Shaping CBDCs for Consumers and Businesses | European Blockchain Convention

foreign [Music] yes hello and welcome everyone my name is Erwin valder I'm the senior policy fellow for the European blockchain Association where I had research and advocacy between our members the broader web free community and public institutions and I'm joined today with uh with three out of four originally intended a wonderful panelists unfortunately Emma couldn't join us today however we will do our best to continue on in her stead the topic that we're discussing today is one that is uh fast moving and changing and you could say also very politically charged and that is the role of cbdc's and the way it will shape the world for consumers and businesses as many of you may be aware Central Bank digital currencies have recently exploded into the mainstream with roughly around 90 percent of global GDP currently across different jurisdictions um in either a research POC or an active pilot of a central bank digital currency and our four panelists today will be touching on the various aspects from from a retail and from a wholesale perspective and also from their unique company insights and what they are doing uh either building on cbdc Rails or preparing for cbdc's in capital markets and how they also view the the role of cbdc's in the way that it's going to develop over the course of the next few years so without further Ado I will I will hand it over to uh to James to to kick off the introductions and and we can move on great thanks Erwin are you guys here at the back this is working okay thank you um so I'm James Wallace I work for ripple I've been uh working in financial technology for over 25 years um and my role at Ripple is I lead the work we're doing with central banks around cbdc's and Commercial banks around stable coins and tokenized deposits um Ripple is I'm sure many of you have heard of Ripple um but for those of you that haven't is a 10 year old company based in San Francisco um we are most well known for our Global Payments Network called Ripple net which operates in over 70 countries um we have other businesses and one of which is the Central Bank digital currency Group which I lead um in terms of just sort of framing out briefly the the landscape you know when you look at you know truly digital money so I'm not talking about e-money I'm talking about digital money that you know could be implemented on a blockchain or DLT you know they're really sort of three main flavors there are you know Central Bank digital currencies which are you know issued and backed by central banks um on one end on the other end of the scale there are native cryptos like Bitcoin you know ethereum xrp and so forth and then sitting somewhere in the middle are stable coins and which there are multiple different flavors of stable coins um you know our perspective is you know all will co-exist so cbdc is just part of the ecosystem um you know central bank money in most countries is less than 10 percent of the money uh available um you know crypto is typically less than one percent and the rest of it is Commercial Bank money so you know we're trying to address with our solution all of those categories um we've built a full stack solution from a ledger uh you can issue either on a private Ledger or a public Ledger and then we build a full stack solution for minting Distributing transacting and so forth with uh with digital currencies um our ultimate sort of vision if you like is to help people move money uh very quickly very low cost and a very you know very sustainable way both domestically and cross-border we see you know that a lot of the work that's going on at the moment is really early stages development uh thinking about you know policy thinking about the technology thinking about use cases at the end of the day you know cbdc's won't get widely used if the use cases don't provide value if it's not saving people money or enabling them to do something else that they can't do today so we kind of think of the basic Plumbing as a platform for Innovation so hopefully most of that will be private sector innovating on top of what the central banks build out as the the basics wonderful hi everyone I'm Nadia I'm head of blockchain and crypto asset in case the Depot in France is a kind of a public Bank of development there and we are working on blockchain and crypto from 2015 now on different topics uh could be uh the point of uh cbdc uh the pilot regime identity SSI and we are also a custodian on on crypto for for some public clients and so we are we have a an agreement on on San in infants and I'm also the chair of inadba International Association for trusted blockchain application that is based in Brazil and we are working also on these two peaks with our members and also with the government advisory body uh that we launch onto the subjects in different countries under the point of uh of cbdc I think that I will more talk about the the wool cell part than the retail part because the retail part is something that could be difficult to achieve in in the few years and particularly in in Europe I think for for many uh point of view because there is the the question of the Privacy there is the question of the acceptability of the public and there is perhaps something about around the how we can stay with a kind of inclusion for for everyone it's important for our group because the depot because we are so um leading the the French first and labong postal and it's a mission for us to to have some some access to the bank for for everyone it's not only a question of age it's also a question of people who are we cannot access to to the web or people who have a 90 cap and on the the wool cell I think there is a use case really uh important uh on the the point on the the settlement and we work on that point with uh some French Bank like BNP and credit recol and two startups I think one in the room it's tokeni and um the blockchain is Dev and we try to Launch what we name cidc commercial and table digital currency on the the subject of the the settlement and do inducts with different technology on the tesus and ethereum trying to work also on the point of enteropairability