 So I would like to switch over to the second paper and I would like to invite Simon and Morten to the stage. The paper is on the coming battle of digital currencies, so it sounds very belligerent. And Simon is an assistant professor in finance at AGC Paris. And he was a postdoctoral research fellow at Chicago Booth during the academic year 2021-2022. So we are looking forward to your presentation. Yeah, thanks so much. I guess I can stand up for the presentation. Thanks so much for inviting me. It's a great conference, great paper, great start of the day. And thanks for everyone for joining. It's a pleasure to be here to present. So as the name says today, I'm presenting a paper that's called CBDC. That's the capital letter of the words here. The coming battle of digital currencies can also be a preview at CBDC. And it's joint work with Will Song from Cornell University and myself from AGC Paris. I jump right in. In the recent past, we have essentially seen and observed tremendous changes regarding payments and currencies. In particular, we have observed the rise of private payment systems that operate kind of outside of the traditional banking system. Examples of that are PayPal, Alipay, and PESA. And clearly these developments have kind of upset regulators in some of the countries. More recent phenomenon was the rise of cryptocurrencies and decentralized finance as well as their fall recently. And one particular interesting development in this context are essentially stable coins, which are kind of a form of private money that has grown somewhat important up to some point and has reached a market cap of about 100 billion US dollars. Before there was a crash and then the market cap dropped a little bit. All these developments regarding digital assets, digital currencies, and digital finance have attracted enormous attention from regulators and policymakers around the globe. To give you an example of that, in the context of the US, March 9, 2022, President Biden essentially signed an executive order on digital assets in which he urged federal agencies to look more into the regulation of digital assets as well as into the development of a digital dollar, a so-called central bank digital currency. And more generally speaking, there's a growing interest in central bank digital currencies in short CBDC. And at this point I would like to note that the discussant of this paper has thought about this topic much earlier than we have thought about it. Here's published a paper about this topic already 2017. The following map gives you an idea about the state of CBDC initiatives around the globe. And simply the fact that most of this map is colored means that many central banks around the globe are at least looking into CBDC if not having already developed a pilot proof of concept or even rolled out a CBDC. And one large country that's pretty much ahead in these pursuits, for instance ahead of Europe or the US, is China with its Iran MIMBY. And China in particular has already rolled out a large scale pilot regarding CBDC. And interestingly, the implementation of this pilot of the ECNY not only has caused some debates in China but also has triggered some debates in the US, which were some of the opinions, but certainly not all of the opinions reflected a concern that the ECNY might challenge the US dollar dominance. Of course this is a debate, some people don't believe it, some people believe in it, but there is just one example of an article that voices this opinion, which is Ehrlich 2020 in Forbes, which is this nice title, not a Cold War, China is using a digital currency insurgency to unseat the US dollar. Another example or another event that got central banks going on to think about CBDC was essentially Facebook's LIPRA, i.e. an attempt to launch a large scale private digital currency. In 2019, Facebook essentially proposed its digital currency initiative LIPRA and LIPRA was supported by a consortium of big tech companies or smaller tech companies and payment companies led by Facebook. As you all know, LIPRA was never realized especially because the Facebook had some wins from regulators. And it's clear why, because if LIPRA, a large scale private digital currency, had been launched, had been widely adopted, it would be clearly a threat to public money. But going forward, there might be the possibility that at some point such a private digital currency or large scale digital currency might be launched and this might actually give some rise to pre-emptive actions to prevent this going forward. So what do we do in this paper? Essentially all of these developments hint that there might be going forward a battle of digital currencies. And if so, then there are many questions to answer. For instance, how does this coming battle of digital currency shape the future of money as well as currency competition between fiat currencies, CBDC and private digital currencies? And should countries react to the competition by private currencies, by digitizing their currency, for instance, by implementing CBDC or by doing something else? This is a research agenda on its own. We in this paper just take a small step in kind of rationalizing some of the developments we see or formalizing kind of the developments we see. And in particular, we develop a relatively simple and stylized framework of currency competition, which differs from the ones we essentially know from the traditional literature in that countries can essentially choose endogenously whether to digitize their currency, whether to innovate, in particular, whether to launch CBDC. And this kind of can be integrated as a game theoretic analysis of countries' strategies or timing decisions when to digitize their money or launch CBDC. So let me give a bit more context. In particular, we develop a dynamic model of currency competition between two national currencies, let's call them A and B, and one representative group the currency C, which can be integrated