 Okay, so we are very, very honored and grateful that today we're going to have Yesha, Yadav and Rod Garrett, who are going to illuminate us with wisdom on digital currencies in particular. And so Yesha is a professor of law at Vanderbilt University, and before that she was a real person. She actually worked in a law firm in Paris, and speaks perfect French, and also was a legal counsel to the World Bank. And Rod also was half a real person because he was vice president of the Fed of New York, and also has done some very interesting and important work on using these technologies for settlements with the project Jasper in Canada, and he's now become a professor. Professor of economics at UCSB, and he has done some very important work on monetary economics in particular, and theory, economic theory in general. So this is fantastic, thanks a lot to both of you for accepting to participate in this roundtable. So what I will do is I will first ask each of them one question that they will have five to ten minutes to answer, and then we will go to a more back-and-forth mode with questions from the audience. So Yesha, I would like to ask you what are your views about the development of digital currencies, and because you specialize in financial securities regulation, from the regulatory point of view, what do you see new risks associated with those currencies? Thank you so much, and thank you so much for having me. It's such a pleasure to be here today. As a lawyer, I think it's my job to make everyone else look good, so I'm truly delighted to have this opportunity and to share the platform here with Rod and Bruno. So I think this is a really interesting question, and to maybe illustrate some of the risks. I'd like to take you guys to the UK, where another crazy thing happened a couple of weeks ago when the NatWest Bank suffered an outage. The NatWest is a massive bank in the UK, and its online platform stopped working. People could not access their online banking. Moreover, much more worryingly, many of them saw some of the money disappear from their account. So let me ask you guys, how many of you do online banking? How many of you do banking on your phone? That's easy, right? It's pretty much everyone. How many of you have done banking, did online banking, five years ago? How many of you did online banking 10 years ago? Right? It says, it's an ever, that's amazing. It's a slightly more dwindling number, but what we can see is that over the last 10 years, we have seen this massive structural shift from a bricks and mortar, highly localized, highly personalized banking system to one that is now increasingly digitized and automated over telephones. Let me ask you this other question. When these folks from the NatWest saw that their banking apps were not working, that in fact, their money seemed to have disappeared, what do you think they did? They went to the branch? Yeah. Right? So these guys did exactly what us as primordially rational human beings will do, right? In this moment, which is run to the bank and try and get our money out, right? That is the rational, reasonable thing to do, even though as a collective, we all know the problem that that creates for the banking system, right? So here we see an example, which is an example that is happening all the time, right? That is created by this transition from a bricks and mortar banking system to one that is digitized, but yet seems to suffer from similar kinds of risks that we've always seen, the run risks that we regulate the entire banking system for, right? The run risks that govern and essential to the entire architecture of banking regulation, capital regulation, liquidity regulation, conduct of business regulation, the whole thing is centered around this run risk that is entirely essential to the way in which banking regulation is structured. The question really becomes is what will this run risk? What will the banking system look like in the next 10 years, right? As regulators or as people who think about the law and policies, especially here in Toulouse and the Toulouse School of Economics with its very unique approach to dealing with real world problems. The question is not what it looks like today, right? The question is what regulation needs to do for the risks that will exist in 10 years time as banking evolves and as digital currencies become the norm within the marketplace. Now one thing to think about is what will a run look like in 10 years time when we have an entirely digitized monetary system? In that context will we be able to run to the branch in the event there's a problem, right? In a cashless economy are we going to have the chance? Are we going to have an opportunity to be able to walk outside our door to go to the to go to the Societe Genère and to try and get our money out in a cash format? And if we do not in fact have that opportunity then what will a run look like? In fact will run exist at all? And maybe, right, there's some reason for optimism on this context that maybe runs will become less frequent, right? Maybe in the context of banking in 10 years time with the digital currency where entitlements are recorded in code as Christine was discussing in the context of Bitcoin perhaps the digital currency can encode the entitlement the identity of the person to whom the money belongs in a more in a more obvious way that perhaps we're able to store the data in a more distributed fashion so it's not in the bank branch of the Societe Genère and Toulouse but you know on a distributed ledger that perhaps customers might feel more secure in the way that the banking system works. Maybe runs will become less and if we cannot retire cash then what does the money look like? Right? Will the money move? Where will it go? At the same time I think there's some new risks that exist in the context of a digital future 10 years from now and the changing nature of what the run architecture is going to look like. Even if we're unable to get cash out of a branch because perhaps cash doesn't exist in the same way then maybe we can transfer this cash or transfer our digital money to another bank, right? Or perhaps transfer it into a payment system like a crypto currency that Christine was talking about, right? In that context perhaps institutions like Societe Genère or BNP Paribas can still suffer some kind of liquidity crunch because customers are taking out their digital currencies and moving it into another institution or perhaps into a crypto system. More broadly I think the biggest risk here is that of operational risk, right? The fact