1 00:00:10,760 --> 00:00:14,120 Speaker 1: Hello, and welcome to another episode of the ad Thoughts Podcast. 2 00:00:14,200 --> 00:00:18,400 Speaker 1: I'm Tracy Allaway and I'm Joe Wisen't thal Joe. I 3 00:00:18,440 --> 00:00:22,079 Speaker 1: feel like it's uh an interesting time to be a 4 00:00:22,120 --> 00:00:26,120 Speaker 1: central bank. I mean, yeah, it always is, but I 5 00:00:26,160 --> 00:00:32,280 Speaker 1: think particularly interesting right now because the scope of new challenges, 6 00:00:32,880 --> 00:00:37,680 Speaker 1: new economic conditions, new forces on sort of like how 7 00:00:37,720 --> 00:00:40,440 Speaker 1: banking and money and markets work. Lots of new stuff 8 00:00:40,520 --> 00:00:43,199 Speaker 1: right now, lots of new territory. Yeah. So, not only 9 00:00:43,240 --> 00:00:48,519 Speaker 1: are central banks responding to an exceptionally unusual economic crisis 10 00:00:48,560 --> 00:00:51,400 Speaker 1: in the form of a global pandemic, which basically led 11 00:00:51,440 --> 00:00:54,760 Speaker 1: to you know, the shutdown of the entire economy last year, 12 00:00:54,840 --> 00:00:58,720 Speaker 1: but they're not now all reacting sort of differently to 13 00:00:59,040 --> 00:01:02,640 Speaker 1: the recoveries. For instance, we saw the FED coming in 14 00:01:02,720 --> 00:01:05,720 Speaker 1: more hawkish than expected last week, but it's still basically 15 00:01:05,760 --> 00:01:09,720 Speaker 1: on hold for the foreseeable future. You have Brazil delivering 16 00:01:09,920 --> 00:01:14,840 Speaker 1: successive rate hikes to deal with inflation. China's sort of 17 00:01:14,880 --> 00:01:18,000 Speaker 1: winding down some of its easy monetary policies. The ECB 18 00:01:18,160 --> 00:01:22,120 Speaker 1: hasn't even started tapering or you know, even talking about 19 00:01:22,120 --> 00:01:24,800 Speaker 1: tapering at this moment in time. So you have all 20 00:01:24,840 --> 00:01:27,280 Speaker 1: these central banks sort of going off and doing their 21 00:01:27,319 --> 00:01:30,800 Speaker 1: own thing, trying to respond to this very new environment. 22 00:01:31,520 --> 00:01:35,440 Speaker 1: And in the meantime, you also have some very interesting 23 00:01:35,520 --> 00:01:40,399 Speaker 1: ideas floating around on the nature of money, so sort 24 00:01:40,400 --> 00:01:46,319 Speaker 1: of like the very fundamentals of being a central bank. Yeah, 25 00:01:46,360 --> 00:01:49,640 Speaker 1: that's true. I hadn't really like thought about it, and 26 00:01:49,760 --> 00:01:51,840 Speaker 1: the sort of those kind of cross winds, I mean, 27 00:01:51,840 --> 00:01:55,960 Speaker 1: you're absolutely right, like sort of like unprecedented, you know, 28 00:01:56,360 --> 00:01:59,720 Speaker 1: I guess there's a sense in which the COVID crisis 29 00:02:00,080 --> 00:02:03,200 Speaker 1: hit everyone the same way at the same time, basically, 30 00:02:03,280 --> 00:02:05,400 Speaker 1: like it kind of had this big shutdown effect, but 31 00:02:05,520 --> 00:02:09,080 Speaker 1: the recovery is very different with different conditions. So it's like, Okay, 32 00:02:09,080 --> 00:02:11,720 Speaker 1: everyone turns off everything for a few months, and now 33 00:02:11,720 --> 00:02:14,280 Speaker 1: we're trying to turn it back on again. And some 34 00:02:14,280 --> 00:02:17,480 Speaker 1: countries have had different fiscal policies, some countries have had 35 00:02:17,560 --> 00:02:21,400 Speaker 1: different trajectories of the virus itself. Some countries have like 36 00:02:21,440 --> 00:02:25,480 Speaker 1: different underlying economic conditions that change the nature of the recovery. 37 00:02:25,560 --> 00:02:27,880 Speaker 1: So there's that, and so then you get the splintering 38 00:02:27,919 --> 00:02:31,720 Speaker 1: of policy outcomes as you talk about. Plus again, you know, 39 00:02:32,040 --> 00:02:35,040 Speaker 1: the the rise over the last year of like different 40 00:02:35,080 --> 00:02:41,320 Speaker 1: thoughts about money, particularly cryptocurrencies. We have the Chinese digital currency, 41 00:02:41,360 --> 00:02:43,560 Speaker 1: which is like people talked about for a long time, 42 00:02:43,600 --> 00:02:46,680 Speaker 1: but there's actually out that's raising all kinds of new questions. 43 00:02:46,680 --> 00:02:51,080 Speaker 1: So yeah, just numerous things all hitting at the same time. Yeah, 44 00:02:51,120 --> 00:02:54,079 Speaker 1: it's a lot for central bankers to wrap their heads around, 45 00:02:54,120 --> 00:02:57,959 Speaker 1: but we are going to try to do exactly that today, 46 00:02:57,960 --> 00:03:01,400 Speaker 1: and we have the perfect person to discuss these broad 47 00:03:01,440 --> 00:03:03,560 Speaker 1: themes with, you know, the outlook for central banks and 48 00:03:03,600 --> 00:03:08,360 Speaker 1: also how central banks are dealing with new approaches towards money, 49 00:03:08,440 --> 00:03:12,040 Speaker 1: including cryptocurrencies. We're gonna be speaking with Human Song Shin. 50 00:03:12,360 --> 00:03:15,400 Speaker 1: He's the economic advisor and head of Research at the 51 00:03:15,520 --> 00:03:19,560 Speaker 1: Bank for International Settlements and also a previous All Thoughts guests. 52 00:03:19,600 --> 00:03:22,320 Speaker 1: So thank you so much for coming on. It's really 53 00:03:22,360 --> 00:03:25,280 Speaker 1: great to be back. So I guess just to begin with, 54 00:03:25,880 --> 00:03:28,040 Speaker 1: I sort of wanted to zero in on the central 55 00:03:28,040 --> 00:03:31,640 Speaker 1: bank digital currencies idea because it does feel like over 56 00:03:31,680 --> 00:03:35,960 Speaker 1: the past year this is an idea that is gaining 57 00:03:36,120 --> 00:03:38,520 Speaker 1: a lot of momentum. We've seen a lot of banks 58 00:03:38,960 --> 00:03:43,600 Speaker 1: issue papers about it, including the b I S. One 59 00:03:43,600 --> 00:03:46,120 Speaker 1: of the things I want to ask is are we 60 00:03:46,160 --> 00:03:49,560 Speaker 1: seeing more talk about c b d s because of 61 00:03:49,600 --> 00:03:53,120 Speaker 1: the economic environment that we're in, has the pandemic sort 62 00:03:53,160 --> 00:03:58,520 Speaker 1: of accelerated interest in central bank digital currencies because we're 63 00:03:59,000 --> 00:04:01,960 Speaker 1: perhaps not using as much cash and we need a 64 00:04:02,000 --> 00:04:06,640 Speaker 1: whole lot more liquidity in the financial system. I think 65 00:04:06,680 --> 00:04:09,520 Speaker 1: it's a bit broader than that, Tracy. I think, you know, 66 00:04:09,560 --> 00:04:13,680 Speaker 1: there has been a broad trend um in the thinking 67 00:04:13,720 --> 00:04:17,400 Speaker 1: about the monetary system at central banks. I think it's 68 00:04:17,440 --> 00:04:23,080 Speaker 1: been accelerated, certainly by the pandemic and the the advent 69 00:04:23,120 --> 00:04:25,839 Speaker 1: of touch list systems and so on, contactless systems and 70 00:04:25,880 --> 00:04:28,040 Speaker 1: so on. But I think it's it's broader than that, 71 00:04:28,080 --> 00:04:30,520 Speaker 1: and I think it's um it's a result of the 72 00:04:31,080 --> 00:04:33,440 Speaker 1: of the importance of I would say, the importance of 73 00:04:33,520 --> 00:04:37,599 Speaker 1: data in the digital economy. Um. I think the vast 74 00:04:37,680 --> 00:04:41,120 Speaker 1: troves of data that's probably the most important feature of 75 00:04:41,200 --> 00:04:44,600 Speaker 1: the digital economy, and that you know, poses a couple 76 00:04:44,640 --> 00:04:47,239 Speaker 1: of questions on the way that the monetary system works. 77 00:04:47,839 --> 00:04:50,240 Speaker 1: I think one has to do with, you know, competition. 78 00:04:51,200 --> 00:04:53,880 Speaker 1: I think here the discussion about big text in finance 79 00:04:54,160 --> 00:04:57,120 Speaker 1: you know very much dovetails into this. So if you 80 00:04:57,200 --> 00:05:00,599 Speaker 1: have network effects, you know, whereby the more or users 81 00:05:00,600 --> 00:05:04,440 Speaker 1: flocked a particular platform, the more incentive there is for 82 00:05:04,480 --> 00:05:08,080 Speaker 1: others to flock to that platform. You know, then data 83 00:05:08,600 --> 00:05:13,000 Speaker 1: then the data has this has this property that it 84 00:05:13,080 --> 00:05:16,279 Speaker 1: actually is a very important resource, and the payment system 85 00:05:16,279 --> 00:05:20,720 Speaker 1: itself is you know, can be prone to concentration. For example, 86 00:05:20,760 --> 00:05:24,840 Speaker 1: in China, the two big companies have have a nine 87 00:05:25,560 --> 00:05:30,080 Speaker 1: share of the of the mobile payment market. If you 88 00:05:30,120 --> 00:05:32,880 Speaker 1: then combine that with the issues to do with data privacy, 89 00:05:33,480 --> 00:05:38,800 Speaker 1: the importance of maintaining financial inclusion while guarding against the 90 00:05:38,880 --> 00:05:42,839 Speaker 1: entrenchment of market powerents on, I think all these uh 91 00:05:43,120 --> 00:05:47,280 Speaker 1: considerations point to the importance of a kind of a 92 00:05:47,279 --> 00:05:50,880 Speaker 1: a public interest case for a well functioning payment system. 