1 00:00:00,000 --> 00:00:10,000 Welcome everyone. It's wonderful to have you here. My name is Neha Narula and I am the... 2 00:00:10,000 --> 00:00:23,000 Central Bank Digital Currency or CBDC is top of mind with over a hundred central banks... 3 00:00:23,000 --> 00:00:32,000 But in 2023 we're in a context marked by geopolitical fragility, financial instabil... 4 00:00:32,000 --> 00:00:41,000 Since we are still at the beginning, it remains to be seen exactly what kinds of... 5 00:00:41,000 --> 00:00:46,000 Will they help solve for financial inclusion or deepen the digital divide? 6 00:00:46,000 --> 00:00:56,000 Can CBDCs unify geopolitical and technical fragmentation in payment and economic syst... 7 00:00:56,000 --> 00:01:11,000 In our recent work at MIT, we've said that CBDC has the opportunity to play an import... 8 00:01:11,000 --> 00:01:16,000 But so much of this outcome depends on the design decisions that we make today. 9 00:01:16,000 --> 00:01:27,000 In this panel, we will explore the motivation and goals for CBDC, discuss recent researc... 10 00:01:27,000 --> 00:01:38,000 We'll then move to broader questions about macro prudential issues that may arise if... 11 00:01:38,000 --> 00:01:43,000 And so now I would like to introduce this very illustrious panel. 12 00:01:43,000 --> 00:01:46,000 Thank you so much for being with us here today at the forum. 13 00:01:46,000 --> 00:01:52,000 I'd like to start with Governor Hadnjaho from the South African Reserve Bank. 14 00:01:52,000 --> 00:02:05,000 Then we have Liva Mastri, the CEO of Euroclear, Governor Amir Yaron from the... 15 00:02:05,000 --> 00:02:11,000 and Governor Belarde, who is the governor of the Central Bank of Peru. 16 00:02:11,000 --> 00:02:15,000 So thank you all again so much for being with us here today. 17 00:02:15,000 --> 00:02:19,000 And I'd actually like to start with Governor Belarde. 18 00:02:19,000 --> 00:02:26,000 So please allow me to share our hopes for a peaceful resolution of the protests that h... 19 00:02:27,000 --> 00:02:33,000 Now, despite the protests, Peru will remain one of the fastest growing economies in La... 20 00:02:33,000 --> 00:02:37,000 You predicted 2.9 percent growth over the next year. 21 00:02:37,000 --> 00:02:50,000 And in the BIS report last spring on CBDC in emerging market economies, authors from yo... 22 00:02:50,000 --> 00:02:57,000 and nearly 350 percent in the newly authorized payment system, which supports ... 23 00:02:57,000 --> 00:03:13,000 Now, I think that both of these developments underscore the importance of central banks... 24 00:03:13,000 --> 00:03:20,000 So I'd like to ask you, Governor, what are the main motivations for exploring central... 25 00:03:20,000 --> 00:03:25,000 And what role does CBDC have to play in the continued development of the Peruvian... 26 00:03:26,000 --> 00:03:28,000 Well, thank you very much for the question. 27 00:03:30,000 --> 00:03:34,000 I should be aware we are trying to do is a more efficient payment system. 28 00:03:34,000 --> 00:03:41,000 And then we started with an experience that failed that was recommended around the wor... 29 00:03:41,000 --> 00:03:46,000 All the phone companies, all the banks to party electronic wallet. 30 00:03:46,000 --> 00:03:50,000 But that business case for the banks was not there. 31 00:03:50,000 --> 00:03:52,000 And it was not so user friendly. 32 00:03:52,000 --> 00:04:00,000 So in 2019, we started again to try for all that detail wireless of the banks to be... 33 00:04:01,000 --> 00:04:03,000 And that was interrupted by covid. 34 00:04:03,000 --> 00:04:10,000 But because of covid in part, there was a strong development of the other wallets. 35 00:04:10,000 --> 00:04:19,000 For example, the affiliated more than two million very small businesses for the... 36 00:04:19,000 --> 00:04:26,000 And now they have around what will be around 70 percent of the population. 37 00:04:26,000 --> 00:04:32,000 Before to facilitate the world pushing for this one is to be interconnected. 38 00:04:32,000 --> 00:04:38,000 That's when I saw there is no we are forcing them to interconnected and starting March. 39 00:04:38,000 --> 00:04:40,000 They have to be interconnected. 40 00:04:40,000 --> 00:04:48,000 Oh, and starting the end of June, all financial institutions might be able to... 41 00:04:48,000 --> 00:04:50,000 We turn you see the phone. 42 00:04:50,000 --> 00:04:52,000 That's the cell phone basically. 43 00:04:52,000 --> 00:05:00,000 We see the central bank detail currency as part of the solution for a bank people. 44 00:05:00,000 --> 00:05:08,000 That is if we have a record of the transactions, it will be easier for them t... 45 00:05:08,000 --> 00:05:14,000 We have seen a lot of things interested in having this information. 46 00:05:14,000 --> 00:05:16,000 Of course, it has to do with open banking. 47 00:05:16,000 --> 00:05:17,000 That's in there. 48 00:05:17,000 --> 00:05:19,000 You will have to do with her. 49 00:05:19,000 --> 00:05:25,000 We have learned that hard way that the relation has to come from the central bank. 50 00:05:25,000 --> 00:05:29,000 It took us 18 with those secure standard. 51 00:05:29,000 --> 00:05:34,000 Actually, we discovered later that they follow the guidance, but not so strictly. 52 00:05:34,000 --> 00:05:37,000 So sometimes they were not into the operable. 