that we're dealing with a digital currency landscape where currency is code, right? In that context we are incredibly susceptible, systemically susceptible to a failure in code, right? How many of us, we all have our iPhones and our smartphones, right? How many of you had to, you know, update your iPhone recently or restart your iPhone because it was glitching, right? That is the norm. That is inevitable. That has to happen. Now in the context of a currency that is code, how will the central bank deal with this kind of operational risk, right? When it comes to updating the software that is governing the currency, what will that look like? Under what circumstances will that code updating process and securing process be like? Apple sends us updates every couple of months to, you know, plug up these bugs and horrible things that our phones are susceptible to hacking and so on. What will the central bank have to do to protect the monetary system, protect the code that is governing the monetary system? Now a more kind of interesting question as we think about the present moment is what is the role of private industry here, right? And in particular, if we're dealing in a digital marketplace, are banks enough to be able to spread the digital currency across our national financial systems? Now, if I tell you that 40% of the US population today does not have a bank account, right? 40% of the US population today does not have a bank account. But 200 out of 220 out of the 330 million people do in fact have a Facebook account, right? So the question becomes, do we need private enterprises like Amazon or Facebook or Google or WePay, Ali, you know WeChat and so on that are highly networked whose network is essentially the way in which they're connecting their business to the average person. Do we need them more than banks to be able to play a role in ensuring the velocity of the digital currency across the marketplace? And if so, what's the regulatory impact there, right? What is the regulatory impact? So thinking about the third part of this is the interaction and the interconnection between the central bank digital currency and the central bank needing to move that digital currency, the potential reducing role of banking, as well as the potential for us to have to increase our reliance on private companies with highly networked business models such as Facebook or WeChat or so on. In that context, how do we how do we regulate that system, right? How do we ensure that Facebook or Google or WeChat have the resources to be prudentially secure? How do we make sure that they have the resources to withstand a potential run risk if indeed their digital wallets that they supply to hold the digital currencies become unoperational or failure or have a failure in the software or some malware or some hacking, right? So I think that there is some really interesting, very cool puzzles for us to think about which go not not just to the fact that our currency system is changing but to the fact that our entire project of how we've envisioned the way in which money moves in the society potentially changing, right? And that creating new species of run risk, new kinds of operational risk when currencies code, and number three, requiring us to pay a lot more attention to non-bank financial companies whose expertise and experience in the financial marketplace is incredibly new, right? So I think those are just some of the opening thoughts to thinking about some of the system. Thank you very much. This is a very thought-provoking. So you talked about the central banks interaction with the Facebook and BNP Paribas. So now we're going to have maybe the views from the central bank or about the central bank and maybe I would like to ask Rod more precisely what what do you think Rod should be the role of the central bank in this new environment of digital money and digital banking and should central banks issue their own digital currencies? Yeah, yeah, thank you. So it's a it's a pleasure to be here and so this is a question that that a lot of central banks we're grappling with. So thinking about this the current money landscape and whether or not they should play this new role in providing some form of currency and electronic form that's directly accessible to the public and in fact it's it's pretty important to make a distinction right off the bat that in terms of thinking about central bank digital currencies which which is the term that people are commonly using although most central bank money is digital but most central bank money is only accessible to financial institutions. So we have to make this distinction between what we might call a wholesale CBDC a central bank digital currency that would be used in retail or sorry in wholesale payment systems. Project Jasper that Bruno mentioned earlier this was a proof of concept where we imagine using a tokenized version of central bank money in a closed system that would allow banks to to make payments to each other on a distributed ledger system and a retail type of concept where the central bank money was actually available to all and that's not a new idea. Tobin James Tobin back in in the 80s proposed something called deposit currency accounts which would have been a way for individuals to have basically bank accounts at at the central bank. So this concept isn't new what's what's really new is that in principle this could be done in in new ways using new for example distributed ledger technologies although you know central banks aren't most central banks aren't close to that using that technology just yet because of the fact that you know as as you know was alluded to you know we can't have bugs and problems with central bank money so this these technologies have to be tested before they can be used. So when we think about this at the retail level that is should the central bank provide some form of electronic currency to the public uh I one of my first thoughts on this was always sort of oh why not you know I mean if if you had a million dollars in cash right now you're forced to uh you know you don't want to hold a million dollars in cash you want to basically digitize it right now you're forced to loan that money to a commercial bank uh you know in most countries that's not such a big risk the systems are sound but why should you have to do that why can't you just take that one million dollars in central bank liabilities and digitize them um but then when I thought about it more deeply uh I come to the first way of the first line of thought which is what's the mandate so what is