WEBVTT - Central Banks Wrestle With the Crypto Conundrum 0:00:00.240 --> 0:00:04.360 Money is not about technology. Money is essentially what we 0:00:04.480 --> 0:00:08.799 have in our heads, the common understanding of what money is, 0:00:08.880 --> 0:00:11.360 as long as we agree on what it is, and 0:00:11.440 --> 0:00:20.800 that requires some kind of illegal framework. Hello and welcome 0:00:20.800 --> 0:00:23.759 to Stephanomics, the podcast that brings the global economy to you, 0:00:24.120 --> 0:00:27.560 and this week we're glimpsing the future of money, a 0:00:27.720 --> 0:00:31.280 digital crypto future that in some ways it is already here. 0:00:31.800 --> 0:00:35.200 Bitcoins the digital currency everyone's heard of. It's been around 0:00:35.200 --> 0:00:38.000 since two thousand and nine, but there are now eight 0:00:38.040 --> 0:00:42.400 thousand other cryptocurrencies out there are competing for your business. 0:00:43.120 --> 0:00:46.840 That explosion in crypto more than fifteen trillion dollars worth 0:00:46.840 --> 0:00:50.800 of transactions last year alone. Maybe based on twenty one 0:00:50.920 --> 0:00:54.600 century innovations like the blockchain, but it feels a lot 0:00:54.680 --> 0:01:01.480 like the nineteenth century wild West, exciting, uncharted territory, also lawless, 0:01:01.480 --> 0:01:04.759 full of snakes. If you don't trust banks or governments, 0:01:05.160 --> 0:01:09.679 it all sounds great. Central banks and regulators naturally have 0:01:09.760 --> 0:01:12.640 a rather different response. They want to bring order to 0:01:12.680 --> 0:01:15.679 the chaos, and they also, many of them, want to 0:01:15.680 --> 0:01:18.959 compete with digital currencies of their own. At last count, 0:01:19.280 --> 0:01:22.080 more than a hundred central banks had either introduced a 0:01:22.160 --> 0:01:25.000 central bank digital currency or had plans to do it. 0:01:25.560 --> 0:01:28.639 I got to chair a fascinating discussion of the future 0:01:28.680 --> 0:01:31.240 of money and central banks at a conference the other 0:01:31.319 --> 0:01:34.760 day organized by the Bank of International Settlements, the Central 0:01:34.760 --> 0:01:37.400 Bank of Central Bankers. We had the governor of the 0:01:37.440 --> 0:01:39.800 first central bank to pilot its own digital cash, the 0:01:39.840 --> 0:01:42.920 Swedish ricks Bank, the chief executive of one of Europe's 0:01:42.959 --> 0:01:47.160 biggest banks, and a Yale University professor who's the academic 0:01:47.200 --> 0:01:49.600 authority in this area. So if you if you want 0:01:49.600 --> 0:01:52.280 to actually understand what a central bank digital currency is 0:01:52.320 --> 0:01:55.000 and why on Earth we might want them, I urge 0:01:55.040 --> 0:01:58.080 you to carry on listening. But before we talk about 0:01:58.080 --> 0:02:00.600 the theory, a taste of what a i'fe lived in 0:02:00.680 --> 0:02:05.040 crypto might be like in practice. Last year, Al Salvador 0:02:05.400 --> 0:02:08.320 became the first country in the world to make bitcoin 0:02:08.639 --> 0:02:13.480 legal tender. So Bloomberg Central America based reporter Michael McDonald 0:02:13.840 --> 0:02:16.360 through his digital wallet in the suitcase and went to 0:02:16.400 --> 0:02:35.080 put that to the taste up for me. It's not 0:02:35.200 --> 0:02:38.000 for me, you know why, because those of us who 0:02:38.040 --> 0:02:40.600 don't know how to read, we're going to lose money. 0:02:41.600 --> 0:02:44.840 That was Maria or Billina, who runs a ribbed restaurant 0:02:44.919 --> 0:02:48.560 in the town of Conchagua, El Salvador, or Billina, is 0:02:48.560 --> 0:02:51.160 in her late seventies and stands over a pile of meat, 0:02:51.240 --> 0:02:53.919 waving a butcher's knife as she prepares the day's cuts 0:02:53.919 --> 0:02:57.280 of beef. She says the learning curve is too steep 0:02:57.560 --> 0:03:03.080 and swears she'll never accept cryptocurrency as pay men. I 0:03:03.120 --> 0:03:06.600 appreciate the visit, but for me, no bitcoin. The government 0:03:06.639 --> 0:03:10.440 made a mistake with that. Unfortunately they have add advisors. 