 So I have the pleasure to introduce the second keynote speaker of the conference, Jean-Charles Rocher. Jean-Charles is written from the metal contribution in banking and financial stability, but also in two-sided markets and digital payment. So we thought he would be the idea as speaker for a session that we share between the central banks conference initiative this morning, and the 15 initiative conference that we continue later in the afternoon. So Jean-Charles, thank you a lot for having accepted our invitation. The floor is yours. Thank you very much, Milo. Can you hear me well? We do hear you well. Fantastic. So good afternoon, everyone. It's a great honor and a great pleasure for me to participate in this conference. I have to apologize for presenting very preliminary work. Yesterday, Jean was apologizing because his paper was not fully finished. My paper is really, really preliminary. But on the other hand, I was eager to get your comments. So please don't hesitate to interrupt me at any time with questions or comments. They would be very welcome. So this is based on, and first of all, again, many thanks to the organizers, to Emma and Milo for inviting me. So this is based on ongoing research with John Frost and Yoon Sheehan from the BIS and Marianne Verdier from the University of Paris. And the motivation is really simple. It's really the observation that the traditional business model of banks is jeopardized by two things, FinTech innovation and big tech platforms. FinTech innovation allows to unbundle deposits and credit which we are traditionally put together by banks. And on the other hand, big tech platforms are rebundling financial services with their core services. And I will come back to that later. This is the idea of Bruno Meijer, James, and Landau. Moreover, as we saw yesterday in the mobile money session, in emerging countries, tail co-operators contribute to financial inclusion by offering payment services as well. So we like to reintroduce the fantastic title of the paper of Boyd and Gertler in 1994. That was, I quote, our bank's debt or other reports are greatly exaggerated. And I think at the time, it was the issue of disindication. And here it's another threat to the existence of banks. So the banks have succeeded to resist the first movements. And that was the essence of the paper of Boyd and Gertler, showing that in spite of competition by financial markets, banks were able to survive. And today, the question is open. And it's even more serious than that because the question may also apply to central banks in the sense that the cryptocurrencies threaten monetary sovereignty of countries. So it's the traditional model of banks and central banks that is jeopardized by these innovations. So the research question that we want to address in our paper is essentially what is the socially optimal industrial organization of the payment system in a digitalized economy? In a traditional economy, an economy of the past, we had a so-called two-tier structure between commercial banks and central banks where commercial banks manage the retail accounts of the final users and provide financial services to the public, while central bank only manages the reserve accounts of the banks. It's the banker of the bank. And the users, the final user, do not access this higher level circuit or payment system. So this is a traditional structure that has been in place for many centuries, actually, or at least two or three centuries. And the question is, is this system going to be preserved by digitalization? The second question related to that is whether an appropriate regulation of payment activities is sufficient to implement the social optimum? Or do we need more? Do we need public provision by the central bank in the sense of a central bank digital currency? So this is the core research question that I'm going to examine. And as I told you, unfortunately, I have more questions than answers. So this presentation will have two parts. First, I will briefly explain what we already have done in the paper. The model we have built and the preliminary conclusions. But a lot remains to be done. And I will essentially look at the five fundamental questions that condition not only the assumptions and the modeling strategy, but also the interpretation, the policy recommendation of our results. And these questions have been examined in the literature. So I will refer to be a survey of the literature, and I will give you my personal opinion on the way people have answered these questions. But I believe that we need to answer them before we can have a clear picture of the future of the payment system. So the first question is related to what I was saying. Are traditional banks going to survive in some way or another? I have always taught in my banking 101 courses that the role of the banks was to provide deposits and credit simultaneously. This is the classical transformation of maturities at a diamond and big big. And the reason was that this was good for the allocation of resources in the economy. The question is, are these old scope economies between deposits and credit still relevant in a digitalized world? Or is it going to disappear? That's question number one. Question number two is associated to the new scope economies between payments and platforms. Let's say we're talking of, come back to that, social networks like Facebook or e-commerce platform that Amazon or Alibaba. So these big techs, these internet giants are bundling payments among other things with their co-activities. Is it something that we, it's probably something we cannot avoid. It will be like that. Question is, how can the regulator or public authority take this into account in order to provide the best allocation of resources and the best service provision to the final users? Question number three is why and how should cryptocurrencies be regulated? It's what is interesting in the domain of banking economics is that you have the impression that it's always the same question that come back cyclically in a cyclical pattern. This question of should money be private or public? What is the fraction of the money that should be provided by private banks and what is the fraction that should be provided by the central bank or public authorities? And it goes back and forth and it says it's an old question being reexamined in the light of technological