53 00:05:37,000 --> 00:05:41,000 Now every cure has to be allowed by the central bank. 54 00:05:41,000 --> 00:05:46,000 So that's not to have these difficulties that works only for a particular bank. 55 00:05:46,000 --> 00:05:52,000 Now we believe that we need it to be a business case for the banks to promote it. 56 00:05:52,000 --> 00:05:59,000 A P2P transfer will not be charged, but probably will be a small charge for P2P fo... 57 00:05:59,000 --> 00:06:02,000 And that's the point. 58 00:06:02,000 --> 00:06:06,000 Central bank data currency is going to come later. 59 00:06:06,000 --> 00:06:09,000 We don't know exactly the formula. 60 00:06:09,000 --> 00:06:11,000 We're working with IMF. 61 00:06:11,000 --> 00:06:17,000 It's still a very small pilot, but it's very hard to know what will happen. 62 00:06:17,000 --> 00:06:23,000 It might be something similar to just wallets where these wallets of the bank people, 63 00:06:23,000 --> 00:06:28,000 they have to have research in the central bank or with paper of the central bank, et... 64 00:06:28,000 --> 00:06:31,000 But that is something to be seen in the future. 65 00:06:31,000 --> 00:06:36,000 And we're looking closely to what is happening around the world in those terms. 66 00:06:36,000 --> 00:06:37,000 Thank you. 67 00:06:37,000 --> 00:06:38,000 Yes, this is such an important topic. 68 00:06:38,000 --> 00:06:44,000 Interoperability, both in the domestic case, so bringing together your banks and your... 69 00:06:44,000 --> 00:06:47,000 but also internationally as well. 70 00:06:47,000 --> 00:06:51,000 And so, Governor, I want to turn to you to discuss interoperability briefly. 71 00:06:51,000 --> 00:06:57,000 There's a risk of further fragmenting our payment systems if central banks operate i... 72 00:06:57,000 --> 00:07:00,000 instead of contributing to a shared foundation of knowledge. 73 00:07:00,000 --> 00:07:05,000 And a major issue that requires cooperation is shared standards for interoperability. 74 00:07:05,000 --> 00:07:10,000 And as Governor Bellardi indicated, this is an important role for the central bank to... 75 00:07:10,000 --> 00:07:16,000 Now, you've engaged in Project Icebreaker, which is a collaboration with Norway and... 76 00:07:16,000 --> 00:07:19,000 And this aims to test near instant retail CBDC. 77 00:07:19,000 --> 00:07:24,000 So we can divide CBDC into retail, which is available to the general public, and... 78 00:07:24,000 --> 00:07:29,000 which is more for financial institutions, but across borders, so retail across borders. 79 00:07:29,000 --> 00:07:32,000 So can you share a little bit about what has been learned here? 80 00:07:32,000 --> 00:07:37,000 And what are some of the challenges when you try to address interoperability between... 81 00:07:39,000 --> 00:07:40,000 All right. 82 00:07:40,000 --> 00:07:43,000 First of all, thank you, Nia, for having me here. 83 00:07:43,000 --> 00:07:52,000 Maybe before I say something about Icebreaker, I think we're all realizing we... 84 00:07:52,000 --> 00:08:01,000 And if payments used to be sort of more plumbing, they're affecting the I.O.... 85 00:08:01,000 --> 00:08:05,000 And that's why central banks are there. 86 00:08:05,000 --> 00:08:11,000 We are seeing it faster payments, smart contracts, e-money, crypto assets, stable... 87 00:08:11,000 --> 00:08:19,000 And CBDC, as you mentioned, is sort of a public good that can be both complementary... 88 00:08:19,000 --> 00:08:25,000 but can also, in some circumstances, crowd out some of these things. 89 00:08:25,000 --> 00:08:31,000 Some of the advantages have been mentioned, advanced and safe alternative to existing... 90 00:08:31,000 --> 00:08:36,000 ensure the adjustments of payment system to the needs of the digital economy. 91 00:08:36,000 --> 00:08:46,000 CBDC could be the gateway to stable coin, which is the gateway instead of stable coi... 92 00:08:46,000 --> 00:08:52,000 and the standard economy and cheap cross border, which is where your question comes... 93 00:08:52,000 --> 00:08:59,000 So what we've done with the BIS Innovation Hubs in Nordic Center and the Central Bank... 94 00:08:59,000 --> 00:09:06,000 we launched this project and the project kind of went through the second part of 2022. 95 00:09:06,000 --> 00:09:09,000 It's got a lot of technological features to it. 96 00:09:09,000 --> 00:09:18,000 And I believe it's the first CBDC retail experiment that takes a retail payment, a... 97 00:09:18,000 --> 00:09:25,000 paying in shekels, local currency, and transferring it back to somebody in Sweden... 98 00:09:25,000 --> 00:09:27,000 So it's a cross border. 99 00:09:27,000 --> 00:09:35,000 It allows all the users to do that with the end users receiving the payment with CBDC ... 100 00:09:35,000 --> 00:09:40,000 The key feature here in order to achieve this project, the team designed the Hub, 101 00:09:40,000 --> 00:09:47,000 which facilitates communication and the exchange of data among the national CBDC... 102 00:09:47,000 --> 00:09:55,000 By the way, I'm sort of proud to say that the Hub was actually built by the technologica... 103 00:09:55,000 --> 00:10:05,000 Basically, the concept requires only minimal adjustment to the national CBDC systems in... 104 00:10:05,000 --> 00:10:13,000 So while one of the key things you want to have, once we have a whole matrix, all the... 105 00:10:13,000 --> 00:10:16,000 you want a system that is agile enough to do that. 106 00:10:16,000 --> 00:10:19,000 And it seems like this system is capable of doing it. 107 00:10:19,000 --> 00:10:26,000 The Hub and the technology used in the project teams enables basically nearly ato... 108 00:10:26,000 --> 00:10:32,000 For example, funds would be paid from the CBDC wallet of a payer in Israel. 