0:03:11.760 --> 0:03:15.600 That she's so downbeat on bitcoin is telling because Conchagua 0:03:15.760 --> 0:03:18.560 happens to be where the Salvadoran government plans to build 0:03:18.680 --> 0:03:23.040 Bitcoin City, a city free of income and capital gains taxes, 0:03:23.480 --> 0:03:27.040 and where a nearby volcano will provide electricity for bitcoin minds. 0:03:31.440 --> 0:03:34.720 In September of last year, Al Salvador became the first 0:03:34.840 --> 0:03:38.320 country in the world to make bitcoin legal tender, so 0:03:38.360 --> 0:03:41.000 the digital currency can be used as an official means 0:03:41.040 --> 0:03:44.760 of payment for goods and services. It is the biggest 0:03:44.800 --> 0:03:47.880 test for bitcoin in its twelve year history, and the 0:03:47.880 --> 0:03:51.160 crypto world has watched closely to see how it all unfolds. 0:03:54.280 --> 0:03:59.000 It's now February and I am here to test the system. 0:03:59.040 --> 0:04:00.880 I jumped in my rent to car for a road 0:04:00.920 --> 0:04:03.280 trip around the country to see how feasible it is 0:04:03.320 --> 0:04:06.320 to pay for things like meals, hotels, and even a 0:04:06.360 --> 0:04:10.360 game of pool using bitcoin. But things don't always go 0:04:10.440 --> 0:04:19.880 as smoothly as hoped. Infection wasn't completed right now, it's 0:04:21.040 --> 0:04:23.160 and then when they see that the transpection was committed, 0:04:24.040 --> 0:04:29.320 that's what happened. That's Natalia Abu lates she manages a 0:04:29.360 --> 0:04:33.039 local Asian fusion restaurant called Bruto, which opened last year 0:04:33.240 --> 0:04:38.600 and accepts bitcoin. My bitcoin transaction isn't processing properly, so 0:04:38.640 --> 0:04:41.880 I ended up paying with a credit card. In fact, 0:04:42.200 --> 0:04:45.480 local businesses have reported lots of issues using bitcoin as 0:04:45.520 --> 0:04:49.000 payment here, from slow internet speed and long delays in 0:04:49.080 --> 0:04:54.400 transactions to volatile price swings in the digital currency mark. 0:04:54.440 --> 0:04:57.960 The escoar at National Car Rental in San Salvador tells 0:04:57.960 --> 0:05:01.040 me the company still needs to upgrade its technology before 0:05:01.040 --> 0:05:07.920 accepting it. Right now, our bitcoin app is going through 0:05:07.920 --> 0:05:10.640 some minor adjustments, so at the moment we are not 0:05:10.800 --> 0:05:13.400 using it. It's easier to use a credit card because 0:05:13.440 --> 0:05:16.040 it is easier to charge the deposit and it makes 0:05:16.040 --> 0:05:25.080 refunding the deposit much easier, Yeah, Ricardo Casta, you know. 0:05:25.200 --> 0:05:28.680 Salvador based economists for the Central American Institute for Fiscal 0:05:28.760 --> 0:05:32.640 Studies said the nation's economy is largely made up of 0:05:32.720 --> 0:05:37.240 small businesses, which has prevented widespread adoption of bitcoin as 0:05:37.279 --> 0:05:44.120 legal tender. Large businesses, especially those in the formal sector, 0:05:44.640 --> 0:05:48.240 high percentage of them are accepting bitcoin. In the case 0:05:48.279 --> 0:05:52.720 of small business it's a much smaller percentage, especially considering 0:05:52.720 --> 0:05:57.120 the characteristics of the Salvadoran market, which is largely informal. 0:05:57.640 --> 0:06:01.279 About seven workers are in the informal sector. So for 0:06:01.320 --> 0:06:04.520 those businesses, you might find a few that accept bitcoin, 0:06:04.839 --> 0:06:08.000 but the vast majority don't. If you go to buy 0:06:08.080 --> 0:06:12.320 your morning French baguette, they won't be accepting bitcoin. If 0:06:12.320 --> 0:06:14.919 you go to a PUPUSA, you might find one that 0:06:14.960 --> 0:06:23.240 accepts it, but the most are not accepting it. There 0:06:23.320 --> 0:06:26.400 are a few daring entrepreneurs who say bitcoin has been 0:06:26.400 --> 0:06:31.240 good for business. Oscar Attilio Lopez sells peanuts alongside the 0:06:31.320 --> 0:06:35.000 highway near a town called Hikualisco, and he accepts bitcoin. 