93 00:05:51,080 --> 00:05:54,400 Speaker 1: So I think that's probably the best background to pose 94 00:05:54,440 --> 00:05:58,000 Speaker 1: this particular question. So obviously, another thing we saw was 95 00:05:58,080 --> 00:06:01,839 Speaker 1: this sort of like frustration at the speed and ability 96 00:06:02,000 --> 00:06:05,120 Speaker 1: of authorities to get out stimulus. In the US, we 97 00:06:05,160 --> 00:06:07,760 Speaker 1: saw a lot of issues with the unemployment insurance. There 98 00:06:07,880 --> 00:06:10,960 Speaker 1: was frustration at the ability of central banks or the 99 00:06:11,040 --> 00:06:13,320 Speaker 1: FED to be able to backstop large portions of the 100 00:06:13,400 --> 00:06:16,680 Speaker 1: credit market, or being unable to do anything for smaller 101 00:06:16,720 --> 00:06:21,800 Speaker 1: businesses or household How much of the CBDC discussion is 102 00:06:21,839 --> 00:06:26,159 Speaker 1: informed by some of these disparities with the tools that 103 00:06:26,200 --> 00:06:30,159 Speaker 1: we have for um policy and a crisis, I think, Joe, 104 00:06:30,200 --> 00:06:33,520 Speaker 1: it's probably less to do with the tools, but rather 105 00:06:33,960 --> 00:06:38,440 Speaker 1: UM I think the realization that the current payment systems 106 00:06:38,440 --> 00:06:40,440 Speaker 1: still have a way to go. You know, when we 107 00:06:40,480 --> 00:06:43,560 Speaker 1: talk about programmable money, this is sometimes how it's put. 108 00:06:43,720 --> 00:06:48,720 Speaker 1: You know, you have very you know, clever contingent contracts 109 00:06:48,760 --> 00:06:51,720 Speaker 1: in the disbursements. I think in a way, you know, 110 00:06:51,800 --> 00:06:54,280 Speaker 1: programmable money is a bit of an oxymora. And if 111 00:06:54,320 --> 00:06:56,440 Speaker 1: you think about it, because the whole point of money 112 00:06:56,680 --> 00:07:00,560 Speaker 1: is that it's invariant, you know, its value is variant 113 00:07:00,600 --> 00:07:03,760 Speaker 1: two changes and in circumstances, I would I would say 114 00:07:03,800 --> 00:07:07,320 Speaker 1: that these kind of contingent contracts are more like vouchers. 115 00:07:08,000 --> 00:07:10,080 Speaker 1: But I think it's worth actually thinking back, Joe to 116 00:07:10,920 --> 00:07:15,120 Speaker 1: the discussion more broadly about financial inclusion. I think in 117 00:07:15,200 --> 00:07:18,640 Speaker 1: many countries, I think once the political decision was made 118 00:07:18,920 --> 00:07:22,680 Speaker 1: that the disbursements would take place. I mean, most of 119 00:07:22,680 --> 00:07:25,960 Speaker 1: it was done in a very efficient way, very expeditious way, 120 00:07:26,680 --> 00:07:29,760 Speaker 1: through the conventional banking system. You know, if you have 121 00:07:30,360 --> 00:07:33,960 Speaker 1: pretty much everyone connected to the banking system, everyone has 122 00:07:34,000 --> 00:07:37,360 Speaker 1: an account um and it's working efficiently, and the costs 123 00:07:37,360 --> 00:07:40,040 Speaker 1: are very low. You know, you don't have to send 124 00:07:40,040 --> 00:07:42,800 Speaker 1: out paper checks to people. You can just credit people's 125 00:07:42,840 --> 00:07:45,480 Speaker 1: bank account. And I think it's important to think about 126 00:07:45,520 --> 00:07:50,239 Speaker 1: the CBDC debate not as something which is fundamentally new 127 00:07:50,320 --> 00:07:53,640 Speaker 1: and something which is you know, radically different from what's 128 00:07:53,640 --> 00:07:56,480 Speaker 1: gone before. It's more of an evolution. I think it's 129 00:07:56,480 --> 00:07:58,120 Speaker 1: important to better in mind. I think if we think 130 00:07:58,160 --> 00:08:01,800 Speaker 1: about the the so called all the retail fast payment 131 00:08:01,840 --> 00:08:05,040 Speaker 1: systems around the world. So these are now pretty commonplace, 132 00:08:06,040 --> 00:08:09,520 Speaker 1: even in developing countries, and actually some of the best 133 00:08:09,560 --> 00:08:13,800 Speaker 1: examples are in countries like India that's really managed to 134 00:08:13,840 --> 00:08:17,320 Speaker 1: build up their systems. And it's um it's a payment 135 00:08:17,400 --> 00:08:22,080 Speaker 1: system where there is a platform that's provided by the 136 00:08:22,160 --> 00:08:25,520 Speaker 1: central bank or is operated by the central bank, and 137 00:08:26,000 --> 00:08:28,400 Speaker 1: you have a pretty open system. And that if you 138 00:08:28,440 --> 00:08:30,040 Speaker 1: want to be a member of the system, you have 139 00:08:30,160 --> 00:08:34,320 Speaker 1: to you know, abide by data ownership data governance rules, 140 00:08:34,840 --> 00:08:39,480 Speaker 1: whereby you know, you cannot simply form um you know, 141 00:08:39,559 --> 00:08:42,520 Speaker 1: data silos or walled gardens where you simply have a 142 00:08:42,559 --> 00:08:45,880 Speaker 1: proprietary network. You have to be open to the other 143 00:08:46,679 --> 00:08:49,679 Speaker 1: entrance into the system. But in return for that, in 144 00:08:49,720 --> 00:08:53,160 Speaker 1: return for playing according to those rules, you have access 145 00:08:53,200 --> 00:08:57,000 Speaker 1: to an open marketplace. And the idea is that you 146 00:08:57,040 --> 00:08:59,880 Speaker 1: can you know, turn these kinds of you know, the 147 00:09:00,000 --> 00:09:05,600 Speaker 1: these attributes of network effects and activity begetting more data, 148 00:09:05,720 --> 00:09:08,360 Speaker 1: which begets even more activity and so on. That kind 149 00:09:08,400 --> 00:09:11,400 Speaker 1: of thing can be turned into a virtual circle where 150 00:09:11,480 --> 00:09:16,520 Speaker 1: you have bigger markets, cheaper services, and just generally a 151 00:09:16,559 --> 00:09:19,760 Speaker 1: more inclusive systems. I think, just to you know, kind 152 00:09:19,760 --> 00:09:24,560 Speaker 1: of long story short, I think we probably overestimate how 153 00:09:24,640 --> 00:09:26,480 Speaker 1: much there is new in this debate. I mean, there 154 00:09:26,559 --> 00:09:30,679 Speaker 1: is a pretty long thread that goes back to these 155 00:09:30,720 --> 00:09:49,880 Speaker 1: conventional payment systems. So maybe now is a good time 156 00:09:49,920 --> 00:09:54,000 Speaker 1: to step back and ask what exactly the ambition is 157 00:09:54,280 --> 00:09:58,880 Speaker 1: of CBDCs. So what are central pink digital currencies actually 158 00:09:58,920 --> 00:10:01,400 Speaker 1: trying to do or what problem are they trying to solve? 159 00:10:01,960 --> 00:10:07,080 Speaker 1: And if it's about making an improvement to the payment system, 160 00:10:07,200 --> 00:10:12,320 Speaker 1: then why not just let private companies build payment technology 161 00:10:12,640 --> 00:10:15,960 Speaker 1: on top of the existing system and the money provided 162 00:10:16,000 --> 00:10:18,320 Speaker 1: by the central bank. I guess another way of saying 163 00:10:18,360 --> 00:10:21,520 Speaker 1: that is, you know, what's the right division of labor 164 00:10:21,640 --> 00:10:24,960 Speaker 1: between the central bank and the private sector when it 165 00:10:24,960 --> 00:10:29,840 Speaker 1: comes to improving payments technology? Yeah, I think that's a 166 00:10:29,880 --> 00:10:33,160 Speaker 1: great way of posing the question, um, so what are CBDCs. 167 00:10:33,200 --> 00:10:35,160 Speaker 1: What our central bank digital currencis? I mean, you can 168 00:10:35,160 --> 00:10:39,760 Speaker 1: think of them as um as a digital version of cash. 169 00:10:39,800 --> 00:10:41,880 Speaker 1: I mean currently, if you want to make a digital payment, 170 00:10:42,520 --> 00:10:46,360 Speaker 1: you make a transfer from your deposit to the receiver's 171 00:10:46,440 --> 00:10:51,240 Speaker 1: deposit account, possibly as another bank or a payment service provider. 172 00:10:51,320 --> 00:10:54,760 Speaker 1: The idea is that you can use a CBDC to 173 00:10:55,040 --> 00:10:59,000 Speaker 1: make a payment digitally using your phone or some other device, 174 00:10:59,559 --> 00:11:04,439 Speaker 1: just as you would by handing over cash and tracy 175 00:11:04,480 --> 00:11:06,960 Speaker 1: as you put it, the the idea is not to 176 00:11:07,080 --> 00:11:11,520 Speaker 1: displace banks and other financial service providers, but rather it 177 00:11:11,640 --> 00:11:13,800 Speaker 1: is meant to serve as a kind of you know, 178 00:11:13,920 --> 00:11:17,520 Speaker 1: base layer on top of which the the other payment 179 00:11:17,520 --> 00:11:21,720 Speaker 1: service providers can can then serve customers better. So so 180 00:11:21,720 --> 00:11:26,000 Speaker 1: so the idea is that CBDCs will still enable central 181 00:11:26,000 --> 00:11:29,280 Speaker 1: banks to have a very small footprint in the financial system. 