109 00:10:32,000 --> 00:10:38,000 If and only if the payee finds and receive the payee's CBDC wallet in Sweden. 110 00:10:38,000 --> 00:10:44,000 Thus, the counterparty risk that exists today in corresponding banking system is... 111 00:10:44,000 --> 00:10:51,000 It's important to notice and emphasize that the transaction would be immediate as oppo... 112 00:10:51,000 --> 00:10:54,000 which is what's happening in today's system. 113 00:10:54,000 --> 00:11:01,000 One of the key insights, and I'm getting to you, was that it is possible to make a dir... 114 00:11:01,000 --> 00:11:05,000 between CBDC coins of different countries. 115 00:11:05,000 --> 00:11:10,000 In fact, there are two important characteristics here that do not exist in ... 116 00:11:10,000 --> 00:11:16,000 The first one, in today's world, cross border payments take on average a few days to... 117 00:11:16,000 --> 00:11:22,000 And in the system we built, there's basically no third party involved in the transaction. 118 00:11:22,000 --> 00:11:27,000 And so there is no risk that the same party will fail. 119 00:11:27,000 --> 00:11:32,000 This may save significant risk premiums down the road. 120 00:11:32,000 --> 00:11:40,000 Also, the design of the system we built allows us to separate the money transfer f... 121 00:11:40,000 --> 00:11:46,000 The Hub is an intermediary for that to the local foreign currency. 122 00:11:46,000 --> 00:11:54,000 Today, when you transfer money through a bank or another payment company, and I have her... 123 00:11:54,000 --> 00:12:00,000 the same entity converts your local currency into foreign currency and makes the payment. 124 00:12:00,000 --> 00:12:09,000 This situation, in some sense, reduces competitiveness and may make the high cost... 125 00:12:09,000 --> 00:12:20,000 And basically, our feature is separated to operation, make the currency exchange mark... 126 00:12:20,000 --> 00:12:31,000 I won't go into the detail. There's a whole technical issue of how it's done through t... 127 00:12:31,000 --> 00:12:39,000 It consists of a bunch of APIs, and we will put a report out that gives the detail. 128 00:12:39,000 --> 00:12:44,000 But the important thing is the interoperability is not just between two... 129 00:12:44,000 --> 00:12:54,000 It can be extended challenges, and I'll stop here. AML issue, we haven't really dealt w... 130 00:12:54,000 --> 00:13:01,000 It wasn't one of the issues in the project, but that will be an important issue going... 131 00:13:01,000 --> 00:13:06,000 The important question down the road, who will build this Hub if we do it globally? 132 00:13:06,000 --> 00:13:15,000 Is it going to be a consolidation of central banks, international bodies like IMFBIS,... 133 00:13:15,000 --> 00:13:17,000 So I'll stop here for now. Thank you. 134 00:13:17,000 --> 00:13:24,000 So many important things raised in that. First of all, I love that you said the tec... 135 00:13:24,000 --> 00:13:27,000 I think we think of central banks as being mainly economists. 136 00:13:27,000 --> 00:13:35,000 I'm a bit biased, I'm a computer scientist, but I think you're going to have to have m... 137 00:13:35,000 --> 00:13:38,000 They're not easy to hire. 138 00:13:38,000 --> 00:13:44,000 Have to make it worth it. But also, this notion of separating functionality. 139 00:13:44,000 --> 00:13:55,000 You're separating the money transfer from the FX, and this speaks, I think, more broadly... 140 00:13:55,000 --> 00:14:04,000 Now, there's a lot you said there, and in time I'm going to turn to Javier to talk... 141 00:14:04,000 --> 00:14:15,000 But before we do that, I want to talk to Governor Hanago about the South African... 142 00:14:15,000 --> 00:14:24,000 You've been an early innovator in this space. You began exploring faster payments and... 143 00:14:24,000 --> 00:14:37,000 But the SARB has a unique perspective, I think, on cross-border transactions, given... 144 00:14:37,000 --> 00:14:44,000 You joined the BIS's Project Dunbar, which is testing international settlement of CBDC... 145 00:14:44,000 --> 00:14:54,000 Now, what opportunities does a cross-border CBDC create that the current SADC RTGS sys... 146 00:14:54,000 --> 00:15:01,000 Thanks. I think my colleagues have said quite a mouthful, so I would be brief. 147 00:15:01,000 --> 00:15:16,000 A point of departure in thinking about the CBDC is, is this a solution looking for a... 148 00:15:16,000 --> 00:15:22,000 If we have some real problem that we are trying to solve, what exactly is that... 149 00:15:23,000 --> 00:15:39,000 Of the countries that you have mentioned, just over 120 that are looking to introduc... 150 00:15:39,000 --> 00:15:54,000 The first one has to do with the modernization of the central bank. The... 151 00:15:54,000 --> 00:16:17,000 Secondly, the second broad area has to do with making national payment systems... 152 00:16:17,000 --> 00:16:25,000 And the third broad category has to do with dealing with domestic market failure and... 153 00:16:25,000 --> 00:16:43,000 And so as you think about the CBDC, then you have got to be thinking about what is it t... 154 00:16:43,000 --> 00:16:57,000 And some of the banks, there would be consensus in the digital category that... 155 00:16:57,000 --> 00:17:09,000 So there are the issues of the supply side of the central banks, feeling that the... 156 00:17:09,000 --> 00:17:18,000 But then there is also the demand side, because we might come with these things,... 