0:06:36.240 --> 0:06:39.279 Standing outside his tin house with a dirt floor, he 0:06:39.279 --> 0:06:42.640 said he even pays vendors in the cryptocurrency and has 0:06:42.680 --> 0:06:47.400 made three hundred dollars speculating on price wings. I whip 0:06:47.400 --> 0:06:49.680 out my phone and send him seven dollars worth a 0:06:49.720 --> 0:06:58.600 bitcoin for two bags of nuts. No, wow, he got 0:06:58.600 --> 0:07:02.200 my seven dollars immediately. Lopez tells me he made a 0:07:02.240 --> 0:07:06.400 big sale recently and accepted bitcoin as payment instead of 0:07:06.440 --> 0:07:09.200 converting it to US dollars. He kept the payment in 0:07:09.279 --> 0:07:12.800 bitcoin and wound up watching its value rise when he 0:07:12.840 --> 0:07:15.680 withdrew the money from his checking account. He realized the 0:07:15.720 --> 0:07:21.440 thrill of accepting the cryptocurrency. We've never had a problem 0:07:21.480 --> 0:07:24.080 with it. It's so how fast it was, and that's 0:07:24.080 --> 0:07:27.360 how fast it's usually is. You can find a few 0:07:27.360 --> 0:07:30.640 other places that accepted near me. Not every one accepted, 0:07:31.360 --> 0:07:33.720 but there are a few. The will I got interested 0:07:33.760 --> 0:07:37.480 to cost the investment aspect called my attention. That's with 0:07:37.640 --> 0:07:40.360 certain amounts he could make money, according through a price 0:07:40.400 --> 0:07:50.240 of bitcoin. Back in San Salvador, Diego Medanda has been 0:07:50.280 --> 0:07:55.040 speculating on cryptocurrencies for several years and even made enough 0:07:55.080 --> 0:07:58.080 money on its appreciation against the dollar to expand his 0:07:58.160 --> 0:08:02.160 small company. He imports jewelry and sells it at several 0:08:02.200 --> 0:08:10.720 locations around the capitol. Cryptocurrency is the new option. It's 0:08:10.760 --> 0:08:13.840 just one more currency. When I was younger, I lived 0:08:13.840 --> 0:08:16.200 through a new currency when we switched from the clone 0:08:16.240 --> 0:08:19.320 to the dollar, and this is exactly the same It 0:08:19.400 --> 0:08:22.559 happened when we only used to use tangible currency, the dollar, 0:08:23.080 --> 0:08:25.960 and then started to introduce credit and debit cards, and 0:08:26.040 --> 0:08:28.480 people found it improbable that their money could be on 0:08:28.520 --> 0:08:31.760 a little plastic thing. It was unthinkable to say I 0:08:31.800 --> 0:08:34.720 have ten thousand dollars in my hand. Now we have 0:08:34.760 --> 0:08:37.840 to convince people that we can say in my phone, 0:08:37.960 --> 0:08:40.920 I have ten thousand in bitcoin, which is just a 0:08:40.920 --> 0:09:03.120 new way to implement a new legal currency. So for 0:09:03.160 --> 0:09:05.640 some in our Salvador, at least, this isn't such a 0:09:05.679 --> 0:09:08.320 new world after all. And several of the experts I 0:09:08.360 --> 0:09:10.839 spoke to it that Bank of International Settlements event the 0:09:10.920 --> 0:09:14.559 other day said much the same thing. The technology may 0:09:14.559 --> 0:09:18.320 be new, but this debate we're having about what money is, 0:09:18.600 --> 0:09:22.280 how we regulated, how we trust it, it's very old. Indeed, 0:09:22.800 --> 0:09:25.040 you're going to hear an edited version of that conversation 0:09:25.080 --> 0:09:29.319 now featuring the governor of the Swedish Central Bank, Stephan Ingves, 0:09:29.360 --> 0:09:33.920 the chief executive of Santander Bank, Jose Antonio Alvarez and 0:09:34.000 --> 0:09:40.679 the Yale University Professor of Finance, Gary Gorton. Gary, I'm 0:09:40.679 --> 0:09:43.760 going to sort of break a precedent. We often start 0:09:43.840 --> 0:09:46.560 with the policymakers, but I think given the analysis that 0:09:46.600 --> 0:09:49.360 you've done in this area and the contributions you've made, 0:09:49.360 --> 0:09:51.240 I think it would be very useful to have you 0:09:51.720 --> 0:09:55.800 setting a little bit of the landscape that we're seeing 0:09:55.840 --> 0:09:59.280 that the change in payments around the world. But I 0:09:59.280 --> 0:10:03.880 think particularly um what challenges and opportunities arise for central 0:10:03.920 --> 0:10:07.559 banks out of this. So let me let me just 0:10:07.679 --> 0:10:12.360 say two things. One is about a hundred years ago 0:10:12.520 --> 0:10:17.680 or so, every