because I there is an issue there that could be difficult to achieve also and uh working on on different uh currency because if you are in the Capital Market you are not working only Euro under Euro but you can work Euro under a dollar and or other currency so it's important to to work on on this topic also foreign good morning can you hear me okay good morning to all of you hola Barcelona I'm not doing a spreadsheet I'm not doing a fact sheet I'm head of innovation for society general based in Luxembourg and I hope you will enjoy my French accent so blockchain crypto is not something new for for us we are working since now I believe eight nine years we order different use cases I'm I'm based in Luxembourg and in charge of the security services side so we already have some live offer in terms of record keeping of cryptocurrency for the client and segment Asset Management so it's already live but we have no cbdc because it's not yet the reality and also what is very important is that we are working closely with our subsidiary Society General first we have made already the issuance of eib and a lot of issuance and in the primary and second secondary market and we were the first one we were the first one to do it in a public blockchain and with the French cbdc about the frost so it has been done two years ago now so we we work a lot on on that topic so regarding cbdc World cell and uh it's part many of our Focus today yes it is something that is necessary for us and uh we work a lot on that topic and for the retail we work also on on that topic but uh yes it's more an exploration phase for the moment thank you very much um you all touched on some some very important points I'd like to pick up on on the uh the role of cbdc's in in capital markets I think would be a good place to start so where do you see the key value add for um for a cbdc in in this sector of the economy if you could pick one or two one or two points yes so uh so I would continue yes it's like finally it's like having a Ferrari a strong car and you are limited to 20 kilometers so uh per hours it's the same so definitely we see there is a strong potential for the tokenization of financial asset and non-financial asset today in the Capital Market if you just have a look to the different figures there is a potential Market of 20 trillions of US Dollar by 2030 with equities with bonds certificate products real estate and so on so there is indeed a strong uh potential but if you don't have the cash on sale you will not have the efficiency what does it mean to have the cash of change that means that you will have to to make the tokenization and on the other side you will have to manage the cash today we have a t plus two t plus 3 in terms of settlement with the cash of saying it will be a t plus one with uh the cache of sign t plus one but with the cash unseen everything unsigned with a cbdc it will be a t plus 0 or t plus 15 minutes let's say tip is 15 minutes cbdc is did is indeed very very important also from Marcus perspective because if you want to make a DVP with a stable coin and another issue from a capital markets and respect respective risk perspective it will make no sense for us so definitely uh the time settlement is very important the efficiency is very important and the last point is for me the cross-border payment which will bring a lot of value added in countries where it makes sense if I could just add one comment I totally agree with your points on the efficiency and speed I think the other thing to think about is um some of the actual sort of systems that are used beyond the the settlement so for example there's a number of projects looking at uh Securities depositories on the blockchain so you know taking Beyond just the currency but also the blockchain technology as a storage mechanism um so if you get all of those together then you have a Ferrari with like three turbos or something right yeah yes I agree with you and I think there is a we are waiting for that for us now five or six years because for example in in case the depot and also we associational we we begin to work on the the security uh lag and we know that it's working on the security like there is no no problem with that uh but uh what we need to to do together I think because uh working on on the on those subject and globally on blockchain and crypto assets it's something that need to be worked by collaboration between all the actors I think it's really important it's that we need to have a reflection on the all the the process and all the actors there and to see how we can make them go on on this new subject and and go to the future of the Capital Market on security and linked it by a digital currency could be a cbdc could be what I name a cidc because I'm trusted so that the Commercial Bank can issue some uh some some stable coin and um the point is that for the moment uh we know that some intermediaries for example the CSD and even the custodian are not really motivated but by this issue because it will disrupt their their model so it's it's a point that need need to be looked and something that was said uh in in one of the room tables this morning is the question of the the business model and the question of the volume because for the moment and what do sj4 is very interesting but there is one operation One Insurance and if you are working on Capital Market and I know that it's difficult for me to to ask our desk to to try to do one operation they said why I will do one operation I I have something that's working and I have I need some volume so the the pilot regime for that it could be a an interesting sandbox in Europe I know that they don't use the word sandbox but I use the word sandbox because it's a Sandbox but it's important to make us work together and it's what we are trying to do for example in France with Barrio plus and all the actors to go on this Market and to make that it could have a sense a real sense but with volume because for the moment there is no volume and even to motivate the the Central Bank not only the European one to issue a cbdc that could work on the whole sale Market we need to have more volume I think it's one of the points I