CBDC: New Forms of Digital Money

[Music] good afternoon everyone thank you for staying with us for another amazing session we have the honor to have an amazing set of panelists and adam will do also an amazing job moderating the session so that's all for me thank you for being with us and adam the stage is yours thanks very much daniel uh for the invitation uh and for setting expectations high for this panel which actually i know our experts will definitely be able to deliver so my name for those who don't know me is adam gigan i head up government affairs for american express for europe middle east and africa based out of london and so i have a great opportunity and privilege of getting to engage some of the experts across that region on a number of interesting innovations in payments and obviously dlt and what we're going to talk about today central bank digital currencies one of the key trends i'm very privileged to be joined by some real experts in the space they can help talk about both the political challenges in bringing cbtc's to market uh the sort of policy and regulatory implications that need to be thought through by governments and then also the sort of macro prudential and you know technical challenges for central banks to actually bring these things to life and so to introduce my great colleagues here we have obviously dr uh your cookies who is up until very recently the state secretary for finance in germany has now been elevated to actually lead for the new german government or eu and financial affairs supporting the chancellor so i'll be setting the scene for one of europe's leaders uh as the key market uh secondly i'm very happy to be joined by andrea who's the deputy governor for the bank of israel who again is one of the most innovative central banks that we see around the region but is also clearly moving very fast in the cbdc space and andrew is the person who's actually spearheading the efforts to make that work in practice so has the challenge of delivering on the great expectations of both uh the governor and the government uh in israel and then certainly last but not least we have peter kirsten so again many of you will know it's one of the most innovative thinkers we have in the european commission and leads on a lot of the work that dg digifisma and other key interlocutors do there to drive forward innovation and make sure that europe is not left behind but in fact actually defines and leads the charge on these great new trends that we're seeing central bank digital currencies being one of them um it's going to be an exciting day today um as you may have noticed 2021's been a busy year when it comes to uh private crypto activity we've had all-time highs for digital assets we've had all-time highs for use of stable coins the volume of transactions i think in 2021 being 1 000 over 2020 and even though they're just at 0.5 percent of the total payments volume globally you know the opportunity for that increase year over year is clearly there and in and around those core areas where dlt is being used in the financial system there's a myriad of new use cases and obviously associated efforts in nfts and in loyalty and digital identity that clearly will have major impacts on governments and the financial sector what we want to talk about today though is the fact that that private sector innovation is clearly happening means that governments potentially need to now react and certainly we're seeing regulation on private crypt assets picking up around the region and again you will have heard some of that talked about in earlier sessions and what we're going to talk about today is potentially the second big reaction which is a challenge to governments and central banks to maybe be innovators themselves and particularly over this fantastic new innovation around central bank digital currencies that offer so much promise and so much opportunity uh while probably quite a few challenges as well so the way we're going to try and address this today is really to talk it through in three sections first essentially why do we need central bank digital currencies what are the problems we're trying to solve secondly what do we really mean when we say a central bank digital currency what are going to be its functionalities how is it going to work and again does it really all need to be done just by the central bank and then lastly how is this all going to happen how's it going to come to market and again how quickly potentially are we going to see this real and live and are we going to see the speed of action we're seeing in other regions here in europe um and so that's what we're going to try and run through to kick us off and essentially figure out how innovative each of my speakers is today um i thought i'd start with a quick tour of toddler to find out again what your real personal experience is when it comes to payments and new use cases so maybe dr cookie starting with you give us a sense of what your experience in daily life uh when was the last time you use cash maybe how many great phone apps uh do you use daily and then also um you know have you ever actually bought anything with a dlt acid or token uh in terms of the last few months and years over to you josh cookies so the the latter um is the answer is yes but only on an experimental basis because i uh i participated in uh in sort of a test uh trial run um so i i would say i get half credit maybe for that because it was a it was only a sort of an artificial transaction but uh but at least i'm i'm trying um usage of cash is going down massively and i'm very happy that germany um maybe the only um sort of positive impact of the last months um of the of the crisis is that uh the due to the hygienic concerns um all of a sudden in germany in bakeries in taxi cabs you can all of a sudden pay with uh with uh with cards so that's completely new um has never happened germany was a very cash-focused society on a relative basis uh to the rest of the world we still are but on an absolute basis uh you're able to