He also spoke about three disruptive forces faced by central banks.
“We have new players, many of them unregulated. We have new assets like crypto-assets or stablecoins. And we have possibly new market infrastructures (that are) decentralized,” said Villeroy de Galhau.
“This is a challenge for us central banks. If we want to be up to the challenge, we must find the right mix of supervision, regulation, and yes, innovation. This is what the Innovation Hub is about, and you can rely on our full commitment.”
The new Hub’s work plan will cover green finance, cyber risks, regtech and suptech, CBDC, and future financial market infrastructures.