CBDCs in Europe. Anytime soon?

[Music] hello and welcome everybody thank you all for joining us today on this pan discussion on central bank digital currencies in europe i'm looking very much forward to this discussion my name is hashim hassan i'm a financial legal expert at the danish central bank and i'm thrilled to be facilitating this discussion around cbd cbdc i would just like to remind everyone that throughout this session you are invited to ask questions by submitting them into the question panel and they will have a q a by the end of the session before introducing you to our amazing panelists i would like to just set the stage and give you some background info so a vast majority the majority of central banks are researching and actively experimenting with cbdc concepts both wholesale and re retail and and these include a lot of european projects such as project helvetia and the trigger chain and l bitcoin but also extensive research on on retail cbc cbc architecture and cross-border arrangements furthermore the european central bank will soon decide whether to launch this a digital euro project so i think it's fair to say that there's a lot of very interesting stuff going on in and especially in europe and this will bring us of course to the main topic of this panel will we have a cptc in europe anytime soon and and so as answered this question and lucky for us we have our great panelists who are also a driving force behind many of these projects and research so without further ado i would like the panelists to introduce themselves should we start with you thumbs thank you very much hakim i am thomas moser i'm an alternate member of the governing board of the swiss national bank i'm an economist by profession i started first with it and also took some cryptographic courses during my sabbatical but i'm an economist thank you hey everyone thank you hashim for this kind introduction and for inviting me um my name is rafael auwa i am a principal economist in the innovation and digital economy unit of the bank for international settlements and i cover all things cryptocurrencies stable coins and cbdc um it's going to be a great pleasure to be talking here as always i'll be speaking only of my on my own behalf and none of that of the bs all right thank you and anthony thank you again hi everyone um i'm anthony welfare so i'm the executive director for enterprise at symbol nems we're um a blockchain platform recently launched symbol but also we've had an em for a while um i've been in this space since well a long time i mean it's what's five six years so i'm in blockchain time or normal time that's probably 100 years i think for normal people and so i've spent quite a few years working with large tech companies so oracle and dxc where i've worked with many enterprise companies and governments on blockchain solutions so lots of um discussions around cbdc's digital currencies digital assets and the whole sort of tokenized world so really excited to be here to be talking about you know cbdc and will we see one in europe very interesting discussion ahead thank you and the last one martin thank you very much for inviting me my name is martin deal i work with deutsche bundesbank now i have been working here for more than two decades and half of that time roughly i have spent with payments and settlement systems as an analyst heading a group analyzing payment and settlement system and half of that time i have also covered with the crypto token blockchain dlt and now digital money so that is the focus of my work and i'm really excited to have that exchange today perfect thank you and we're very grateful for all of you for taking part in offering your thoughts on on these topics so today we'll be discussing uh three subjects first very brief introduction to the motivations behind a possible issuance of the of disease in europe then we will discuss what are the challenges that still needs to be overcome based on on our panelists experience and research and and finally we will we will discuss whether we could expect an issuance of stability in europe uh anytime soon um so let's just jump right into the questions i would like to start with raphael rafael um as we as we mentioned there's a lot of projects going on there's a lot of discussions going on and research why are central banks exploring cbdc's why don't we just use commercial bank money cash coins why why why even discuss the disease so that's thanks that's that's obviously right it's the it's not the million dollar question it's not the billion dollar question it's a trillion dollar question and and i think especially at an event like like the european blockchain convention so when thinking about why central banks are pursuing cbdc many are tempted to you know to assume that it's you know bitcoin and private sector stable coins that are sort of driving that you know for forecasting technological trends that central banks want to harness or that that are you know seen as an alternative but in my perception it's really the reality is it's quite different and it's actually much simpler and and and while you know all this this hype around bitcoin and other projects has has certainly been sort of a catalyst of of public attention central banks are ultimately reacting to a much simpler and different development and that's that that cash is being used less and less it's a wonderful product it's resilient it's inexpensive it's accessible but people use it less and less in offline transactions especially since covet 19 of course but all in an online transaction you can't even use it at all and and now for central bank that's really a fundamental issue right they have they have a legal mandate to supply an accessible means of payment and for for decades for centuries and you know in some jurisdictions for millennia that has been cash and and so we simply have to think about alternatives and and that's why central banks are researching a digital complement to cash a direct claim on the central bank in electronic form thank you so so this is kind of a reaction to to the world becoming cashless or at least at that cash is being used less than less uh anthony you have a more technical