pay digital and with cards now um in places that uh that never were possible before so the the adaption the adoption rate of nfc um has increased massively and i'm taking heavy use of that right so as you say a silver lining from the very painful few months if not years now we've all been living through um and maybe andrew over to you next israel one of the more innovative jurisdictions in terms of generating companies uh particularly in the payment space what's your daily experience there in terms of cash great mobile apps and then maybe nfts well on the cache i think it's rare that we'll do more than one or two transactions per week using cash the strange thing though is if i go out i still feel naked if i don't have some cash in my pocket even though it's very unlikely i'm going to use it i think that's more of a generational problem my kids have no such problem i don't think they have cash in their pockets but it doesn't seem to worry them but for me going out without the cash there still feels a little bit strange in terms of the use of payment systems and cash in israel we're a sort of bipolar society in that there's a large section of society that's using all the payments news payment systems out there the apps and whatever and will rarely use cash but there's still a fairly large part of society that is using cash as its major form of payment so it's not that we've reached a cashless society nor do we actually look to reach a cashless society we still think cash has a role to play but we differ between two sort of use of cash by normative people that's fine but a large part of the cash that's been used in recent years and is out there it is held by more problematic elements of the population i always find in israel it's one of those great innovative i guess origin places for a lot of companies but the day-to-day experience even when i'm using a card or finding cash as you say seems quite polarized sometimes and peter maybe over to you brussels um we all go there quite a bit uh again yusuf of electronic payments has got better certainly probably during the pandemic has your experience been the same as york and andrews um yes indeed well if you ask me personally the last time i used cash i had to think about it and it's about three weeks ago i'm a bit like andrew i carry cash on me but i actually rarely use it because i find it very inconvenient and the most inconvenient part about using cash is that you have to deal with the change which you get so i try not to use cash at all so in three weeks for me how many apps do i have on my phone i had to count and i would say that i have about a dozen that i regularly use and then a few dozen that i tried but don't necessarily use i got way too much junk on my smartphone but about a dozen i use very regularly have i ever bought um dlt based assets and told them yes because i don't think you can make policy work in this area if you haven't tried this and i think i'm beyond the experienced user this or the experimental user getting into the experienced user a bit that's great that's very helpful scene setting and probably also to be transparent from my side so yeah same i i very rarely use cash right unless um i i really need to and that's generally when we're on holiday with my wife french family uh somewhere in normandy where sometimes the total coverage of electronic payments isn't great and yeah certainly for my kids i have a four-year-old you know whenever we play shop he goes beep whenever he's buying something as opposed to hanging over notes and coins so yeah the generational change i think will catch and as you say i think a bit of experimentation and learning when it comes to nfts and dlt tokens in the asset area as with most people you know you never buy enough when it goes well and you always bought too much when you think it went in the wrong way but that's a great scene setting guys and i think that's maybe how we say we're into the first section which is as you can see there's a lot of options a lot of choice when it comes to uh financial services particularly payments today um central bank digital currencies often are seen through a retail or wholesale lens um again there's some opportunities that they could maybe bring to solve problems but from your perspective what are those problems you know why do we need a cbdc and maybe first we'll start with you andrew in israel from your perspective what are the problems that the cbdc is going to help solve but i think the the initial call line to make is if you ask people in the street they don't see a problem the person in the street is happy with the payment systems he has he thinks he thinks he has um central bank money in his put in his um card and in his bank account he only realizes he doesn't have central bank money in his bank account or in his cars or his wallet when there's an event like northern rock in 2008 but for the most part you ask him do you need more central bank assets but um money but the answer is no i've got plenty so i think on the side of the consumer when we when and if and when we do go ahead with the cbdc we'll have a real job persuading him to use it because we'll have to produce sufficient value in the the product we put out there that we're interested in enough to use it over and above the the sort of products he has today um as i said before we're not looking to replace cash we think cash continues to have a um a role to play what we want to do is to try and introduce more competition into our payment system our payment system is is fairly dominated by a few players and there's high barriers to entering what we would hope a cbdc uh to be able to do is to reduce the barriers of entry to allow more players to come in there and have a level playing field against some of the larger players that's what we'd really look to do but we still have to persuade the consumer there's something in it for him fascinating and yeah i think particularly that that challenge of competition which has always been the case particularly in payments because