broadly and describes also other private payment systems, including stable coins. And we call country A the strong country, i.e. currency A is dominant, the strong currency, think of currency A as the US dollar, and B is a relatively weaker, but maybe also strong currency, think of it maybe as the Rinminbi or the Euro, it's just not the dominant currency, it's just a little bit weaker. And these currencies fulfill essentially the three functions of money in that they potentially serve as a store of value, i.e. in our model, the households use money to store their wealth across time. They serve kind of as a medium exchange in that money provides liquidity services. In other words, holding money gives you some convenience, you get some convenience here from holding money. And last, money can also serve as a unit of account, which also can be essentially captured by assuming a convenience yield to money. And in this model, there's a third currency, cryptocurrency C, that competes essentially with the two national currencies A and B. And in particular, there's some dynamics in that cryptocurrency grows and is dynamically adopted over time. i.e. over time, national currencies face more and more competition from this new form of private money. And as such, the countries strategically react to this competition by digitizing their currency, which could be by launching CBDC, but could be also by doing some other things, maybe upgrading the payment rates. And let me quickly highlight the main results before going into more detail. In this model, there are feedback effects in currency competition, which naturally lead to some form of dollarization, i.e. the stronger currency kind of dollarizes the weaker one. And this is bad for the weaker one. Once you add crypto to this model, then essentially the cryptocurrency acts as a kind of buffer zone amid the competition between the two currencies and therefore may mitigate the adverse dollarization weaker currencies are exposed to. As I said, cryptocurrency as a form of private money is dynamically growing and adopted, which poses some competition for the national currencies. And as such, the national currencies react and digitize their currency or launch CBDC. And in particular, in this model, there's some pecking order in that the country with a relatively strong but non-dominant currency benefits the most from launching CBDC early on. In particular, in our model, it can gain some so-called first-mover advantage. The second line in terms of incentives is the country with the dominant currency, for instance, the US with the US dollar. And the US or the country with the dominant currency has strong incentives to launch CBDC early on. Due to a preemptive motive, if you launch CBDC early on, you preclude future competition from cryptocurrency. That is, you nip the growth from cryptocurrency in the bud in the early stages. And last, if not, if cryptocurrency has been widely adopted in this model, then the dominant currency must be digitized. Otherwise, it would lose its dominance. And countries with very weak currencies in this model, they do not benefit at all from launching CBDC. Their currency is weak regardless whether it's digitized or not. And in this case, they would be better off like adopting crypto as a legal tender within the territory. Overall, in this model, the rise of cryptocurrency not only can be seen as a financial innovation as such, but also incentivizes financial innovation by the central banks of governments, i.e. by incentivizing them to digitize the currency to launch CBDC. And last, the model also has a role for stable coins. So what are stable coins? Stable coins are essentially cryptocurrencies that are kind of packed to the US dollar. What does this imply? In other words, due to the emergence of stable coins, kind of the US dollar has become some effective unit of account in the crypto space. And this in our model is kind of incorporated and reduces the incentives of the country with the dominant currency, i.e. the US, to digitize the US dollar. And why is that? Well, because of the emergence of the stable coins, the digital dollar kind of exists in the form of the stable coins, maybe not in the form you wanted, but in other words, the crypto sector kind of creates some digital dollars in that way, simply because the US dollar has this advantage that it serves kind of as the effective unit of account in the space. So let me go into the model of skipping the literature. I think there would like to mention there's also recent work from the ECB on CBDC, like Tony Arnold and Peter Hoffman, as well as Katrin Asenmaier have published some survey and some theory paper next to it. So it cannot run through the literature. So the model is essentially a discrete time model, and time is infinite, whereby time runs with increments dT. And the notation suggests we set the model up in discrete time, but in the end of the day we do a continuous time limit because it's more tractable. And the economy is kind of populated by one representative overlapping generation household, which is born at time t, endowed with one unit of the consumption gut, but would like to store this consumption good and consume at its, essentially when it's old, at time t plus dT. But the consumption good cannot be stored, so we need some store of value. And what is the store of value here? Well, it's money. And money comes in the form of three currencies, which are all for simplicity now in fixed unit supply and have some endogenous price in terms of the number rare, the consumption good, denoted by pT to the power of x, where x in the index is the three currencies A, B and C. And as already mentioned in the introduction kind of, currency A is a strong national currency. It can be seen as the dominant currency. Think of it again as the US dollar. Currency B is a relatively weaker but non-dominant currency. It can be still strong, but it's just non-dominant. Think of it