background and you've been working with some central banks on different projects why why why is this interesting from a technical point of view yeah i think it's it's following on from what rafael said that we live our lives with our mobile phones and we make payments for for everything so if you think about most of the transactions you do in your lives now they're often electronic be a direct debit for paying your bills or be paying for your petrol or for a meal etc so we're we're already in a a cbdc world in essence in terms of the use cases as humans um you know citizens i know there's still lots of cases of cash but but you know it's coming down drastically the amount and i remember in them in sweden there was some really low figures of the actual you know amount of people that use cash for things so and covert i think changed that a lot and made you know we all had to be online we there was no other way to get your food and your shopping so it really accelerated this so the government's you know the central banks have have now said you know well digital's here what can we do next and technology is already there so technology always moves ahead of regulation and and sort of governments etc and blockchain has been around you know let's say 20 years or so 15 20 years you can argue a lot more before um you know different different people argue different things but it's a you know a distributed ledger ledger accounting technology has been around for a while a long time bitcoin's been around for a very long time as the originator of some of the technic technology but if you look at ethereum and some of the new platforms that are coming up like symbol that's now taken the technology to where a cbdc actually could make sense and could operate and there's still a way to go in terms of the scale of this because this is you know acbdc is big you know for europe you know millions tens of millions of people transacting you know this is a big big scale project this is not a small project so i think the technology is there especially decentralized technology it's being tested and it's been tested to to destruction and in most cases it's not got destruction which is brilliant it's now a case of regulation and processes and people need to need to sort of catch up um and that's where the interesting part when we all start working together and bringing together regulation people processes with the tech that's already really there perfect thank you so so we are in the cbdc world where we we are reacting to that cash is being used less and less then i would like to move on to the next questions and and that would mainly be about your experiences and and and and challenges that still needs to to to be overcome i would like to start with you er thomas from a wholesale perspective and based on your work with the project helvetia what are the main questions that still needs to be answered and just based on your experience where are we what yeah what still needs to be done well thank you i mean you mentioned an important uh point uh namely wholesale cbdc so in addition to what rafael and anthony said which mainly concerns cash and retail cbdc there is also an issue here for central banks on the wholesale side so currently central bank money is already available in digital form four banks and the platforms that we use for for the payments between the banks you know our so-called real growth settlement systems rdgs which have been basically the new technology in the late 80s and 90s and now the big question is whether the infrastructure of the future will be based on distributed ledger technology so that's uh when central banking has to ask itself you know do we need to get now central bank money somehow on a distributed ledger and that's exactly what we were looking at in this project helvetia that you mentioned now the cool thing about project helvetia is that it's not just a research project it's together with the swiss digital exchange which intends to go live this year so we could uh basically try it out on a on an almost uh ready to go live project so the experience has been you know it works it works very well we could get the central bank money in the form of a wholesale cbdc onto this dlt that sdx uses and and you know it has clearly some advantages and now we go but now we go into the next stage of these experiments and we go now really into the details we want to check out the end-to-end uh connectivity we go into the core systems of the banks we check performance security a lot of details including also some some governance and legal questions that are still open perfect perfect so so we're moving on to the next stage and and really digging into the details to see how this is actually going to affect the different axes within the systems so moving on to more to the to the retail part you published a white paper with the with the so-called grandfather of crypto crypto currencies and and and and based on on on the different requests especially within the this digital euro consultation privacy was one of the top features requested and based on your just on your research within this topic do we still have some challenges that needs to be to be addressed within retail cpc because this does both like the technical side but those there's also a lot of policy issues so what are the main main questions uh that still needs to be answered within retail no thank you for mentioning the the working paper that we published on the swiss national bank website exactly i mean these are so basically two issues that we that we address in there one is and i think this is still an issue anthony also mentioned it's scalability i mean the retail cvtc that's that's huge so there are different you know solutions to that but that's clearly uh one of the issues how do you get the scalability that you need because you have a lot of transactions per second with a retail cdc so to that we said you know why user why use the blockchain at all uh despite all the the the nice things you can do with the blockchain so that's i think one thing that's special about our research paper we base it on david jones original ecash idea and then the other issue is uh privacy that you