Jon Cunliffe: Money and payments - a "black ships" moment?

Speech by Sir Jon Cunliffe, Deputy Governor for Financial Stability of the Bank of England, at the Economics of Payments XII Conference, hosted by the Federal Reserve Board, Washington DC, 26 October 2023. 

The views expressed in this speech are those of the speaker and not the view of the BIS.

It is difficult to overstate the importance of the announcement by Facebook in June 2019 that it intended to launch a multicurrency stablecoin, a new digital currency called Libra for general cross-border payment use. Indeed, one commentator has likened the impact of the Libra announcement on central banks to the sudden arrival off Tokyo harbour in 1853 of the 'black ships of evil appearance' - a modern, irresistible US fleet – that led quickly to the collapse of a centuries-old ruling system and to the opening up of Japan.

For the previous decade, central banks and financial regulators had been watching, with a wary eye, the development of crypto-asset markets, using new technologies, outside the conventional financial system. Many, like the Bank of England, had dipped a toe into the experimental water, running small experiments with these new technologies with the aim of understanding them and their possible use cases better. Some financial firms had gone further, exploring and investing in limited use cases within wholesale financial services.

And regulators, increasingly fretful about the cocktail of risks in unregulated crypto-asset markets – risks ranging from illicit finance to consumer harms and, potentially, to financial stability – had been debating whether and how to bring 'crypto' activities within regulation.

But the Libra announcement and the potential appearance of a new form of money, using new technology and moving between countries on new rails outside the current system, galvanised central banks and regulators into much more urgent action on a number of fronts.

I want to talk today about three of those fronts: the G20 roadmap to improve cross-border payments; the Bank of England's exploration of the Digital Pound, a central bank digital currency; and the regulation in the UK of systemic payment systems using 'digital settlement assets' like stablecoins.