sovereign state decided that the government should 0:10:17.679 --> 0:10:21.319 have monopoly on the production of money, and the reason 0:10:21.440 --> 0:10:24.400 was that only the government can provide a currency that 0:10:25.000 --> 0:10:28.760 trades at par with no questions asked, and only the 0:10:28.800 --> 0:10:32.280 government's currency is not subject to bank runs. So the 0:10:32.400 --> 0:10:36.679 question of whether we should have monopoly, whether states should 0:10:36.679 --> 0:10:39.880 have monopoly of our money production has arisen again because 0:10:39.880 --> 0:10:43.520 stable coins are a form of privately produced money, and 0:10:43.840 --> 0:10:47.200 they've already have a foothold, and I think it's at 0:10:47.240 --> 0:10:49.760 least in the US, it's too late to do anything 0:10:49.800 --> 0:10:53.160 about it until we have the next financial crisis. The 0:10:53.200 --> 0:10:56.560 other thing I would say, and fortunately I think this 0:10:56.679 --> 0:10:59.400 is not so controversial as it might have been, but 0:10:59.440 --> 0:11:03.079 everybody has a seem now the importance of the global 0:11:03.120 --> 0:11:07.360 financial plumbing was swift, and the U. S. Treasury was 0:11:07.480 --> 0:11:11.160 using Swift data, you know, before all this to track 0:11:11.360 --> 0:11:14.600 terrorists and so on. And that's going to change when 0:11:14.640 --> 0:11:18.160 we moved to blockchain, say in ten years, when everything 0:11:18.240 --> 0:11:22.160 is interoperable, the standards for how you get data are 0:11:22.160 --> 0:11:25.480 going to be completely different. And I think central banks 0:11:25.520 --> 0:11:28.840 have to be involved here to jointly decide what the 0:11:28.920 --> 0:11:32.120 standards are going to be and to understand how the 0:11:32.200 --> 0:11:34.400 data is going to flow. And I think that's an 0:11:34.400 --> 0:11:38.920 issue that's been overlooked and governor ingvis as. I mentioned 0:11:38.960 --> 0:11:41.840 that the Risk Bank was very early, I think it 0:11:41.880 --> 0:11:44.400 was twenty sixteen you announced that you would do that 0:11:44.480 --> 0:11:48.120 the pilot of the of the digital currency. How do 0:11:48.200 --> 0:11:51.840 you think of your role as a central bank in 0:11:51.880 --> 0:11:55.240 this in this landscape sort of both in terms of 0:11:55.240 --> 0:11:59.679 your own intervention with the pilot, but also in potentially 0:12:00.280 --> 0:12:04.520 regulating and moderating the kind of interventional innovation we're seeing 0:12:04.520 --> 0:12:09.360 on the private space obvious to us, maybe earlier than 0:12:09.400 --> 0:12:11.840 in some other places, that we needed to sort of 0:12:11.840 --> 0:12:15.679 start thinking about these things because given the technological change 0:12:15.679 --> 0:12:19.040 that was going on, people were just moving out of cash. 0:12:19.360 --> 0:12:22.440 And then we sort of started thinking about it kind 0:12:22.480 --> 0:12:26.360 of in a way that Gary just referred to, because 0:12:26.400 --> 0:12:29.400 we started looking at what happened actually in the late 0:12:29.440 --> 0:12:36.040 eighteen hundreds, what was the process that produced the division 0:12:36.080 --> 0:12:39.480 of labor, if I call it that, between the central 0:12:39.480 --> 0:12:43.319 banks and what the private banks used. But we're doing 0:12:43.360 --> 0:12:46.520 back then, and the basic starting point is very very simple. 0:12:47.080 --> 0:12:51.760 In the old days, everything was on paper. Now we're 0:12:51.880 --> 0:12:55.160 moving into another world where nothing will be on paper. 