182 00:11:29,440 --> 00:11:31,920 Speaker 1: I mean, cash typically is a very very small fraction 183 00:11:32,559 --> 00:11:35,360 Speaker 1: of total deposits in the economy, and the idea is 184 00:11:35,360 --> 00:11:39,120 Speaker 1: that CBDCs will similarly have a small footprint. But the 185 00:11:39,160 --> 00:11:42,840 Speaker 1: idea is that this base layer can be um an 186 00:11:43,000 --> 00:11:49,280 Speaker 1: enabling layer that brings you benefits to do with data 187 00:11:49,800 --> 00:11:53,000 Speaker 1: data governance that uh, and we can go into the 188 00:11:53,040 --> 00:11:55,760 Speaker 1: details on on on how exactly they would do this. 189 00:11:55,840 --> 00:11:59,000 Speaker 1: But if you can put down a layer that guards 190 00:11:59,040 --> 00:12:02,960 Speaker 1: against the data silos and concentration of data in the 191 00:12:02,960 --> 00:12:05,800 Speaker 1: hands of a few players that leads to entrenchment and 192 00:12:05,840 --> 00:12:09,920 Speaker 1: monopoly power and safeguard data privacy, then that could be 193 00:12:09,960 --> 00:12:13,600 Speaker 1: a very promising base on which you know, other private 194 00:12:13,600 --> 00:12:18,360 Speaker 1: sector players can can really you know, maximize and you 195 00:12:18,400 --> 00:12:20,160 Speaker 1: know display what they do best, which is, you know, 196 00:12:20,280 --> 00:12:24,680 Speaker 1: used their creativity and ingenuity too to serve customers better. 197 00:12:25,360 --> 00:12:27,880 Speaker 1: So it's very much a two tier sort of vision. 198 00:12:28,640 --> 00:12:32,520 Speaker 1: But the base layer is such that it enables a 199 00:12:32,600 --> 00:12:38,120 Speaker 1: more competitive and more sort of inclusive system where you 200 00:12:38,160 --> 00:12:42,400 Speaker 1: can guard against you very high cost le entrenchment of 201 00:12:42,400 --> 00:12:44,720 Speaker 1: of market power. That's that's a kind of in a 202 00:12:44,760 --> 00:12:48,920 Speaker 1: short version. So this is one thing I kind of 203 00:12:48,920 --> 00:12:52,320 Speaker 1: want to push on. But if if central banks are 204 00:12:52,320 --> 00:12:57,280 Speaker 1: devoting all this time and energy to designing this new technology, 205 00:12:57,559 --> 00:13:01,600 Speaker 1: why not go further? Why is stop at a layer 206 00:13:01,720 --> 00:13:06,160 Speaker 1: that augments the existing financial system, and why not sort 207 00:13:06,200 --> 00:13:09,440 Speaker 1: of go all the way and actually try to create 208 00:13:09,760 --> 00:13:13,160 Speaker 1: a digital replacement for cash? Because the system that you're 209 00:13:13,160 --> 00:13:17,600 Speaker 1: describing at the moment doesn't necessarily have the same autonomy 210 00:13:17,720 --> 00:13:20,600 Speaker 1: that cash would. So you know, if I pay someone 211 00:13:20,600 --> 00:13:23,640 Speaker 1: with cash, it can be an anonymous transaction the central 212 00:13:23,640 --> 00:13:25,880 Speaker 1: Bank doesn't know about it. But most of the systems 213 00:13:25,920 --> 00:13:30,599 Speaker 1: being discussed as CBDCs seem to veer much more towards 214 00:13:30,840 --> 00:13:34,840 Speaker 1: a sort of traditional payments technology rather than designing something 215 00:13:34,840 --> 00:13:39,040 Speaker 1: that's a little bit newer that maybe would preserve the 216 00:13:39,400 --> 00:13:43,800 Speaker 1: anonymity of cash. Yeah, I think that's a very good 217 00:13:44,040 --> 00:13:48,240 Speaker 1: uh goal to aim for. UM. The idea is not 218 00:13:48,360 --> 00:13:52,600 Speaker 1: to replace the role of the private sector payment service providers, 219 00:13:52,600 --> 00:13:56,760 Speaker 1: but rather to have an option where, you know, users 220 00:13:56,800 --> 00:14:02,120 Speaker 1: can make payments digitally, just as if you were using cash, 221 00:14:02,160 --> 00:14:05,560 Speaker 1: but but do so digitally. So the idea is that 222 00:14:06,000 --> 00:14:09,440 Speaker 1: you know, rather than going through an intermediary, you would actually, um, 223 00:14:09,600 --> 00:14:12,080 Speaker 1: you have a wallets on your phone and you would 224 00:14:12,120 --> 00:14:15,760 Speaker 1: transfer a digital cash unit as it were directed to 225 00:14:15,800 --> 00:14:20,920 Speaker 1: someone else. Now, how can we preserve privacy in that 226 00:14:21,000 --> 00:14:22,800 Speaker 1: kind of context? And I think this is one of 227 00:14:22,840 --> 00:14:29,480 Speaker 1: the big design challenges, you know, undoubtedly, because a digital 228 00:14:29,640 --> 00:14:32,640 Speaker 1: version of money is a Ledger entry. I mean it's 229 00:14:32,680 --> 00:14:35,920 Speaker 1: a it's an entry in a database that says so 230 00:14:36,080 --> 00:14:39,840 Speaker 1: and so owns this unit, um at at what time? 231 00:14:40,360 --> 00:14:42,040 Speaker 1: And then if you transfer that there has to be 232 00:14:42,080 --> 00:14:46,520 Speaker 1: a Ledger entry that indicates that you know that transfer. Now, 233 00:14:47,080 --> 00:14:51,040 Speaker 1: if that ledger was something that is like bitcoin, you 234 00:14:51,080 --> 00:14:55,200 Speaker 1: would just have you know, this public ledger. Everyone has 235 00:14:55,240 --> 00:14:57,760 Speaker 1: access to all the transactions. It's just that you are 236 00:14:58,480 --> 00:15:03,600 Speaker 1: masking your true identity behind the address that you're using now. 237 00:15:03,720 --> 00:15:08,920 Speaker 1: In in the conventional payment system, some notion of know 238 00:15:09,080 --> 00:15:12,960 Speaker 1: your customer rules KYC rules so called I think you know, 239 00:15:13,000 --> 00:15:16,880 Speaker 1: will be necessary to keep the integrity. But um, you know, 240 00:15:16,960 --> 00:15:21,640 Speaker 1: there are ways of you know, minimizing the the unwarranted 241 00:15:21,640 --> 00:15:24,960 Speaker 1: access to data. So just to give you a quick example, 242 00:15:25,440 --> 00:15:29,000 Speaker 1: in the CIR called a p I S or Application 243 00:15:29,040 --> 00:15:33,600 Speaker 1: programming interfaces that we use in in conventional payment systems. 244 00:15:34,240 --> 00:15:37,080 Speaker 1: In some open banking jurisdictions, what you can do is 245 00:15:37,080 --> 00:15:39,840 Speaker 1: you can open the app of one bank and you 246 00:15:39,840 --> 00:15:43,360 Speaker 1: can check your balances in another bank using that you know, 247 00:15:43,400 --> 00:15:47,280 Speaker 1: one banks app, And you can do that because, um, 248 00:15:47,360 --> 00:15:51,160 Speaker 1: you know, when you log into your the first banks app, 249 00:15:51,320 --> 00:15:55,160 Speaker 1: what you're doing is you're you're logging in using your password. 250 00:15:55,720 --> 00:16:00,480 Speaker 1: Then your identities established and so when the actually goes 251 00:16:00,480 --> 00:16:04,480 Speaker 1: to the other bank that says, please display the account 252 00:16:04,480 --> 00:16:07,640 Speaker 1: details of this person. What you're doing is you're sending 253 00:16:07,640 --> 00:16:11,200 Speaker 1: a secure message to you to this other bank, establishing 254 00:16:11,240 --> 00:16:14,560 Speaker 1: who you are, and then retrieving only the information that 255 00:16:14,640 --> 00:16:17,280 Speaker 1: is absolutely necessary for that kind of transaction. So for example, 256 00:16:17,840 --> 00:16:19,960 Speaker 1: so you know, if if they know the name and 257 00:16:19,960 --> 00:16:23,920 Speaker 1: your account number, I mean, that's all you need to establish, 258 00:16:23,960 --> 00:16:27,400 Speaker 1: you know, that link and bring the necessary balance over. 259 00:16:28,320 --> 00:16:31,080 Speaker 1: They don't need to know, for example, the payment history 260 00:16:31,200 --> 00:16:33,720 Speaker 1: or your home address or phone number and so on. 261 00:16:34,560 --> 00:16:37,920 Speaker 1: And the technology behind these API s, I mean, this 262 00:16:38,000 --> 00:16:41,400 Speaker 1: is nothing other than public key cryptography. This is the 263 00:16:41,480 --> 00:16:46,880 Speaker 1: technology that's underlying, you know, the digital signature technology and 264 00:16:47,680 --> 00:16:51,720 Speaker 1: in many applications, including bitcoin, you you have this public 265 00:16:51,760 --> 00:16:53,920 Speaker 1: key that's out there. You know, you can sign a 266 00:16:53,960 --> 00:16:58,200 Speaker 1: document and convince the receiver that it's you without necessarily 267 00:16:58,400 --> 00:17:01,080 Speaker 1: revealing your private key. So you know, there are these 268 00:17:01,080 --> 00:17:04,680 Speaker 1: technologies available where you can, uh, you know, mask all 269 00:17:04,720 --> 00:17:08,440 Speaker 1: the data other than the pieces that are absolutely necessary. 