maybe as Renminbi, British Pound or the Euro. And last there is one representative private cryptocurrency, which broadly describes many forms of private money that are outside of the banking system, stable coins, or money created by these private payment providers. Currencies carrying our model of convenience yield, which broadly captures the medium of exchange function of money as well as the unit of account function of money. And to formalize this convenience yield, we essentially introduce empty to the power of x, which is simply the households holdings of currency x at time t. And because money is the only store of value, this household will always invest its entire unit endowment in money. And so like empty to the power of A plus empty to the power of B plus empty to the power of C is simply one. So convenience yield from currency A is essentially characterized by a concave function V and a constant z t to the power of x pre-multiplying this convenience yield function. And the convenience yield from currency C is also characterized similarly, but then y, which is another variable, is pre-multiplying this convenience yield function. And this y will move. So that's the convenience from the arrive in crypto and ask crypto becomes more adopted. y will increase and that will be the dynamically moving part in this model. So why do we have this function V? Well, simply V is a concave function. It captures the imperfect substitutability between the currencies. So we model here one representative household that populates kind of the world economy. And with this assumption, we simply capture that maybe some people in the U.S. would like to hold U.S. dollars. And we in Europe, we would like to hold euros. And there's obviously imperfect substitutability. I cannot pay with U.S. dollars easily here. So cannot U.S. citizens pay with euros in the U.S. and we have some additional elements which I cannot go through. There will be some endogenous inflation. There will be some taxes kind of levied by the government. And this will essentially make fiat currency less attractive. So what does the household do? The household at any point in time decides which currency to hold, trading off kind of the convenience from holding a specific currency versus the relative appreciation and depreciation of this currency relative to the other ones. And that leads then kind of to this equilibrium condition in the second line which simply states that the marginal convenience to holding cryptocurrency C plus the expected appreciation of cryptocurrency C must in equilibrium be equal to the marginal convenience to holding any fiat currency I plus essentially again the expected appreciation of fiat currency I. So in other words, if cryptocurrency becomes more convenient, the household substitutes from fiat to cryptocurrency. If the household thinks that cryptocurrency is not convenient today but maybe becomes so in the future and appreciates in price, then also the household substitutes to cryptocurrency. And if a currency has a lot of inflation then you go away from it. Very intuitive. So like what's special here about crypto? We assume that crypto is something like that came up recently, that's dynamically evolving, that's dynamically adopted. And in particular the convenience to holding crypto characterized by why is growing over time. In particular dynamically and in dorsion is the growing. In effect, like as we stipulated here, the more people adopt crypto today, the higher the convenience tomorrow, the more people adopt crypto tomorrow, so the price is higher. And that feeds back again the decision today because you're anticipating that the price is increasing. And that leads then kind of to some exponential growth. Could be also modified, we could also account for crashes, we could also account for maybe that this sector dies. But think of this model just describing the scenario that we have like this private cryptocurrency growing over time and how should governments react. The other scenario that this sector dies is less interesting in this case. So what is also special about crypto and its relation to currency A? Well we also captured it like the US dollar is kind of the unit of account in this crypto space, which has led to the emergence of the stablecoins, which are cryptocurrencies packed to the US dollar and also partially backed by US dollars. And how do we incorporate this in the model? Well essentially some fraction CETA, which could be maybe the fraction of stablecoins within the crypto market cap, is backed by currency A. This essentially captures simply the US dollar as kind of unit of account, so you need like some cryptocurrencies packed to the US dollar and to stabilize them, they need to also be backed by US dollar assets. And what does this mean kind of for currency A? Well currency A has like some direct demand from the households as well as some indirect demand induced by the crypto sector. So the more adopted cryptocurrency is, the more dollars people also demand because kind of dollars are the unit of account in this sector. And the last part of the model essentially which I will introduce is what do we mean by CBDC? What is happening here with digitization? All we assume is essentially that the country has essentially the option, any country A or B has the option to invest and to digitize the currency, which makes the currency more convenient. So how does this relate to CBDC? So implicitly we assume kind of when a country launches CBDC then the convenience to holding this currency kind of increases. Why is this so? Well I refer essentially everyone interested maybe to the survey by Kathrin Asenbaum, Tony Arnold. There are many reasons why CBDC might make a currency convenient. It could be related to privacy. It could be related to payment efficiency. It could be also related maybe to other digital applications that are then accessible by the currency. Also on, we don't take a stance, we just assume