also mentioned and here i think that's that's really an issue that is uh these that our central banks are now investigating is how can you provide some degree of privacy with the cbdc but still ensuring you know compliance with empty money laundering uh regulation and that's we also provide the solution in our people and that solution if you don't use a dlt is much easier than if you use a dlt where using you know privacy enhancing cryptography on a dlt and make it scalable that's quite a challenge there are a lot of clever people out there and i'm sure they're working and will find some new solutions but it's it's a challenge thank you so much thomas martin i would like to ask you more about the resales in the seaside of this what what what's your stand point and this do we need retail stability is it really necessary first of all thomas just mentioned maybe it's not necessary to even use blockchain but is it even necessary to issue we researched cbc at this time i think you're muted thank you i want me to sorry i would like to start with a quote by mark twain in his famous huckleberry finn there is a sentence which goes like having lost sight of their destiny they redoubled their efforts we have to avoid that situation there's a lot of effort in in central banks and uh private institutions and so on how to use the solution but we need to answer the question why several things have been said why we should issue cbdc and i'm not sure whether there is really what is really convincing um the cash case reducing use of cash well this is a private decision of households will use less cash we have the situation in sweden where people use very little cash the same is in denmark the swedish uh rick bank has decided we need cbdc to overcome that the danish central bank danish national bank has said well so what let's do it let's watch it we don't need dvd for that the euro system has published a report on a digital euro in october last year a report by a high level task force where we put a lot of effort in also we and the bundesbanks and they wrote eight scenarios they described eight scenarios which could be a reason to issue cbdc but whether they are really a convincing case we don't know yet several have to do with uh with of course with cash use and the one which was described one other has to do with surrounding forces maybe if private companies big tax issue a form of a stable coin which would become so big that we that it could interfere in monetary policy or maybe even financial stability it could be the case that we deem it necessary to issue cbdc in order to overcome that situation it doesn't have to be of course we have other weapons to defend our case a central bank as you know but maybe the most way out of it would be to issue a cbdc on our own another point is goes more in the direction of thomas and it is also described in the report of about the digital euro the case to support the digitalization of our economy dlt offers a lot of opportunities and to be honest most of those opportunities are mainly for big corporates for financial institutions they don't have to do with every single household not a private household like me i would not run a note on on a ledger in order to deal with uh money though but if i if i wear a bang i would like to er to speed up my settlement i would like to reduce my settlement risk and maybe use dlt to have an immediate evp settlement so we need maybe money on the ledger but there are also other options than that so thinking about the wholesale as thomas has proposed is in my eye much more compelling at the moment second if we come to the point that one of those scenarios will apply and redeem it necessary to issue for instance a digital euro then having issued a wholesale cbdc before could help us having learned a lot the technology for a wholesale tbtc is much easier to handle because we deal with professionals professionals who know how to run operational risks how to avoid cyber risk and so on so that would help us and the numbers are much smaller we don't have to scale into millions we scale into 10 000 or maybe into thousands because we're dealing only with the banks who have already acted and that is also another important aspect the major risk which are claimed to stem from cbdc are coming into existence because cbdc would widen the access to central bank money uh because then it would there would be the danger that it could substitute for commercial bank money it could substitute for deposit with banks and we don't know what that means for monetary policy for financial stability and other aspects wholesale cbdc doesn't bear that risk so much you know because we limit it so i personally i see a lot of uh argument in favor of starting with wholesale and then looking further whether those scenarios may apply for cbdt as for the euro system uh just to make the case the euro system will decide in june whether to start an uh an investigation pace whether they uh could and what it means issuing a digital euro and after that investigation campaigns in 22 months or so in roughly two years the euro system will decide whether to issue that is the current point and uh we support that of course from the bonus buck thank you so much and many interesting points yeah and and and you just mentioned that maybe like a wholesale assembly would be would be easier and and and better to issue and and that wants me to make like to ask you you had the trigger chain project and with that you used you used the block you use blockchain to to as a dlt or dlc as a as a settlement technology without using cpdc so do we even need wholesale simplicities to to actually benefit from from the from the technology yeah thank you very much for pointing that out of course this trigger solution uh let me explain what it means the trigger solution could be part of the trick to solve the tort not to solve to help our industry the financial and the real industry to use dlt and to settle the money lag of big trades in central bank money without needing cbdc so our idea was not only our idea there were many institutions in the world which had the same idea how can we link dlt to conventional payment system the the smb has