the mandate of central banks and and has that mandate changed have conditions in the economy of oral change such that that mandate should change so so speaking on the first topic what's what's the mandate my comments will be somewhat US-centric I apologize for that but but in the US the central bank was founded in 1913 uh uh in order to provide soundness against financial panics so essentially the lender of last resort function so that was the the main reason that the banks existed the central bank was created and central banks have been pretty successful artists in the US the central bank is pretty successful in performing that function we've had major financial uh crises continental Illinois in 1984 the crash of 87 um the recent financial crisis where the central bank and played a supportive role and and and did I think a pretty reasonable job of of of dealing with the crisis so the central bank has performed well in that role but over time that role of the central bank has expanded so central banks role now includes uh ensuring uh found the soundness of the banking system but also uh uh other general economic goals of of price stability and economic growth and then further those goals expanded into uh goals with regards to maintaining a well functioning payment system uh in fact the central bank the federal reserve bank issued a white paper in 1990 where it outlined these main responsibilities uh in terms of safety efficiency and access these are the three functions that the central bank uh attempts to perform with regards to payments and I should distinguish there's a distinguish between payments and money uh the you know the payment system is the system by which money is transferred and central bank has responsibilities with regards to both aspects um but these goals of of uh safety efficiency of access have been uh performed I think quite well by central banks and the central banks can perform these roles in really two ways they can be an operator so they can take over and run a payment system this is typically what they do with large value payments and also retail payments something like a ch uh or they can be a supervisor slash regulator of of of other systems in fact you know most of the money in the united states is and in most countries is not central bank money it's commercial bank money it's money that's issued by uh commercial banks um through the credit process and so so you know they're there in that regard they regulate and supervise the banks so the central bank can play either a leading role or a supporting role and so when we get back to this idea of central bank digital currency should they issue one what what role should they play uh so at this point then I think well let's go back to thinking about the mandate I think the overarching theme of what I've said about the central bank activity so far is that they're supporting the banking system I mean remember banks came before commercial banks and so the central bank supports the banks but one might ask whether or not in today's world uh even if we stick with that basic mandate are the banks the right players are they the ones that the central banks should be supporting so one of the things that's been happening a lot in the payment space is there's in some sense this decoupling of the functions of money so economists often talk about the three functions of money store value unit of account and medium of exchange and a good money was something that had all three of these properties in fact when bitcoin first came out there were all these articles that said it's not money because it's it's not good at all three functions there were these there were these great blogs uh a Krugman's blog was bitcoin is evil there was there was another great blog uh uh uh I'm forgetting the name but the title was I want bitcoin to die in a fire and these were these were people that were writing blogs that were basically arguing it's not good because it's not a good money in terms of all three functions but things have changed and and now people are decoupling these three functions and if you think about what's happening in terms of a lot of initiatives what they're really doing is they're leaving the central the unit of account store value aspect with with with fiat money and they're trying to capture the medium of exchange aspect and and take over this aspect and and and and they do this in a creative way so if you think about things like Venmo and the United States or Alipay in in China what they're really doing they're still transferring commercial bank money or central bank it's backed by central bank money uh but they're doing it on these new platforms and more importantly they're these these are highly integrated often with other aspects of these platforms so if you think about the Libra proposal in particular uh this is a you know the Facebook platform it's integrating all your other social aspect and the aspects of your social life uh in with your payments uh and so this really changes or should change I think the way we should think about payments and and uh Brunemeyer uh James and Landau have this really nice paper where they talk about in some sense the the inversion of financial services so in some sense thinking about the idea that banks used to play a central role in payments and these were supported by by other players and now there's this inversion where these other players are the key are the key drivers of payment activities and the banks support them and if we think in those terms then then then maybe the central bank if we stick with this idea that they play a supportive role and by the way if if the central bank was to think about issuing a digital currency that is providing electronic currency to the public that would require a change in the bank act this is not within their existing mandate so this would be a decision that not only central banks would have to make the governments would have to make but if the central bank decided to stick with the supporting role then I think the interesting question is who should they be supporting okay and if you think about what's going on in China so in China there's this new initiative where I think possibly within months China will be issuing a digital currency they call digital currency electronic payments which seems kind of redundant it seems the first two words and the second two words say the same thing but this is a this is an initiative whereby I think essentially they would provide the liquidity that's used in say alipay so instead of alipay moving around commercial bank