Central banks are the institutions best placed to provide trust in money in the digital age and will continue to be, according to Agustín Carstens, general manager at the Bank for International Settlements, an umbrella group for the world’s central banks.

“The soul of money belongs neither to a big tech nor to an anonymous ledger,” Carstens said. “The soul of money is trust.”

Central banks are the key institutions for providing trust, and alternatives have often ended badly, he said. He was speaking at Goethe University’s Institute for Law and Finance (ILF) conference on “Data, Digitalization, the New Finance and Central Bank Digital Currencies: The Future of Banking and Money” on Tuesday.

He pointed to digital innovations such as stablecoins, which are tech company-issued cryptocurrencies whose value is tied to assets like the U.S. dollar, and decentralized finance (DeFi), which offers financial services without intermediaries, as exciting developments but ones that can potentially fragment the monetary system without the necessary oversight.

“It is undesirable to rely solely on private money. Paying with a big tech global stablecoin might be convenient. But in doing so users may be handing the keys to our monetary system over to private entities driven primarily by profit. Such an arrangement could erode trust,” Carstens said.

Carstens also pointed to recent BIS research that argued the promised decentralization in DeFi services is an illusion. According to the report, blockchain consensus mechanisms have a tendency to concentrate power, which makes it easy for a small number of stakeholders to make big decisions.

“DeFi is subject to the same vulnerabilities present in traditional financial services,” Carstens said. These vulnerabilities include high leverage, liquidity mismatches and connections to the formal financial system that could affect that broader system’s stability.

Carstens offered some plausible scenarios for the future of money. In one, a few big tech corporations will provide financial services to all. In another, a decentralized system could replace people and institutions with “blockchains and algorithms.”

He also offered a third possibility: One of an open, global monetary and financial system that harnesses technology for the benefit of all.

“In a third scenario, incumbents, big techs and new entrants compete in an open marketplace that guarantees interoperability, building on central bank public goods. End users can seamlessly interact across different providers – both domestically and across borders,” Carstens said.

Carstens said central bankers must work with other public authorities and private stakeholders to make that third version a reality.