270 00:17:08,560 --> 00:17:10,760 Speaker 1: So it's so I think of this lot, you know, 271 00:17:10,840 --> 00:17:13,520 Speaker 1: rather like a jigsaw puzzle. Um, you know, everyone has 272 00:17:13,560 --> 00:17:16,640 Speaker 1: a little bit of the jigsaw puzzle, but no one 273 00:17:16,760 --> 00:17:20,280 Speaker 1: has the full picture, you know, other than the individual concerns, 274 00:17:20,359 --> 00:17:23,360 Speaker 1: and no one needs to know the big picture, and 275 00:17:23,400 --> 00:17:25,280 Speaker 1: that of course includes the central bank as well. And 276 00:17:25,400 --> 00:17:28,960 Speaker 1: central bank doesn't need to know everything, It only needs 277 00:17:29,000 --> 00:17:33,400 Speaker 1: to know the absolute minimum that will enable the central 278 00:17:33,400 --> 00:17:36,280 Speaker 1: bank to actually execute the you know, the change in 279 00:17:36,320 --> 00:17:40,000 Speaker 1: the ledger. Well, let me ask you another sort of 280 00:17:40,040 --> 00:17:43,000 Speaker 1: like reframe the question a little bit. Because even before 281 00:17:43,040 --> 00:17:48,080 Speaker 1: the digital currencies discussion started heating up, we've done there 282 00:17:48,160 --> 00:17:50,840 Speaker 1: was criticism of cash was growing, and of course there 283 00:17:50,880 --> 00:17:53,920 Speaker 1: was Ken Rogoff's book. He was largely focused on large 284 00:17:53,960 --> 00:17:57,199 Speaker 1: denomination bills, but still like this idea that cash is 285 00:17:57,280 --> 00:18:00,840 Speaker 1: kind of a scourge for various reasons and crime and 286 00:18:00,880 --> 00:18:03,960 Speaker 1: money laundering and so forth. Set I guess side the 287 00:18:04,000 --> 00:18:09,280 Speaker 1: technical capabilities, do you perceive that transaction privacy, at least 288 00:18:09,320 --> 00:18:13,560 Speaker 1: on some level, is of value that central bankers or 289 00:18:14,240 --> 00:18:18,320 Speaker 1: regulators around the world want to preserve. Is it something 290 00:18:18,359 --> 00:18:20,960 Speaker 1: that they care about preserving as the world gets more 291 00:18:21,000 --> 00:18:23,840 Speaker 1: digital or more or less Do they see this as 292 00:18:23,880 --> 00:18:28,000 Speaker 1: an opportunity to sort of fix what was a sort 293 00:18:28,040 --> 00:18:31,399 Speaker 1: of flaw in the monetary system. I think central banks 294 00:18:31,400 --> 00:18:35,720 Speaker 1: put a great deal of value to privacy and maintaining privacy, 295 00:18:35,720 --> 00:18:38,080 Speaker 1: and I think cash is a very valuable medium in 296 00:18:38,080 --> 00:18:40,720 Speaker 1: that respect. I mean it's um. Not only is it 297 00:18:40,760 --> 00:18:43,920 Speaker 1: a direct claim and a very tangible you know, link 298 00:18:44,000 --> 00:18:47,119 Speaker 1: to the central Bank, but it guarantees a certain minimum 299 00:18:47,200 --> 00:18:49,320 Speaker 1: level of privacy, which I think is you know, has 300 00:18:49,359 --> 00:18:52,320 Speaker 1: attributes of a basic right. Um. I think what Ken 301 00:18:52,520 --> 00:18:54,920 Speaker 1: was talking about was much more to do with the 302 00:18:54,960 --> 00:19:00,000 Speaker 1: implementation of monetary policy and how to implement deeply negative 303 00:19:00,080 --> 00:19:02,080 Speaker 1: interest rates and so on. So I think that's a 304 00:19:02,119 --> 00:19:07,080 Speaker 1: slightly different discussion, and certainly among central banks, the need 305 00:19:07,160 --> 00:19:10,560 Speaker 1: to preserve privacy, I think it is a very important 306 00:19:10,600 --> 00:19:14,119 Speaker 1: strand in the discussion. And you may have seen the 307 00:19:14,200 --> 00:19:19,120 Speaker 1: various notes that central banks have published. The ECB has 308 00:19:19,160 --> 00:19:24,240 Speaker 1: recently published a note about this. Now, even with a 309 00:19:24,320 --> 00:19:29,040 Speaker 1: system which is based fundamentally on digital identity and you 310 00:19:29,119 --> 00:19:31,520 Speaker 1: know and and real name that enables you know, know, 311 00:19:31,640 --> 00:19:36,359 Speaker 1: your customer type of requirements for the payment service providers, 312 00:19:36,440 --> 00:19:40,840 Speaker 1: you can achieve some level of anonymity. I mean it's 313 00:19:41,000 --> 00:19:42,159 Speaker 1: you know, you can think of it as a kind 314 00:19:42,200 --> 00:19:45,639 Speaker 1: of anonymity overlay. You can actually you know, have an 315 00:19:45,640 --> 00:19:49,560 Speaker 1: overlay on the system that guarantees this. The the system 316 00:19:49,640 --> 00:19:52,960 Speaker 1: that the ECB has floated. Is this idea that there 317 00:19:53,040 --> 00:19:56,879 Speaker 1: is a separate privacy registrar which is separate from the 318 00:19:56,920 --> 00:20:00,600 Speaker 1: Central Bank, and then you would, you know, registering real name, 319 00:20:00,640 --> 00:20:03,320 Speaker 1: but the registrar would grant you a kind of credit 320 00:20:03,600 --> 00:20:08,160 Speaker 1: of how much you can spend anonymously and then so 321 00:20:08,440 --> 00:20:10,600 Speaker 1: so when you use a CBDC, you can use some 322 00:20:10,680 --> 00:20:13,800 Speaker 1: of this credit. Now, whether you like that particular scheme 323 00:20:13,920 --> 00:20:17,200 Speaker 1: or not, um, I think the fact that these schemes 324 00:20:17,200 --> 00:20:19,560 Speaker 1: are being discussed, I think it's very much a sign 325 00:20:20,359 --> 00:20:24,119 Speaker 1: that maintaining uh, you know, this minimum level of anonymity 326 00:20:24,160 --> 00:20:27,040 Speaker 1: is a very very important part of the monetary system. 327 00:20:27,119 --> 00:20:30,160 Speaker 1: I wanted to ask you how central banks are thinking 328 00:20:30,280 --> 00:20:34,919 Speaker 1: about stable coins at the moment, we keep thinking along 329 00:20:34,960 --> 00:20:37,560 Speaker 1: the exact same line. I'm glad you went there. All right, 330 00:20:37,640 --> 00:20:41,320 Speaker 1: we finally reached the ultimate melding of minds. But I mean, 331 00:20:41,760 --> 00:20:44,960 Speaker 1: stable coins are an interesting development in many ways, but 332 00:20:45,280 --> 00:20:48,879 Speaker 1: sometimes people talk about them as sort of impinging on 333 00:20:49,280 --> 00:20:53,560 Speaker 1: conventional money or conventional monetary policy in the sense that 334 00:20:53,840 --> 00:20:57,560 Speaker 1: you know, you're sort of creating um something that's supposed 335 00:20:57,560 --> 00:21:00,600 Speaker 1: to be relatively stable. Obviously, the clue is in the name, 336 00:21:00,720 --> 00:21:04,639 Speaker 1: but it's still backed by fiat currencies, it's still backed 337 00:21:04,680 --> 00:21:08,240 Speaker 1: by a central bank or government, and that maybe that 338 00:21:08,359 --> 00:21:11,520 Speaker 1: has the potential to to sort of splinter the monetary system. 339 00:21:11,600 --> 00:21:15,080 Speaker 1: So I'm just curious, is this viewed as a challenge 340 00:21:15,240 --> 00:21:18,760 Speaker 1: to the existing financial system or is it sort of 341 00:21:18,840 --> 00:21:22,359 Speaker 1: overblown currently? I think, Tracy, this is this is a 342 00:21:22,440 --> 00:21:26,600 Speaker 1: very good question and it is occupying minds at the moment. 343 00:21:27,200 --> 00:21:29,720 Speaker 1: Just to be clear, when you talk about stable coins, 344 00:21:29,720 --> 00:21:32,840 Speaker 1: I think you're referring to the stable coins that are, 345 00:21:33,160 --> 00:21:35,959 Speaker 1: you know, that have been proposed as a means of payment, 346 00:21:36,040 --> 00:21:39,280 Speaker 1: rather than all the all the defy stuff that's going on. 347 00:21:39,720 --> 00:21:42,919 Speaker 1: So I'll assume that and correct. Yeah. Yeah, so I 348 00:21:42,920 --> 00:21:45,320 Speaker 1: think you know, we we had the discussion about liber 349 00:21:45,359 --> 00:21:50,800 Speaker 1: two years ago, which which really concentrated minds. Um uh, 350 00:21:50,800 --> 00:21:54,120 Speaker 1: and that plan has been you know, somewhat modified. Um 351 00:21:54,359 --> 00:21:58,760 Speaker 1: Now it's a single currency proposal that's being let's being 352 00:21:58,760 --> 00:22:02,920 Speaker 1: prepared under a new name of of them. I think 353 00:22:02,960 --> 00:22:05,199 Speaker 1: the stable coin idea is a very interesting idea, and 354 00:22:05,240 --> 00:22:07,800 Speaker 1: that it is it is going back to the history 355 00:22:07,800 --> 00:22:10,199 Speaker 1: of money in a way. Is the the I think 356 00:22:10,320 --> 00:22:12,480 Speaker 1: last time we even possibly talked about the Bank of 357 00:22:12,520 --> 00:22:16,680 Speaker 1: Amsterdam where in the seventeenth century, you know, merchants would 358 00:22:16,720 --> 00:22:20,000 Speaker 1: bring the gold and silver coins and then the Bank 359 00:22:20,040 --> 00:22:23,680 Speaker 1: of Amsterdam would would then write up a ledger entry 360 00:22:23,680 --> 00:22:26,680 Speaker 1: you'd have a deposit, and then you would transfer those 361 00:22:26,680 --> 00:22:29,600 Speaker 1: deposits to other merchants as a means of payment. And 362 00:22:29,720 --> 00:22:32,760 Speaker 1: that's essentially what a stable coin is. You know, you 363 00:22:32,800 --> 00:22:36,640 Speaker 1: can buy into a a payment means, you know, by 364 00:22:37,320 --> 00:22:41,200 Speaker 1: transferring fiat currency if you like, you know, this would 365 00:22:41,240 --> 00:22:44,080 Speaker 1: be you know, used as a as a means of payment. 