I completely agree and to change gears slightly and pick up on something that you had also said in the in the introduction Nadia was the role of uh you mentioned also intermediaries so I would like to ask the three of you what you also see as the role of intermediaries let's say from from from a retail perspective uh to to change it up a little bit um for example commercial Banks PSPs and the like and how this intermediation system could function and to the end effect for how that would benefit consumers I can I can start for for this question uh for for me there is still a place for banks in the future in the context of uh the retail cbdc uh still need to to have an intermediate with because I just take the example of my mother if I ask my mother to download to download a wallet to to transact with a dgo in the future for my for my daughter it will be quite easy because we know that they uh if you just take the example in Europe or in France about 10 percent of the population they own cryptocurrency and for the 10 percent you have a 50 percent between uh I think it should be between uh 18 and 30 years old so uh for the for the retail I I see there is still a place for uh for the for banks in the future and when we see the different setup uh in place it is in China in the different uh projects there is still a place for banks for the distribution for the onboarding to take care of the kyc and so on after uh one size does not fit all I think that they will build all the retail uh cbdc depending on their needs for example in Europe uh it's still in progress but from what we have heard it will not be a programmable uh digital currency there will be some limitation and so on so there will be some specific cbdc in different countries depending on the needs of the country because the needs in Africa will not be the needs in China will not be the same needs in U.S and uh and in Europe and uh yes uh after we will have to see what we looks like the dgo or the digi uh other currency and let's see where our banks have a role to play but at least to onboard kyc uh collateral probably opening uh wallet after we will have no remuneration on the dgo I think so we will not make anything on that by the way just think about regulation and we will have to to deal with regulation so the regulation and the conception of the cbdc will help us to understand where we will have a role to play yeah I think the um it's very clear that in every instance you know there will be intermediaries of some sort you know central banks are not equipped to you know open accounts or individual citizens right they work with the banking sector um I think we'll see um as Laurence said different flavors around the world I think uh in some of the Emerging Markets you know we we work you know in all continents apart from Antarctica um and we have you know more than 10 active projects and you know talking to a lot more central banks than that and in every single instance there is a role for the commercial Banks you know as a distribution methodology onboarding kyc and so forth um but I think we'll also see in some of the uh Emerging Markets where traditional banking is not well um it does not got a great penetration because they don't serve very well the people with low incomes I think we'll see other other entities whether that be pound providers or fintechs or other startup organizations that will you know they most likely will need to get licensed by the central bank but the central banks just are not equipped to be able to deal with the retail I think we will see different flavors and we'll see different um sets of rules I think one of the interesting things is when you start talking about cross-border and you have you know maybe within the ECB Zone you have one set of rules on how much currency you can hold and then in another jurisdiction it's different and then when you start doing cross-border how does that all work out so that's a interoperability topic which we may come on to later but definitely 100 intermediate is uh for cbdc's just I have a question here we we are all talking about web tree crypto and blockchain and I want to know who is in the room and is not an internmentories because there is here Paradox and I think all of you are is as a moment a kind of intermediaries and the point is that if we are talking about cbdc's for retail The Shield the issue always be the Central Bank okay but what is the the services and the offer that you have around that the bank is not only issuing money for for for the clients it's not the only role of the bank they are they have loans they have saving they are different products in in there and it's the same for the PSP it's the same for some corporates and some government that are working on the subject so I think that the intermediaries will continue to to be there perhaps the business model will change perhaps the products will change but we are all human and we for us I think it's difficult to try to be totally decentralized or if we have the reflection about cbdc to be totally centralized by the central bank we don't talk about that but there is a key point there that it's a paradox to say okay it's it's very great to have cbdc and don't understand that it will be issued by a central bank so so something really centralized it's it's my my first point and uh there is another Point that's it's totally uh something a uh related to to to the police if I'm the public policy and the geopolitik and I agree with the with Laura and could be as a French people and American people in another path could be only agree with that that we don't have the same value the same usage in the different part of the world so it's important to to take care about that and I think the project that we saw in in China that we saw in in North Africa and that we saw in Europe are not dedicated to to the same objective and it could be useful to use the programmability of cbdc I think but here I think in Europe it's not the the main objective that that we saw so and temperature is to answer to your question I think uh will be there the model could change and we will see who will win here just uh this elegantly leads us into our into