I spoke to the senior director at NTT Data to get his thoughts on where the future may lie

Jorge Lesmes talks CBDCs

Jorge Lesmes is a senior director and client partner at NTT Data UK&I Banking and Financial Markets practice. A seasoned financial professional, Lesmes has been in the industry for 15 years and in that time has amassed a wealth of experience. 

He and I spoke about all things CBDC: whether we need them, regulatory issues, and how the future may look. 

Hi Jorge, thanks so much for joining me! Please could you give a quick overview of your background and how you’ve ended up where you are? 

Yes, of course! I’ve been with NTT Data UK&I for 10 years now. As well as being a senior director and client partner, taking care of one of our largest banking clients, I regularly provide thought leadership and insights on blockchain, crypto, and digital assets. In 2016 I co-created that practice within NTT Data, called the Blockchain for Banking practice.  

There seems to be an almost 50/50 split when it comes to CBDCs; some commentators are saying that CBDCs are an attempt by governments to stay relevant and others are saying that they’re vital. Where do you fall on that idea? 

I don’t think governments have a need to stay relevant. On the other hand, I don’t think CBDCs are truly vital either; I think it’s somewhere in between. 

CDBCs can do a lot of positive things for the economy and especially for regulation. One of the challenges with these new forms of money is that they’ve been unregulated since their inception. And I think that central banks rightfully want to get their work with CBDCs straight and controlled from the beginning. 

That’s not a reason to say they’re doing it to stay relevant. The objective of the Central Bank is to try to be one step ahead of any potential mishaps in the economy, and I think that with CBDC’s they have a great opportunity to come up with a programmable way of exchanging value that can be closely adhered to regulation. Whatever that regulation might be anyway, because at the moment there’s not a lot of it! 

One of the things I’m really interested to hear your thoughts about is what the public perception of CBDCs might be. 

I don’t think the conversation is there yet, to be honest. I think that the conversation is still taking place within a pretty small circle of specialised people dealing with, or investing in, the technology. I’m sure if I go to the high street now and ask five random people what a CBDC is, no one will have a clue. 

To that point, that’s great. We don’t have to educate the audience in the high street in the underlying technology of an application that they use to interact with their banks. In the same way that you now check your balance in your banking app for whatever bank you use and don’t know if your balance is being held in a relational database inside a mainframe system; why would anyone want to know if it’s been held by a Distributed Ledger? I don’t think that the end client should worry about it, as long as they feel comfortable with dealing with a sensible and reputable banking institution, that’s all they should care about. 

But I understand where your question is coming from and that there’s this need for people to understand what Bitcoin is, what crypto is, what blockchain is, what DLT is. That’s new. That didn’t happen in the past when the conversation was around big data projects for example; no one was interested in learning the ins and outs of what big data really does. But now, for whatever reason, people want to understand what Crypto and Blockchain are and see if they’re missing out on something. But I think that if we ever get to use CBDCs, I hope that people don’t have to worry about what a CBDC is. That would mean that the implementation has been so seamless and so simple that they just can use it. 

Bitcoin’s been on the market for more than 15 years; do you think the fact CBDCs are taking so long might have an impact on their rollout? 

Definitely! I don’t remember the first time that I talked about CBDCs, but it’s been a while now and to me it still feels like the conversation is pretty much on an academic level yet. I haven’t seen anyone just showing me something tangible that I can really use. 

The problem with Crypto, DLT, blockchain, CDBCs, is that whenever it looks like people are focusing on them, a new trend comes and suddenly the conversation stops while everyone puts their focus on something else. It happened with the metaverse, for example. Everyone was talking about DLT and CBDCs, and then the metaverse appeared and no one spoke about CDBCs anymore for a while. Then the metaverse went, and we started talking again about blockchain, DLT, CBDCs. Then AI comes and the cycle repeats itself. 

Even when other topics might come and reduce the time that we spend talking about CBDCs, the conversation always drifts back. So I want to believe that CBDCs are not something we talk about just because they’re the new cool thing to talk about, but because we really see value in them. 

However, there have always been blockchain and crypto tourists in the industry. I go on LinkedIn and the people that I used to talk to about CBDCs are now focused on AI; I try to stick to focusing on DLT and CBDCs because we honestly see value in their implementation. 

Hopefully one day, sooner rather than later, we’ll see real progress from institutions in terms of implementing real tangible in-production implementations of CBDCs that are being used by high street retail clients. 

One of crypto’s biggest selling points is that it’s unregulated, but obviously Bank of England (BoE) issued CBDCs will be regulated. What kind of impact do you see that having? 

Well, first of all, it’s important to understand that the regulator regulates the use case, not the technology. As far as I’m aware, we don’t have a technology regulator yet besides the Digital Regulation Hub in the UK. We should start having regulators for the technology soon, because it’s going to become more important than the use cases itself, but at the moment the BoE focuses on the use case. 

By use cases I mean: how do you use that money? What do you use it for? The BoE are not that much interested in the underlying technology. Is your balance sitting in a relational database or on a DLT implementation? At the moment, they are not worried about that. But I would bet my money that very soon we will see them actually taking a stance on technology matters. That’s the only way that it will work. 

Crypto is unregulated because that’s how it started, we must remember that. Bitcoin was an alternative pseudo-anarchist neoliberal way of exchanging value; no one 15 years ago would have thought that retail and corporate banks would be buying into it, because it was quite the opposite. Bitcoin started because people didn’t want to have to deal with banks, and now it has shifted into something completely different. 

You won’t be able to regulate it, and that’s why they are not regulating Bitcoin the technology, but they are regulating the crypto exchanges, the use cases. Bitcoin and its underlying blockchain implementation will always be unregulated. 

Thank you to Jorge for joining me and sharing his thoughts on CBDCs. It’ll be very interesting to see how they do pan out once they’re introduced, not least their implementation but their usage too.

Image: NTT Data

Robert Welbourn
Robert Welbourn is an experienced financial writer. He has worked for a number of high street banks and trading platforms. He's also a published author and freelance writer and editor.