the network effect it seems like cbdc's as well as maybe other innovations like instant bank uh payments as a way to crack that nut um dr cookies maybe from your perspective um again uh germany is going to be probably one of the loudest voices in the room already is within the ecb in terms of how quickly we move towards the cbdc and what it looks like from the more political perspective there you know what do you think that's going to solve for again german voters and to deliver on in terms of the government's new priorities well i think the i completely agree with andrew that it's not a foregone conclusion that anyone will actually use cbdc and i've said this in many fora that i think the the focus at the moment is only about the adverse case of wrong-way risk where there's a crisis and everyone flees into cbdc and you know thinking about that scenario is completely legitimate and and necessary from a financial stability perspective but from a usability perspective and an adaptability perspective and i'm very happy that the ecb is also thinking about the normal case i.e what happens in normal times and how do we actually get people to use a potential cbdc offering if and when it comes and for that i think it's absolutely necessary that that the central banks also think about the the um the interface to the client where um it's not a foregone conclusion to me that central banks are the are the best um i'm able to provide convenience and innovative power um of connectivity to to retail clients so i think the the challenge will be for the central banks to find the right um place for handing off the the um the cbdc's into distribution networks into innovation networks that then build around a core of of central bank currency and you know that's absolute daily business in all other areas where there's always a handover point between the central bank activity and the private sector activity so i think that delineation will be specified more in in this case the other element that i want to mention is um and we've said that many times as german government and we don't think that the the limitation to re retail cbdc is is appropriate and we also don't agree that we um through target and tips we have very very innovative systems absolutely correct for europe but we still don't have um the the the all of the fully specced out requirements of a wholesale central bank digital currency and i think there's still there's still a lot of work to be done in terms of uh also um the the question of um where do we make use of programmability of a um of a digital currency whether it's a central bank currency or a commercial um bank tokenized currency that that i think is uh is the question and again where is the handover point between the two yeah it's fascinating and we'll talk a little bit about the architecture later but i have heard often sometimes more of the record that that does seem to be almost a bottom-up call for more wholesale use cases and again the fact that you develop that whereas it's more of a top-down call for a more retail use case again because of some of those points around competition also maybe some sovereignty concerns right maybe that's a good way to to segue to you damien you've got to try and again uh keep a delivery in terms of the legislative agenda on my car the new um cryptocurrency regulation you've also i think got this european commission got to engage the 27 governments to make sure what happens on cbdc is led by the ecb delivers on your bigger policy concerns what's the challenge there what's a unifying theme and is it as as doctor he's put out you know trying to deliver on those competition innovation kind of mandates that you feel they have or the other concerns which is frankly you know sovereignty everyone's terrified of dm what's uh what's the truth of it in the middle well it depends there's many drivers for this on the one hand there is the innovation itself and the fact that we want more diversified more competitive payments environment not that there's anything wrong from a functionality of the current payment system payment systems in europe work well and to the satisfaction of pretty much everyone some people complain that they're too expensive some people complain that they're too slow and so on but of course people don't necessarily know what they want or what they need until it arrives i'm often thinking about our ancestors who when they were riding horses and walking around if at the time you would you would have asked them do you need a car they probably would have said no or 20 years ago if you ask people do you need gps i remember that when i bought the first gps my wife said why why do you buy them why do you need this thing what is it what's what's the point of it or who would have thought that there was any use or any value in social media or in a search engine or in electronic commerce or buying stuff online people said no we don't need that yet when it arrives and when people see the convenience and the advantages of it they want it and so while payment systems in most eu countries work very well that doesn't mean that they're perfect and you can always improve on them the second area is of course the emergence and development of web 3.0 so the token based internet and there i do think there's a strong much stronger need for central bank digital currency because otherwise this web 3 environment will develop fully based on private means of money there will be no public cash and that i think is not a good outcome uh money is a public good and if um the blockchain economy the web 3 economy really develops and i have every expectation it will i can't prove it but i expect it will develop it would be highly beneficial to have a public means of payment for the web3 environment and if there is public money available if there is central bank digital currency available that will actually encourage the development of the blockchain and web3 economy in my view well that makes a lot of sense and that's certainly what we hear and even talk