deposits alipay would move around central bank deposits of the public so so there is certainly precedent or there soon will be precedent for this idea of central banks playing a supportive role but changing the players whom they support so I think that is is maybe one of the most likely things so getting back though to the idea of the central bank being playing the primary role one question I have then is that you know are we even able to do that like are we just sort of kidding ourselves that in this world the central bank could provide a currency that anybody would want to use especially in this world where these things are so integrated with other aspects of social media and social platforms and this isn't the central bank's strength this isn't what they do so I think if the central banks did try to provide some form of electronic cash they would most likely not do it on their own they would do it through I think commercial banks so a very natural way that this would happen would be that you would suddenly be able to have a savings account a checking account and a central bank account at the well link of Canada or at the bank of america in the United States so these are the things that I think are possible lastly I should say there are other aspects that one could consider I mentioned the privacy aspect in my talk earlier that's that's that's certainly that's certainly one thing but but broadly speaking I think that you know generally speaking central banks have played a supportive role in the financial system and I think they can continue to do that offering central bank currency on on the role is one solution but they can facilitate private sector initiatives to offer something that's almost equivalent I think that's that's might be a better way to go thank you so yesha and rod you mentioned commercial banks you mentioned central banks you mentioned facebook you even mentioned Krugman who said bitcoin was evil I would like to say that maybe facebook is even more evil than than than bitcoin and possibly I hope this will not be dangerous for me to say maybe the central bank of china you know I'm not sure so so there was this dream with with blockchain and bitcoin that there would be some distributed ledger that would not be captured by a central authority it seems what do you think about that do you think there is there's any hope of that or any chance or it's doomed well it depends what kind of a distributed ledger you want to create right so the ledger comes essentially from this bitcoin idea where you have different nodes being able to record the transactions being able to do a few things which is make sure that the transactions are verified in accordance to some set in accordance with a set formula to then after verification put this transaction on a ledger and what this does essentially the idea behind it is to reduce the need for a central intermediary so one of the questions earlier was what happens if you have an exchange to centralize intermediation function the idea behind distributed ledger when everyone across the different nodes is verifying information automatically in accordance with certain codes making sure it's correct and storing that information in a distributed fashion across these nodes that that provides a more secure way of storing information and checking information for this distributed ledger that is the basic idea that governs the way in which bitcoin transactions are done and which people have been super excited about for a long time in the financial markets so I am pretty pessimistic in some respects on certain very non-permission aspects of the blockchain which is to say a completely central blockchain when there's no one standing behind the transactions to making sure that that blockchain works right and the problem with that in financial markets a completely unpermissioned blockchain is that in financial markets we're used to having a central actor that stands behind processes right that makes sure that risk management is properly done right that makes sure like in the case of a clearing house that there's always someone standing behind the transaction to make sure that it executes in a way that is designed to do right as a way to provide finality uncertainty within the financial system so given the fact that this distributed ledger in a non-permission way does not or tries to do away with the central authority many folks in financial markets are just not going to sign on to this right because they want some guarantee that there's someone standing behind the trades if indeed that trade fails if there's a problem recording the transaction if there's a massive problem that there'll be someone there to fix it there's just too much at stake to have any other situation now where some folks in the industry are seeing some potential though unrealized is in the case of permissioned blockchains right where people who are allowed to use these blockchains are those who are specifically authorized to do so pre-authorized folks so you are increasingly seeing in the case of certain banking uh banking conglomerates like jp morgan or hsbc creating their own coins right hsbc coin jpm coin in which they're being able to transmit versions of basically able to settle internal payment obligations using an jpm coin or an hsbc coin um through a permissioned blockchain within their own institution at the same time there's some problems with it one is very small right it's a very small scale localized operation number two it has latency right which means that it's slower than what you get when you use a real-time gross settlement payment system that a central bank provides right so it's slower you need the systems to be able to go through and perform the checks and make sure it's all in accordance with the proper parameters so with that latency the fact that it's still smaller the fact that you still need to deal with and change legacy systems that we're used to and perhaps most importantly we need to see the payoff of this and right now the payoff is not all that clear why is it better to use a blockchain than use an rtgs system right and that payoff case is not necessarily being fully made so a lot of the hope that was there in blockchain has slowly started to die um the question is you know what's next there's some possible technological iteration that can reduce latency maybe allow for greater interoperability and overcome legacy systems sort of deficiencies maybe but right now it's hard to see what the payoff is thank you rod what's your take on these issues yeah i think similar i