innovations. Another important aspect that they will briefly touch upon is the impact of payments on privacy and data markets. One crucial characteristic of physical cash is anonymity of transactions. And if we, if physical cash disappears and is replaced by digital currencies, is anonymity going to be preserved for the good or for bad? And what are the consequences on privacy and data markets? And finally, I will address this question of is it really a good idea to create a CBDC? And if it is the case, how to design it? Because there are many different possibilities for designing a CBDC. And so I insist again, feel free to ask questions and interrupt me if you want clarification for your comments. Okay, so if there are no questions at this stage, I will essentially explain to you what we do in the paper which is, as I told you, still very preliminary. Essentially, what we do is is dear to my heart because it's integrating two topics on which I've been working for many years. One is two-sided markets and the other is banking economics. Okay, so we have in the model, we have two sectors or two types of activities. One is online, for example, e-commerce, but it could be a social network. But let's focus on Amazon or Alibaba. It's e-commerce and the point of sale. So you have physical wake and water shops. And so you want to be able to, so some goods are bought online, some goods are bought physically. So in the current situations, we have basically three types of payment instruments. We have what I call bank transfers which could be, you know, card payments or mobile payments or checks or other things. But essentially the idea is that you're moving money from bank accounts to another. And you have the more or less developed stablecoin issued by the platform. And I will come back to what I mean by stablecoin, but it's the idea that the platform is creating or issuing its own currency to some extent. For the physical transactions, point of sale payments, then basically the trade-off is between bank transfers, card or mobile, and physical cash. Sorry, physical cash guarantees anonymity, but the bank services are bundled with credit. So the bank payment services are bundled with credit. So for example, if you use your bank account, you may benefit from the possibility of having a credit line or having overdraft or this kind of thing. On the other hand, the platforms, the platform, here there will be only one platform, does something different. It bundles payments with matching services. The idea that for example, a platform is going to find you the best product on the internet and it's going to use the data, the information collected on your behavior particularly your payments, in order to find for you the best product, you can think of. So this has a positive side, which is that it improves the allocation of resources, but presumably the platform is going to collect the majority of the surplus. So it's not necessarily good from a consumer welfare perspective. So in this model, we have three payments instruments that they call CB&S. We have central bank money, that will be initially physical cash. Then we will replace it by electronic cash or CB&S. You have the digital money issued by banks, which is essentially bank deposits, classical private money that we are used to. And we have the new thing, which is this stable coin issued by the platform, which could be as I said, e-commerce or social network, for simplicity, I will focus on the e-commerce. And so you have these two types of transactions. B&S compete for online activities because obviously you're going to use cash for online purchases. However, if the CBDC is created, then the central bank currency could potentially be used also for online transactions. And CNB, which is the central bank money or the cash if you like, and bank transfers compete for the point of sale transactions. So it's the physical activities. And also there is this possibility that the so-called the tipping or leveraging on this market power, since the platform is really big, it may convince consumers to use also their stable coins, their DM or their other cryptocurrencies or stable coins for purchasing also at the point of sale. And the shop, the merchants, may be forced to accept it if the market power of the platform is big enough. So it's basically an extension of my paper with Jean on the credit cards, essentially. It's really the same idea, except that you have, so yeah. Sorry, one clarifying question. So the platform in the model does not offer financial services. So here at this stage, the platform is only offering payment on top of it. But you're perfectly right. It's also interesting to see what happens when the platform also offers financial services. But for the moment, we don't deal with that. We assume that the superiority of the bank if you like is to be able to provide credit. And for the moment, we assume that the platform does not provide credit. Okay, is that clear? Yeah. One other question. Okay, so what we do is an extension of my paper with Jean. I think Seth has another question. True. So is the fact that the online platform can't accept cash important? Because I think in places like, for example, yesterday, Grab went public. Grab is a big e-commerce platform in Indonesia. And they have lots of outlets that actually will enable people to use cash because obviously not everybody has access to digital finance. No, no, you're absolutely right. I try to focus on the advanced economies, but you're right that in full generality, accepting physical cash could be also a possibility. But the point is that there will be transaction costs. That is probably the fees of the intermediaries. And it will not be the preferred technological solution. But I agree with you that this is conceivable. Okay, so what I was saying is that implicitly, behind all that, you have banks, you have the different business models for the way in which the payments are processed. You have, for example, the classical bank transfer model, where you have the bank of the merchant, the acquirer, and the bank of the consumer, the issuer that has their arrangements between themselves in particular, in terms of interchange fees, and this interchange fees could be regulated. And we also have the possibility for the platform to control everything. So in a sense, the platform is a bit similar to