157 00:17:18,000 --> 00:17:30,000 Quite frankly, in the introduction of the CBDCs, you're actually going to need natio... 158 00:17:30,000 --> 00:17:50,000 And the technology, there are enough people to solve the technology problem. The big... 159 00:17:50,000 --> 00:18:02,000 So we decided to split our CBDC work into two. We first looked at the wholesale CBDC... 160 00:18:02,000 --> 00:18:13,000 And when we looked at the wholesale CBDC, what we called Project Coca, we experiment... 161 00:18:13,000 --> 00:18:17,000 It no longer does. I think that there have been a lot of developments in other... 162 00:18:17,000 --> 00:18:29,000 But we were able to bring in the banks in South Africa that account for more than 90... 163 00:18:29,000 --> 00:18:38,000 Processed 70,000 transactions with settlement within two hours, which is something that ... 164 00:18:38,000 --> 00:18:47,000 And we were able to process that within a period of two hours with full settlement i... 165 00:18:47,000 --> 00:19:02,000 And then came the cash, the cash that as you do these things, and the end is who has... 166 00:19:02,000 --> 00:19:10,000 And we proved to ourselves that that could be done. And so on the wholesale side, it bec... 167 00:19:10,000 --> 00:19:19,000 And the reason we started on the wholesale side is that for all intents and purposes,... 168 00:19:19,000 --> 00:19:26,000 You could say that it is digital in some form or the other. Are there efficiencies to be... 169 00:19:26,000 --> 00:19:37,000 And very clearly tokenization sped up the process of settlement and that in itself w... 170 00:19:37,000 --> 00:19:50,000 With respect to retail CBDC, we took consciously a decision that we are going t... 171 00:19:50,000 --> 00:19:59,000 If we are not going to be the first movers, we would rather be very fast followers... 172 00:19:59,000 --> 00:20:12,000 I mean, at the end of the day, you do all these things. What happens when you go... 173 00:20:12,000 --> 00:20:24,000 What does that mean for the ordinary people who must transact if you have completely... 174 00:20:24,000 --> 00:20:32,000 And once you bring in offline, there is a risk of having to synchronize transactions... 175 00:20:32,000 --> 00:20:38,000 And when you come back online, how you get those and what does that mean? Does that m... 176 00:20:38,000 --> 00:20:45,000 You posed the question, why did we need a cross border CBDC if we are doing this? 177 00:20:45,000 --> 00:21:02,000 And I think that in an earlier conversation, what we did in Sadak for all intents and... 178 00:21:02,000 --> 00:21:13,000 And we were able to push significant volume in Sadak. But then there was a challenge. 179 00:21:13,000 --> 00:21:22,000 The challenge here was that these are multi currencies. And the question is, do you fi... 180 00:21:22,000 --> 00:21:26,000 Which one is that? The default was that could we be using the dollar? 181 00:21:26,000 --> 00:21:34,000 And then the question was, who's going to supply dollar liquidity in the this RTGS? ... 182 00:21:34,000 --> 00:21:49,000 So who's going to get the dollar? And the default was that when we have got to be... 183 00:21:49,000 --> 00:21:59,000 And so the big issue is going to be the issue of interoperability. But then there are... 184 00:21:59,000 --> 00:22:14,000 So you have got all these countries in Sadak. The legal systems are based on English law... 185 00:22:15,000 --> 00:22:20,000 And you've got to go and try and find each other, set the governance arrangement. 186 00:22:20,000 --> 00:22:29,000 And it turns out the governance arrangements in dealing with cross border CBC are actua... 187 00:22:29,000 --> 00:22:36,000 And the technology solutions could actually be found. So let me pause there. 188 00:22:36,000 --> 00:22:45,000 There are other issues that you might want to deal with, which include the role of the... 189 00:22:45,000 --> 00:22:48,000 And what collaboration mechanisms do you have there? 190 00:22:48,000 --> 00:23:05,000 How do you deal with the incumbents who are thinking that the small guys who are comin... 191 00:23:06,000 --> 00:23:12,000 In this cross border system, whether you look at the correspondent banking systems are... 192 00:23:12,000 --> 00:23:21,000 And in Africa, moving $100 that hundred dollars, you move $100 in Africa by the ti... 193 00:23:21,000 --> 00:23:31,000 And so so there are there are significant inefficiencies, there are significant rent... 194 00:23:31,000 --> 00:23:34,000 And that is going to need the involvement of central banks. 195 00:23:34,000 --> 00:23:43,000 There's so many interesting things there. And yes, your point, I think it was the CEO of... 196 00:23:43,000 --> 00:23:49,000 They pay much higher fees than the rich and making small payments across borders is... 197 00:23:49,000 --> 00:23:56,000 I'm really glad you brought up offline. And at the very end of this panel, we will spe... 198 00:23:57,000 --> 00:24:03,000 Absolutely. But before we get an offline is so important, hopefully we'll have time to... 199 00:24:03,000 --> 00:24:15,000 But before we get to that, I think you set up a transition to the private sector very we... 200 00:24:15,000 --> 00:24:24,000 According to a recent report, they said that the payment system underpinning cross bord... 201 00:24:24,000 --> 00:24:32,000 And they cite several things the governor just mentioned. High costs, low speed and... 202 00:24:32,000 --> 00:24:39,000 And they cite these as reasons why central banks should be exploring interoperable... 