also the same idea had in their project helped media to make this link and others for lbb and germany a bank and i think even clear in spain has also done that they linked it to commercial bank money to clearing houses we linked it to target 2. well what does it mean we have a trade on an asset chain on a dlt where you settle a security trade and then you have a smart contract which acts as a virtual trustee so he keeps the security which was sold by a seller and he keeps it and blocks it and then he sends he triggers a payment via a trigger chain which is run by bundesbank and we send this payment instruction to target two where it is settled and then we send back a payment confirmation that the money lag has been settled to that smart contract which in turn releases the security to the buyer if we send back uh if you don't bend back this confirmation or say the money lag has failed then the security of course is released back to the seller and though the dvp has failed so in the successful case we have a dvp settlement in central bank money without creating cbdc this could be also a very good complement to cbdc uh why well see we keep the payment system as it is we use the conventional payment system we don't change anything so it's only a technical bridge we have built this technical bridge in our cage in bundesbank and target 2. uh if we start a real project we could do it i would believe within uh nine months or so it was much faster than any cbdc uh will be created so it could solve it if later on we need cbtc and we create wholesaling tbtc okay we don't need trigger anymore whether they both coexist or not i don't know it is certainly nothing for household it is nothing to substitute for the digital euro in general because it doesn't solve the retail cases that's that's for clear but it could be a support for our industry to make use of dlt thank you so much marcin and many interesting points um we're receiving a couple of questions and and and especially on on this insta mediation of of of financial institutions and and i think that's a perfect uh uh question for for you rafael because you've been you've been researching on cbc architecture and direct and hybrid models and and and just in general how should we design and which kind of design options do we have when we want to issue cpcs do you want to like do you see a one-size-fits-all design and and and which kind like what approaches do we have which design options do we have uh for essential bank money so um thank you very much at bs we do a couple of stock takes on and what central banks around the world are pursuing and one definite answer you can give is that there will certainly not be a one-size-fits-all solution it's not even clear who will pursue a cbdc and those jurisdictions that might pursue it they will pursue quite different options um and to think about them and and how they could still involve the sort of the private sector i think you know we first have to be very clear about what a cbdc is a cbdc is not a technology of course it's digital but it's it's a concept right it's that and to think about that concept um we have to think about the difference between cash and digital money that exists today and the difference is that cash is not a claim on an intermediary it's a claim on the central bank whereas any electronic money that exists is a claim on a financial corporation and this financial corporation might run into illiquidity or insolvency issues so that is sort of the difference between cbdc and today's existing money is that the claim would be direct to the central bank now because sort of you have a legal relationship with the central bank just as you have with cash people at first thought of as a cbdc as a central bank fully central bank operated payment and financial system and that came with big question marks uh regarding disintermediation and driving the private sector out of out of out of their their comparative advantage and and such we call that you mentioned already a direct cbdc so that would really be the central bank offers a central server infrastructure devices to access it and people run payments on that infrastructure and obviously there is a number of arguments against this architecture um in in particular right we have a reason why we have today's financial system and that central banks are good at stabilizing the core and the private sector is good at interfacing with consumers in an efficient manner innovating for smooth payment experience and and that that should be the same so this direct option is not really considered by by most jurisdictions i have to say an exception is like in small remote jurisdictions where there's really an underdeveloped banking system that is being considered but sort of it's a niche case a much more promising design is is what we call we this is the hybrid design where sort of um the private sector instead of today handling sort of you know accounts for the for the clients just updates the record of which retail client holds which cbdc at which moment of time so they handle all the customer facing activity and they handle payments in real time but the central bank sort of is a backstop to the system and it it maintains the core and the way it sort of can not only provide more better legal protection via the direct claim so there are no balance sheet concerns but also some technological improvements is for example if the central bank runs a backup system so for example imagine you have a payment system with various intermediaries and then at some point one of them encounters technical difficulties what the central bank can do with such a backup system is to take these client relationships that are non-functioning and just switch them to a different intermediary who's that still has a working infrastructure now of course there is one caveat to this which is for the central bank to be able to do that it needs to have the information on the actual retail client balances right because that you can't restore balances if you don't know what they are and and and while so this design offers better resilience there are question marks as to whether the central bank actually wants to have that data um many