Amex, in a sense it's the three-party system rather than the four-party system. But I don't want to go into that. There are so many items I would have to deal with that I will not go into the detail of the model. So what we do is first we analyze a less-fair situation where there is no interventions by the government. First of all, the payment system is fragmented in the sense that the users need at least two accounts or two types of tokens. You have the physical cash, you have the bank deposits, and you have also the stablecoin. So the fragmentation may not be fully optimal from a social perspective. Another thing is that the platform may use its market power to oblige consumers and merchants to use stablecoins for online payments, but this could be rolled out by the regulators. So the question is, is it a good idea to roll it out? Similarly, the platform may leverage its market power for online activities to encourage the use of its stablecoin on the physical market. But again, this could be probability by regulation. And the interesting point from the technological and preferences point of view is that if stablecoin replaces cash for certain transactions, then there's presumably a loss of privacy. If the stablecoin replaces bank transfer, presumably there is a loss of the credit option, although as Milo pointed out, the platform could also provide credit services. And there is also the argument that we developed with Jean in another paper on the must-take card argument, namely that if the platform has a sufficient market power, it may oblige the merchants to accept the card, to accept the stablecoin, sorry, even if it's very expensive, if the merchants fees are high, excuse me. So in the second time, we look at what regulation alone can do. We don't allow for public provisions of services. We just look at the government as a regulator and not as an operator, if you like. Sorry, Jean-Char, can I ask a question? So in your setting, what would be the first best organization of the market? I mean, as I said, there are many assumptions that need to be clarified. And at this stage, what I have in mind is that the share of the transactions which will be processed by the different payment instruments depends on the characteristics of the transaction. A bit like in my model with Jean, the basically there is a convenience benefit for, in my model with Jean, there is a convenience benefit for the point of sale transactions where you have a benefit from using cash, sorry, a benefit from using the card or a cost from using cash. So depending on this realization, this random variable, you have a fraction of the transaction that are held with card and a fraction held paid by cash. And so the same is true here. That is for the, there would be a certain interior market sharing between stable coins and credit card or bank cards for the online transactions. Depending, for example, if you need credit on this transaction or if privacy is an issue or if different types of considerations. So it's the same idea that there is a first best that could be defined depending on the list of the parameters that I gave you. And of course the question is whether this optimal allocation can be implemented by regulation alone or do we need on top of that public provision? So let me move on because there are many things I would like to discuss. John, I just have one question. Yeah. So I'm just wondering when you talk about the loss of privacy in some situations that may be incremental like Amazon is able to figure out a lot about us without using Amazon coin. So I'm just wondering if you can think about a regulation of cryptocurrency separate from data privacy regulation. No, no, you're absolutely right. The platform already has some information of my preferences, for example, even if I pay with another instruments. So I will come back to that at the end, but you are very ahead of me. So I would like to really start by the basics. And then we would discuss this aspect but it's very good question. So the first thing we the regulators could do is look at the stability of the stable coin in the sense of potential regulation. And this is the spirit of the recent reports of the US president working group on stable coins. Really this idea that we have to be sure that the stable coins are stable, that there will be no run. And that's, so it's very much like a narrow bank you have to be or a money market fund. You have to be sure that the assets of the stable coin of the platform that issues a stable coin are really invested in goods that are in assets, financial assets that are not risky or that it's over collateralized. So you want to avoid the risk of rent. So this is in effect considering the platform as a bank or a narrow bank. Another important aspect of regulation is the to force interoperability between the stable coins and bank deposits, for example. As I said, in this model, we have a fragmentation of the payment system. You have different payment instruments. So I would not say that we have really different monies. I can discuss that later. Maybe it's the euro or the dollar everywhere, especially if the first point is in sure that there is a one-to-one conversion of the stable coin in euro or dollars. But you still have fragmentation. You still need to have several bank accounts, several types of tokens or accounts. And so you want to encourage, to minimize the transaction costs between transferring money from the different kinds and in particular requiring interoperability. There could be also issues related to what I was talking about, namely the use of interchange fees in order to pump up merchant fees to avoid this exploitation of the must take card argument. As I said, there is this question of potential regulation, which I already alluded to in the first point, where you want to essentially regulate payments of these providers, even if they are not known banks, if they don't have credit activities, you want to regulate them to avoid rents. Another aspect of regulation is, of course, antitrust, because of the market power of the platforms. But I mean, to some extent, the whole movements on open banking was initiated by the observation that there was not enough competition in the banking sector. So it's not only a competition between the online activities, but also for traditional banking activities. And finally, this question