launching CBDC increases the convenience. And in particular country X, which could be country A or B and unfortunately it chooses some effort to digitize the currency or some investment. And when you try to digitize the currency it's not possible immediately. So you have to wait a little bit. There's some delay. In particular if you try to do so try to develop digital currency you might always have to wait a little bit until you really succeed, until you really implement it. So we capture simply that you will successfully launch CBDC at some random time t to the power of X and this kind of time arrives earlier the more resources you expand. The last part, what does the government or central bank do? So like we mix these two terms while it's not strictly possible. Well the government in our model has this objective here in equation one which simply says intuitively that the government or the central bank would like to maximize the adoption of its currency. Why is this the case? Well, we generally there's other objectives you might think there's price stability objectives or there's some objectives tied to real economy but here we say that you would like to maximize the adoption. How to square this? Simply said, if you may can have a high adoption of your currency you might have a better possibility to conduct monetary policy. You might have better possibilities to you might have better means to ensure financial stability. If on the other hand the adoption of your currency goes down and you might even lose your unit of account function then you cannot ensure price stability. In other words, government in this model maximizes adoption value or the strengths of its currency which is capturing reduced form some measure that you can essentially do your monetary policy and so on. So, this is the key issue that we are interested in. Which country moves first in digitizing their currency? Which country benefits the most and why is this so? So, this model we essentially look at countries efforts to launch CBDC early on and panel A essentially depicts the effort by country A. Again, country A is the country with the dominant currency i.e. the US and country B is the country with the less dominant with the non-dominant but possibly strong currency. And the effort of country B to launch CBDC is essentially depicted in panel B. What panel D essentially shows is that country B in our model has the higher incentives to issue CBDC. Why is that? Well, country A already has a natural advantage in this space because its currency is already the unit of account in the crypto space. So, any gross in the crypto space harms country B more than it harms country A. So, country B has the higher incentives essentially to digitize the currency to fend off the competition from cryptocurrency. And another thing here that can occur in the model is kind of you get a first move advantage. If you move first in digitizing your currency, you can also like kind of get some additional adoption of your currency by taking away the adoption from the strong currency. Three minutes left. Srimi, thanks so much. What does country A would like to do? Well, country A has also relatively high incentives to launch CBDC in the beginning. Why is that? If country A faces sufficient threat from cryptocurrency, there's a preemptive motive. If you launch CBDC early on, if you digitize your currency early on, you reduce the adoption of cryptocurrency today, which kind of dampens the future growth of cryptocurrency. In other words, by digitizing your currency you nip future cryptocurrency growth in the bud, precluding future competition from cryptocurrency. In other words, you can interpret it as a killer adoption. You adopt the technology and kill other developments. But if you don't launch CBDC early on enough as country A, then your incentives dip again while they increase in the end again. So this is why we have this double-peaked shape in N-Panel A. And essentially the last peak simply captures that once-grip the currency in our model has become sufficiently convenient. So why or lock-wise sufficiently large? Then digitization is unavoidable. Let me go to the next plot, which is essentially leading to the packing order from this model. What do we plot here? So essentially, N-Panel A plots the average effort or the average incentives to launch CBDC of countries A and B. Whereas country B, N-Panel B plots the difference and N-Panel B plots essentially the sum. And kind of we vary one parameter, Pi B, which is capturing inversely the strength of currency B. So think of when Pi B increases, then currency B becomes weaker. What can be seen is that B's incentive to launch CBDC are U-shaped in its relative weakness. In other words, country B has the largest incentives to launch CBDC if it's not too strong, if its currency is not too strong and not too weak. That kind of leads to the packing order we have also already described in the introduction. The packing order kind of stipulates that countries with relatively strong and non-dominant currencies have the highest incentives to launch CBDC early on. Again, to fend off competition from grip to currency, you gain a potential first move advantage. The next in line in terms of incentive is the country with dominant currency, the US with the US dollar and the lowest incentives to launch CBDC are borne by the countries with very weak currencies in our model. These countries have weak currencies regardless of whether they are digitized. So let me conclude with the last highlight in the role of stable coins as I already said, the cryptocurrency packed to the fiat currency and the notable observation here is that this fiat currency isn't almost all of the cases the US dollar. And what does this essentially imply? Well, why do we need stable coins? We need stable coins because the US dollar is kind of the effective unit of account in the crypto space so people were demanding some crypto dollar kind of. And