BIS, BoE open innovation hub with central bank digital currencies in view

The Bank of England has to "get its hands dirty" with new financial technologies, Deputy Governor Dave Ramsden said at the launch of the London Innovation Hub with the Bank for International Settlements.

Ramsden said the new hub would allow the BoE to build on its existing work in the fintech field, while maintaining its focus on its core mission of monetary policy and financial stability.

"We do have to be able to embrace and make sense of innovation. Our response will be to say, 'Yes, we've got to regulate it,' but we've also got to understand it. And that sometimes means getting your hands dirty in the technology," said Ramsden.

The aim of the hub, jointly launched by BIS and the BoE, is to serve as a focal point for central bank experts on innovation. It covers a variety of fields including the use of technological innovation in supervision and regulation, future financial market infrastructures and central bank digital currencies.

The hub will examine central bank digital currencies and BoE Governor Andrew Bailey said the bank's own discussions on the topic were encouraging.

"I am very encouraged by the fact that we are getting to grips with what is a critical innovation. 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," Bailey said.

Bailey noted that while the hub will be based in London, it will make use of the fintech sector and financial expertise throughout the U.K.

"What this really emphasizes is the importance of collaboration. The innovation that will come from the center's work will be felt on a national and global scale. The public goods of open economies and open financial system and the stability of that system are global," he said.

U.K. Finance Minister Rishi Sunak welcomed the launch of the hub, noting that the British fintech sector is a world leader worth £11 billion.

"Its work will help central banks to support safe innovation and boost our efforts to capture the extraordinary potential of technology," said Sunak.

The London hub is BIS's fourth after Hong Kong, Singapore and Switzerland, and it is planning further collaboration of this kind with the European Central Bank and the central banks of Canada, Denmark, Norway, Sweden and Iceland. Earlier this year, BIS signed a memorandum of understanding for strategic collaboration with the Federal Reserve Bank of New York.