of a level playing field between banks and non-banks payment service providers. So let me move on, because I'm running out of time already. The third point that we examine in the paper is the impact of implementing a fast or instant payment system. Many countries have adopted this fast payment system, which is clearly an improvement. But different styles of instant payment system are possible. I listed here a few examples, more or less in our chronological order. In 2004, Mexico started this system, a SPI or CODI, which is operated and regulated by the central bank. So the central bank does everything. In the UK, it was different. The faster payment system is operated by private banks and it's only regulated by the Bank of England. In Sweden, it started slower because swish was only essentially a person-to-person payment system. But then it evolved to include a person to businesses. And it uses QR codes. That is, you don't need to have a bank account. You need to have some key or a bit like in India or in Brazil. In Brazil, you don't need a bank account. The PIC system in Brazil is also very efficient. And if you compare with swish, for example, it's universal in the sense that you have all kinds of payments. Person-to-person, person-to-businesses, business-to-businesses, person-to-government, business-to-government, etc. And you don't need a bank account. So, non-bank-sperm-on-service providers can allow you indirectly access to PICs. It works with a key, which could be your email address, your cell phone number or QR code. UPI in India is also similar, except that it's still, if I'm not mistaken, limited to bank accounts. But you have this mixed system where it's operated by an entity which is a private-public partnership and it's regulated by the central bank. And interestingly, although we have tips in the euro area, the FedNow project is still lagging behind. And it's very interesting to see that the emerging countries are much ahead of the US or even the euro area because they have, to some extent, leapfrogged to the new generation of payment systems. And the last thing we do in the paper is we look at the impact of the central bank digital currency. And the question we ask is, what is it that you can obtain with public provision that is the government himself providing a payment service, to some extent? What is it that you can do with public provision that you cannot do with regulation alone? And so you could think, well, maybe it's related to the imperfections of the regulatory system. And in fact, if you look at the experiments, different experiments of regulation of credit card into change fees in the world, and Jean and I worked a lot on these questions, they are not very successful. And interesting, I mean, there are several episodes. I mean, I don't want to go into detail, but the latest one, if I've made a mistake, is that Amazon has decided to reject the UK visa card since Brexit, simply because visa decided to increase massively the interchange fees before they could not, because there was this rule in the European, there was this capital interchange fees in the European Union. And since Britain has left, now visa has raised interchange fees. So it shows that the regulation of interchange fee doesn't work very well. So one idea is that the CVDC can do two things. First of all, stimulate competition for payments and also for credit, but also eliminates the risk of domination of a limited number of platforms, like we have seen in China. And I will come back to that in a moment. But the problem is one of the problems that I see with this public provision is that it's difficult to preserve competitive neutrality. If the central bank is both a supervisor and an operator. So we have to think of a regulatory structure that avoids this lack of competitive neutrality. And to some extent, this kind of mixed duopoly solution or mixed oligopoly solution exists already for a large value payment system, because in most developed countries, you have for interbank payments, for large value interbank payments, you have coexistence of a private system run by the banks themselves and a public system run by the central bank. And this issue of competitive neutrality is already there. And finally, I would like to insist on something which is a bit surprising in some way. Is that a priori you would like to minimize transaction costs, right? You would like to say I can transfer my different money from my different accounts or from one token to the other without transaction costs. Excuse me. But if you do that, you augment the risk of a digital run because if it's very easy for a user, for a consumer to transfer all his money from one account to the other, it's possible the high call for instability of the system. So now that I've told you exactly the type of approach that we have started to adopt, I would like to insist on five fundamental questions. As I said, they are relevant to the assumptions, to the modeling strategy, but also to the policy interpretation of our results. And I will start by this question of the economies of scope between deposits and credit. So are these economies of scope between deposits and credit still relevant? Though as I told you, this is what I teach in my 1911 course. And it's an old idea of Fisher Black in 1975. That is the traditional business model of banks is to manage deposits and credit. And there is an economy. There are economies of scope between the two because by managing deposits, bank learn something about the credit worthiness of customers. However, this business model can be disrupted by FinTech. And I believe that Uda is going to present this paper with Chris and Paolo and Zhu where they look at the competition between FinTech and traditional banks for payment services and entry of FinTech, stimulus competition from payment but may reduce bank lending because it makes the funding of the banks more costly. Of course, when you allow FinTech to sell payment data to the lenders, then the part of this effect disappears. But interestingly, the impact on consumer welfare is ambiguous. But I don't want to say too much because I think Uda would be in the best position to explain these results. Another thing which is important is that when you introduce the possibility of FinTech lending, then when borrow or share the data, which is the hope of the European Commission that