about internally right the fact that building functionality and this kind of new web 3 experience right writer token and attribute sharing everything from digital identity to real payments to settlement it's arriving and figuring out how that we can all hopefully um uh make money in that scenario but also to deliver something new and valuable for consumers as a challenge for the industry and for governments just talking again maybe the politics because clearly there's maybe things cbdc's can solve but there definitely seems to be an increase in the urgency uh from what we hear from a number of policy makers and central banks why is that from your perspective um is that china and the fact obviously the digital renbi has gone from strength to strength in two years going from a small pilot with 50 000 people tonight i think 120 million people uh having done transactions uh or is it really the fact that private crypto markets continue to evolve what's a driver and is it something that concerns you maybe peter to answer first and i'll come to you andrew and dr cookies i think that if you look at it from a european perspective i think the main driver in the change of attitude among central banks was the arrival of or the announcement of diem up until that moment there were about 60 central banks globally that were researching central bank digital currency and the research mainly was well it's all very interesting but we don't need it i'm i'm exaggerating but that was kind of the solu the the the summary of the research and when at the time dean was announced you saw this shift because all of a sudden uh policymakers and central banks realized that large companies with huge network effects if they were getting involved in the issuance of private means of payment that the this could be very very quickly distributed in the market and could overtake um uh public money and my experience has been that that really was a catalyst for a change in attitude for among central banks from a rather not to a rather yes uh approach on central bank digital currency much more than the developments in china although of course we like everyone else are looking with great deal of interest not fear on our part but interest on the developments in china because of course they have been experimenting and rolling it out already for a longer time in pilots and have huge potential it's interesting some more um the private sector and developments there andrew was that your experience uh do the private sector or the chinese or other cbdc jurisdiction developments drive your speed or is it just because you believe it needs to happen now andre i think just on me sorry i think our situation is very different from let's say obviously the europe or the united states or china we're a small open economy and we face different challenges than those other much larger economies dm for us is not really a threat actually it's more of an opportunity to reduce uh costs of across border payments so it doesn't necessarily um be the catalyst that makes us thinking about cbdc obviously also cryptocurrencies is not a catalyst for us we don't see cryptocurrencies as a payment system we see it at the best as a very volatile financial asset that should come with a huge warning sort of public health warning on it and the people who are interested in using cryptocurrencies well they're interested in volatility so a cbdc is not the answer for them so really it goes back to sort of what are we thinking in terms of cbtc it's really for domestic sort of reasons to try to improve our our own payment systems um and the jury is really out there because one of the questions we keep actually asking ourselves on each sort of sort of um feature you might think of a cbdc can you do it in your existing systems do you need a cvdc whether it be a smart contract you don't necessarily cbdc so we do ask ourselves can we do it in our existing systems first of all and then if we think that it could be done easier in a cbdc then that's another reason why to go for a cbdc but it's certainly not sort of um the catalyst of um cryptocurrencies or even sort of the dollar or euro stable currencies fascinating yeah more of a almost a fintech attitude from uh from the israeli uh central bank which is always positive to see and dr cookie same question for yourself um again our developments in china what we see with private crypto projects driving the urgency or again is it just because you think now is the time [Music] well i mean obviously when it was still called libra that was a wake-up call for for policy makers right because of course it made everyone aware of what could happen in terms of disintermediation and at the same time of course it made clear what potentially the issues around licensing and supervision etc could be um and therefore once the the um libra then dm team heard what european policymakers would require and you can see it pretty much um now enshrined in legislative text in mika um it probably altered the business case to a certain degree so in that sense i'm not surprised that that it went the way it it went but um the verdict is of course still out and um and uh i think um like it or not the central banks will have to keep this competition from private sector um participants in the in this market um in mind because of course it's uh it's a similar topic if you can establish a stable coin with reliable collateral and access to collateral and valuation and transparency and all of these things then of course the benefits of cbdc could be offered by by stable coins as well so far i'm rather alarmed at what we're seeing in terms of quality of collateral transparency of collateral access to collateral and all of these um all of these very important consumer protection issues that of course also become um size of market issues because if the if the industry remains um opaque with a lack of clarity and a lack of transparency um it will obviously always be limited to a to a certain segment of the market so in that sense you know the verdict