that has led to the immersion of the stable coins. Many stable coins are therefore packed to the US dollar and for this packing to work they are also backed by US dollar reserves and the ones that were not backed by the US dollar reserves have partially failed. In the model essentially implies that currency A has a natural advantage. It both faces a direct demand from the household who wants to hold currency A. It also has a direct demand from the household because the households hold cryptocurrency as the unit of account in the space. Okay, thank you so much. I conclude with this slide. What does it essentially mean here? So kind of that the fact that the country with the dominant currency has this natural advantage by being the unit of account undermines the incentives to digitize the currency. In other words the stable coins or by through the appropriate regulation of the stable coins could be on the digital dollar and once you regulate it you might transform it to the way you want. So let me at this point conclude. Thanks so much for all the attention. This is a dynamic model of currency competition with indigenous digitization. CBDC is a response to growing competition from cryptocurrency in this model. I would like to emphasize competition from private digital currencies, cryptocurrencies or private digital payment systems. If this is not the case then the model would also be altered kind of. This is on the path assuming that these things continue to grow. Thanks so much for all the attention. I'm looking forward to Morten's comments. Thank you. So the discussion will be done by Morten Beck from the chat. Thank you for the kind presentation and kind invitation to come here and discuss this great paper. I should just say that whatever I say almost surely does not reflect the views of the BIS. But let me just first touch on I work for the BIS innovation hub. What is the BIS innovation hub? Just very clearly we will have one here for the Eurozone in Frankfurt of Paris and even later one in Toronto and we have a strategic partnership with New York innovation center which is run for the Federal Reserve out of the Federal Reserve Bank of New York. And so we started as a scale up and we're slowly becoming a scale up. I always say central banks in innovation is a bit of a contradiction in terms. So I think we are like a bumblebee fly but we are off the ground and I think generally flying in in the right direction. So what is it actually that we do? I like to use the Econ 101 like production possibility frontier so we're really trying to move out the technology frontier for central banks maybe move central banks to the efficient frontier and also moving out the efficient frontier. So how do we do that? We do that by doing actual technology projects and yesterday we announced together with with with the Swiss National Bank and the Monetary Authority of Singapore this idea of actually trying to build what is known as an automated market maker something that comes out of DeFi but in a world where central banks have actually issued wholesale CPC how would you do liquidity and effects in such a world and there we are trying to borrow some of the techniques that actually comes out of this DeFi world. I think it's very it's kind of like maybe beyond the horizon kind of thinking and that's that's what I think an innovation hub should do. Anyway, back to this paper I think it's a great paper this is from my daughter's writing class right and this is what you need to have in order to write a good paper I think these times with the internet they now put this plagiarism up front because you know I don't think they did that back in my days but anyway the good thing about this paper is its research work it's really high quality work it's a great paper I think some of the content is actually quite creative and the delivery is maybe not fast it's never fast for an academic paper but it's very very good so I think I think that's excellent so I'm going to talk a little bit about the definition of a CBDC some things I will say a few words about CBDC data then I'll very briefly discuss kind of like the key things in the model and then I'll have a few conclusions so definition so I think you can explain the CBDC in one equation so what is this so the right hand side of the equation is basically showed for making M0 great again right this is what it's all about right cash we need to make base money great again alright that's a bad joke but this is the only one I have but what are central bank digital currencies we wrote this paper on basically that and we tried to define four key features of money whether it's accessible whether it's electronic whether it's issued by the central bank slash the state and whether you can transfer it peer to peer and that allows us to define basically four kinds of central bank digital currency the key one is the one that we know today which is the reserves but that we did not denote as central bank digital currency so we had two we had wholesale centralized central bank money for banks and then there was two types of retail CBDC one that was based on more traditional account based technology and then something that was based maybe on DLT or some of these newer technology so those are both retail CBDC this paper just focuses I think on retail CBDC and doesn't really care for good reasons whether it's one technology and the other the data so the BIS actually published very similar data to the data that was shown and so the same picture emerges at the one that came from the CBDC tracker which I think but what is nice here is that it highlights some of the countries in the Caribbean and in Africa that are actually very active in CBDC so that's actually where the action is right now so I think it's a stylized fact that the action in introducing real CBDCs are in Africa and or in the Caribbean so Jamaica has just gone live or with a pilot that and I think it's the motto is like no money