PSD2 and the open banking, the idea that there is not enough competition for lending. And so if you open, if you allow consumers to give access to their data to third-party providers, then it would be wonderful because it would stimulate competition between them. Problem is that Hei, Wang and Zhu have shown that there may be unintended consequences of this phenomenon that, in fact, at the end of the day, consumer welfare may decrease after open banking is introduced. Another interesting paper that would be presented, I believe, after my talk, which is this paper by Gauchvali and Zhang, and I think it's the one presented. This is why his name appears in bold, which is this idea that the data on cashless payment to low FinTech lenders to evaluate creditworthiness of firms better than banks. And so I'm really looking forward to the presentation because I want to, there is something I don't fully understand. This is a citation from the abstract. And they say that the synergy between cashless payments and credit supports data sharing and open banking. And leads to, and I quote them, an alternative banking model without a balance sheet or traditional banking relationship. So the idea is basically that you're going to revolutionize banking by exploiting this synergy between payment data, cashless payment data and lending. But I slightly disagree with that and maybe that's a misunderstanding on my part because I believe that the synergy is really something that underlies the traditional business model of banks with going back to Fisher Black. And what Gauchvali and Zhang focus on is a different thing. Is the relationship banking, the idea that you need to have several periods of relationship so that the bank accumulates or produces soft information inside the bank. And this is opposed to the more modern type of artificial intelligence use of big data and payments, which is a hard information produced outside the bank. OK, so you have the, of course, the choice between the two techniques. But I believe that in the current state of the regulation, there is not enough. There is not really a level playing field between banks and non-banks in the sense that banks contribute to improving the system by producing this data or by giving the access to this data. But they cannot benefit from it. OK, so my question to Yao and his co-author is, what is traditional banks also use FinTech methods? And maybe after all, big tech platforms pose a more serious threat to traditional synergies and FinTech. And this is what I really think because banks could buy FinTech companies, could use FinTech artificial intelligence. But there is something more serious, which is related to the big tech platforms, not the FinTech, but the big tech. So there is this paper by Berg et al, which shows that digital footprints, in other words, what you do on the Internet, predict consumers' default better than traditional credit scores. And similarly, there is this paper of my two co-authors, John and Nune and others, on a big tech credit in Argentina, where they show that the small Argentine firms that use big tech credit perform better than their competitors. So is it after all the end of bank lending? So this is related to my question of survival of traditional banks. And finally, sorry, it's not finally, it's still two slides. I was talking of the two tier structure of the payment system. Remember, bank offerings, payments and credit services to financial users, the central bank, only managing the transfer or reserve in between banks. Is it something that we want to preserve? Is it something that is efficient in a digital economy? Because there is a simple alternative, which is essentially already in place in some countries, to some extent, in Switzerland or UK and Mexico, which is to offer a real-time payment system to everyone, including non-banks and large corporations. So this is related to the design of the CBBC. Who has access to bank reserves and who has access to central bank reserves and who has access to the fast payment system allowing to transfer them. And this is related to the title of this paper of Dirk Diepelt reserve for all with a question mark as opposed to something more interrogated where the CBBC would not disrupt the two tier structure of the payment system. Finally, I would like to say that the question is also related to what the Brenner Meyer et al. considered to be a fundamental change in the business model or in the structure of the payment industry before the banks were at the center of the model and they were mediating a relation between different types of consumers offering different types of services. And now it seems that the center is really not, it is not really the bank itself, but the platform that provides access to different kinds of services, but it's not the bank itself. The lending activities is outsourced somewhere, et cetera, et cetera. And I'll come back to that when I talk about China. So now, second point, the consequences of the new scope economies between payments and core platform activities. As we know, the big tech giants, and I will illustrate it by Ngroup and Facebook or Meta, it's called now, view themselves at quote unquote lifestyle platforms or Metaverse, which we use the term as we come back, where users can spend if they want the entire life. You don't have to be in the real world, you can be on the platform. You can chat with friends, watch videos, order meals, buy goods, books, etc. and pay your bills. So why would you need a bank account when your platform, for example, and financial can offer you all the financial services that you can dream of? The scope economies between e-commerce and payments started by a very simple escrow account that were used to build confidence between the buyer and the seller. You buy something on the internet, you don't know if it's exactly what you want. The seller don't know if you're going to pay. So the idea is that you put some money in deposits with the platform and then when you give the green light to the transactions, then the money goes to the seller. But I mean, immediately Alibaba realized that it was very easy to extend it to add many other financial services to the simple app. And this is what we have now. The end group is a fantastic conglomeration of different activities. So Alipay on online mobile payment, Jai Tiebay on small business