is out on that on crypto i think also the verdict is out um i mean a lot of what is being done in crypto is pure regulatory arbitrage um up to and including um arbitraging um aml rules that are that are being implemented elsewhere um i mean the industry when we came up with our legislation implementing as one of the first countries in the world the travel rule that uh does something very simple namely to oblige both sender and recipient of uh of crypto assets to be able to identify both sender and recipient there was an uproar in the industry right and um and um on the one side we were surprised on the other we were warrant because it's obvious that as long as other jurisdictions still permits transfer of crypto assets without the obligation to identify sender and rep recipient there will be a regulatory arbitrage relative to the regulated banking sector and unfortunately inevitably there will be um adverse selection and a lot of the illicit activity moving to the lightly regulated now there's been quite a lot of activity at the level of the the um fsb the g20 um the european union has now passed legislation on on travel rule implementation so it's just a qui question of time but uh but i think every jurisdiction has the obligation to make sure that the highest aml standards are upheld and then it will become interesting and then you'll see whether the a lot of the use cases were just pure regulatory arbitrage or whether they actually also work in a level playing field environment and i think also on that the verdict is out at the moment fascinating it's going to be interesting once everyone has to play by the same rules you'll be able to see what's a real innovation as you say just um an opportunity in the short term and maybe i mean that's been excellent in terms of setting the scene of what the challenges are in terms of why we're going to develop these things let's talk about exactly what we're going to develop now and maybe coming to you first andrew as the central banker on the panel um are you focused on a retail a wholesale cbdc and what would be the key functionalities that would need uh so is anonymity going to be important is the ability to set interest is the ability to make sure people can only use it to buy and sell certain things what are the kind of functional elements of a cbdc that you would find key as you go about this design process so then starting point is i think we are talking about the retail cbdc rather than a wholesale doesn't necessarily rule out a wholesale one but i think they for us in terms of the local column i think there's probably more need in terms of the retail market to increase competition there and lead to more innovation in those sort of areas so that's the area that we're uh concentrating on the moment um one thing's clear to us it's going to be a two-tier model the last person you want to have dealing with customers as a central back um i spent the last sort of 10 years of my life running the markets department i was very happy we only had one client central banks are not good dealing with clients so we don't want anything to do with it we want the private sector to deal with the clients and we also want the private sector to deal with the innovation because we don't think a central bank is the right um body to really lead innovation so if anything we're going to be doing is we're just going to base building the basic rails of the cbdc and then the private sector um get on with it and obviously we'll have to have some form of supervision of it but we want them to be as innovative as possible and one of the questions i think you sent out to us at the beginning was right now are you worried about the disruptive elements of a cbdc well on one point we want the disruptive um elements of cbdc we want them to cause change um we don't know quite where that change is going to be i think this is what peter alluded to you don't know what's going to be like it in 10-15 years time you can't imagine it but we think that the private sector is the right body to do that there are some areas where we are worried about destruction we're worried about disintermediation from the banks people pulling their money out of current accounts and that will lead to sort of i think decisions are on paying interest on it we don't at this point envisage paying interest on cbdc precisely for that reason um so that there will still be some advantage to hold your money at a bank in terms of paying an interest rate on it but we'd want the cbdc to have the the ability at least that one day we would change your mind that you could pay an interest but initially the starting point i don't think we'd want to have uh um and we wouldn't be paying interest on that precisely because of that sort of fear of disintegration at the beginning um so those are some of the sort of starting points that i would think about in terms of what how that cbc would look like thanks andrew and just in terms of that anonymity point um in terms of again the use of cash today that is what a lot of people talk about right in terms of why they like cash in their pocket and they go they buy they sell so we see some problems with that in terms of aml kyc challenges over again just illicit trade corruption um from your perspective is that a question that still needs to be answered in terms of how anonymous these uh kind of cbdc's could be you see where the kind of central bank of china's landed on that you see where some of the other pilots are looking at it do you have a view yet from the bank of israel or that's still to be determined well it won't be anonymous it will have to meet the basic conditions for kyc and an aml that's i think pretty pretty straightforward for us at least then the question is about how much information is about the transactions that people do who is able to see those transactions we actually think it would probably be something that the consumer would decide he can decide not to have no sort of transparency above the basic aml kyc requirements because he wants to