203 00:24:39,000 --> 00:24:44,000 However, there are so many challenges there, which I think the governor very nicely... 204 00:24:44,000 --> 00:24:54,000 And they also note the contraction in the correspondent banking system that leaves s... 205 00:24:54,000 --> 00:25:03,000 So Javier, could you sort of expound upon that and say why in a world with CBDC migh... 206 00:25:03,000 --> 00:25:06,000 I think that we probably still do. And I think you would agree with that. 207 00:25:06,000 --> 00:25:12,000 How do these different paradigms work together? And perhaps in your answer, you... 208 00:25:13,000 --> 00:25:18,000 OK, well, I have to say thank you as well for inviting me to the panel. 209 00:25:18,000 --> 00:25:29,000 I have to say this this hero villain construct is something that I understand t... 210 00:25:29,000 --> 00:25:34,000 I think in real life it's a little bit more nuanced. 211 00:25:34,000 --> 00:25:51,000 And and yeah, let me a little bit elaborate on on on where we stand in general, the... 212 00:25:51,000 --> 00:26:01,000 We really want to build a robust, resilient and interoperable interoperable that is... 213 00:26:01,000 --> 00:26:09,000 We do need to collaborate private and public sector, but but as well existing... 214 00:26:09,000 --> 00:26:12,000 It is paramount and particularly in cross border payments. 215 00:26:12,000 --> 00:26:25,000 When you think about it, they are inherently complex because we're talking about bridgi... 216 00:26:25,000 --> 00:26:40,000 We see now from digital fear to to see businesses and and that at the end of the ... 217 00:26:40,000 --> 00:26:57,000 You mentioned that in the the the agenda, the road map towards improving international... 218 00:26:57,000 --> 00:27:12,000 And in that sense, we've been actually collaborating very closely over the past f... 219 00:27:12,000 --> 00:27:15,000 They have very clear targets when it comes to speed. 220 00:27:15,000 --> 00:27:22,000 Seventy five percent of all transactions should be reaching and beneficiary account... 221 00:27:22,000 --> 00:27:28,000 And they've quantified also the cost for different segments where it is particularl... 222 00:27:28,000 --> 00:27:35,000 But, you know, work in progress also on wholesale and as well targets when it come... 223 00:27:35,000 --> 00:27:40,000 So as far as we are concerned, we are at Swift. 224 00:27:40,000 --> 00:27:45,000 We've we've now been working on and serious innovation of our platform. 225 00:27:45,000 --> 00:27:53,000 And now we're reaching four billion accounts, you know, with our new platform that allow... 226 00:27:53,000 --> 00:28:04,000 You know, I know there are some stats out there, but I think it needs to be known th... 227 00:28:04,000 --> 00:28:13,000 And with the new development that together with the financial community, with central... 228 00:28:13,000 --> 00:28:24,000 but also with with the banking community, we're getting to a journey towards truly... 229 00:28:24,000 --> 00:28:31,000 And that is possible because of the work at the domestic level on on domestic... 230 00:28:31,000 --> 00:28:36,000 but also in the bridging between all of those jurisdictions. 231 00:28:36,000 --> 00:28:42,000 So we get to that state and definitely we get within the objectives that the G20 has set... 232 00:28:42,000 --> 00:28:51,000 Maybe to add, because I have to say I enjoy the conversation on the on the... 233 00:28:51,000 --> 00:28:59,000 I do agree. And by the way, it is crucial, including all the controls when it comes t... 234 00:29:00,000 --> 00:29:10,000 I mean, it's that is where we need to bridge what we've built together over the past... 235 00:29:10,000 --> 00:29:18,000 Cyber providing liquidity to the system with the new world of bridging of bringing new... 236 00:29:18,000 --> 00:29:25,000 For example, CBC, that indeed has a great promise when it comes to financial inclusi... 237 00:29:25,000 --> 00:29:31,000 And in that regard, we've been running, we've been working on that also on tokenization ... 238 00:29:31,000 --> 00:29:44,000 But in in in CBDC in particularly, we made a breakthrough experiment last year whereby ... 239 00:29:44,000 --> 00:29:54,000 with the results that we can through the SWIFT platform with all the controls that... 240 00:29:54,000 --> 00:30:03,000 We can bridge any country having any kind of technology or any kind of form of value. 241 00:30:03,000 --> 00:30:13,000 And we did particularly obviously focus on CBDC, so CBDC's DLT based network bridging... 242 00:30:13,000 --> 00:30:24,000 but also, as importantly, CBDC blockchain based networks with traditional existing... 243 00:30:25,000 --> 00:30:36,000 And and it was a very important innovation in the in the sense that if CBDC's or when... 244 00:30:36,000 --> 00:30:41,000 they can immediately scale and be interconnected to the rest of the world. 245 00:30:41,000 --> 00:30:44,000 But with all the controls and that is what is paramount. 246 00:30:44,000 --> 00:30:54,000 If we want to build that inclusive and robust financial ecosystem that supports global... 