Today, the Bank for International Settlements (BIS) launched its Toronto Innovation Hub in conjunction with the Bank of Canada. The Hub won’t just target Canada but will act as a regional innovation base for Latin America and the Caribbean.
BIS General Manager Agustín Carstens discussed the concept of the BIS Innovation Hub more generally as having ‘relatively small operations with big ambitions’. Initially the BIS board authorized five people in Basel and the Hub has now grown to a hundred people across seven regions. He described it as a “wild idea for the standards of the BIS,” but one that has paid off.
Regarding topic areas, the Toronto Innovation Hub will focus on three of six Innovation Hub themes: next-generation financial market infrastructures, regtech and suptech innovations, and open finance.
Its first project is FuSSE (Fully Scalable Settlement Engine), which includes the Inter-American Development Bank (IDB). Mr Carstens described the project as enabling “the development of next generation payment systems and financial market infrastructures. It will position countries even with rudimentary payment infrastructures to leapfrog to the front of the pack.”
Canada’s motivations
Tiff Macklem, the Governor of the Bank of Canada, gave three motivations for Canada to open a Hub. Firstly, he noted that digital technology has already transformed finance, but he has a sense that this is just the beginning. From a central banker perspective, he wants to ensure the benefits are harnessed and the pitfalls are avoided.
Secondly, he believes the private sector does a way better job at innovating and reinventing digital finance. At the same time, some aspects of finance are public goods whereas the private sector has different incentives. Hence, the central bank has a role in creating those public goods.
Finally, innovation and new technology harbor significant dangers such as cyber attacks, private breaches and fraud. Given central banks are in the ‘business of trust’ he’s keen to guard against these dangers.
Central banks can’t simply read reports to understand the digital sector. Engaging with technology first hand is essential, which is the key to its interest in hosting a BIS Innovation Hub in Toronto.
Meanwhile, Miguel Diaz will lead the Toronto Innovation Hub.
