The role of central banks in payment and settlement systems

This chapter examines the roles of central banks in payment systems, their oversight activities, and the challenges they face as the payment landscape and the technology underpinning it evolve. It suggests that there is an evident movement that supports gravitating away from centralisation in central banks. This results in two key implications. First, it motivates central banks to take action (and some would say, put a finger in the dike) and become an innovation catalyst. Second, it may transform the nature of trust in central banks, replacing it with trust in technology. The chapter, accordingly, analyses two critical questions. How have the changes (and transformation) of the payment landscape described in Chapter 1 affected the appropriate scope and nature of central banks’ oversight of payment systems? What are the implications of those changes on the future of central bank money as the ultimate settlement asset? This discussion is anchored in the concept of trust and the complex scholarship that captures its characteristics and fragilities.