One of the biggest misconceptions about events, by people who have never put one together, is that they are easy to construct. Panels, speakers, roundtables, exhibitors — all of these things just magically appear two weeks before the conference, ready to welcome eager delegates. While it is true that an industry get-together is not finished until the last vendor booth is packed up and sent for recycling, the planning starts at least a year in advance.
This makes for an interesting, and I think essential, paradox where what is scheduled for the stage isn’t always the topic most discussed on the floor. What you see on stage is what people were chatting about at the drinks dos and networking dinners the year before. Think of it as events in the multiverse — you as a speaker, delegate or exhibitor can experience the past, present and future in a fun and information-filled three or four days.
While there were lots of conversations at this year’s Sibos (watch our View from Sibos roundtable now) one topic was conspicuous by its absence — and that was any discussion around central bank digital currencies (CBDCs) and digital assets. Not on-stage mind you — roughly I counted at least 25 sessions that were tagged ‘CBDCs or digital assets’ in this year’s programme. But on the Sibos floor? Digital tumbleweeds.
This wasn’t my imagination. Several people I sat down with at Sibos this year actually changed the subject when I asked about experiments like the digital euro and the rest. (Most changed the topic to artificial intelligence (AI). Generative AI is definitely at the top of the hype cycle).
I often ask people what tidbits they’ve heard throughout the week at a show like Sibos. At the end of my conversation with Heidi Dittmar, head of Broadridge’s Swift services business about their 23-year relationship with Swift, instant payments and their API enabler programme, she was quick to respond to my question.
“No one is talking about CBDCs,” she said. I know, I nodded enthusiastically, that is what I have been (well, not hearing) all week.
From Spring 2022 to Summer 2023 you couldn’t get away from chatter about CBDCs — it became a favourite topic on our weekly podcast The Banker Midweek. Now, apologise for repeating myself…digital tumbleweeds.
Why, we wonder? Well, I think there are a few reasons why.
Reason number 1: the state of crypto and the resulting culture around digital assets right now.
I sat down with ACI Worldwide CEO and president Tom Warsop at Sibos to talk about their role in the recent US instant payments rollout called FedNow. We talked about how FedNow will eventually need to interoperate with the States’ other real-time payment network from The Clearing House, the culture of credit card usage in the US and how to combat fraud with 24/7, always-on payment rails (hint: it involves AI).
I asked him what he thought about the near hysteria from crypto circles that the FedNow real-time payment network was in fact a way for the US government to enforce a digital dollar onto the American public. (Currently, the US government have announced no plans to even experiment with CBDCs.)
Mr Warsop just looked at me and laughed. The Fed’s big marketing push was about financial inclusion, not about digital currencies, he said.
The concern around retail CBDCs is around privacy and, with its creation, it would allow central governments the ability to monitor and control what the general public could spend its money on. It is fair to say that the crypto world has a libertarian bent and any notion that a central bank or central government could infringe on individual privacy is something this group naturally rebels against.
While, on paper, you could see how the introduction of a digital version of a central bank currency could introduce privacy concerns, the idea that the Federal Reserve (or the Bank of England or the European Central Bank, etc.) would have any interest in what sandwich you buy for lunch is ludicrous. Many of these same people have no problem with Apple Pay or Venmo having access to all of your transaction data, mind you.
But the reaction, specifically around the FedNow launch, was not only over the top, but based on facts that were just wrong.
And, of course, we all learned, this week, that those NFTs we all bought two years ago (wait, no, you neither?) are now worthless.
Reason number 2: Do we even need a retail or wholesale CBDC? As evidenced above, retail cash is increasingly digital. The vast majority of the population don’t carry large amounts of cash in their wallets anymore and many more don’t carry cash at all. Cards, mobile apps, contactless payments — all of these make retail cash easily accessible and usable in the digital realm for countless numbers of people.
What use would retail CBDCs have? Maybe in a future internet of things scenario when your fridge empties your bank account because you’re out of milk and eggs? Or as a way for governments to better track tax cheats and fraudsters? None of this is happening this week.
As for wholesale CBDCs, there has been some talk around using these to ease cross-border issues. However, real-time gross settlement already settles interbank payments continuously, allowing for the instantaneous transfer of money/securities for high-value transfers. Most of the global banking industry is in the middle of migrating to ISO 20022 to standardise the messaging for cross-border payments. What ‘problem’ would CBDCs solve, really?
Reason number 3 (the last one, I promise): Do central banks really need to be ‘cool’? The fintech revolution that burst onto the scene post-2008 banking crash has had a huge and positive impact on the banking sector. One of the only truly disruptive innovations to evolve from that period was the creation of cryptocurrencies — like the good old-fashioned bitcoin. A store of value that didn’t need to be validated by a third party. Intellectually, it is a fascinating idea.
Many banks launched innovation labs and reached out to fintech companies in various degrees of success. While I truly believe most innovation programmes at banks are intended to create better and more efficient products for customers, there was an element of needing to be seen as ‘cool’ at least at the beginning of this fintech era. Central banks are not immune to this desire.
Digital assets and cryptocurrencies were set to transform how we look at value and the notion of money as a concept. Central banks dealt with just that — money. They would be seen as behind the curve, old fashioned, ‘not cool’ if they didn’t start experimenting with a central bank digital currency of its own (there is an oxymoron in there somewhere).
Sibos is a bank-industry-heavy conference. To my knowledge there was only one person on-stage who talked about a post-labour society based on Mars, next to someone calling himself ‘the crypto messiah’. But the banks that are members of Swift and attend Sibos talk about real things impacting their work and institutions right now — ISO 20022, instant payments, AI, T+1, digital trade finance, etc. (I could go on).
Maybe talking about something that is sort of being experimented on, not everyone is in agreement with, and the perceived benefits of which the jury is still out on, just isn’t the conversation the industry wants to talk about in 2023.
Liz Lumley is deputy editor of The Banker. Follow her on X (formerly known as Twitter) @LizLum
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