no problem so it's kind of kind of cute there's the Bahamian sand dollar there's something for the East Caribbean central bank and then there's a couple of ones actually going on in Africa at the moment especially Nigeria with the Naira which is up and running so whether this is whether these are really weak currencies or not we can have a debate but I think this is the stylized fact that these are actually the ones that are moving first this should be model I think yes so what the model really does is that it combines two concepts the two strands of literature one is about currency substitution which is really the use of a foreign currency in parallel domestic currency and then there's the currency competition literature which is the free energy of private sector firm into the issuance of a currency and here I think you need to cite Hayek you know I love Ricardo Lagos right and stuff like that but I think this is Hayek that you would have to talk about and those two are both combined into the model which is super nice what is the model the model is really a two-player game right and where each player is a country A and we have country B there's also the cryptocurrency in there but the cryptocurrency doesn't play any strategies and so really the country A and country B really have three strategies today, tomorrow or never in terms of adoption of CPC and so you have this three-by-three game and so on the train ride up here I try to plug it in I wasn't so here there's an incentive to implement CPC and that's really around maintaining a senior okay so the objectives of the countries are really to protect or gain a senior edge and but then you have to invest in order to implement CPC and I just assume that it's very expensive for the dominant country to implement to implement the CPC today I think the reasoning would be that the dominant country because you are the dominant country you don't have to invest so much in your financial market infrastructure and so on and so forth so actually to take this leap you would have to do a lot maybe whether that's a true reflection of the US I guess people we can disagree on that but it's just that it's harder for the the dominant country to implement CPC and then there's this also this thread in here this is this Bitcoin simple this is like you're getting adopted into your country and then you can with different assumptions you can set up the game and then you can actually get the national equilibrium to be this one where the dominant country implements tomorrow and the non-dominant country implements today so really this is just a show and then under certain assumptions then you can also get if the country is very very weak then it never implements but the dominant country implements tomorrow and then the non-dominant currency as was mentioned which could be the euro or the Swiss franc so the Chinese currency would then try and gain this first move advantage as a way of making sure that the dollar doesn't take over in the digital world in their domestic settings okay so kind of like some of the conclusions I think this is the the government bank of France or bank de France is also the chairman of the BIS and so he gave a speech and I think he actually lays out kind of like the thinking of central banks at the moment so a lot of the use cases are not definitely fixed yet when it comes to CPDC but there are some very material reasons for to consider the issues of the digital euro and one is just to preserve and the usability of central bank money if you're a central bank and you think if you want to be relevant in the future you might need to do something in CPDC but also and these are these two more perhaps more geopolitical reasons one is like the monetary sovereignty this is the thing that really got people up in arms with Facebook and then there's also to support the strategic autonomy of the European continent so these are some love the more political science reasons which I think economics might have a harder time actually explaining so the way that I look at it I think we are in a situation now where we're in a we're in a scramble for the future monetary system and there's like two layers one is who should provide the money of the future there's going to be crypto central banks I wouldn't discard commercial banks yet so I put them in and then there's like some trade-offs between them between the central bank and the commercial bank if the central bank issues CPDC there's a key issue around funding and the commercial banks and the cryptos really who has the contact to the end-users but then there's also another layer which is more like the geopolitical layer which is really between countries and our currencies and this is also what this paper also touches on so between China and the US or the Euro so maybe there's an issue around who wants to be or who will be the reserve currency between the US and the emergent markets there's something around dollarization and then between China and the emergent markets it's like can China be this new vehicle currency in which trade takes place so combining all those together and they are all intertwined so I think it's a very interesting topic to analyze and research and I think this paper does a really good job of like trying to specify some of the key trade-offs so my final conclusion was really I was thinking when I read it I said well you should just take out this coming part of the title it's not the coming it's just the battle of digital currencies but then I noted that I hadn't noticed the cuteness that this actually becomes CPC so I guess my suggestion now is just to say the current battle of the digital currency all right thank you very much thank you more I would now like to take a few questions if there are any in the room if there aren't I would have one so you're assuming that these are countries maximizing the adoption of their currency and this is captured in this convenience yield function and I