have you know his to keep his privacy or he may actually want to give up that privacy because he'll get a cheaper product it may be that a a vendor gives him a cheaper product if he can see the data that you see and use the data of the transactions so we actually would want that sort of the rails to allow the consumer to choose the amount of privacy above a certain minimal level um that he he will [Music] leave for himself depending on the pricing of the of the vendors that's great and almost extending that principle in open finance open banking today right that you know you can share a lot more information if you want actually even at the transaction level but you as the consumer should be in charge of it which i like um those cookies maybe next to you in terms of again functionality you mentioned wholesale obviously it was a focus not just retail um other elements of either the wholesale or retail development from the ecb that you would like to see in terms of again what the thing will be able to do i think the the question of programmability is really the one of the key use cases and whether that is relevant at the level of the cd cbdc at the core or if it's in the realm of tokenized commercial bank money i think is a question for uh for private sector participants to decide but i think the development of cbdc should be open to this question and we've um we have a working group in my old um in my old um employer the german finance ministry together with uh bundesbank and um some of the most uh innovative industrials in germany um and the companies came up with many many use cases for programmability of of currency and um we're now working on the question of for that to take place do you need a link into cbdc yes or no or is it sufficient just to do that at the level of of a potential um tokenized commercial bank money and the verdict on that one is out but what all of the companies that we spoke with um told us is that um the the ability to settle into central bank currency um in a straight through purely digitized format would definitely be an advantage and and um some some participants also publicly gave quite detailed information on where that goes so in that sense i do think in the in the design it will be important to have a link between the two the bundesbank had a very interesting um experiment together with uh the the finance ministry's uh federal debt agency um where we tested a trigger solution where you basically have the conventional uh path of settlement of the central bank currency um combined with dlt settlement of the securities and there's a dlt-based uh trigger that then that then joins the world of the conventional payment system with the with the dlt world that's also possible that we use sort of um hybrid solutions of conventional um and um and digital that's also one of the possibilities so at the moment we're in exploratory phase there but the these different exploration paths are leading to very interesting insights um and um and um i think the other example of course is bonk de france that basically did a in an in a test scenario right not a not a real world but already did the whole value chain of um issuance um to trading and everything into in digital currency including the settlement into digital into central bank money so i think you know the the experiments in all directions are leading to very interesting insights and all go into as input into what fabio panetta is doing at the ecb and we're working very closely with the ecb and the teams there and it's very productive because all of these innovations and interesting ideas are leading to to a better result at the end makes sense yeah i i think fabiano's everyone's comments just a couple of days ago in terms of how central actually keep pace with what private sector was doing tells us that innovation programmability i think clearly is something that has strong support across the political spectrum and just one last question those are the programmability again i think people talk about that innovation from the private sector a lot of exciting things is there interest from government as well to use a programmable cbdc almost for social economic policy so making sure maybe if there's you know covered really funds in some future crisis that can only be spent in a certain way for a certain thing to make sure that that is targeted um within the economy is that something that people discuss even if maybe no decision has been made or is that something that's seen as too political too sensitive theoretically yes practically speaking um you know a lot of the data protection issues are are challenging to navigate let's put it that way but definitely doable but to be honest most use cases we saw on programmability really come from the more innovative sectors of the private sectors right i am everyone who's in iot and everyone who's into machine to machine payments directly those are the areas where where we really saw interesting applications of potential programmability and com combination with sort of next generation smart contract technology um and quite a lot of our companies are working on on use cases for that so i think that's uh that's quite important and quite interesting right and hopefully a lot of people who are leading that charge in the border region globally are listening to this so um that's a call from cookies there to keep innovating keep coming up with great ideas and maybe now just over to you peter i mean the commission's got an incredibly ambitious agenda on everything from digital identity to open finance open data you know real upskilling of how europe operates as a digital leader where does cbdc fit into that and again what's the functionality of the cbdc that would maybe be issued by the ecb or other european central banks to make sure you could deliver on that ambitious policy agenda well the the current focus in the european-wide debate is definitely on a retail cbdc uh but there's def there's also a strong body of opinion that says don't limit it to retail cepdc we