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Speaker 1: Bill Dudley joins us right now writing an important column

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Speaker 1: on c B d C central bank digital currencies. Bill

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Speaker 1: Dudley very valuable and thought provoking. This morning, we just

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Speaker 1: saw criminal trials, guilty verdicts, maybe appeals involved. But are

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Speaker 1: we getting away from the presumed criminality, the punishment, the

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Speaker 1: secrecy that Ken Rogoff had the courage to talk about.

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Speaker 2: Well, I think that the crypto space is in disarray

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Speaker 2: right now, and the real question now is our central

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Speaker 2: banks around the world going to introduce central bank digital

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Speaker 2: currencies to sort of take up that slack. I think

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Speaker 2: that's going to happen, probably going to be more evolutionary

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Speaker 2: than revolutionary.

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Speaker 3: Because it depends on what payment system that you're starting with.

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Speaker 3: I think where central bank digital currencies could play a

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Speaker 3: very very important role. This is highlighted a new paper

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Speaker 3: that we put up by the Brenton Wiz Committee is

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Speaker 3: really on cross border payments. We had a system of

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Speaker 3: central bank digital currencies where the interfaces were harmonized, you

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Speaker 3: could probably execute payments on across border basis at a

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Speaker 3: fraction of the cost today. For a lot of migrant

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Speaker 3: workers when they're sending their payments abroad, it costs over five.

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Speaker 4: Percent of the value of the payment just just to

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Speaker 4: execute the trend.

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Speaker 3: It's very slow, So we could certainly do a lot

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Speaker 3: better than we're doing right now now in this process.

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Speaker 3: The FIT is very far far behind in terms of

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Speaker 3: their work on central bank digital currencies, and in the

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Speaker 3: US there's a quite a bit.

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Speaker 4: Of skepticism the need for central bank digital currencies. Why

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Speaker 4: is this working continued?

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Speaker 1: Well, that's so hard of the matter. I'm going to

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Speaker 1: go to Raphael our owns the high ground on this

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Speaker 1: at BIS. He's documented the incredible friction of transactions in

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Speaker 1: the real world. We all thought we'd be trading bitcoin it,

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Speaker 1: you know, John would be down at Selene trading bitcoin

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Speaker 1: for a sweater, but the answers were not. We can

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Speaker 1: really get down to where this is efficacious for central banks.

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Speaker 1: We could really squeeze us down to where there's no

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Speaker 1: transactional friction.

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Speaker 3: Well though obviously always give a little bit of transactional friction.

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Speaker 3: But we can do a lot better than we're doing

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Speaker 3: right now. I mean, in central bank digital currencies should

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Speaker 3: be a pretty significant improvement over cash.

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Speaker 4: I'll be just the safest cash.

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Speaker 3: But in terms of the fault risk because you'll be

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Speaker 3: guaranteed by the sovereign nation, but you don't have worries

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Speaker 3: about storage. You can transact with digital cash across long distances,

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Speaker 3: So to me, it's like cash plus. It's superior to

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Speaker 3: cache and something that we that the US should start

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Speaker 3: to innovate on.

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Speaker 5: There's a concern bill that as you disintermediate banks, essentially

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Speaker 5: those agents that really capitalize from those frictions that exist,

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Speaker 5: that some of the functioning of markets that traditionally has

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Speaker 5: supported things like treasuries starts to ebb away. How concerned

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Speaker 5: are you as you start to adopt new, less friction

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Speaker 5: filled methods and as capital markets slow in the wake

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Speaker 5: of rate hikes, how much does that really disintermediate banks

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Speaker 5: that really are still a state for the functioning of

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Speaker 5: the treasury market.

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Speaker 3: It really depends on central bank digital currency design, and

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Speaker 3: I think there you want to have a two tier

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Speaker 3: system where the banks continue to own the customer relationships.

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Speaker 3: Central banks don't want to have customer relationships with hundreds

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Speaker 3: of millions of households, so they should hand that off

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Speaker 3: to the banking system. The second thing you want to

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Speaker 3: do is make sure that the central bank digital currency

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Speaker 3: doesn't pay interests, It doesn't pay interest. It's basically going

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Speaker 3: to be used for payments, not for investment. So that

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Speaker 3: preserves the role of the central of commercial banks as intermediaries.

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Speaker 3: So I think if you do those two things essentially

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Speaker 3: protect that the commercial.

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Speaker 4: Banking system as providing.

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Speaker 3: Financial intermediation services, but the central bank helps provide a

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Speaker 3: better payments medium.

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Speaker 5: The reason why I ask is on a broader sense

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Speaker 5: away from digital currencies, is there is increasing concern about

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Speaker 5: how much of the risk taking activity and how much, frankly,

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Speaker 5: of financial market functioning has moved outside of the highly

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Speaker 5: regulated banks into the private sector. Earlier this morning, UBAS

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Speaker 5: chair Clem Kelliher came out warning again that there's a

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Speaker 5: bubble in private markets and that there's risks building there

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Speaker 5: as an increasing amount of lending moved to that area.

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Speaker 5: Are you concerned about that? Do you think that there

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Speaker 5: is this sort of situation forming on the heels of

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Speaker 5: rate hikes, on the heels of the more tightly regulated

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Speaker 5: banks that deserves greater scrutiny.

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Speaker 4: Absolutely.

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Speaker 3: I think this notion that all we need to do

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Speaker 3: to fix the problems that we saw in March of

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Speaker 3: twenty twenty in the banking system is to appile a

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Speaker 3: lot higher cabal requirements on the largest banks. I think

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Speaker 3: that's misguided. Increase the cabal requirements on the biggest banks,

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Speaker 3: you're just going to push activity out into the non

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Speaker 3: regulated banking sector, and that's going to make the financial

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Speaker 3: system less secure, more unstable than the current regimes.

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Speaker 4: I think we need to think.

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Speaker 3: Really hard about what were the problems in March twenty

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Speaker 3: twenty and how to address them.

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Speaker 2: Bill, thanks for catching out with us.

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Speaker 4: Give us a your view on that.

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Speaker 1: Built outly, the former New York Fed President