0:12:56.080 --> 0:13:01.120 Now when that technological change happens, would we like to 0:13:01.240 --> 0:13:05.839 maintain roughly the same structure that has been established for 0:13:05.880 --> 0:13:08.160 about a hundred hundred and fifty years ago in many 0:13:08.160 --> 0:13:12.360 many countries, or should we just let it go? And 0:13:12.440 --> 0:13:15.560 then we came to the conclusion that no, we should 0:13:15.600 --> 0:13:19.040 not let it go, because that would imply that in 0:13:19.080 --> 0:13:23.480 my country we would only have private sectre money available 0:13:23.600 --> 0:13:27.559 to the general public. And if history gives us any guidance, 0:13:28.240 --> 0:13:31.960 that's a bad idea, and all the more so in 0:13:32.000 --> 0:13:37.199 a small, very very open economy where it's important, given 0:13:37.240 --> 0:13:40.800 that we have our own field currency, that people actually 0:13:40.960 --> 0:13:44.280 use that currency, because supposed we were just sitting with 0:13:44.320 --> 0:13:47.520 our arms crossed, the whole thing moves into I don't 0:13:47.520 --> 0:13:52.360 know what other other currencies. In that environment, you can 0:13:52.400 --> 0:13:56.160 forget about monetary policy as we know it, because then 0:13:56.200 --> 0:13:59.960 there is no way of increasing or reducing the supply 0:14:00.000 --> 0:14:03.800 own money in the system, because people would start using 0:14:03.840 --> 0:14:08.000 what I call o PM other people's money, and producing 0:14:08.040 --> 0:14:11.280 money nowadays in a small central bank is actually a 0:14:11.280 --> 0:14:15.199 competitive business. People never think about it in that way, 0:14:15.240 --> 0:14:18.920 but it actually it actually is. And that means that 0:14:19.040 --> 0:14:24.280 what we do has to be from a transactions purpose efficient, 0:14:25.120 --> 0:14:28.440 and we need to ensure that we can maintain the 0:14:28.520 --> 0:14:33.600 exchange rate between central bank money and private sector money. 0:14:33.960 --> 0:14:37.120 And if that exchange rate is not one to want, 0:14:38.200 --> 0:14:40.880 then with a fairly high likelihood, you end up with 0:14:41.000 --> 0:14:44.200 serious problems in the system. And those were exactly the 0:14:44.240 --> 0:14:47.760 problems that we had in the eighteen hundreds when banks 0:14:47.920 --> 0:14:51.280 issued all sorts of notes and coins on on their own, 0:14:51.800 --> 0:14:54.840 and that it created all sorts of all sorts of problems. 0:14:54.960 --> 0:14:57.080 And that has to do with the fact that money 0:14:57.600 --> 0:15:01.280 is not about technology. Money Essentially, what we have in 0:15:01.320 --> 0:15:04.960 our heads, and then we need to agree on what 0:15:05.000 --> 0:15:09.960 we're should have in our heads moving moving forward, and 0:15:10.000 --> 0:15:14.240 then that speaks in favor of producing a central bank 0:15:14.280 --> 0:15:18.760 digital currency. But having said that, I just don't expect 0:15:18.840 --> 0:15:23.360 a CBDC to sort of outcompete, so to speak, private 0:15:23.400 --> 0:15:26.480 sector money at all. It's a sort of it's it's 0:15:26.520 --> 0:15:30.000 the final thing that you can provide on the public 0:15:30.040 --> 0:15:34.280 sector side in order to ensure that the system is 0:15:35.040 --> 0:15:40.720 is stabled. We've been around in sixteen sixty and had 0:15:40.760 --> 0:15:43.640 we not changed the way we do business and the 0:15:43.680 --> 0:15:46.920 way we do things time and time again, then of 0:15:46.920 --> 0:15:50.080 course we have been out of this business a long, long, long, 0:15:50.080 --> 0:15:53.320 long time ago. And we started out back in the 0:15:53.360 --> 0:15:59.280 sixteen hundreds with twenty kilo copper coins. That's extremely inefficient, 0:16:00.520 --> 0:16:02.880 and had we not gotten rid of the copper coins 0:16:02.960 --> 0:16:07.040 moved into physical notes, then it would have been game 0:16:07.120 --> 0:16:09.760 over a long long time ago. So now, given that, 0:16:10.000 --> 0:16:12.680 at least in my corner of the world, people are 0:16:13.400 --> 0:16:17.160 earlier adapters when it comes to new technologies, and there 0:16:17.160 --> 0:16:21.160 are probably earlier adapters because there is a fairly good 0:16:21.200 --> 0:16:24.440 trust in what the government does. So if you're so 0:16:24.520 --> 0:16:28.280 if you introduce new technological sort of things into into 0:16:28.320 --> 0:16:32.160 our system. People tend to use them, and then it's 0:16:32.240 --> 0:16:35.640 just it's our job to go with the flow. Well, 0:16:35.680 --> 0:16:37.200 and I guess you have you have to say Sweden 0:16:37.240 --> 0:16:39.600 was an early adopter when it comes to central banks 0:16:39.600 --> 0:16:42.320 being being the very first. And of course you've also 0:16:42.720 --> 0:16:45.800 you were able to solve some of these problems before 0:16:46.280 --> 0:16:48.840 for other central banks who came after you. So I 0:16:48.840 --> 0:16:51.680 guess in the world definitely as you ows you were 0:16:51.720 --> 0:16:56.680 dead now, Jose Antonio, you are representing all of the 0:16:57.480 --> 0:17:01.160 private financial system in this debate, so you better be good. 0:17:02.360 --> 0:17:06.440 But often the private sector view on this is quite different. 