Yesterday the Bank for International Settlements (BIS) announced that Pablo Hernández de Cos will take on the role of BIS General Manager on 1 July 2025. The former Governor of the Bank of Spain will replace Agustín Carstens whose term ends in June. Recognizing the increasing digitalization of finance, Mr Carstens has advocated for an innovation agenda. During his term the BIS launched the network of BIS Innovation Hubs around the world. He has also promoted the concept of a Unified Ledger, tokenization and the Finternet.
The BIS has launched Project Agorá, an initiative involving seven central banks and over 40 institutions, aiming to modernize correspondent banking and cross border payments using tokenization. When it unveiled the project, it highlighted that this was not just another BIS Innovation Hub experiment. While it won’t commit to launching given the early stage, it’s taking the project very seriously.
So it would be hard to imagine another BIS leader leaning into innovation quite to the same extent as Mr Carstens. We were curious about the likelihood of the new BIS leader picking up the baton.
Mr de Cos’ tokenization experience
On the basis of desktop research, we uncovered two strong indicators, one in favor and one more reserved. At the Bank of Spain he was keen to support tokenization initiatives, but he also chaired the Basel Committee on Banking Supervision with its risk management emphasis.
Before the European Central Bank (ECB) formulated its wholesale DLT settlement trials, the Bank of Spain decided to conduct some of its own research. It commissioned multiple projects, including the creation of a wholesale CBDC platform to support tokenized deposits and securities settlement. Also, during his Bank of Spain tenure, the private sector led by Iberpay explored smart contract driven payments as early as 2019, and digital euro preparation more recently.
Basel Committee and tokenization
Mr de Cos chaired the Basel Committee on Banking Supervision from 2019 through to June 2024. It’s responsible for formulating rules for how banks engage with crypto. The downside of his involvement as Chair, is it emphasis on the management of risks rather than opportunities. During his tenure, there was a mixed bag of outcomes, although it is a committee, so he was not the sole arbiter.
Basel discouraged banks from having direct exposure to cryptocurrencies, with the aim of protecting regular account holder from crypto volatility and bank mis-steps. On the other hand, it did not discourage banks from providing cryptocurrency custody, unlike the US SEC. The Basel Committee had planned to add a small risk weighting to tokenized securities, but dropped the idea before announcing the final version of the Basel crypto rules.
However, in early July this year, days after Mr de Cos’ departure, the Committee approved rules which make it prohibitive for banks to underwrite digital securities issuances on public blockchains. The position was formulated while Mr de Cos was the Chair. On the other hand, while banks have shown interest in public blockchains, they’ve been cautious because regulators are less keen.
What’s clear is that Mr de Cos is likely to be well informed about the ins and outs of both crypto and tokenization. Only time will tell how this influences the future direction of the BIS.
Tokenization friendly BIS Chair re-elected
Today the BIS confirmed that François Villeroy de Galhau has been re-elected as the BIS Chair. He is governor of the Banque de France, which is the only central bank in Europe to have piloted a wholesale CBDC so far. Mr Villeroy de Galhau was amongst the first to propose a pan European DLT infrastructure last year. That’s a concept that the ECB more recently outlined as the foundation of a potential Digital Capital Markets Union.
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