mean it's the if we think about this aspect of trust in the in the systems it's as you were suggesting these distributed legacy systems aren't trustless you have to trust the coke you have to trust you have to trust that it works and moreover in most of these systems it's interesting to see how even the fully decentralized systems you know centralization creeps into the christine you know in her talk suggested to us that there's you know that even those to centralize the miners essentially or large mining pools there's there's this sort of uh possibly collusive aspect which is very non decentralized um and so generally you know we see the centralization moving in if you think about stablecoin concepts i mean stablecoins are designed to eliminate the volatility and say something like bitcoin it's a cryptocurrency sort of but you have human actors that are moving in and tying this to a fee in currency and so all of a sudden you've got this new trust element you have to trust these people are actually backing the coin by what they say they're backing it with uh and that can sometimes be in doubt as is the case with with with tether so you you always have this this trust element uh and of course even in central bank currencies uh you know regular fiat money uh you've got a trust issue and i think what's interesting there though is that you know which form of trust is better i think it always comes down to you know who you should trust what you should trust people that have the right incentives to do what you want them to do and so you know many of the objections against putting your trust in say central bank authorities uh people raise issues like what's going on in venezuela uh zimbabwe where currencies were inflated to you know to become valueless and but these aren't good examples because these are areas where there were there was no central bank independence and so you basically have you know dictators of countries printing money to fund whatever they wanted to fund uh in a place like the united states canada you have not perfect central bank independence but reasonable central bank independence uh mariner eckholz who was the the founder of or sorry the founder but was the the the board uh the chairman of the board of governors in the thirties and forties uh referred to the fed as an agency of congress and what that means is that is that the federal reserve is responsible to the people uh it's responsible to the legislative branch it's not responsible to the executive branch so it doesn't have to do whatever presidents say but it is responsible to the people uh and as an agency of the people its incentives are to do what's good for the public and so i think in a context like that that the trust is well founded uh central bank doesn't gain from from doing anything that's not in the public interest so i think in situations like that there's lots of reasons to believe that these systems can be can be preferable to decentralized systems fully decentralized systems uh that doesn't mean there's not use in these decentralized systems so i mean what's the purpose of a stablecoin a stablecoin is a digital representation of a dollar that you can trade on a distributed platform well i i asked and answered the question at the same time its use is that it can be traded on a distributed ledger platform which gives you a new way to transact fiat currency and so i do think there is some value uh in these but again there's this whole idea of of that the trust doesn't go away it's just in in in many instances you're changing the counterpart as you trust or you have to trust in the code i mean the trust aspect is always there thank you very much so now it's time for your questions yes christina if banks are no longer part of the payment system do we have to regulate them i would say absolutely right um because we are in a universe in which money is moving uh there are many different things that can go wrong in a payments um environment uh one can have for example just basic snafus that can take place for example someone is using suboptimal technology so the data can be hacked one is using digital wallets in a way in which um they are potentially unable to cope with surging demand at certain times so for example when people get paid on a friday that maybe the digital coin doesn't work as smoothly as it should um perhaps a payment is made in error and in those situations you need to reverse the transaction so there are different there are different kinds of risks that would attach even to the private uh private movement of money i mean we see this in the context of money transmitters for example that are regulated even though they're not banks given the fact that they have responsibilities towards customers they can defraud them they can steal that money they can do all sorts of different things so one needs to just make sure that these guys have the trust element to be able to hold and safeguard not necessarily hold necessarily but at least process people's money that the technology they use is is is adapted and well interoperable with the larger banking and central banking system and that they are going to not cause vulnerabilities for the larger banking environment such that their failure to perform causes folks to lose confidence in the system as a whole so that um you know the question is an interesting one one could say that maybe these guys can regulate themselves you can have some kind of private ordering that can do that that's not unprecedented so here in in the EU we've had sepa the single euro payments area sepa has been very much a case of a privately led initiative initially by the banks but also non-bank payment providers that have come together to create rules private rules the road for the scheme at the same time there's certain things that they need from a regulatory standpoint which resulted in the payment services directive in 2000 and whatever six seven that allowed these money transmitters to be subject to certain basic standards in order to make sure that we trust them enough to give them the money to process and to create the network effects that that system needs thank you Rob what's your take on this yeah I mean it's a it's a pretty extreme scenario that the banks aren't involved in payments so I think you know we'd be thinking about a situation I guess where banks were fully disintermediated so you know they weren't acting as deposit institutions anymore they were just pure investment banks in which case they they'd be regulated the way uh investment banks are regulated so there would still