lending, MyBanks, etc. etc. And so if you look at the chart on the right, you can see that the structure of the revenue of the end group, which was initially concentrated on payments in dark blue, is now much more diversified and includes credit in light blue, insurance and asset management. But of course there was a regulatory backlash. As we know, in November 2020, the Chinese authorities decided a rectification plan, restructuring of end group in a financial holding company submitted to financial regulation and supervision by the Bank of China. By the way, it's very similar to the conclusion of the U.S. president working group. A stripping of Alipay platform from financial products, consolidation of lending operation into a single entity, the Chongqing Ant Commercial Finance and the downsizing of your bow, which was this huge money market fund that grew of the simple escrow account used for customers of Alibaba. And so the official motivation, of course I write official because I know that there were also political issues, but the official motivation, which we have taken into account, were the protection of consumer rights and the privacy, the limitation of market power and also the notion of a level playing field between all kinds of competitors, financial intermediaries, the banks themselves, the FinTech PSP, the non-bank's payment service providers and maybe the other big tech because Alipay is not the only one, you have also paid the same. So let me now move on to the third question. And as I said, there are more question marks than answers. Why and how should cryptocurrencies be regulated? So of course there is this old debate about the denationalization of money. It comes back and forth regularly. So the idea that maybe it's more efficient to have competing monies and that the monopoly of the government is not a good idea. But if you look at the facts, competition between private monies doesn't work so well because of the complexity of exchange rate risk, you have to transform one into the other. You have a transaction cost, you have risk to run. And so if you look at a recent example, the free banking era in the US in the 19th century, more recently the Liberty dollar that lasted only 11 years in the US doesn't seem to be working very well. I will not touch upon the Bitcoin aspects or the cryptocurrencies in general. I will focus on stable coins. The reason being that first of all, there is already a large literature to which Catherine contributed eminently. But also it's more of a vehicle for speculation in my opinion rather than payment instruments. So I will not talk about that. I will concentrate on stable coins. Stable coins, which I believe are more promising instruments and the characteristic is that in principle their value is pegged to one official currency, the dollar or the euro. And to some extent, they are very similar to money market funds that provide the payment services. So even if you have the same currency everywhere, even if those stable coins you consider them as dollars or euros, the payment system is a fragmented. And even if you prohibit any fees for transferring one into the other, which is already a big assumption, even in this case, you still have a fragmentation because you have to manage several accounts and it's more complicated, less efficient than having a single payment. So I'm not sure. And this is something I would like to discuss with you. I'm not sure that in the long run, many cryptocurrencies can survive. So there is this issue of platforms and tokens. There is already a large literature on the incentives of platforms to issue their own tokens, if you like. And as you and Rogoff point out, this is not new. We used to have stamps. We used to have air miles, et cetera. So the idea that you want to encourage customer loyalty and to some extent it's also a way to exert market power because you want to lock in your consumers to some extent. But interestingly, you and Rogoff show that in their paper at least, the platforms make more profit if the tokens that they issue are non-tradable. That is, they have to be exclusively used for buying items on the platform. So the platforms do not want to issue money, general purpose money. Bernard Meyer and Pine in a paper that I've only seen slides but not the paper itself. I couldn't find it. But I discussed with Marcus a little bit. So they have a different view. They consider that in the digital era, you can do better. So it's not the old stamps things of the 1950s. It's something more, you can view digital tokens as what they call smart bills of exchange in the sense that you can do more things. You can use a, it's a programmable money. You can use smart contracts and stuff like that. And they compete with traditional currencies because they can be both a means of payment and store of value. But then if you want to have a store of value, you need to maintain a reputation. You need to avoid runs. And there is a trade-off because this is costly. There is a trade-off between senior-age revenue and cost of maintaining reputation. Michael and Wei have an interesting paper where they argue that tokenization might be a commitment device to prevent a platform from abusing its users. It's a more appealing funding scheme for platforms with a weak fundamentals, but probably not a means of payment. And now you have to draw the line between crypto assets and cryptocurrencies that are different things. What are the challenges created by stable current? Well, if I go to this report to the U.S. president of the working group on stable current, I quote Yellen's introduction. She says stable coins have the potential to support beneficial payment options, but there is a big but current oversight is inconsistent and fragmented. And the concern that there might be destabilizing runs, there might be fragmentation of the payment system. There can be excessive market powers of the issuers, especially when it becomes big. Of course, you could argue that this report has been written under the influence of the U.S. banking industry and also the regulators and the FDIC in particular, they have their own political interest in there, but basically the recommendations of this working group are interesting. And as I said, that basically requires stable coins issuers to be regulated financial institutions, like Max. They can impose maybe capital