also need a wholesale cbdc now of course wholesale if that means for use interbank you can say well banks already have access to digital forms of central bank money so a central bank digital currency wouldn't add anything there but if you think about large corporates using uh central bank digital currency in digital form they currently don't have access to it if you think about other markets and so the debate isn't so much in my view about whether or not it is a retailer or a wholesale cbdc but whether it is an account based instrument or whether it is a tokenized instrument and in the design i'm speaking i i'm giving you my personal view on it uh and i'm not stalking here for the institution um uh i represent is that its main design features in my view for cbdc to be promising is that it has to be usable and has to promote the internet of value web 3.0 so when it comes to programmability the central bank digital currency itself shouldn't be a program it shouldn't be a smart contract but it should be usable in smart contracts because it is after all central bank money and that means it has to be universal uh it has to be completely fungible a euro is a euro a digital euro is built your euro i know that technically it is possible to create a digital euro for this purpose and a digital euro for that purpose and digital euro for x purpose that is technically possible but whether that's desirable or useful i have very strong doubts just like currently a euro note or euro coin can be used for any purpose but what is essential in the design is that it is usable in smart contracts and the degree to which it is tokenized and is operating on an interoperable uh base layer is essential for the usability of central bank currency digital currency in these innovative applications which will not be developed by central banks or governments but which will be developed the private sector by innovative people there who are much smarter than anyone and much more creative than anyone in government or in any central bank um maybe challenge the last statement as i i know a lot of very innovative policy makers but i i think um i mean all of your other statements were very much 100 on the money now i think the challenge that we're starting to see is again how do we get that speed of action uh in a lot of jurisdictions beyond what we've already seen out of china and others maybe just to finish off this element and start moving towards the how we'll make this happen and picking up some questions we're getting in the chat i mean one of the challenges the scene is the speed that which central banks can actually bring a new form of legal tender which is digital and programmable that takes time that's going to take a number of years certainly in parts of europe maybe israel know the jurisdictions can move faster but it will certainly be a while is there an opportunity for something like a synthetic cbdc where the private sector kind of creates almost a stable coin and sort of some public private partnership one-to-one backing in a central bank so essentially this could happen faster than maybe it is gonna happen if central banks have to do all the heavy lifting um i know i think there was a paper put out by think tank just recently dr cookies is this idea of a synthetic cbdc something that is discussed in germany or is that really seen as something which is outside uh the opportunity well it's something that uh when bundesbank went through its examples was always all also taken into account so i think it's uh it's a legitimate element to be taken you know we want to be technology neutral and who knows what what will which which solution will actually be taken up by consumers and markets so i think keeping the synthetic element as one of the possibilities shouldn't be excluded whether it turns out to be viable and doable and practicable i think that verdict is out but it should be part of the evaluation spectrum but it's too early to judge whether whether these synthetic elements are realistic or not very clear thanks and andrew maybe from the perspective of israel again is the cbdc just going to be the domain of the bank of israel or could you maybe do some partnership with the banks to get something out a little bit faster which is based more on some sort of public private um uh dlt system i think the problem we face and is a small country um is that it's difficult for us to go ahead alone because in the end we'll want a cbdc that will be able to be connected up to other um cbdc's of other countries so one of the main things we want to do is actually for cross-border transactions and that for us is a very big issue because the cost of cross-border transactions for the israeli economy is very large so if you think of one area that would bring it you know an immediate reduction of costs that would be one of the areas it may not necessarily be you have to do it through a cbdc again it could be through connecting up uh rtgs systems but it would be difficult for us to go ahead and create a cbdc and create the infrastructure of it without knowing what was happening in the rest of the world it's a bit like you know if you think about it we're in a 10 000 meter race in the olympics and we're all running along at the moment and no one really wants to rush ahead um but when one two or three people do rush ahead i think then the pace will pick up question is it only going to be on the last lap or can we do it a little bit earlier um and that's certainly an issue for us because we're not going to go and develop our own cbdc in the end we're going to look for products are already out there we're going to listen to the private sector and ask them what do they want in the sort of the pro in for a cvdc what sort of characteristics they need for it and then really think about uh the products are out there that will give us um that sort of um [Music] sort of design that's great i like this idea that all the central banks run a gentle jog at the moment on sort of lap two or three and yeah but the pace is only going