be issues associated with what they're investing in the sum of protection uh financial stability concerns but but uh yeah I mean that's a pretty extreme world when the banks aren't involved in payments at all thank you yes no I have two different questions one is about monetary policy I mean what would become an anomaly about the policy if we have this digital right and the other one is face to the risk that you say about networks and maybe cyber war and so on maybe as a customer I will start to change my behavior I may maybe uh into some old fashion bags I will pay more fees but just to keep some uh usual cash or I will stay to have some gold or other distance to be sure that uh it's a hedge against this type of phrase well because if in the U.S. you have 40 person of people that do not have uh that at all then then maybe we still have a lot of people that will have either old fashion and atonement or gold or whatever yeah yeah I guess I'll start so I mean one thing I should say is that most of the comments I sort of said earlier really did apply to developed developed countries where a large fraction of people are banked uh there was I was recently visiting the the bank for international settlements that worked on the the G7 report on on global stablecoins and and in that report uh it's acknowledged that that you know that the two biggest issues or the payments are one is global international payments issues of making international payments and access so these are issues that that that people really need to work on and are working on but within the context of say developed countries where people are primarily banked then then you know the the new issues associated with things like central bank digital currency have many monetary policy issues so one one thing people talk about is this zero lower bound issue that one of the reasons interest rates can't go negative is that then people would convert deposits into cash but if you have a digital currency that there's no cash then you can charge a negative interest rate on the on the digital cash and it allows some more flexibility and monetary policy people talk about other aspects such as uh the fact that you could maybe do monetary policy more precisely because instead of monetary policy working its way through the financial system you could you could implement it directly with consumers or all of your who are essentially your account holders um and then the last thing i'll say on it is that this is this is actually why uh the Lieberman announcement was so important however why it had such a big impact uh say relative to bitcoin uh you know bitcoin has been around and central banks have been thinking about and talking about bitcoin for quite a while but bitcoin is incredibly small it's negligible in terms of its size uh and what it means the central bank activity seven transactions a second the segwit maybe 14 transactions a second per second uh jesus 20 000 alibis 100 000 a second it's absolutely insignificant uh but Lieberman the proposal for Lieberman not so much uh you know facebook has billions of customers so uh billions of billions whatever customers so all of a sudden this thing could be massive and uh equally importantly it is uh it is denominated uh based on a basket of currencies or backed by a basket of currencies which means it would be its own unit of account and so this means that it would essentially be a private competing currency with the us dollar with any currency and any in any domestic country so that impacts the ability to conduct monetary policy so so these things can have huge monetary implications if they're larger so i just wanted to speak to the behavioral question the i think it's a great one and it's one that is on the minds of many folks which is to say that if we are in a completely digitized world a digitized world maybe people will feel over survey you know over-surveillance they will feel like maybe their money is not safe of these not west type of situations always happen there's probably five it snafus a week in the uk and so the question is maybe they change their behavior and they move maybe into bitcoin or they try and find cash where they can do it there is however i think a generational situation here which is to say that the younger generation the millennials the gen zeds are much more comfortable with an entirely digitized payments environment i mean i have students who are transacting almost entirely in venmo with one another um who have no problem giving up their data um on their phones who have no problem publicizing what they're spending their money on and so it seems that digital natives folks who have never known anything else um that maybe they're going to be much more comfortable and that the behavioral shift will be smoother into accepting a very digitized form payment and in accepting the monetary consequences that might come from it and they feel more natural to them the other side of it from a developed developing country perspective is also very interesting which is to say that many new payment providers have provided services which have never existed before in those countries so in the case of we pay and ali pay in china they built their own payments networks because banking networks for servicing actual normal citizens just did not exist on that scale they were no credit cards to speak of and so they built their own networks and we pay i believe has something like 900 million regular users a month um and in that environment where there's a real local uptake and a need then in those situations it's hard to imagine people giving up those gains um for the tradeoffs become much more complicated because they really need those services and no competing services exist whereas in the case of here in france or in the in the uk or in the eu or you know in the us we do have fairly developed markets with credit cards and banking systems and so on so that for us maybe the immediacy and the choice and the existence of options gives us some opportunity to have modulated shifts in behavior but for certain developing environments in china and india for example after demonetization digital the the the the anchoring of digital has become much more much stronger and so people are much more reluctant to change their behaviors so i have a rather provocative question how will uh would digitized currencies behave in an unsettled world in other words how what's the point of sustainable finance in a non-sustainable world what happens in case of massive conflict i did not understand what you said what happens in