247 00:30:54,000 --> 00:31:01,000 Yeah, I think you're making a very important point there, which is, you know, CBDC's do... 248 00:31:01,000 --> 00:31:04,000 And in particular, they need to be linked. 249 00:31:04,000 --> 00:31:05,000 There will be many payment systems. 250 00:31:05,000 --> 00:31:11,000 There will be many other parts to the financial system, not least of which is... 251 00:31:11,000 --> 00:31:15,000 So, Liva, I want to I want to turn to you to talk a little bit about that. 252 00:31:15,000 --> 00:31:26,000 And in particular, I want to understand, you know, EuroClear has engaged in some... 253 00:31:26,000 --> 00:31:29,000 So, you know, this type of prototyping has been has been very common. 254 00:31:29,000 --> 00:31:39,000 But what I really want to learn from you is what problem you were seeking to solve tha... 255 00:31:39,000 --> 00:31:45,000 And really, what does the potential for CBDC for having that fast leg of central bank... 256 00:31:45,000 --> 00:31:49,000 What does that mean for securities clearing platform like EuroClear? 257 00:31:49,000 --> 00:31:53,000 Thank you, Niga. Thank you to have the opportunity to explain this to you. 258 00:31:53,000 --> 00:32:02,000 So as you look here, we are in the business of safekeeping and settlement of securitie... 259 00:32:02,000 --> 00:32:07,000 We hold currently 35 trillion euros worth of securities on our books. 260 00:32:07,000 --> 00:32:13,000 And on a yearly basis, we process more than a quadrillion euros worth of securities. 261 00:32:13,000 --> 00:32:16,000 That is that is one and fifteen zeros. 262 00:32:16,000 --> 00:32:20,000 That is each month. Well, GDP that we process on our books. 263 00:32:20,000 --> 00:32:33,000 Innovation and especially innovation in view of supporting safety and efficiency and... 264 00:32:33,000 --> 00:32:39,000 And so it is in that context that we do many experiments, many experiments with block... 265 00:32:39,000 --> 00:32:47,000 It is not only the Banque de France one on which I will go into more detail, but it's... 266 00:32:47,000 --> 00:32:54,000 It's also being part of the finality experiment in commercial digital currency. 267 00:32:54,000 --> 00:32:59,000 We are collaborating with Swift in their experiment as well. 268 00:32:59,000 --> 00:33:06,000 So a lot of experiments are part of our DNA in order to foster that innovation. 269 00:33:06,000 --> 00:33:16,000 Now, typically, if we look at what we have done in the Banque de France experiment, i... 270 00:33:16,000 --> 00:33:19,000 And to end life cycle experiment. 271 00:33:19,000 --> 00:33:28,000 So we started with doing digital issuance together with the French Treasury of real... 272 00:33:28,000 --> 00:33:32,000 And that issuance was really native on the chain. 273 00:33:32,000 --> 00:33:40,000 And it was both the securities token and the cash token that were native issued on the... 274 00:33:40,000 --> 00:33:47,000 We had in the ecosystem partners also local banks that were using the same block chain. 275 00:33:47,000 --> 00:33:55,000 And we were working on the block chain of the Banque de France, by the way, using that s... 276 00:33:55,000 --> 00:34:05,000 We were then able to go after the primary phase, after the primary issuance into... 277 00:34:05,000 --> 00:34:13,000 And we went even up to the corporate action sphere where we processed corporate action... 278 00:34:13,000 --> 00:34:27,000 And why we do that, I think we all at this stage do most of these things to learn,... 279 00:34:27,000 --> 00:34:39,000 We all know that. But you also have to learn what are the capabilities of the new... 280 00:34:39,000 --> 00:34:43,000 So there's a bit of a chicken and an egg behind that. 281 00:34:43,000 --> 00:34:52,000 And so you really have to do these experiments, learn and then get more focus... 282 00:34:52,000 --> 00:34:55,000 So what were our big learnings there? 283 00:34:55,000 --> 00:35:00,000 First of all, not surprisingly, we learned that we could be more efficient. 284 00:35:00,000 --> 00:35:12,000 I think across the different stakeholders, we could be more efficient avoiding... 285 00:35:12,000 --> 00:35:32,000 A second big game that was clear is that you could increase end to end transparency, en... 286 00:35:32,000 --> 00:35:38,000 So that end to end transparency was a big game as well. 287 00:35:38,000 --> 00:35:47,000 But next to that, we also discovered that there were a number of weaknesses, new typ... 288 00:35:47,000 --> 00:35:55,000 We were able to get around the energy problem by putting in a four validators model on t... 289 00:35:55,000 --> 00:35:58,000 So there was a form of central authorities. 290 00:35:58,000 --> 00:36:07,000 It was the two parties of the deal, the central bank and us as a central operator ... 291 00:36:07,000 --> 00:36:09,000 Secondly, a bigger risk. 292 00:36:09,000 --> 00:36:12,000 And I think we really have to have that in mind. 293 00:36:12,000 --> 00:36:19,000 And sometimes we overvalue the atomic nature of instant settlement. 294 00:36:19,000 --> 00:36:32,000 We overvalue that sometimes because what we saw is that there was an increase of... 295 00:36:32,000 --> 00:36:50,000 And secondly, as as you work instantaneously, you lose all the advantages of nothing for... 296 00:36:50,000 --> 00:36:55,000 But then I would say the biggest challenge that we see in the longer run. 297 00:36:55,000 --> 00:36:58,000 So you can see you can solve for a number of these problems. 