our next question which all three of you have briefly alluded in James kind of foreshadowed which is which is its interoperability at the end of the day um you know DLT rails they they promise to collapse time distance and and cost uh however if you look at Enbridge or the experiments between capgemini and Swift or for example what the bis is doing um the biggest challenge seems to be how how to intermingle intertwine interconnect these these cbdc Arrangements cross-border what what do you view as the biggest impediment currently to realizing that kind of digital currency connectivity in the future yeah I think the um thirsty I think interoperability as a term is widely used and there are several different definitions so you know one level of interoperability has just been able to interoperate with the existing payment schemes you know be able to go and buy a coffee with your cbdc with your wallet another is the more technical which is the interoperability between different protocols you know different countries will pick different protocols for their their Ledger systems and then a third one which I think is really where you're driving here is cross-border interoperability um it it does depend a little bit on what you really want to try and Achieve if you're trying to achieve you know an atomic settlement across border on different protocols and there's some deep engineering problems that need to be solved you're trying to really solve the more of a Business Solution in terms of actually being able to make the transaction very efficient um you know there's some techniques that could be used for cross-bought like automatic Market making and so forth or digital exchanges lots of different sort of technical aspects but at the end of the day you know there has to be a willingness or a desire from those jurisdictions to want to better do trade and business with each other so there's definitely going to be a need for standardization um but I think we shouldn't wait for that if you wait for standards should we still you know I'll have a beer The Gray beard down to here but I understand there's developed so I think they evolve over time um you know just a quick you know comment on Ripple so we we use um uh digital assets on our cross-border payment Network as a as a neutral Bridge currency so we have a instant settlement without the need for pre-funding um through the use of digital assets so there are some solutions out there but you know that's still relatively small scale when you think about the trillions of dollars that are flowing around the world every time um but yeah I think we need to look at all those three elements of interoperability no I I fully agree with you interoperability uh still is still a problem but it was a problem in the Capital Market 20 years ago so we will not have to reinvent the wheel we have to work as we said for cbdc retail and wholesale they will be built by purpose uh different depending on the different usage so we just need to take that in account it is the case for the tokenization uh it is the same case for the tokenization so we have to to work together on different same protocol on a different on a different standard that's why we we have built also a protocol in SG4 which is public and also we we need to work together with also Central Bank it is already the case with bis as you said there is a eight or nine project with a bug defrost Nigeria I think there is a I think they are working also with cross border payment with different uh cbdc and so on so yes definitely uh this is this is a topic but it's not something new and we have to work together and perhaps I totally agree on the on the interoperability it's that subject and we need to work on that and uh perhaps one of the other subjects you talk about revenue of that remuneration on the cbdc there is a subject of governance because all these actors will have to Define how they will work together where is the responsibility between the people in the the issue on the on the transaction even in the cache and how we work uh the bridges between the some public network and some Consortium Network for example and perhaps another Point that's perhaps some cbdc will not be issued on a blockchain it could be a case even in Europe and so all these this topic need to be worked and I think it's why one of the the key points that for the moments that for 20 uh 23 or 2024 but more for the end of the decade but I hope we will work well on that together all of us and just the last word because I see that I have a friend from us in the panel we we have to be strong in Europe so uh if it is a world sell or return cbdc we still need to to think that in Europe if we are not doing it uh in Europe the other will do it and probably in Europe too so uh if you want to be uh in the future uh not the the best in the world but we have to to work all together in uh in the different topics to to make Europe more stronger yeah I think the uh it's a really good point the the speed of development around cbcs is is all over the map right you've got you know the US is probably going to be one of the slowest so many so much politics and different bodies different people having a vote I know the ECB is probably a little bit further ahead but still a lot of road to go but there are many um smaller countries and smaller economies including some of the Eastern European countries that are already I think the thinking is further ahead and for them the benefits are a little bit more clear right because you know they want to make sure that they can you know their currency remains relevant that they they can do trade they can attract tourism you know lots of different you know use cases um and then it's you know outside of Europe um you know as I mentioned you know Financial inclusion is a big driver so there's lots of different reasons but I think you know competitiveness you know around trade is a key driver for everyone thank you very much for your very insightful contributions I realize Victoria that we've gone slightly over time I do apologize however I hope that everybody did enjoy the panel and we can give our panelists a round of applause that would be us foreign