case of massive conflict the world we live in is clearly down for the wall and uh you know in case of worldwide conflict what happens to digital currency you mean war like the war war between china and the us for example what would happen yeah well maybe currencies would not be the only problem yeah no but the well indeed the problem of currency would not be the only problem but the place where my question is leading to is that from the perspective of people who think of trying to set up a sustainable world the if there is a solution it's probably in thinking small and thinking smaller structures and wouldn't a solution be the setting up of local currencies albeit digital but you know and interacting with one another but then the question of trust becomes much easier to take into account the question of huge energy consumption also becomes a lot easier to uh to take into account so that you know one thing i have in the back of my mind is shouldn't we try to think as part of the solution it's probably not optimal as far as huge market is concerned but as far as the future of the planet is uh you know local currencies whether be be they coin money or digital maybe the one role of central banks could be to actually help the setting up of local currencies and unify them rather than resist them at all costs as they could have been seen to be doing before this and what would you like to see yeah i mean i i'm going to interpret your your question basically that like these are these are you're talking essentially about flights to safety and so you know we've had many episodes of flights to safety but the question is where are you flying from and where are you flying to and so you know in situations where situations like and ron where we had you know fear and corporate debt and so on we had flights out of corporate debt into the banking we've had episodes where there's been banking panics where monies either flowed out of banks into treasuries or from one bank to another bank and then you're positing a situation where we've got sort of just instability in the country as a whole and so then the question is where do you where do you fly to uh so people in that case you know you can think of you know there are many examples of countries that have been in that have had great domestic instability and you know people fly into real assets if they can they fly into other stable currencies so you know the US dollar functions as a reserve currency around the world for probably for this reason so when other currencies are in trouble or people you know try to hold US dollars if they can so Libra i mean in principle would would have would play that sort of role it's meant to be a a currency that's sort of global and would be stable and somewhat resistant to whatever type of problems were occurring in any particular country now you mentioned i think you mentioned that the whole world is sort of crumbling in some kind of environmental crisis but you know that i don't know i mean but you fly to something would would people fly into sort of putting faith in local currencies that's a possibility and we did have a period in which currency was very local so in the US for example when the US was founded every single local region has its own had its own currency so massachusetts for example small regions in massachusetts the private banks there would issue their own currency and that was a very local environment designed to respond to local monetary environment unfortunately that system failed because it was extremely unstable and it was difficult to interact and to exchange those currencies without incurring high costs we know from our own experience that when we travel to say even the UK and you have to exchange for pounds like that's a pain right like it's i mean it's just a pain and so you know so the there are some costs and the ultimate goal of our currency is to create network effects right which is to say that multiple people should be using it accepting it merchant should be accepting it that's when the currency becomes a currency because it functions really effectively as a medium of exchange that's why bitcoin really hasn't taken off to the same degree because merchants don't use it people are not using it the network effects are limited so it's much more a sort of nascent bespoke infitesimally small system and so the question becomes whether local environments can generate the network effects that would provide the stability and the safety to function in an environment in which no one trusts each other and when there's a sense of uncertainty and panic and difficulty and surviving into the end of the day right those are real existential issues and so one needs something which we one can trust completely as accepted widely and everyone can get behind and so that's the problem with a very localized model it has failed in the past for that reason thank you other question Matthew yeah i just wanted to pick up on something you said on when you were talking about uh cbdc so you said that if if you were to implement this you can probably do a national banks but it seems like cbdc in kind of direct competition right for for deposits of this right so in some sense it's like news for banks potentially would make the cost of funding higher maybe they could they could also make them more fun to run because now you have this kind of very safe alternative you should take your money out and so we're wondering if you maybe expand a little bit on how do you see the role of commercial banks in a world in which you could have retail cbdc available to everyone yeah yeah so i think i think the answer to that is that that's right so it's the you know most countries use a two-tiered system which is based on the provision of central bank reserves through the commercial banks that then create commercial bank money through the lending process and that system seems to work pretty well and so central banks by and large aren't looking to destroy that system uh so the idea i i think in in in principle and the deputy governor of the bank of england ben broadman had a speech where where he he said that basically it's what you would do is you want to make the uh central bank money as cash like as possible so you you don't you don't pay interest on it you don't author any of the additional services like overdrafts that would be on on on deposits and in doing so you would limit its competition so if all digital cash did was replace physical cash uh there would be no disintermediation of commercial bank deposits uh commercial banks by reduction in