have some doubts whether this function is really reflecting reality in the sense that in the end its user is adopting these things so the currency they want to trade in and it's probably also some network effects related in there which are not fully captured by a concave function so I think it would be interesting also to reflect a little bit on how the function could look like if you have kind of network effects maybe inside the country but also maybe on international scale and at what point monetary sovereignty would be threatened so especially when there is a foreign cryptocurrency coming into a country so you have these players and the maximization but I'm not quite sure whether this is really how this adoption would look like thanks for this excellent comment so like you're mentioning one important point here there's network effects so why we don't exactly model it of course I agree with you they are certainly there and they're kind of a little bit omitted the concave functions are just something else it's like actually suggest all these network effects must be rather weak but like if there are relatively strong network effects then it would be something you could refer to as tipping so like if some foreign currency or cryptocurrency gains sufficient adoption then it would become even a higher threat to the national currency because like these network effects then lead to some tipping that such that once it's sufficiently adopted some foreign currency or cryptocurrency it's like it's unavoidable to curb it kind of back yeah so I fully agree with you we should definitely look into that and also to what extent these functional forms describe reality that's definitely some debate that we haven't read it's very it's very difficult to capture many of the reality so it's kind of a qualitative model at this point but if one wanted to take it a step further one would have to address your comment more seriously yeah to make things even more complicated you could also think of governments taking measures to yeah fend off this threat by either imposing restrictions of the use of currency or by giving yeah changing the remuneration of the CBDC so you could also have strategic battling on that level yeah so that's also correct yeah so like we abstract here from regulation so we think as we think about is essentially you can do certain things with regulation but you maybe cannot achieve the complete ban of these crypto currency you cannot curb it fully back you can only curb it back to some extent and if you try to do more maybe if you try to ban it completely it would be costly so you may want to take other actions which are not direct and what you want to do is diversify the data and then then not just digitalization of CBDC comes into play but that's also a very important point it's mentioned here and I haven't discussed the presentation and if one wanted to take this model in a more quantitative sense then obviously one would have to also address this point of regulation so that's also very nice work like I mean this is a emerging that can be used essentially to quantify the benefits of CBDC issuance. Yeah, we have an online question coming in from Cyril Monet. And Cyril is asking, is there a version of Gresham's law in the paper? For example, people would hold dollar to save, but crypto to trade. So crypto, the bad money, would drive out the dollar, the good money, as a means to pay. Oh, this is a very good question as well. So like, unfortunately, I cannot answer this probably to a satisfactory point because we model kind of saving and trading. We model a saving is like fine. This is like kind of not necessarily reduced for model. We have an overlapping generation household. Someone would like to save when young and consume when old. But kind of trade is not modeled explicitly. We simply assume a convenience yield that could capture the trade that occurs in specific currency, could capture for the medium of exchange function, and also could capture for the unit of account function also central to trade. So like, there won't be a version of Gresham's law at least unless you were to micro-found the trade, I would believe. But this is a very good question. I haven't thought about it so far. So maybe if you would like to react to Morton's discussion as well. Also particularly the question on why African countries are the first movers, I think. Yeah, so like, I also looked into that recently. So like, so the model is essentially not capturing probably all these features that led to this, many of these countries adopting CBDC, or developing CBDC, I guess in the Bahamas like the reason for why, reason explaining the launch of CBDC would be simply that like, it's on an island and physical cash would be difficult to transport and these type of things. So yeah, there might be other reasons outside of the model that have led to the development of CBDC in these countries. So our model is just here currency competition, just focuses essentially on the currency competition aspect. But as I said, there might be other features outside of the model that essentially explain the issuance of CBDC by certain countries and maybe why other countries do not move. Morton's discussion was very helpful because he also essentially touched, gave us again very good overview about the state of CBDC initiatives, why we should launch CBDC and like there's very many useful resources on that by the BIS and also like, I like this last graph with the two triangles that were intertwined essentially highlighting kind of how the monetary systems is kind of structured and the interactions between the different countries. Yeah, so very helpful and I would appreciate if you could send the discussion slides to me. Thanks a lot. So this concludes the first session of this morning and then we will have a coffee break and I'd like to have you come back at 11, 11, 15, Sebastian. At 11. Thanks a lot to everybody. Thank you. Thank you. Thanks.