clients do not want the the central banks to have that data but the central bank doesn't want it either because you know it could create legal problems right the central bank sees no value and and and it might be sued by some courts to hand it out and some disputes so a third option is sort of an intermediate uh architecture and here it is really only sort of the central bank only knows wholesale balances so each intermediary has client relationships and it reports the sum of these holdings by their all their clients to the central bank of course now if you have an a system like that then the central bank again needs to have some supervisory mechanism to check whether the the private sector intermediaries actually report the true balance is the true sum of balances so these are sort of the is the range of architectures that exist and all of them are being considered and it's really like you know the size of the jurisdiction matters the the how people think about the work split between the public and the private sector matters and how people think about what kind of information the government should have matters and that's why we will not see one size fits all but we will see a variety of these and again the disclaimer is we don't even know how many jurisdictions will actually issue a retail cbdc interesting thank you and and and i have i have one more question and that's more uh martin martin was talking about what like linking linking up system different payment systems and and and payment system into interoperability and i would like to have you your view on mods like multitasking you see arrangement but also cross border like we've we've been talking a lot about retail simplicity and and and simply see within one country one system but what's your view on on on spreading the tcpc into different systems and using it across different systems so um one of the longest standing problems in payments is not on the domestic side but on cross-border payments especially for small payments like for remittances um cross-border payments are far too expensive they're they take too long to be processed they're they're the data transmission along this chain and and the associated ease of compliance is not very good and they also have access problems and there's a global roadmap that's coordinated by the g20 and it's trying to tackle these issues there are there is a number of of building blocks and again right there there are many solutions and one of them is is cbdc and those are called you you already mentioned it multi cbdc arrangement and the idea is really that to some extent cross-water problems originate from legacy issues right different countries built their national systems and the focus was domestically and then only later people started to sort of connect them across borders and that created frictions that still exist today because they're very difficult to tackle exposed so a principal example would just be the clean slate central banks around the world are looking into cbdc design and there is sort of a common agreement that you know the cross-border salute the cross-border dimension should be tackled alongside the development of a of a domestic payment system and and and there is a number of of different arrangements of mcbc arrangement being considered one is just really this that i just mentioned is like to coordinate from the get-go but also other models exist uh some that would be an intermediate level of coordination is when you have different payment systems each country has their own cbdc payment system but they're sort of interlinked with a technical interface and if you make a payment from retail client a that sits in one country to retail client b that sits in another the payment is sort of processed through these both systems and the interface directly without any middlemen being involved and so this creates technical linkages that can sort of shorten the payment chain and lead to some efficiencies but of course you need to coordinate this common interface and that is a governance problem it's also a technology problem you need to bring in a number of stakeholders given that we say um this the private sector should have a role in a cbdc system you know you do not only need to bring in governments you need to bring in private sectors from different countries so there is a number of stakeholders and integration could even go further in the sense that it's also possible to have multiple cbdc's run on one system so one payment system really means there is one common infrastructure there is one common set of access criteria and one rulebook if you are able to to pay in cbdc from country one then you are also able to to pay in cbdc from country two it's really one system there's just an fx market in between these two cbdc's and obviously then if if such a system is integrated to that extent the basically a cross-country cross-currency payment becomes as difficult to process as a single currency within country payment but of course the cost is the downside is that here you really have to have two or more countries that need to co not only coordinate certain aspects but they need to agree on having the exact same technical system and that's going to be very hard so the the the takeaway is that there is a variety of agreements and central banks around the world are coordinating from the get-go to see if they decide to launch a cbdc how they can also tackle cross-border payments problems on passe thank you so much and and i think i think you're making a lot of very interesting points and and and especially in regards to governance and and central banks agreeing with with first of all the technology and who's going gonna have the responsibility and and a lot of different issue and that that take me to the next uh questions question to anthony you've been working with central banks you've been working with technology and and and you're uh you are you what's what's your experience with in working with these kind of entities and also is it even possible to to to work with central banks and make them make them use new types of technologies yeah i mean it's a difficult one because of the the issues you know from from my fellow