0:17:07.000 --> 0:17:11.400 There is sometimes a feeling, either explicit or beneath the surface, 0:17:11.960 --> 0:17:14.439 that says central banks aren't the ones who are going 0:17:14.480 --> 0:17:17.000 to be good at innovating, and they shouldn't be at 0:17:17.000 --> 0:17:20.280 the forefront of this development. We should be counting on 0:17:20.320 --> 0:17:22.760 the private sector to come up with all the right 0:17:22.880 --> 0:17:27.040 solutions here, Um, how do you see that the comparative 0:17:27.080 --> 0:17:30.880 advantages of the private and public sector here? The first 0:17:30.960 --> 0:17:34.080 not you said, doesn't matter where the innovation comes from, 0:17:34.119 --> 0:17:37.520 as long as the good innovation that it's good for 0:17:37.600 --> 0:17:40.360 the society as a whole. Doesn't mother it comes from 0:17:40.400 --> 0:17:42.560 the central ban of the private sector. I am not 0:17:42.800 --> 0:17:47.560 going to make a distinction so into between who is 0:17:47.640 --> 0:17:53.440 innovating whoever it is innovating, welcome, Okay, that's our approach um, 0:17:53.560 --> 0:18:00.680 particularly in any space where technology has changed. As Stephans before, 0:18:01.160 --> 0:18:03.720 we've been doing the things in a way for many 0:18:03.800 --> 0:18:11.800 many years, and suddenly technology allows a more diverse, diverse ecosystem, 0:18:11.840 --> 0:18:15.600 particularly in the payments space. The payments space has been 0:18:16.280 --> 0:18:20.480 in space where we used to have the bank's central 0:18:20.480 --> 0:18:24.399 banks and a few other places. Suddenly we got on 0:18:24.480 --> 0:18:27.679 the back of the new technology, the tech companies in 0:18:27.720 --> 0:18:31.080 the space, the fintech in the space, in a world 0:18:31.160 --> 0:18:37.679 that where the number of transations grew exponentially on the 0:18:37.720 --> 0:18:42.000 back of the new technology. Online and e commerce means 0:18:42.080 --> 0:18:47.320 that the number of transations is growing exponentially year after year. 0:18:47.440 --> 0:18:52.679 So we have suddenly this and another future that is 0:18:52.760 --> 0:18:56.919 quite interesting for a lot of business models. That is 0:18:57.160 --> 0:19:04.440 the data. So digital payments means that your capacity to 0:19:04.480 --> 0:19:11.800 gather data that enrich a verety of business models is 0:19:11.920 --> 0:19:16.240 another feature that came along. Yeah, So with this explosion 0:19:16.800 --> 0:19:21.280 of the payments using the new technology, volument and I 0:19:21.359 --> 0:19:24.159 think the public sector has a clear role here. The 0:19:24.240 --> 0:19:27.680 first thing is we need to establish standards, standards on 0:19:27.800 --> 0:19:38.440 what on first customer protection, second data security, their data sharing, 0:19:38.800 --> 0:19:43.359 for privacy, so this kind of things we need to 0:19:43.400 --> 0:19:47.160 have standards. So innovation is good, but at the same time, 0:19:47.840 --> 0:19:51.400 if if we need to have you do an activity, 0:19:51.680 --> 0:19:54.560 you should have the same roles that other people doing 0:19:54.600 --> 0:19:58.840 the same activity, the same supervision if any. That has 0:19:58.880 --> 0:20:03.520 been the role of the on the central banks. So 0:20:03.560 --> 0:20:07.520 the public sector has a role there. And finally we 0:20:07.600 --> 0:20:11.000 have the crypto space. The crypto space I'm not referring 0:20:11.040 --> 0:20:13.119 to the big coins and like and referring more to 0:20:13.200 --> 0:20:17.560 the stable coins, digital bonds and all these things, so 