requirements, liquidity requirements, and the minimum is the guarantee that the assets are safe or overcollocated. Similarly, they want to require the other intermediaries which are the non-bank PSPs or the custodial wallet providers to be supervised. The question is how much? What kind of supervision? There is something I never understood in the U.S. regulatory literature which is this obsession for the separation of banking and commerce. I don't think in Europe we have the same obsession, but basically they want to separate stable coins issuers from commercial entities, and this is not entirely clear to me. And finally, again, this notion of interoperability between stable coins, which is also very easy to understand. Now, let me briefly discuss the impact of payment methods and privacy in data markets. As I said, and as you know, physical cash preserve privacy. That's essentially a big reason why it's still used a lot in some countries like Switzerland or the U.S. Sorry, can I ask a clarifying question? Sure. So can you explain what interoperability between stable coins means? Because I don't understand when people say that. Say it again? What is the question? When we say interoperability between stable coins, is that not just the currency exchange? How does that look different from currency exchange? No, but I guess it has not only to the fact that you can exchange one with the other as a feature, the one for one as a parity, if you like, at par. But also presumably regulation of the fees because if you have a par, but there is a big fee for the intermediary, effectively there is no interoperability. So I think it has to do with the regulation of interchange fees basically. Okay, thank you. Okay, so I was talking of physical cash and privacy. For digital monies, it depends a lot on the way they are designed. And in fact, you don't want to eliminate the use of data because I believe that data generates huge network effects. It's a so-called DNA loop, data network activities. If you get data on the payments, then you can offer better services. But the problem is that these network effects, you don't want to kill them, but they can be a mixed blessing for users. On the one hand, the DNA loop can create a virtuous circle driving greater financial inclusion. This is particularly the case in emerging countries. Better services and lower costs. On the other hand, it may impel the market for payments towards further concentration. And the look at the example of China, where Tencent and Alipay have like 85 or more percent of the market of payments. There is a literature on big tech and big data, but it's not specifically focused on payments. And so you have the paper of Kirpalani and Filippo, where platforms gather data that users and they sell it to merchants, et cetera. I will not go into that because I'm running out of time, essentially. And again, Michael, as an interesting paper with you and Amway Zhang, where the platform's extensive access to user data may allow them to take advantage of users' vulnerability to skip it because I'm running out of time. There is also this literature on privacy, the market for data, the notion that the data on previous purchases allow firms to price-exterminate users, in particular, the tailoring, calcutture, and paper. You also have the paper by Doshin and his co-authors on the fact that individuals do not fully internalize the cost of losing privacy when consumer tastes are correlated with observable characteristics. And finally, there are a couple of paper by Garrett and Coasper who rightly point out the fact that when payment data provides information about consumer taste, in the long run, the only stable outcomes of those models are data monopolies. That is, there is a tipping phenomenon. At the end, only one big platform survives. And they argue, I don't fully understand the argument, but they argue that electronic cash, a CBDC, maybe a way to monetize this privacy and avoid the use of the market power by the data monopoly. So let me finish by discussing why creating a CBDC and how to design it. First reason, of course. Just to tell you, I know this is the last question, but it's five minutes. Five minutes, okay. Perfect. So a first reason, which is perfectly reasonable and that is put forward by central banks, is that we do that because it responds to users' needs. And it's true that in many countries, the share of cash and data transactions is falling, especially in the European, in the Euro area, for example, or in the... But not so much in the US. And not so much in Switzerland. And so the argument goes, that is part of the central bank mandate to provide legal tender to all in the convenient form to central bank money. And so if people don't want cash anymore, you will give them digital cash. Another reason which I believe is really important in the back of the mind of the regulators is that they are fed up with merchant fees for credit cards and even debit cards. And that is this old debate on the huge costs of digital payments for merchants through the manipulation of interchange fees. So in many countries, even if digital payments are more efficient than cash, they are also very expensive. So the idea there is to stimulate competition. However, there is a large literature, a sub-sample of the papers, of the mostly macro-monetary papers, who argue that be careful with the CDBC because it may lead to a digital run. That is, if it's very efficient and simple and cost less for depositors to put their money in the central bank rather than at the commercial bank, you will do it. And so it will be more efficient, but it will also crowd out bank deposits. It will raise banks' funding costs and decrease investment. So some people like Dirk Nippel suggest that the central bank could recycle the fund but lend it to the banks. But this is not always a good idea because it may expose the central bank to counter-party risk and favoritism. So the role of the central bank to lend to the private sector. So the idea here that is defended by some, like our Burma, is that you want to have a CDBC, yes, but what they call a minimally invasive. You want to maintain the two-tier structure with commercial banks and central bank, but in a minimum way, in a way that does not perturb the two-tier payment system. And the idea is to have a limited financial system footprint in a way