panelists it's not um i think when people think about this they they think it's very simple and you you know you go to the shop you've got a euro and you just spend it and you're using your wallet etc why can't the banks just do that just send it to me that's it you know there's what 250 million people or whatever it is in europe you know and probably most people have got a few bank accounts it's just the scale of this so the it depends on one the maturity of the the the country and the governance um you know if it's a a newer economy a less developed economy in terms of the western then it's easier to do things like cbdc digitally um so a lot of the clients we work with in say south america africa etc that they are they adopt the the sort of the phone easily and they can then transact easier they don't have expensive big systems that have been in place for hundreds of years like you know the the bundesbank or the bank of england would have on the fed so so it's easier than those i think working with the central banks it's very different again from everybody wants to understand this for one it as a whole and two for their their citizens their people their businesses um for example so with a bank of lithuania an lb coin um you know that's arguably a cbdc um in in one way in terms of it's a central bank that's issued a currency that you can use in a very limited format so so it's using using the sort of definition in in a way the point of what cb what lb coin is is to test the interface with the humans with the citizens going let's say so the cbdc is is or the lb coin should i say is a collector's coin it's a token coin which is issued on a blockchain on a private blockchain but also public so the point of having public and private is is critical here so the private blockchain is within the firewall of the bank and then the public blockchain is one that you and i would interface with and it's all secure it's fully you know as safe and secure as a central bank would expect and so you can buy tokens and you can transfer those into actually a silver coin at the end of the day so you so you you basically play you transact on a blockchain it's gamification of it and then you get this physical silver coin which has a value of silver it actually has a printed value as well which is important for lithuania so it does have value what that's done is actually shown how people how citizens interact um and that's really critical the next stage of the project is actually to start trying out real payments with um a let's call it like a tokenized euro it's not an official euro as as we've said this is years away for an official but again it's a trial with a you know a number of citizens a number of people to see how they interact and how do do you actually have all your wallets as citizens with the central bank i mean the risks and issues they're immense so how do you deal with wholesale commercial in the middle and i think that's that's a lot of the discussion we've had here and a lot of the challenges which we're going to see uh moving forward and i think the other part of the what why cbdc is so important is financial inclusion and that's not just for developing countries that's for the west as well so if you think during covid a large number of people needed payments um to them to support you know things that happen self-employed elderly people etc most of europe doesn't have a system where the central bank can give money to the people like straight away the us has sent out checks i mean paper checks we're in 2021 and we're sending out paper checks you know that's that's old school really old school you know um so a cbdc would allow that to happen it would allow the government to say i need to give everybody in you know europe 100 euros so they can go shopping so they can buy the food so they can pay the bills that's a really important place to look at and it would be tracked and traced and that's the importance so if they put in 100 million euros they know that x million arrives or you know 100 arrives in my account and in your account etc so it's the technology is there to help the discussions and for me the most important thing is to have these discussions i talked to the bank of england city of london ecb bank of lithuania a lot of banks in you know latin america they're all very different very different issues but actually they're all trying to do it and what we're trying to say and and so raphael talked about is there's not going to be one solution for everyone it's impossible there's going to be a solution for each but actually part of what they need to think about is the interoperability of the cross border and i think that's where you could get the key to some of the wins where we say actually if we build hours like this as ecb as the euro and we make sure that it can interoperate with the dollar the pound the yen etc that would help take things forward i think quite a lot thank you so much anthony i think it's it's very interesting to get your view from like from a more practical side and working with different stakeholders within this industry and then we're moving to the main question uh and and and thomas you mentioned the the retail city how to design one how to issue one you mentioned the wholesale part uh martin's the same with you you've been working with the trigger chain and and and and not it's not cbc related but but but but we're all exploring these kind of designs and issues and researching on on many of these topics and and and anthony you are more into the practical side of this with with china with with china's pilot with the u.s exploring this this uh this topic also with the christine lagarde saying that there could be a digital euro within four years just in general are we going to have swc in europe anytime soon it could be a wholesale it could be a retail um what's what's your opinions on on on on this um it's more it's more like forecasting but what but what do you think is going to happen within europe within the couple yeah next couple of years and i think it's more open discussion i would like to hear all of your views on this and maybe just try to sum up some of the things you've been saying yeah i