366 00:22:44,760 --> 00:22:48,479 Speaker 1: Um you know. I think one issue that was present 367 00:22:48,600 --> 00:22:51,120 Speaker 1: with with Libra, which is not present now I think 368 00:22:51,280 --> 00:22:55,160 Speaker 1: is the it's a multi currency aspect, but more broadly, 369 00:22:55,240 --> 00:22:59,159 Speaker 1: just leaving aside that, you know, the particular proposals, um 370 00:22:59,200 --> 00:23:01,959 Speaker 1: you know, one issue I think is to what extent 371 00:23:02,040 --> 00:23:06,080 Speaker 1: will will stable coins allow a system that's going to 372 00:23:06,119 --> 00:23:10,280 Speaker 1: be interoperable with the conventional payment system. So, for example, 373 00:23:11,080 --> 00:23:14,359 Speaker 1: can I, as a customer of a bank make, you know, 374 00:23:14,400 --> 00:23:18,480 Speaker 1: make a payment or receive payments from a stable coin 375 00:23:18,520 --> 00:23:22,200 Speaker 1: account holder? I think for that kind of system to work, 376 00:23:22,480 --> 00:23:23,800 Speaker 1: you know, there would have to be some kind of 377 00:23:23,840 --> 00:23:28,000 Speaker 1: settlement you know, underneath it. Typically, what would happen in 378 00:23:28,040 --> 00:23:31,439 Speaker 1: the current system is the central bank would be you know, 379 00:23:31,520 --> 00:23:35,280 Speaker 1: at the at the base, and so when a payment 380 00:23:35,400 --> 00:23:39,000 Speaker 1: is made from one bank's customer to another bank's customer, 381 00:23:39,600 --> 00:23:45,000 Speaker 1: the ultimate settlement happens on on the central banks balance sheet. Um. 382 00:23:45,040 --> 00:23:46,679 Speaker 1: And the question is, how would that kind of system 383 00:23:46,720 --> 00:23:52,399 Speaker 1: work when you have a stable coin working alongside a 384 00:23:51,760 --> 00:23:54,919 Speaker 1: you know, alongside the conventional payment system. I think if 385 00:23:55,000 --> 00:23:58,320 Speaker 1: it's if it's interoperable, I think, you know, then we 386 00:23:58,359 --> 00:24:00,560 Speaker 1: can reap you know, many of the benefits that are 387 00:24:00,640 --> 00:24:03,520 Speaker 1: there in an open payment system. If, on the other hand, 388 00:24:03,560 --> 00:24:05,720 Speaker 1: if it's going to be more of a of a 389 00:24:05,840 --> 00:24:09,199 Speaker 1: data silo, more of a silos system where you have 390 00:24:09,240 --> 00:24:12,840 Speaker 1: a walled garden, then I think, you know, there there 391 00:24:12,880 --> 00:24:15,480 Speaker 1: are issues to do with you know, to what extent 392 00:24:15,720 --> 00:24:18,520 Speaker 1: will there be a fragmentation of the monetary system where 393 00:24:19,200 --> 00:24:22,160 Speaker 1: the whole point of the monetary system is the more 394 00:24:22,200 --> 00:24:25,840 Speaker 1: people use that particular system, the more useful it becomes, 395 00:24:25,880 --> 00:24:28,000 Speaker 1: and so more people want to use the system. There's 396 00:24:28,000 --> 00:24:31,520 Speaker 1: a kind of you know, virtuous circle there. If you 397 00:24:31,560 --> 00:24:34,959 Speaker 1: have a fragmented system, Uh, the question would be how 398 00:24:35,040 --> 00:24:37,560 Speaker 1: much that virtuous circle, how much that fit of that 399 00:24:37,680 --> 00:24:40,000 Speaker 1: feedback loop is going to be you know, on the 400 00:24:40,000 --> 00:24:43,879 Speaker 1: mind by the fragmentation. Are you satisfied with the level 401 00:24:43,920 --> 00:24:47,040 Speaker 1: of regulation of stable coins right now? I mean they're 402 00:24:47,040 --> 00:24:50,200 Speaker 1: currently they're about a hundred billion dollars in market cap 403 00:24:50,280 --> 00:24:53,240 Speaker 1: or how many have been issued, some of them are 404 00:24:53,280 --> 00:24:56,080 Speaker 1: continue to be questioned about what's backing them and so forth. 405 00:24:56,400 --> 00:24:59,800 Speaker 1: How much does the current sort of immunitic in a 406 00:25:00,000 --> 00:25:03,600 Speaker 1: an exploding area, how much does the current environment resemble 407 00:25:03,680 --> 00:25:06,800 Speaker 1: what you think the ideal environment should look like. Well, Joe, 408 00:25:06,840 --> 00:25:09,440 Speaker 1: I think you've hit upon a very topical issue. As 409 00:25:09,480 --> 00:25:13,640 Speaker 1: you know, this is something that is being discussed among regulators. 410 00:25:13,400 --> 00:25:17,320 Speaker 1: The traditional answer has been that this space is really 411 00:25:17,440 --> 00:25:22,080 Speaker 1: too small to pose financial stability risks, and I think 412 00:25:22,080 --> 00:25:25,280 Speaker 1: that that is probably has been the case. If they 413 00:25:25,320 --> 00:25:28,399 Speaker 1: become much larger, and I think if, in particular, you know, 414 00:25:28,480 --> 00:25:33,240 Speaker 1: we have points of contact with the the conventional financial system, 415 00:25:33,280 --> 00:25:36,840 Speaker 1: in particular with the conventional banking system, then that kind 416 00:25:36,840 --> 00:25:39,399 Speaker 1: of assessment may need to be you know, may need 417 00:25:39,440 --> 00:25:42,919 Speaker 1: to be reassessed. But as long as the you know, 418 00:25:42,960 --> 00:25:45,679 Speaker 1: the activity is very much you know, within the you know, 419 00:25:45,760 --> 00:25:50,240 Speaker 1: within this crypto sphere, probably the dangers of financial instability 420 00:25:50,280 --> 00:25:53,160 Speaker 1: probably are going to be going to be less. These 421 00:25:53,280 --> 00:25:56,879 Speaker 1: ues I think may have more to do with the 422 00:25:57,040 --> 00:26:02,879 Speaker 1: usual kinds of conduct issues, um consumer protection. Uh, you 423 00:26:02,920 --> 00:26:08,000 Speaker 1: know another conduct issues. So um, that's more the area 424 00:26:08,200 --> 00:26:12,760 Speaker 1: of financial regulators rather than central banks wearing their hats 425 00:26:12,800 --> 00:26:17,119 Speaker 1: as as the guardians of the monetary system. But clearly 426 00:26:17,119 --> 00:26:19,159 Speaker 1: this is something that we need to be UM, you 427 00:26:19,280 --> 00:26:23,480 Speaker 1: need to be monitoring very closely. So I mentioned earlier 428 00:26:23,520 --> 00:26:26,160 Speaker 1: that the b i S is one of a number 429 00:26:26,200 --> 00:26:29,560 Speaker 1: of economic institutions which has been writing about central bank 430 00:26:29,720 --> 00:26:33,439 Speaker 1: um digital currencies, and in fact you're out with a 431 00:26:33,440 --> 00:26:37,280 Speaker 1: new report this week as part of your annual review. 432 00:26:37,359 --> 00:26:41,919 Speaker 1: It's called CBDCs An Opportunity for the Monetary System. There's 433 00:26:41,960 --> 00:26:45,480 Speaker 1: a bit in there that caught my eye and you know, 434 00:26:45,920 --> 00:26:49,320 Speaker 1: advanced apologies to any bitcoin maximalists who might be listening, 435 00:26:49,560 --> 00:26:52,919 Speaker 1: but the exact quote was by now it's clear that 436 00:26:52,960 --> 00:26:56,600 Speaker 1: cryptocurrencies are speculative assets rather than money, and in many 437 00:26:56,640 --> 00:26:59,560 Speaker 1: cases are used to facilitate money laundering, ransomware attacks, and 438 00:26:59,560 --> 00:27:03,360 Speaker 1: other fine anentral crimes. Bitcoin in particular has few redeeming 439 00:27:03,400 --> 00:27:07,879 Speaker 1: public interest attributes when also considering it's wasteful energy footprints. 440 00:27:07,880 --> 00:27:11,359 Speaker 1: So that's pretty damning from the b I s in 441 00:27:11,960 --> 00:27:14,440 Speaker 1: my mind, do you want to perhaps walk us through 442 00:27:14,440 --> 00:27:18,440 Speaker 1: your thinking around you know, the original cryptocurrency bitcoin and 443 00:27:18,440 --> 00:27:23,199 Speaker 1: why it's not necessarily applicable to you're thinking when it 444 00:27:23,240 --> 00:27:28,000 Speaker 1: comes to wider central bank digital currencies. Well, Tracy, I 445 00:27:28,040 --> 00:27:31,960 Speaker 1: think you've you've caught the one paragraph on on bitcoin 446 00:27:31,960 --> 00:27:34,040 Speaker 1: in the whole report, so we hold down on that. 447 00:27:34,280 --> 00:27:36,119 Speaker 1: I think so we were we were not going to 448 00:27:36,160 --> 00:27:39,199 Speaker 1: spend so we're not spending that much time on on 449 00:27:39,240 --> 00:27:43,439 Speaker 1: bitcoin and cryptocurrencies in this report because the focus of 450 00:27:43,440 --> 00:27:46,840 Speaker 1: the report is very much on how can central bank 451 00:27:46,840 --> 00:27:50,800 Speaker 1: digital currencies you know, build on on the current payment 452 00:27:50,800 --> 00:27:54,000 Speaker 1: system to to make it, you know, to make it better. 