deposits uh so i think that's possible it's also it's also you know possible that a little disintermediation wouldn't be a bad thing if you look at if you look at the united states experience uh uh you know since since lift off in in 2015 the central bank raised the federal funds rate uh many times uh from from from basically zero up to around three percent in in several steps and then back down a little bit uh but but during that time that's so that's so this uh sorry so they raised the interest on excess reserves which which which which led to a raise in the federal funds rate but the interest on excess reserves is the rate that commercial banks get paid to hold your money uh so at a time this was close to three this was close to three percent commercial bank deposits non jumbo deposits didn't come up at all so you didn't get any of that as as a positor so uh maybe a little disintermediation would be a good thing but i think the idea would be that this would be done in a way that manages that again if it doesn't pay interest uh if it doesn't offer any other services associated with commercial bank deposits then it's possible that all you would all you would do is basically do replacing physical cash this would you like to add on this or i'm good so one last question for kistin um so you mentioned uh project casper uh would you be talking so how is the project and was it better than the system yeah yeah so yeah so so why is because i mean the sort of quick history is that you know the price of bitcoin went up to $1,200 back in 2013-14 and everybody was like what's bitcoin uh and so there was a lot of excitement around bitcoin and then people started saying well you know we don't think bitcoin is that useful it's too volatile all that stuff but maybe the underlying technology has value so people started thinking well let's think about distributed ledger technology and what it might be useful for so basically it was exploration so i mean central banks have two reasons for understanding distributed ledger technology one is they have an application in terms of the payment systems and so they should investigate anything technology to see if it's useful they also regulate and supervise the banks and if the banks are thinking of using this technology then they need to understand it for those reasons so partly banks were doing this to just understand what the benefits might be so this new technology was there and so at the bank of Canada we did this proof of concept where we were looking at the simplest application which was wholesale payments so uh every country in the world has a whole cell payment system that facilitates the payment between banks just bank to bank payments and the idea was to do this using a distributed ledger technology and so what we did was we said well what we'll do is is uh the banks will essentially allocate reserves to this to this platform uh the central bank will then create tokens which were we called them digital depository receipts so there there are receipts they're digital assets they're like digital bearer bonds they're assets that are tied to that value that's held by the central bank they were the first stable coins this essentially was a stable coin uh and then these were moved around in the platform and advantages are that you know the transactions are initiated bilaterally it could operate 24-7 there was this idea that it might be more resilient no single point of failure so there are all these ideas but you know when you actually do it you realize it's actually more complicated because one thing you need is privacy in these payments so a payment from bank a to bank b in the financial system can't be seen by bank c and so when you introduce these type of privacy requirements uh it starts to limit some of these potential what we thought it was being potential advantages so in the end it was decided that there were no real advantages uh in doing wholesale payments on a distributed ledger platform but i i want to add that we kind of felt that going in but that we're but this is all was it's all supposed to be part of a bigger picture a piece in the puzzle so the idea is that what we're ultimately thinking is that if you look at it things like securities clearing and salamence and cross-border payments where there are a lot of uh uh different parties involved and and costs associated with redundancies and reconciliation and all this sort of thing that that maybe there would be benefits uh but to get these benefits say in securities clearing and settlement you have to have a way to pay and so that requires this digital this digital tokenized version of cash and so so it was all part of uh thinking about down the road of bigger pictures and those experiments are still going on we're looking at other you know broader applications but but that's it really just started from here's a new technology we should understand it is it beneficial let's let's find out i think the only thing i'd add is that i think regulators as a whole today are under a lot of pressure to compete technologically to offer a technological more innovative regulatory ecosystem now perhaps nowhere is this clearer than in asia where regulators are implementing a variety of different sandboxes to encourage innovation and development of new technologies within their jurisdiction but part of that is also their own regulatory experimentation and innovations like Libra for example which are you know incredibly radical in their proposal i mean facebook has almost two billion dollar or two billion users that almost three billion users rather that would immediately create a rival to any central bank anywhere in the world so this need to experiment i think is becoming immediate and urgent and regulators are responding to it the question is really you know at what cost what's the what are the trade-offs they're dealing with how you know they are ultimately the the last resort the safeguard to safeguard our economic system our wealth our well-being our economic futures the experimentation they're under a lot of pressure to implement quickly how resilient safe and workable will they be jasper i think was a long process of testing and retesting and ensuring that you know this was a real concept this worked or not i'm kind of afraid that going forward given the pace of change and the pace of innovation many regulators may not undertake the same degree of diligence in order to meet local consumer demands thank you very much well thank you very much yesha and rod for this wonderful round table i learned a lot from you so