to increase i guess um and maybe just moving uh towards that final section then in terms of how this is going to come to market and also how quickly um maybe just starting with you peter you know when do you think this is going to happen here in europe and again how do you think it's really going to um take place how quickly is it actually going to be used by people in the real world well i think um it's not going to be as quick as i would hope because i would hope it to be next year but i know it won't be next year i think more realistic uh expectation for a central bank digital currency to emerge in the eu market let's say a digital euro would be 25 2025 2026 now that's a lot still a long time from now but on the other hand it's not that long um it's um uh well it's four years from now and that is because this is a major major technical and political enterprise and the european commission but also the ecb need to put a lot of things in motion legal framework for it and so on and we want to get it right rather than get it fast uh because if we want to get it too fast we may get there but we may also make mistakes which can be end up being quite expensive so um we are in this race i don't think it's a 10 000 meter race i think it's actually a marathon and we're in the peloton we're running ahead but we're watching the others and if someone tries to sort of surprise us and pull out we'll we'll pick up the pace because we want to win this race so i'm wants to trip over potentially um so maybe the same question for you uh andrew um how quick is this gonna happen and again how is it actually gonna be brought into people's you know digital wallets or digital pockets i guess in this scenario well i agree with peter it's not going to happen over the next couple of years it's going to be a little bit longer than that my guess is that there are developments going on that may sort of push us forward faster than we think about it if you look at some of the just reading in the newspapers the last few days there's been some innovations in the area of um sort of um the settlement of fx transactions the settlement of financial instruments there's an interesting thing been going on that will sort of cite you can do an fx transaction and settle it without having to go through cls through sort of dlt technology if they were to come to us and say what we really need the private sector is a central bank digital currency i think this would be a big push so actually although we're thinking about the retail sector this is more wholesale sector i think this could be the result of the the the push that gets central banks moving because sort of intraday credit risk in settlement of securities and fx transactions is a big issue and there's plenty of money for people to to produce those products out there this is one of the areas that has lots of money to put a lot of research into it could they come and be the catalyst i think and then we'd have to say yep we have to be part of that move um but again central banks unfortunately we do move fairly slowly so it's still going to take time sounds perfect and dr cookies same question for yourselves how quickly is this going to happen and how will it become real in europe do you think well the ecb has already announced a time plan so sort of two-tier approach of feasibility and architecture and uh and robustness check and input from all stakeholders and then a second three year period of actual implementation and i think that's realistic so um so the only the big problem with the timeline is of course that during those five years the private sector will innovate massively and and the convenience with which the private sector is now facilitating payments will only increase in the next five years because of course it's a it's a growth area and a lot of a lot of companies and financial institutions are investing the automotive industry is getting into payments uh a german car manufacturer announced a a um new test case where you can basically use the car as a wallet and uh and uh do a lot of payment activity from within your your um car so that the space is only going to get more crowded and and a lot of capex is going to go into solutions and of course five years down the road the the um challenge for the central banks to actually find customers for their cbdc offerings um will not be trivial but as andrew said very likely uh the the that won't even be the dilemma of the central banks they'll just delegate the consumer interaction and interface to the private sector and deal with those institutions that that they already deal with right now that's a good message maybe to end on but clearly this disruption and disintermediation is is coming but maybe we shouldn't be too worried we should see it as an opportunity to support a lot of the work you're doing and zadia i've seen uh the chat very much blowing up over the last 20 minutes where there's a lot of i think excitement about what you're all doing from again governments and central banks there's also a clear view that the private sector is not going to slow down and whether it's meta and their partnership with pax or others there's definitely going to be developments in those couple of years um i personally uh back you as the governments and central banks though i always feel a good way of looking at money is it's whatever the government's tell you it is fundamentally all the people with guns uh so essentially you know if you guys tell us we need to use cbdc's we will and i think that we'll continue to support and watch this space so thank you very much um to deputy governor um abir thanks very much peter thanks very much dr cookies it's been as always a fantastic conversation and again we look forward to hopefully seeing each other in a real life in a couple of years time and maybe buying a beer at the bar uh using a cvdc in one form or another whether we're in london or in brussels or in tel aviv on that day but thank you very much again all of you and back to you daniel to continue with the agenda