As the Bank of England launches an accelerator, will fintech transform central banking as much as other financial services?
Nick Bouch, financial services data leader at PwC, says Yes.
The rapidly changing tech landscape raises a challenge to central banks to keep pace with the sophistication of the economic activity they govern. With the rise of blockchain, cloud, mobile and robotics, economic activity is shifting at an ever increasing pace from physical to digital. Fintech is driving digitisation of lending, payments and insurance. It has potential implications for the way money is exchanged, transmitted and stored. From a central bank perspective, it’s easy to see how the management of money supply, the regulation of the operations of commercial banks, and the running of economies are all potentially impacted by the advent of this technology. They must invest in developing a hands-on understanding of fintech and its implications – not least so they know better how the changing landscape impacts the resilience of the banking sector, as well as how to develop the right policy and supervisory oversight. The Bank of England has invested early, taking a lead in understanding blockchain. And this has set a marker for others to follow.
Jan Skoyles, who works at Coinsilium, says No.
No-one knows how much innovative technologies could change central banking as much of it comes down to what will be allowed to change. A central bank’s main remit is to manage money creation by setting short-term interest rates. It does this through assessment of the health of the economy, not with services or products – where we currently see transformation through fintech. One technology, blockchain, may turn central banking into something unfamiliar, particularly through cryptocurrencies. This may disrupt monetary policy if decentralised currencies were to gain widespread adoption. But the chances of this happening in the near future are slim. Indirectly, the impact from blockchain may be felt by central banks. Decentralised ledger applications will change regulation as we know it, while the use cases for cryptocurrencies suggest that treasuries worldwide may soon look quite different. Central banks, which currently advise on both areas, may well be impacted. But the central bank as we know it is unlikely to reflect such innovation.