that CDBC could be designed to have a limited financial system footprint like cash today. And this chart shows you the volume of cash in circulation, cash in red as opposed to bank deposits in blue, as a percentage of GDP in several countries. And as you can see, cash, even if it's still used for retail production, in terms of volume in circulation is very, very small. And you want, maybe, to do the same for CDBC. You don't want CDBC to be huge in terms of volume. So, of course, you can think of different types of CDBC. As I said, the current system is the top system where the CDBC is only available to financial institutions. It's a two-tier system. And now you want to make it available to the general economy. And so you have different possibilities. And depending on the anonymity, absurdity that you want to preserve, you may have account-based or token-based. I don't have time to go into that. So let me finish by saying that there is one aspect in which I believe that CDBCs could be a big improvement to the quality of service for financial users, which is cross-border payments. Cross-border payments are extremely expensive. And the organization of the foreign exchange market is a mystery to me. I don't understand the way it is organized, the flows that are huge, the fees that are very high, especially for retail users. So I don't think this is an efficient system. So suppose that most countries agree to create CDBCs and connect these CDBCs through more efficient systems, then it could improve considerably the functioning of the foreign exchange market and it could improve the quality and minimize the cost of service to the financial users, which would be good for the economy. But of course, maybe some intermediaries would lose if this organization is above. So let me conclude by saying that as you all know, the payment system is a vital element of the economy. For centuries, at least two or three centuries, it has been organized as a public-private partnership between the central bank and the commercial banks. And the digitalization of the economy implies a need to redefine this partnership. So of course, there is a pressure by central banks and regulators to implement the CDBCs. It's not entirely clear to me whether a CDBC is necessary to organize a socially optimal organization of the payment system. So maybe a fast payment system or instant payment system with an appropriate set of regulation could suffice. And in any case, I believe that a one-size-fits-all solution is unlikely to be optimal. I believe that the pros and cons of CDBC depends on countries specific, like for example, the users' preference for physical cash and anonymity, the degree of financial inclusion, and finally, the intensity of bank competition and data governance arrangements. And I thank you very much. I'm sorry for being a bit too long. Thank you very much, Jean-Charles, for a very interesting talk and also for having raised our appetite for the next paper in the session. I propose that we take a few minutes from the break just to, if there are questions for Jean-Charles, you can just speak or raise your hand. So I just start with one. You mentioned a trade-off between value for privacy and the data production that might depend, for example, on the degree of financial inclusion. So you seem to suggest that, for example, in developing countries, the value of generating data and so being able to offer other financial services might outweigh the value of privacy. Is this correct? Yes, but again, as I was alluding to, there is something intrinsic and the user's preference is for anonymity. It's something, you know, in the DNA of the country, people are used to a certain degree of privacy. And if you look at the surveys that have been done by the BIS, if you compare the China situation and the Swiss situation, it's completely different, right? So there is one degree of idiosyncrasy in the preferences for anonymity. And then it depends a lot on what you can offer to the informal system in emerging economies. That is, of course, people are reluctant to enter the formal system because they essentially don't want, they want to avoid taxes. But in the end, it's the task of the government to convince them that they will benefit a lot from, you know, being part of the payment, the official payment system, in particular through the use of the government of, you know, poverty alleviation system or this kind of aid to the poor if they can be mediated through these mobile payments or this, you know, official payment system. I think that that's a way to convince them to participate. And then several empirical work, for example, from my colleague in Geneva on China, on the fact of the, you know, it's also this notion of the platform lending being extremely efficient, particularly Alipay and financial, extremely efficient in stimulating small businesses. So in a sense, maybe people will react with other people. But in a sense, I would say that microcredit in the end was not very successful. But maybe, you know, mobile payments or fast payment systems could be a way to really stimulate investment for small businesses. I see Matthew as a question. Hi, Jean-Charles. Yeah, I had a question about this level playing field you talked about. So the fact that, you know, and the PSD2, for instance, banks have to give access to information, but there is no reciprocity on the part of index. And so I was wondering if you, like, how, so this is actually calling for changing this regulation on, you know, the given access to data and how, what kind of regulation, how would the regulation, like better regulation or more fair regulation look like if we really want to have, let's say, a competition between big techs and banks? Well, it's a very good question. I believe it has to do with the better understanding of the production of new information. That is, there is some data which is available and there are several ways to use it, particular credit scoring methods or you have this big data methods, machine learning, et cetera. So the question is, what is the best way to use this information for the sake of, for the public at the end? And I must say that I don't have a clear answer to a clear view on that. So I think we have to dig a bit more into the production of information. What does it mean? What kind of information is useful and how can it be processed?