0:20:17.840 --> 0:20:23.280 more kind of traditional means of payments where the shuttle 0:20:23.320 --> 0:20:29.199 bunks need to have a potential regulations. If the banks 0:20:29.240 --> 0:20:32.240 are going to have a financial city desire, going to 0:20:32.359 --> 0:20:36.439 have these crypto asis in the bounty, we need a 0:20:37.600 --> 0:20:42.439 well some potential approach in relation with those assets that 0:20:42.520 --> 0:20:53.040 eventually eventually not there are payment means of payments today 0:20:54.440 --> 0:20:57.280 carry and I'm sort of interested in you've given the 0:20:57.359 --> 0:21:00.400 historical parallel, which I suspect some of the sort of 0:21:00.440 --> 0:21:05.040 the fintech firms would would resent being classed along with 0:21:05.119 --> 0:21:09.119 the sort of the wild West years of private currencies 0:21:09.160 --> 0:21:12.919 in the US. But I think it's quite a powerful parallel. Um. 0:21:13.000 --> 0:21:18.200 Do you see US regulators sort of coming towards a 0:21:20.040 --> 0:21:24.760 consistent view on how these stable coins the outside of 0:21:24.800 --> 0:21:28.640 the central bank system should should be regulated and treated. 0:21:30.359 --> 0:21:33.359 I don't think they have come to a decision other 0:21:33.440 --> 0:21:37.440 than that stable coin issuers are banks, and in terms 0:21:37.440 --> 0:21:41.200 of service of a stable coin, say you can redeem 0:21:41.200 --> 0:21:45.320 your coin on demand at par that's a bank. So 0:21:46.240 --> 0:21:49.720 the Treasury President's working groups said they're a bank, but 0:21:49.800 --> 0:21:53.760 they didn't say anything else. Really, I think the issuers 0:21:53.760 --> 0:21:56.639 of stable coins they understand that they have all these problems. 0:21:57.119 --> 0:22:01.280 They're trying to get some aneer of at ability by 0:22:01.320 --> 0:22:05.480 getting you know, bank licenses, fintech licenses in various states, 0:22:05.480 --> 0:22:08.760 but those are not real bank charters and they don't 0:22:08.920 --> 0:22:12.800 as Mr Alvaret said, there's no prudential oversight of these guys. 0:22:12.800 --> 0:22:16.000 So the top five stable coin prices all moved together, 0:22:16.840 --> 0:22:20.800 right the market can't even distinguish between them. So I 0:22:20.840 --> 0:22:23.880 think I think eventually we're gonna have to say they're 0:22:23.880 --> 0:22:26.800 a real bank, and they have to be regulated as 0:22:26.800 --> 0:22:28.880 a real bank. And I mean this would really come 0:22:28.920 --> 0:22:31.480 to a head if say JP Morgan issued it's a 0:22:31.480 --> 0:22:35.639 stable coin, right, that would cause Congress to act right away. 0:22:35.680 --> 0:22:37.159 But you know then I don't think they're going to 0:22:37.280 --> 0:22:39.200 do that. But I mean, I don't want to be 0:22:39.280 --> 0:22:41.679 too pessimistic, but I think the stable coins are not 0:22:41.720 --> 0:22:43.800 big now, but they will be big because lots of 0:22:43.800 --> 0:22:47.639 the problems with blockchain are being solved as we speak. 0:22:48.040 --> 0:22:53.040 It's becoming uh scalable. The problem is this interoperability with 0:22:53.119 --> 0:22:55.840 the current system, and the FED has resisted that they 0:22:55.840 --> 0:22:59.240 won't give a master account to anybody who looks different 0:22:59.240 --> 0:23:01.639 than a bank, and that would be one way to 0:23:01.800 --> 0:23:04.919 get some oversight because you could have rules around you 0:23:04.960 --> 0:23:07.480 know what you have to do to get a master account. 0:23:07.840 --> 0:23:10.119 I think the FED on its own could address this, 0:23:10.200 --> 0:23:12.480 but I don't think they will. I think they want 0:23:12.520 --> 0:23:16.320 to leave it to Congress. So so I make the 0:23:16.359 --> 0:23:18.879 react to this. Yeah, I still having the Museum of 0:23:18.960 --> 0:23:22.200 the Bank, some builders that were issued by bank or something. 