298 00:36:58,000 --> 00:37:19,000 But the bigger challenge that we see is not to find a good solution, but it is how do ... 299 00:37:19,000 --> 00:37:27,000 How on earth are you going to organize that migration without expecting a big bang? 300 00:37:27,000 --> 00:37:39,000 And is even the added value of what we can see in the positives big enough to justify... 301 00:37:39,000 --> 00:37:44,000 And that's where I link that to another point that has been made by several of the... 302 00:37:44,000 --> 00:37:49,000 It's about interoperability and the interoperability. 303 00:37:49,000 --> 00:38:00,000 I see it even more between what I say, the new and the old world, because if we don't... 304 00:38:00,000 --> 00:38:14,000 So the interoperability between the new world, but not losing the liquidity of the... 305 00:38:14,000 --> 00:38:27,000 And that is why I believe it is so important to continue experiments, but even more to... 306 00:38:27,000 --> 00:38:40,000 between all the initiatives around digital issuance with incumbent big parties, becau... 307 00:38:40,000 --> 00:38:42,000 So I would stop here for the moment. 308 00:38:42,000 --> 00:38:47,000 Thank you. Yeah, I love what you said about needing to do the experimentation to... 309 00:38:47,000 --> 00:38:50,000 I call this the technology policy loop. 310 00:38:50,000 --> 00:38:59,000 You need to have some idea of what you can do and what the technology can actually achie... 311 00:38:59,000 --> 00:39:00,000 So I like that very much. 312 00:39:00,000 --> 00:39:02,000 We could continue this for hours. 313 00:39:02,000 --> 00:39:07,000 I think there are so much to discuss here, but unfortunately we are running a bit clo... 314 00:39:07,000 --> 00:39:10,000 So I want to I'm going to ask each of you. 315 00:39:10,000 --> 00:39:14,000 We're going to go down the line, starting with Governor Belarde, if that's OK. 316 00:39:14,000 --> 00:39:29,000 But before we get to that, I want to ask each of you to say to the governors, I want you... 317 00:39:29,000 --> 00:39:36,000 Are their experiments helpful or would you honestly prefer that they just leave you t... 318 00:39:36,000 --> 00:39:41,000 I want to know what does the private sector need from central banks to navigate this n... 319 00:39:41,000 --> 00:39:46,000 But before we before we go down the line and get to that, I'll give you a moment to thi... 320 00:39:46,000 --> 00:39:51,000 You know, I think I just want to speak very, very briefly about design choices. 321 00:39:51,000 --> 00:39:57,000 We've we've we don't have enough time to get into it today, but there's so many importa... 322 00:39:57,000 --> 00:40:00,000 How will privacy be enabled? 323 00:40:00,000 --> 00:40:09,000 There is this myth and misconception that a central bank digital currency automaticall... 324 00:40:09,000 --> 00:40:16,000 We know how to design it so that, in fact, the operator does not need to see fine... 325 00:40:16,000 --> 00:40:32,000 Similarly, there's a myth that it requires an Internet connection or a mobile device whe... 326 00:40:32,000 --> 00:40:37,000 And I think another really important question is around custody and access. 327 00:40:37,000 --> 00:40:39,000 Who can hold the CBDC? 328 00:40:39,000 --> 00:40:49,000 A key difference between cash and any kind of digital money is that cash is held by a us... 329 00:40:49,000 --> 00:40:54,000 And most CBDC developments now also involve financial intermediaries. 330 00:40:54,000 --> 00:41:06,000 And so I think we have to ask ourselves the question, why do we think that CBDC will... 331 00:41:06,000 --> 00:41:12,000 So I think we have to be very thoughtful and creative as we as we go down that line. 332 00:41:12,000 --> 00:41:19,000 And so now I want to turn to everyone to talk about this question of how the private and... 333 00:41:20,000 --> 00:41:23,000 So we're going to do this quickly, starting with Governor Ballardy. 334 00:41:23,000 --> 00:41:25,000 What do you want to see from the private sector? 335 00:41:25,000 --> 00:41:32,000 I believe the role of the central bank is to regulate the standards, but more likely fo... 336 00:41:32,000 --> 00:41:36,000 They are going to be the ones that innovate, that create new products. 337 00:41:36,000 --> 00:41:38,000 I believe it's very important. 338 00:41:38,000 --> 00:41:45,000 What is important for the central bank to set these standards and to foster competition... 339 00:41:45,000 --> 00:41:51,000 And in many cases, we are trying to work at that user experience. 340 00:41:51,000 --> 00:41:59,000 So no bank seems to be more benefited because of the design of the screen in these cases. 341 00:41:59,000 --> 00:42:06,000 But I believe the role of the private sector fundamental, but within a set of regulatio... 342 00:42:06,000 --> 00:42:08,000 And Javier? 343 00:42:08,000 --> 00:42:13,000 I would say, well, clearly, clearly I think we are. 344 00:42:13,000 --> 00:42:26,000 We were facing a fantastic opportunity to achieve those targets over the next five... 345 00:42:26,000 --> 00:42:30,000 Innovation is happening from the private sector will continue. 346 00:42:30,000 --> 00:42:35,000 And that can guarantee you that it is in the case from our perspective. 