think um it's a really interesting one i'd like to think that um that you know you're the ecb can get something in the five-year horizon let's say give or take um you know a few years either side because what china has done is pushed this agenda very quickly as you say and citizens are interacting with the digital one and there's lots of things happening now it's a very different type of economy a very different type of country to anything in europe so i think there's a lot more complexity for for us in europe than there is there just despite the fact we're x number of countries and different systems so i think the the will is there if christine the guard and the the scene you know the the leaders have said this it's definitely that i know from the technology bit we've been working on lots of different ideas and different places so i think the will is there i think probably needs to be a bit more uh forward thinking and a bit more risk taking not risk with money but risk taking in new ideas like what bank of lithuania have done they've tried some crazy ideas in a way you know it was a bit of a crazy idea but it's proving out things and it helps with the discussion put it together with you know the other guys on this call and their expertise i think that's where we can get to in five years or so um let's see something like a digital euro well let me follow up on that but anthony said i i would see very uh similarly i mean when you when you say anytime soon that will not be in the next two to three years because as several have said on that panel it's not just the question of technology it's a question of governance it's this question of uh of a legal adjustment so so it's uh it's quite complicated and uh also that i mean that the more important the the currency is for the international financial system the more careful you are so this is actually a chance for smaller less international currencies to go first but especially that the big ones will be will be careful to to not create the financial stability problem but then again you know the german economist rudiger donbush said once you know in economics things take longer to happen than you i think they will but then suddenly they happen much faster than you thought they could so you can always be up for a surprise but i think it's realistic to say the next two three years do not expect a cptc in europe thank you thomas do you do you have any opinion on this our thoughts on this oh sorry martin please go ahead oh thanks okay no no worry of course we have a lot of thought on this uh um to start with on april 1st i send around april's full stay hawks to my managers and to some colleagues and i i paid the bloomberg message and i wrote into the headline uh that christine lagarde had said we will issue the digital euro for the olympic games in 2022 in paris you know and still i i made it very clear in the sub headline that this was a joke you know but still i received claim calls from people is that true no it was a hawks you know so people believe that that is something to refer what thomas has said it could go very fast at some point well it will go very fast when you have a decisive situation where you know why to do it and to know how to do it the question of how must depend on the answers of why now looking into its chinese case chinese have started their project with the digital un in 2014 which is a long time ago seven years and it will take also a couple of years for us to solve all the problems we are still facing here but then again it is all relative chinese has a history of 5 000 years seven years is nothing you know it's very bad so so once we know why we need to do it we will do it very fast be careful our currency is important i'm not saying that we are more important than the than the chinese ambi or the un but our currency is convertible the union is not convertible so as thomas has said we must look careful to all repercussions on swiss sprawl on u.s dollar on british pound sterling and so on and so on issuing a digital euro which will be extremely successful and may be used in other european countries could also create some pressure on our exchange rate we don't want that you know there are a lot of questions which we have to deal in cooperation with other major central banks this will also take some time the technical aspect as anthony has laid out very well we could do almost everything you want privacy or non-privacy semi-privacy whatever you want we could do it this is possible nowadays but just make clear what do you want this is the most important question this is a political question then again if we want to avoid the negative implications as i have mentioned which stem from the substitution of deposit by a cbdc then people think about restrictions of the use a lot of things are possible but again if we want to create a currency the internal convertibility of one form of currency cash into the digital form into the account form is also very important don't create a sub currency you don't want to have an internal exchange rate euro one euro two the euro must always be a euro this is not easy to guarantee those questions are hard to tackle but again once we feel we are forced to do so and we need it it can go very fast but well two years are pretty soon i mean all of us are old enough to remember that two years can just fly away you know or five years it's also a very short period rafael you so i'm just gonna repeat these words of caution that that the others have have said right and there is there is no rush there is no it's not a competition uh there is a lot of stake because existing systems work well right we've this is something that we learned in the pandemic how how well the the current payment system work works and how easy it adapts also the only thing that was necessary right is is changing the limits for cashless payments card payments and then that was right one policy change by by most banks so um existing systems are capable to adapt issuing a cbdc comes with a lot of question marks central banks are proceeding with caution um that is for the retail side i'm i'm more optimistic about wholesale cbdc just because you know it's a it's a new type of