BIS assesses payment innovation risks and policy options to preserve central bank money’s role

The Bank for International Settlements’ Committee on Payments and Market Infrastructures has published a report assessing how payment innovation changes risks and central banks’ policy choices. It reaffirms that central bank money should remain the settlement asset for systemically important payment systems and other financial market infrastructures where practical and available. Central bank money and private payment instruments play complementary roles, with reliable convertibility at par underpinning their coexistence. The report sets out options for adapting account access, infrastructure and oversight as payment arrangements become more complex. Tokenization and a broader range of payment providers can improve efficiency and competition, but also redistribute risks and responsibilities. Separating issuance from recording and transfer can lower entry barriers while creating uncertainty over accountability for operational resilience and cybersecurity. Shared platforms can concentrate risks and accelerate their transmission. Greater use of gross settlement and prefunding may increase liquidity needs, while poorly connected platforms can fragment available funds. Stablecoins raise additional convertibility concerns where holders lack direct redemption rights and depend on secondary markets, which can produce deviations from par unrelated to issuer solvency. Policy options include broadening access to central bank settlement accounts or differentiating services according to institutions’ risk profiles. Wider access can reduce reliance on competing banks and settlement concentration, but may transmit new risks to central banks and other participants. Infrastructure choices range from extending operating hours and improving connections between systems to making central bank money available for tokenized settlement. Overseers may assess whether emerging arrangements perform functions of financial market infrastructures and meet systemic importance criteria. Depending on their authority, central banks may oversee those arrangements directly, require regulated intermediaries to manage risks arising from their use, or combine both approaches. Common standards and interoperability initiatives can address coordination barriers, with these tools considered together because decisions in one area affect outcomes in others.