347 00:42:35,000 --> 00:42:44,000 Maybe I would add two points to that are relevant, at least from our perspective fo... 348 00:42:44,000 --> 00:43:00,000 And they are, you know, to consider fragmentation in this whole process, to... 349 00:43:00,000 --> 00:43:06,000 This famous theme that we've been discussing here and across the country about about a... 350 00:43:06,000 --> 00:43:16,000 So that is crucial that when we come up with with the new innovations, this can scale a... 351 00:43:16,000 --> 00:43:24,000 We can go against the potential forecast of having digital islands that could accelera... 352 00:43:24,000 --> 00:43:31,000 And we know from the IMF, you know, a recent report have said that could send countries... 353 00:43:31,000 --> 00:43:35,000 So one is fragmentation. The other one definitely cyber. 354 00:43:35,000 --> 00:43:42,000 It's when when we come. Well, you talked about the ML and obviously regulatory... 355 00:43:42,000 --> 00:43:52,000 But I think cyber is paramount when we come to innovation to embed cyber in from the... 356 00:43:52,000 --> 00:43:59,000 The kind of scale over time, you have experience at Swift, but not only at Swift... 357 00:43:59,000 --> 00:44:02,000 It's not only about infrastructure security. 358 00:44:02,000 --> 00:44:08,000 It's not all about. It's not about actually a single party security or it is a financial... 359 00:44:09,000 --> 00:44:19,000 It's about the ecosystem security is about having the right common standards and and ... 360 00:44:19,000 --> 00:44:26,000 It's about the ecosystem security so that we can have endpoint security and and have th... 361 00:44:26,000 --> 00:44:30,000 Thank you, Governor, your own and briefly, if we're running out of time. 362 00:44:30,000 --> 00:44:37,000 Sure. Well, first of all, even if I envision a retail CBDC, I envision it as a two tier... 363 00:44:37,000 --> 00:44:42,000 Where the private sector is actually the one that is engaged with the end user. 364 00:44:42,000 --> 00:44:45,000 So they are going to be there almost by design. 365 00:44:45,000 --> 00:44:49,000 It need not be even banks. It could be payment providers. 366 00:44:49,000 --> 00:44:56,000 And because they don't have the financial liabilities that less regulation may need ... 367 00:44:56,000 --> 00:44:58,000 So it's already back there. 368 00:44:58,000 --> 00:45:05,000 Science has not said the last word on developments and the private sector is... 369 00:45:05,000 --> 00:45:15,000 So so we will need them there. Just as an example, we use the company VMware in Isra... 370 00:45:15,000 --> 00:45:22,000 So I believe it's always there. I'll just say the issue of is it a solution looking for ... 371 00:45:22,000 --> 00:45:25,000 I think there is a whole host of issue. 372 00:45:25,000 --> 00:45:30,000 It's the integral of all of these that will ultimately give rise. 373 00:45:30,000 --> 00:45:36,000 I don't think there is a single point that gives the sort of the reason to do a lifto... 374 00:45:36,000 --> 00:45:40,000 But and it's the scale, the economies of scale of central banks. 375 00:45:40,000 --> 00:45:43,000 It's the trust of central banks. 376 00:45:43,000 --> 00:45:47,000 We have to continue to develop these experiments to be in the frontier. 377 00:45:47,000 --> 00:45:56,000 And here I share my friend, the point is as a small open economy, we have to be at the... 378 00:45:56,000 --> 00:45:59,000 We have to be ready in case this is happening. 379 00:45:59,000 --> 00:46:06,000 But for interoperability to happen, we also need the major central banks to be involved. 380 00:46:06,000 --> 00:46:07,000 I'll stop here. 381 00:46:07,000 --> 00:46:08,000 OK, Liva. 382 00:46:08,000 --> 00:46:17,000 So I think this is a journey on which nobody today is certain about the end point and e... 383 00:46:17,000 --> 00:46:23,000 So in order in order to to facilitate the journey, because we are on the journey and... 384 00:46:23,000 --> 00:46:29,000 I think in order to facilitate that, I would see two requests that I would say to the... 385 00:46:29,000 --> 00:46:32,000 One would be to align amongst themselves. 386 00:46:32,000 --> 00:46:40,000 I would say within the eurozone, I'm already aware of three different models of CBDC th... 387 00:46:40,000 --> 00:46:47,000 So I think the more alignment between central banks on these design choices will be help... 388 00:46:47,000 --> 00:47:02,000 And then the second request I would have is to involve the private sector, the incumbe... 389 00:47:02,000 --> 00:47:04,000 That would be my two questions. 390 00:47:04,000 --> 00:47:07,000 Governor, last word briefly. 391 00:47:07,000 --> 00:47:15,000 Very clearly, it's not our intention to open bank accounts for all citizens in the cent... 392 00:47:15,000 --> 00:47:17,000 Let's get that one clear. 393 00:47:17,000 --> 00:47:21,000 Partnership with the private sector is going to be important. 394 00:47:21,000 --> 00:47:29,000 That partnership is going to have to be reconfigured because we are in the busines... 395 00:47:29,000 --> 00:47:34,000 And this, our actions get transmitted through the actors in the market. 396 00:47:34,000 --> 00:47:37,000 So that issue of partnership is going to become important. 397 00:47:37,000 --> 00:47:38,000 Thank you. 398 00:47:38,000 --> 00:47:40,000 Well, this has been a fascinating conversation. 399 00:47:40,000 --> 00:47:43,000 Thank you again to all of our panelists for being here. 400 00:47:43,000 --> 00:47:47,000 And now I'd like to turn it over to Drew from the sorry, we are closing. 401 00:47:47,000 --> 00:47:51,000 So thank you so much, everyone, for joining us again. 402 00:47:51,000 --> 00:47:52,000 Yes. 403 00:47:59,000 --> 00:48:00,000 Thank you.