technology of how to execute wholesale payments it it it comes with its own set of technological and economic questions when it comes to market design but it can be sort of right and it is being tested in project helvetia at the bonus bank and so on and and and so i see a much clearer path to that but i would not put any date on on retail cbdc issuance in a major western economy so to sum up there's not going to be a retail civic within the next couple of years and the most important question to answer is why not how and and and and and we need to i think i think after you you posted something a couple of days ago where we said we were exploring but without breaking anything and i think i think that's pretty important that central banks won't like we we we are trust like we we we live on trust and we need to we need to move on carefully and i think that's that's what what most of you are saying and i think we have a couple of minutes left for some questions um i would i would like to ask you rafael we have a question about the simple disease um on on on public blockchains the question is um simply see the disable disease pilots taken so far have they been ran on public blockchain and if not what is your view of you and simplices for resale on public blockchains why aren't we using ethereum or a bitcoin blockchains so um not entirely sure what public refers to specifically i would i think that so there are basically three technological choices you or your options you could you could use a permissionless uh dlt uh that would use proof of work or proof of stake like bitcoin or ethereum do or aim to to change to you could use a permissioned version that is what's being offered by many enterprises corda hyperledger and so forth or you could use a centralized database proven systems that that you know have sustained payments for decades and i think sort of what is very clear is that no central bank is is pursuing a bitcoin like design they're just very clear you start with a centralized setup right there is a central value backing and it just doesn't make sense to to add that much decentralization which has a very high cost right we can see that from the the the co2 imprint of bitcoin there's just no need right you either do that because you're an entirely different in a it's a legal institutionalist setup or you start with a cbdc and then you add something that's more centralized on top you could still do a permission the dlt so there instead of having like a centralized system um with one intermediary you have many validators but these validators are known right and and here i think one we keep monitoring this and the the posting you referred to was one update of our database and one trend that i'm seeing is the following people early on because sort of they you know they learned from they they were looking into cryptocurrencies and tried to learn from that and then the the next step was permission dlt and early on let's say two thirds of all trials were on permission dlt and one one third was um centralized designs and now that has flipped a bit and and now we're seeing more and more traditional uh databases and a payment system being run on that and and you know where we'll go that's yet to be determined but but everything is being tried and i see a little bit of a trend towards centralization and i just had um the public private just to clarify um because we are a hybrid public private blockchain um and bank of lithuania has built on our platform so it's public and private um this is a big step forward this is ethereum 2.

0 which is not there yet but um it's very different to what we've had before um you know i've been around the enterprise space for five years or so it was always permissioned hyperledger quarter sim you know same for cbdc's what we realized is you need to interact with people humans and a what a vast number of other people other entities let's say who you don't want on your network you don't need to permission them so the non-permission side the public side is for entities to operate take a supply chain of um asparagus because uh martin was talking about asparagus before the call um you know asparagus is grown in lots of different places if we want to track the asparagus the farmer doesn't need to download a node and run a node he she can just take an app do a gps coordinate and send it through to the system that would be public the actual manufacturer might want the private data of the ph level the toxicity etc that would be on on the private side of it so you probably can private so there's a massive change in the technology over now and in the future and and just to go back to bitcoin as proof of work bitcoin is the only one that's staying on proof of work ethereum moves to proof of stake we're proof of stake plus and there's lots of our friends in the tech community the different types so the scalability and efficiency again as i've said the tech is more or less fixed it's back to as we said before what it what are they trying to build for what reasons as martin says so there are the options now to build public private hybrid chains for cbdc's which is where we see a lot of our work thank you so much anthony i think we are running out of time now and just to sum up there's a lot of work going on in europe and and and our panelists are as i mentioned before are driving force behind many of these projects i'm sure there's many projects coming the next couple of years and a lot of research coming the next couple yeah the next couple of years and um but the question was do are we going to have a cdc in europe any time soon the question is no now the answer is no we will maybe have one maybe a wholesale maybe a resale but not anytime soon we need to move carefully and we need to really explore and understand why why we want to issue this kind of of of of central bank currencies um thank you thomas rafael anthony martin and thank you for your questions um i'm sorry i'm sorry that that we couldn't get all the questions to to to you guys but but i think i think you covered most of the topics pretty well and answered the questions pretty well um and and yeah that's my final words and building back to you daniel