0:23:22.240 --> 0:23:26.200 They're a hundred and sixty years ago when the bands 0:23:26.280 --> 0:23:29.439 the rag Bones were issuing their own currency. All of 0:23:29.480 --> 0:23:32.000 them were preset as supposed to be preset as the 0:23:32.000 --> 0:23:34.120 currency in Spain at that time, all of them whereas 0:23:34.160 --> 0:23:38.159 they were goings some cord, whereas they were goings in paper. Yeah. 0:23:38.320 --> 0:23:42.200 So when this became a monopoly for the reason and 0:23:42.240 --> 0:23:46.240 Stephan said, and became a monopoly because of the time, 0:23:46.400 --> 0:23:49.600 and the reason was much more efficient. Yeah, So it's 0:23:49.640 --> 0:23:53.000 not about the technology. The technology is there. As long 0:23:53.040 --> 0:23:55.959 as the technology is all people problems, we should go 0:23:56.160 --> 0:24:00.680 and using it, but using a reasonable way that allowed 0:24:00.760 --> 0:24:04.000 to preshare what do you say I wish I should 0:24:04.040 --> 0:24:08.560 say a public good that is the financial stability. I 0:24:08.600 --> 0:24:12.960 completely agree with Jose Antonio because as I started out saying, 0:24:13.000 --> 0:24:16.840 money is what we have in our heads. Money is 0:24:16.880 --> 0:24:20.880 a common understanding of what money is as long as 0:24:20.920 --> 0:24:24.040 we agree on what it is, and that requires some 0:24:24.160 --> 0:24:28.159 kind of a legal framework, and without a legal framework, 0:24:28.200 --> 0:24:32.920 you have nothing. So that's where the issue sometimes goes. 0:24:33.040 --> 0:24:35.480 In some sense, the way I'm thinking about it a 0:24:35.520 --> 0:24:39.000 stray because clearly, if you come from the tech side, 0:24:40.160 --> 0:24:42.800 do you have not spent your days thinking about the 0:24:42.880 --> 0:24:46.440 legal aspects of what you're doing, And it's the legal 0:24:46.480 --> 0:24:50.320 framework that defines what kind of a claim you do. 0:24:50.359 --> 0:24:53.720 You have or do not have. And that's really the 0:24:53.800 --> 0:24:57.119 issue with with with stable coins because if the legal 0:24:57.160 --> 0:25:00.840 framework is not there, but the fairly highlight nihood, a 0:25:00.960 --> 0:25:05.320 stable coin is an unstable coin, and you just don't 0:25:05.359 --> 0:25:10.040 know what kind of a claim you ultimately have. And 0:25:10.480 --> 0:25:13.359 that's not a good thing because if history gives us 0:25:13.440 --> 0:25:18.600 any guidance, those type of constructions tend to collapse sooner 0:25:18.720 --> 0:25:22.320 or later. And one one thing we do know is 0:25:22.359 --> 0:25:25.800 that we human beings, we never learn if it's too 0:25:25.800 --> 0:25:29.920 good to be true, Well that's the case, and you're 0:25:30.000 --> 0:25:33.159 not with a problem sooner or later. So if you 0:25:33.320 --> 0:25:36.239 create something which behaves like a bank, well then go 0:25:36.320 --> 0:25:41.200 and get yourself a banking license. I'm interested perhaps from 0:25:42.000 --> 0:25:46.080 Gary Gorton because of his historical perspective. We have said 0:25:46.119 --> 0:25:48.600 that there's not always about the technology, and that these 0:25:48.600 --> 0:25:51.879 issues come up again and again in different forms through history. 0:25:51.920 --> 0:25:53.720 But I guess one thing that one could say was 0:25:53.760 --> 0:25:56.760 different about this about the potential of a central bank 0:25:56.760 --> 0:26:00.359 digital currency would be the degree of information and the 0:26:00.480 --> 0:26:04.400 degree of knowledge that a central bank could have about 0:26:05.000 --> 0:26:10.639 its citizens and all the transactions being undertaken by individual citizens. 0:26:11.800 --> 0:26:15.520 Against that we have, you know, quite large suspicions around 0:26:16.160 --> 0:26:21.280 government these days and concern around privacy. Do you think 0:26:21.320 --> 0:26:24.040 that is one different element to this debate that central 0:26:24.040 --> 0:26:25.800 banks are going to have to deal with the concern 0:26:25.840 --> 0:26:30.760 about privacy. Absolutely. I mean there's there's two issues. One 0:26:30.800 --> 0:26:33.760 issue is the central bank, you know, at least for 0:26:33.880 --> 0:26:37.280 large transactions, needs to know the identity of those who 0:26:37.320 --> 0:26:41.520 are transacting, right, And that's that's why swift data is important. 0:26:42.200 --> 0:26:45.879