453 00:27:54,800 --> 00:27:57,600 Speaker 1: But the idea behind that particular paragraph was just to 454 00:27:57,640 --> 00:28:01,359 Speaker 1: point out that that you know, bit coin isn't that 455 00:28:01,440 --> 00:28:04,000 Speaker 1: much useful transactions. It's you know, there was a time 456 00:28:04,040 --> 00:28:06,920 Speaker 1: when there was a discussion about whether this were that 457 00:28:07,240 --> 00:28:10,879 Speaker 1: where the bitcoin would be used for transactions, um on 458 00:28:10,920 --> 00:28:13,800 Speaker 1: a daily basis. I think that that debate, I think 459 00:28:13,800 --> 00:28:18,359 Speaker 1: it's probably you know closed. It's much more about you know, 460 00:28:18,400 --> 00:28:23,199 Speaker 1: whether bitcoin can serve as as a crypto asset as 461 00:28:23,200 --> 00:28:25,600 Speaker 1: it were, and and all the focuses on how much 462 00:28:26,000 --> 00:28:28,480 Speaker 1: you know, you know, they can be bought and sold 463 00:28:28,600 --> 00:28:32,560 Speaker 1: using using conventional money. So that was the point that 464 00:28:32,600 --> 00:28:34,879 Speaker 1: we were making. You know. Of course, we devoted a 465 00:28:34,880 --> 00:28:37,280 Speaker 1: lot more space to this a couple of years ago 466 00:28:37,359 --> 00:28:40,760 Speaker 1: when we wrote about cryptocurrencies, and and back then we 467 00:28:40,880 --> 00:28:43,880 Speaker 1: pointed out that, you know, there were problems of scalability, 468 00:28:44,360 --> 00:28:49,440 Speaker 1: problems of finality that would probably you know, render these 469 00:28:49,600 --> 00:28:53,040 Speaker 1: uh you know, these you know, very clever instruments, um 470 00:28:53,480 --> 00:29:11,800 Speaker 1: less than suitable as payment media. You know, I'd love 471 00:29:11,840 --> 00:29:13,800 Speaker 1: to just pivot a little bit, with a few more 472 00:29:13,800 --> 00:29:17,320 Speaker 1: minutes to some of the broader macro questions. Actually, I 473 00:29:17,360 --> 00:29:19,840 Speaker 1: think a good way to sort of like sag a 474 00:29:19,880 --> 00:29:23,680 Speaker 1: little bit between the discussion of currency itself to the 475 00:29:23,680 --> 00:29:26,800 Speaker 1: broader macro is to talk a little bit about the dollar. 476 00:29:27,040 --> 00:29:30,240 Speaker 1: Because the dollar itself, the good old green bag, is 477 00:29:30,280 --> 00:29:33,240 Speaker 1: always sort of seen as being stressed or people are 478 00:29:33,280 --> 00:29:37,400 Speaker 1: predicting its demise, or that maybe somehow a crisis might 479 00:29:37,400 --> 00:29:42,360 Speaker 1: test it somehow. We've obviously seen like price weakness. Um, 480 00:29:42,400 --> 00:29:45,760 Speaker 1: just admit this sort of like big risk on move 481 00:29:45,840 --> 00:29:48,680 Speaker 1: that we've seen an asset markets over the last uh 482 00:29:48,720 --> 00:29:53,160 Speaker 1: several months, But from like a standing perspective, the dollar's 483 00:29:53,320 --> 00:29:56,160 Speaker 1: role in the world looking compared to a year ago, 484 00:29:56,200 --> 00:29:59,520 Speaker 1: Has anything changed? Is there any like stress on the 485 00:29:59,640 --> 00:30:03,320 Speaker 1: role of the dollar itself or changing its position? From 486 00:30:03,320 --> 00:30:08,000 Speaker 1: your perspective, I don't think there's been much change there, Joe. 487 00:30:08,320 --> 00:30:11,160 Speaker 1: I think we were on we were discussing pretty much 488 00:30:11,160 --> 00:30:15,720 Speaker 1: almost exactly a year ago. We were discussing financial markets, 489 00:30:16,720 --> 00:30:20,400 Speaker 1: physical space, as I recall, and the dollar. I think 490 00:30:20,440 --> 00:30:24,200 Speaker 1: the the long term, you know, structural features are still 491 00:30:24,280 --> 00:30:27,600 Speaker 1: very much, you know, very much intact. You know, there 492 00:30:27,640 --> 00:30:31,360 Speaker 1: are of course the short term fluctuations, and you know, 493 00:30:31,400 --> 00:30:34,440 Speaker 1: we have seen a shift in the dollar, you know, 494 00:30:34,560 --> 00:30:37,600 Speaker 1: in in the last few days. I remember when we 495 00:30:37,680 --> 00:30:42,160 Speaker 1: had the last conversation that we ended off by saying 496 00:30:42,240 --> 00:30:45,360 Speaker 1: that everything would depend on the on the trajectory of 497 00:30:45,360 --> 00:30:48,800 Speaker 1: the pandemic. And I think I think that's that's been proved, 498 00:30:48,880 --> 00:30:51,480 Speaker 1: right um um. You know, since we last talked, there 499 00:30:52,240 --> 00:30:55,280 Speaker 1: has been, of course the rollout of the vaccines, which 500 00:30:55,280 --> 00:31:00,800 Speaker 1: has been a real game changer. It's not sufficiently distributed 501 00:31:01,120 --> 00:31:04,440 Speaker 1: worldwide yet, so so we're not out of the woods. 502 00:31:04,920 --> 00:31:08,840 Speaker 1: I think economies have opened up a lot faster than 503 00:31:09,400 --> 00:31:12,720 Speaker 1: you know when we were last discussing this, and and 504 00:31:12,760 --> 00:31:14,560 Speaker 1: this is meant that you know, as well as the 505 00:31:14,600 --> 00:31:19,400 Speaker 1: dollar to talk about, inflation has really taken off. And 506 00:31:19,720 --> 00:31:22,840 Speaker 1: you know, we've seen some some interesting you know movements 507 00:31:22,840 --> 00:31:24,920 Speaker 1: in the treasury market with the flatting of the yield 508 00:31:24,920 --> 00:31:28,239 Speaker 1: curve and so on. So there there's plenty for us 509 00:31:28,280 --> 00:31:30,600 Speaker 1: to to think about. You know. I suppose what we 510 00:31:30,640 --> 00:31:34,320 Speaker 1: need to do though, is is not to you know, 511 00:31:34,360 --> 00:31:37,240 Speaker 1: read too much into the you know, day to day 512 00:31:37,360 --> 00:31:42,240 Speaker 1: movements in in market prices and not to interpret these uh, 513 00:31:42,840 --> 00:31:44,760 Speaker 1: day to day changes in terms of some sort of 514 00:31:44,800 --> 00:31:48,520 Speaker 1: some kind of deeper economic rationale. I mean, sometimes it's 515 00:31:48,600 --> 00:31:51,760 Speaker 1: just you know, we sometimes use the shorthand the market's 516 00:31:51,800 --> 00:31:56,360 Speaker 1: expectations too to denote the expectations of of of some 517 00:31:56,440 --> 00:31:59,200 Speaker 1: kind of mythical individual. But it is just a shorthand 518 00:31:59,240 --> 00:32:03,200 Speaker 1: about you know, about prices. And it's important to bear 519 00:32:03,240 --> 00:32:05,160 Speaker 1: in mind that the market is not actually a person. 520 00:32:05,240 --> 00:32:09,640 Speaker 1: It's prices just the outcome of individual actions. Um. So 521 00:32:09,680 --> 00:32:13,000 Speaker 1: you know, when you have unwinding a various positions, you know, 522 00:32:13,040 --> 00:32:17,920 Speaker 1: steeping the positions or on on the reflation trade using 523 00:32:18,320 --> 00:32:21,720 Speaker 1: you know, break evens, you would see this kind of action, um, 524 00:32:21,760 --> 00:32:24,560 Speaker 1: you know, in the in the iiell curve, so I 525 00:32:24,560 --> 00:32:27,200 Speaker 1: think we shouldn't, you know, read too much into the 526 00:32:27,320 --> 00:32:29,320 Speaker 1: day to day changes. I think what we have seen 527 00:32:30,400 --> 00:32:34,440 Speaker 1: is that as the economy is opened up, inflation has 528 00:32:34,480 --> 00:32:37,400 Speaker 1: become more of a topic. You know, we're we're of 529 00:32:37,440 --> 00:32:41,240 Speaker 1: the view that a lot of the recent take up 530 00:32:41,360 --> 00:32:45,560 Speaker 1: in inflation have to do with the base effects, and 531 00:32:46,640 --> 00:32:47,920 Speaker 1: I think there is a lot to be said for 532 00:32:47,960 --> 00:32:52,240 Speaker 1: the for the argument that this is mostly transitory. When 533 00:32:52,280 --> 00:32:54,040 Speaker 1: we talk, you know, possibly if we have another chance 534 00:32:54,080 --> 00:32:57,440 Speaker 1: to talk a year from now, whatever, time to reflect. 535 00:32:58,200 --> 00:33:01,840 Speaker 1: Since you mentioned, um, the steep inner trade just then, 536 00:33:02,360 --> 00:33:06,000 Speaker 1: since the FED meeting earlier this month that came in 537 00:33:06,480 --> 00:33:09,120 Speaker 1: more hawkish than a lot of people had expected, we 538 00:33:09,200 --> 00:33:13,400 Speaker 1: did see a pretty significant bond market reaction, with the 539 00:33:13,440 --> 00:33:16,640 Speaker 1: curve flattening significantly and a lot of these steep in 540 00:33:16,680 --> 00:33:22,120 Speaker 1: our trades that had become basically the reflationary trade getting 541 00:33:22,280 --> 00:33:24,640 Speaker 1: stopped out, and a lot of whiplash in the market. 542 00:33:25,200 --> 00:33:27,720 Speaker 1: I know the b I S has been concerned with 543 00:33:28,160 --> 00:33:31,800 Speaker 1: liquidity in the treasury market overall ever since the big 544 00:33:31,880 --> 00:33:35,800 Speaker 1: drama that we saw in March of I'm wondering how 545 00:33:35,840 --> 00:33:38,360 Speaker 1: you're thinking about that issue now, whether or not you 546 00:33:38,360 --> 00:33:42,800 Speaker 1: feel the market is more robust given FED interventions over 547 00:33:42,840 --> 00:33:46,760 Speaker 1: the past year. Uh, and what the market reaction might 548 00:33:46,760 --> 00:33:50,200 Speaker 1: actually be um, as we sort of prepared to normalize 549 00:33:50,240 --> 00:33:53,560 Speaker 1: monetary policy. I guess that's a really long way of asking, 550 00:33:53,680 --> 00:33:56,640 Speaker 1: are you concerned about a tape per tantrum fueled by 551 00:33:57,000 --> 00:34:01,200 Speaker 1: market structure issues? You know that there has always been 552 00:34:01,280 --> 00:34:04,960 Speaker 1: the you know, there has always been I think the 553 00:34:05,080 --> 00:34:08,200 Speaker 1: short term movements in the market, especially you know, even 554 00:34:08,200 --> 00:34:10,239 Speaker 1: a very liquid markets like to you know, like the 555 00:34:10,239 --> 00:34:13,600 Speaker 1: treasury market. UM. I shouldn't really go into the details 556 00:34:13,680 --> 00:34:16,760 Speaker 1: of the specific you know, montrea actions of specific central 557 00:34:16,760 --> 00:34:20,000 Speaker 1: banks on this. I think it's enough to say probably 558 00:34:20,080 --> 00:34:23,920 Speaker 1: that you know, when we think about the market functioning issue, 559 00:34:24,640 --> 00:34:28,239 Speaker 1: there are you know, there are these episodes when the 560 00:34:28,280 --> 00:34:31,200 Speaker 1: positioning of market players can lead to you know, very 561 00:34:31,200 --> 00:34:34,800 Speaker 1: sharp movements. But even you know, during normal day to 562 00:34:34,880 --> 00:34:37,840 Speaker 1: day movements, UM, you know, there can be some big 563 00:34:38,000 --> 00:34:42,440 Speaker 1: changes if the positioning can also you know, lead to uh, 564 00:34:43,440 --> 00:34:46,400 Speaker 1: you know, a revision of those kind of beliefs. But 565 00:34:46,480 --> 00:34:49,600 Speaker 1: let me leave it there, Tracy, Okay, fair enough. I 566 00:34:49,640 --> 00:34:51,839 Speaker 1: think this has been really good one sort of thing 567 00:34:51,920 --> 00:34:54,160 Speaker 1: that interested me, And this is not about any sort 568 00:34:54,160 --> 00:34:57,279 Speaker 1: of specific central bank per se. But one of the 569 00:34:57,360 --> 00:35:00,080 Speaker 1: things that we saw last year that I'm sure are 570 00:35:00,120 --> 00:35:03,319 Speaker 1: interested in during the crisis is that various e ms 571 00:35:03,960 --> 00:35:08,880 Speaker 1: they engaged in forms of QUEI that people didn't necessarily 572 00:35:08,880 --> 00:35:11,000 Speaker 1: think they had the tools available to them. We saw 573 00:35:11,000 --> 00:35:13,719 Speaker 1: a lot of fiscal expansion, not just in the US, 574 00:35:13,760 --> 00:35:17,279 Speaker 1: but even say in Brazil, we saw fiscal expansion, much 575 00:35:17,320 --> 00:35:20,480 Speaker 1: of it perceived to be effective. Has the has the 576 00:35:20,520 --> 00:35:25,239 Speaker 1: crisis changed anyone's view about what is capable of that 577 00:35:25,320 --> 00:35:29,799 Speaker 1: maybe from a policy space perspective that e ms had 578 00:35:29,800 --> 00:35:33,040 Speaker 1: had more latitude to fight downturns on their own than 579 00:35:33,040 --> 00:35:34,759 Speaker 1: we thought. I mean we think of like e MS 580 00:35:34,760 --> 00:35:36,560 Speaker 1: is like, oh, they have to tighten in a downturn, 581 00:35:36,960 --> 00:35:39,800 Speaker 1: unlike developed markets where they can loosen in a downturn. 582 00:35:40,440 --> 00:35:43,000 Speaker 1: Has the last year brought any sort of change in 583 00:35:43,040 --> 00:35:46,600 Speaker 1: thinking about what kind of policy space might exist on 584 00:35:46,640 --> 00:35:49,799 Speaker 1: the e M front. That's a very good question, Joe, 585 00:35:50,160 --> 00:35:53,080 Speaker 1: and I remember discussing this with you last time I 586 00:35:53,160 --> 00:35:56,160 Speaker 1: was on I Mean, one issue was the extent of 587 00:35:56,360 --> 00:36:03,000 Speaker 1: fiscal space that even emerging economies found during the pandemic, 588 00:36:03,680 --> 00:36:04,920 Speaker 1: and it was a kind of, you know, a very 589 00:36:05,000 --> 00:36:08,920 Speaker 1: unique crisis, and that it was you know, it was 590 00:36:08,960 --> 00:36:11,239 Speaker 1: an economic sudden stop as you know, as as well 591 00:36:11,280 --> 00:36:15,880 Speaker 1: as being a health crisis, and the and the fiscal 592 00:36:15,960 --> 00:36:19,880 Speaker 1: response was really key. And I think what enabled emerging 593 00:36:19,920 --> 00:36:25,359 Speaker 1: markets to deploy fiscal policy very effectively was that they 594 00:36:25,400 --> 00:36:29,280 Speaker 1: discovered that they could actually you know, deploy fiscal resources, 595 00:36:30,000 --> 00:36:32,719 Speaker 1: even to the extent of intervening, you know, in the 596 00:36:32,719 --> 00:36:37,399 Speaker 1: bondom market, mainly for for market functioning purposes rather than 597 00:36:37,440 --> 00:36:42,319 Speaker 1: for quei as traditionally you know depicted. But I think 598 00:36:42,360 --> 00:36:49,120 Speaker 1: that was primarily because the FED and other advanced economy 599 00:36:49,120 --> 00:36:53,880 Speaker 1: central banks were able to really um deploy their liquidity, 600 00:36:54,400 --> 00:36:57,960 Speaker 1: you know, very expansively, so they really opened the open 601 00:36:58,000 --> 00:37:01,360 Speaker 1: the tabs. What that meant was that actual conditions were 602 00:37:01,719 --> 00:37:07,200 Speaker 1: kept very accommodative. The dollar, which you know strengthened briefly 603 00:37:07,360 --> 00:37:10,520 Speaker 1: at the height of the pandemic, the initial phase of 604 00:37:10,560 --> 00:37:15,160 Speaker 1: the pandemic, you know, then went into this downward trajectory, 605 00:37:15,200 --> 00:37:17,759 Speaker 1: and I think that gave a lot of space to 606 00:37:17,840 --> 00:37:19,799 Speaker 1: the emerging markets. So I think that's been a very 607 00:37:19,800 --> 00:37:24,279 Speaker 1: important lesson. Now it's been now over a year since then, 608 00:37:25,200 --> 00:37:28,719 Speaker 1: the question is how much more space the emerging markets have. 609 00:37:29,680 --> 00:37:33,759 Speaker 1: I think phisical space has narrowed because of debts of 610 00:37:33,840 --> 00:37:37,920 Speaker 1: emerging markets have have grown relative to whether we're you know, 611 00:37:38,000 --> 00:37:42,000 Speaker 1: last year, and not all of these emerging markets have 612 00:37:42,480 --> 00:37:45,160 Speaker 1: international currencies. UM, and so you know, there is an 613 00:37:45,200 --> 00:37:50,040 Speaker 1: issue about the extent of fiscal space, and I think 614 00:37:50,040 --> 00:37:52,239 Speaker 1: it's an area where where we need to keep a 615 00:37:52,360 --> 00:37:55,800 Speaker 1: very close eye on how well emerging markets can cope 616 00:37:55,920 --> 00:37:58,759 Speaker 1: if there were to be another tightening of global conditions. 617 00:37:59,719 --> 00:38:02,799 Speaker 1: So I just realized there's a question that we should ask, 618 00:38:02,840 --> 00:38:05,759 Speaker 1: which probably threads the needle between the beginning of this 619 00:38:05,840 --> 00:38:10,520 Speaker 1: discussion on CBDCs and uh the end of the discussion 620 00:38:10,719 --> 00:38:13,040 Speaker 1: that's more on macro and the role of the dollar 621 00:38:13,120 --> 00:38:16,600 Speaker 1: and emerging markets. But there is a perception out there 622 00:38:16,640 --> 00:38:22,200 Speaker 1: that central bank digital currencies could amount to an effort 623 00:38:22,280 --> 00:38:24,799 Speaker 1: to get away from the U. S Dollar as the 624 00:38:24,920 --> 00:38:28,480 Speaker 1: dominant currency of the financial system. UM. I won't mention 625 00:38:28,520 --> 00:38:31,439 Speaker 1: any specific country names, but I think there are fears 626 00:38:31,480 --> 00:38:38,520 Speaker 1: over a specific one. How credible are those concerns? And secondly, 627 00:38:38,880 --> 00:38:43,279 Speaker 1: if we're talking about building a new payment system that 628 00:38:43,320 --> 00:38:46,359 Speaker 1: involves central bank digital currencies, it feels like you need 629 00:38:46,440 --> 00:38:51,320 Speaker 1: some sort of consensus among different countries, different international players. 630 00:38:52,000 --> 00:38:55,799 Speaker 1: How do you go about building that consensus given these 631 00:38:55,960 --> 00:38:59,680 Speaker 1: different interests in the way the financial system functions. That's 632 00:38:59,680 --> 00:39:02,160 Speaker 1: a very important issue. I think it's worth starting out 633 00:39:02,200 --> 00:39:05,640 Speaker 1: by saying that the payment system, you know, it doesn't 634 00:39:05,640 --> 00:39:10,439 Speaker 1: float separately from the underlying economic transactions, and currencies don't 635 00:39:10,480 --> 00:39:15,319 Speaker 1: become international currencies, you know, just because it's digital, just 636 00:39:15,360 --> 00:39:19,200 Speaker 1: because it's in digital form. But rather, you know, they 637 00:39:19,280 --> 00:39:22,440 Speaker 1: become international currencies because there is a user demand for it, 638 00:39:22,680 --> 00:39:26,480 Speaker 1: you know, for instance, for for the settlement of trade transactions. 639 00:39:27,440 --> 00:39:29,719 Speaker 1: And I think that's probably you know, important to bear 640 00:39:29,760 --> 00:39:34,279 Speaker 1: in mind. Um, you know, with regard to the discussions 641 00:39:34,280 --> 00:39:36,680 Speaker 1: about you know, whether China is using the you know, 642 00:39:36,719 --> 00:39:39,520 Speaker 1: the rollout of its E C and Y for for 643 00:39:39,600 --> 00:39:46,440 Speaker 1: those kind of circumvention you know, purposes. The idea of 644 00:39:46,480 --> 00:39:51,360 Speaker 1: cash circulating in briefcases in the black market is probably 645 00:39:51,360 --> 00:39:55,520 Speaker 1: not a good analogy for cbdc s because the kind 646 00:39:55,520 --> 00:40:00,520 Speaker 1: of CBDCs we are envisaging typically in in most banks 647 00:40:01,239 --> 00:40:04,520 Speaker 1: are based on digital I D. You know, they are 648 00:40:04,560 --> 00:40:09,680 Speaker 1: account based. Um So, if someone were to use a 649 00:40:09,760 --> 00:40:13,480 Speaker 1: CBDC that's issued in in one country, but it's but 650 00:40:13,560 --> 00:40:17,200 Speaker 1: it's being used outside the issuing central bank has to 651 00:40:17,280 --> 00:40:20,400 Speaker 1: know about it and has to you know, give you know, 652 00:40:20,440 --> 00:40:24,080 Speaker 1: has to consent to to that use taking place. And 653 00:40:24,120 --> 00:40:26,759 Speaker 1: of course the host jurisdiction central bank will also have 654 00:40:26,760 --> 00:40:29,680 Speaker 1: a lot of say in what kind of transactions take place, 655 00:40:30,200 --> 00:40:33,040 Speaker 1: you know, within the domestic financial system. So I think 656 00:40:33,080 --> 00:40:35,440 Speaker 1: we can overestimate the extent to which you know there 657 00:40:35,480 --> 00:40:38,640 Speaker 1: will be this kind of currency substitution where a foreign 658 00:40:39,840 --> 00:40:44,640 Speaker 1: CBDC will be encroaching on the on the domestic financial system. 659 00:40:44,840 --> 00:40:48,960 Speaker 1: Needless to say, if you want to use CBDCs for 660 00:40:49,239 --> 00:40:54,000 Speaker 1: the transactions that will you know that that will facilitate 661 00:40:54,640 --> 00:40:56,960 Speaker 1: the legitimate kind of make transactions. And of course that's 662 00:40:57,040 --> 00:41:01,760 Speaker 1: something that is very amenable to monetary cooperation. And indeed 663 00:41:02,560 --> 00:41:05,200 Speaker 1: one of the things that you know will surely come 664 00:41:05,200 --> 00:41:10,399 Speaker 1: out as CBDC has become much more commonly discussed, our 665 00:41:11,239 --> 00:41:16,880 Speaker 1: discussions on connecting CBDC systems across countries so that we 666 00:41:16,960 --> 00:41:20,799 Speaker 1: can you know, simplify the monetary architecture where you know, 667 00:41:20,840 --> 00:41:24,160 Speaker 1: typically we will need to go through correspondent banks in 668 00:41:24,200 --> 00:41:27,920 Speaker 1: this very complicated chain, you know, adding costs and adding 669 00:41:28,320 --> 00:41:31,960 Speaker 1: delays to payments. If you have a simple system like 670 00:41:32,000 --> 00:41:36,440 Speaker 1: a CBDC based system, you could potentially, you know, simplify 671 00:41:36,520 --> 00:41:41,120 Speaker 1: that monetary architecture. You could make cross border payments much 672 00:41:41,920 --> 00:41:46,000 Speaker 1: cheaper and simpler. You know, that would be a very good, uh, 673 00:41:46,040 --> 00:41:50,239 Speaker 1: you know development for for both migrants sending money back home, 674 00:41:50,320 --> 00:41:53,799 Speaker 1: for tourists, um, and for travelers. So I would see 675 00:41:53,800 --> 00:41:57,640 Speaker 1: this much more in this positive light of Yes, there 676 00:41:57,640 --> 00:42:01,120 Speaker 1: are pretty significant control as you can apply to make 677 00:42:01,120 --> 00:42:03,480 Speaker 1: sure it doesn't you know, serve purposes other than the 678 00:42:03,480 --> 00:42:07,040 Speaker 1: intended purposes. But then you know, then the intended purposes 679 00:42:07,040 --> 00:42:09,719 Speaker 1: could be you know, pretty broad, and you know those 680 00:42:09,760 --> 00:42:15,520 Speaker 1: are very desirable outcomes in any case, Thank you so much, 681 00:42:15,600 --> 00:42:19,040 Speaker 1: really appreciate you coming on all lots and um explaining 682 00:42:19,160 --> 00:42:23,160 Speaker 1: all these new ideas and central banking to us. So 683 00:42:23,400 --> 00:42:43,759 Speaker 1: thank you, Thanks very much. Thanks that was fantastic, So Joe, 684 00:42:43,800 --> 00:42:46,239 Speaker 1: it really does feel like there's a lot going on 685 00:42:46,400 --> 00:42:49,759 Speaker 1: if you're a monetary policymaker at the moment. But one 686 00:42:49,840 --> 00:42:52,480 Speaker 1: of the things that sort of stood out from that 687 00:42:52,520 --> 00:42:57,960 Speaker 1: conversation was a how quickly the CBDC discussion is sort 688 00:42:57,960 --> 00:43:01,880 Speaker 1: of moving on, but be just how dead that narrative 689 00:43:01,880 --> 00:43:05,680 Speaker 1: around bitcoin is a transaction mechanism actually is like the 690 00:43:05,719 --> 00:43:09,600 Speaker 1: central banks barely even mentioned it. Now, it's yeah, right, 691 00:43:09,640 --> 00:43:12,919 Speaker 1: I mean, I think the perception among regulators is still 692 00:43:13,000 --> 00:43:15,440 Speaker 1: like this is like this like highly speculed of vehicle 693 00:43:15,520 --> 00:43:18,239 Speaker 1: and so forth. But in terms of like actually like 694 00:43:18,280 --> 00:43:20,960 Speaker 1: a thing that gets sort of used in the conventional 695 00:43:21,000 --> 00:43:23,640 Speaker 1: sense of used. I mean, I guess holding is a 696 00:43:23,640 --> 00:43:26,480 Speaker 1: form of usage, but beyond it's just like not really 697 00:43:26,520 --> 00:43:30,200 Speaker 1: a thing that's on their mind. No, not at all, um, 698 00:43:30,239 --> 00:43:32,759 Speaker 1: But I did find that conversation interesting. I also found 699 00:43:32,920 --> 00:43:38,759 Speaker 1: um Huan's distinction between the idea of CBDCs as. By 700 00:43:38,800 --> 00:43:41,040 Speaker 1: the way, every time I say CBD C, I think 701 00:43:41,080 --> 00:43:45,040 Speaker 1: of cb D oil. Now there's like a thousand CBD 702 00:43:45,160 --> 00:43:48,160 Speaker 1: shops that have cropped up in Hong Kong there on 703 00:43:48,239 --> 00:43:51,520 Speaker 1: every corner. I didn't realize it was big there. Yeah, 704 00:43:51,640 --> 00:43:55,319 Speaker 1: it's huge, Like it seems to have suddenly all come 705 00:43:55,400 --> 00:43:57,799 Speaker 1: over in the past year. But anyway, sorry, um so 706 00:43:57,920 --> 00:44:00,480 Speaker 1: if I mess up, if I mess up the two terms, 707 00:44:00,560 --> 00:44:02,920 Speaker 1: that's why. But one of the weird things about c 708 00:44:03,120 --> 00:44:05,920 Speaker 1: B D c S is it sort of goes to 709 00:44:06,000 --> 00:44:10,120 Speaker 1: Huan's point about this being a augmentation of the existing 710 00:44:10,800 --> 00:44:14,160 Speaker 1: monetary system rather than a wholesale redesign. And I think 711 00:44:14,160 --> 00:44:17,400 Speaker 1: when a lot of people think about cryptocurrencies, they generally 712 00:44:17,400 --> 00:44:21,520 Speaker 1: think about a revolution of the financial system, a major, 713 00:44:21,880 --> 00:44:25,319 Speaker 1: um sort of technological upgrade, whereas the way central banks 714 00:44:25,320 --> 00:44:27,279 Speaker 1: are seemed to be thinking about a lot of this 715 00:44:27,400 --> 00:44:30,240 Speaker 1: is is a sort of, um, I guess platform upgrade 716 00:44:30,680 --> 00:44:35,440 Speaker 1: around the edges. Yeah, I feel like this like cb 717 00:44:35,600 --> 00:44:38,400 Speaker 1: d C. I mean, because bitcoin came along and so 718 00:44:38,440 --> 00:44:40,799 Speaker 1: we have this idea of this sort of like cryptographic thing, 719 00:44:40,880 --> 00:44:44,240 Speaker 1: this sort of barr asset that that is the mental 720 00:44:44,320 --> 00:44:46,360 Speaker 1: model that people still think of when they think of 721 00:44:46,400 --> 00:44:49,839 Speaker 1: a CBDC. But for the most part, it sounds like 722 00:44:49,960 --> 00:44:53,120 Speaker 1: a lot of the effort is still more generally towards 723 00:44:54,000 --> 00:44:57,320 Speaker 1: doing a better job of just the core digital infrastructure 724 00:44:57,400 --> 00:45:01,200 Speaker 1: of money, which is not very good. Um it's even 725 00:45:01,239 --> 00:45:04,480 Speaker 1: the traditional systems are kind of slow. They're all kinds 726 00:45:04,520 --> 00:45:10,040 Speaker 1: of problems with it. There's perhaps not sufficiently inclusive, transfers 727 00:45:10,040 --> 00:45:12,480 Speaker 1: are expensive. So I think a lot of this conversation 728 00:45:12,600 --> 00:45:16,200 Speaker 1: is still about just like how can the payment system 729 00:45:16,440 --> 00:45:19,359 Speaker 1: be better than currently is now? And it's something that's 730 00:45:19,360 --> 00:45:22,480 Speaker 1: sort of like more resembles just like an upgrade of 731 00:45:22,480 --> 00:45:24,600 Speaker 1: the system rather than sort of like a new kind 732 00:45:24,640 --> 00:45:27,759 Speaker 1: of central bank money. Yeah, I think that's the right 733 00:45:27,800 --> 00:45:30,799 Speaker 1: distinction to be making um. All right, Well, we'll happen 734 00:45:30,880 --> 00:45:34,200 Speaker 1: in on um in another year and see he's always great, 735 00:45:34,360 --> 00:45:36,240 Speaker 1: He's always great to talk to. I just like find 736 00:45:36,280 --> 00:45:38,080 Speaker 1: like talking to him to be like the sort of 737 00:45:38,080 --> 00:45:40,520 Speaker 1: like fount of insight. And because he's at the b 738 00:45:40,600 --> 00:45:42,680 Speaker 1: I S and so well connected, just like a great 739 00:45:42,680 --> 00:45:44,840 Speaker 1: way to like sort of like sense where the world 740 00:45:44,920 --> 00:45:47,759 Speaker 1: is going totally and I have a feeling it's going 741 00:45:47,840 --> 00:45:50,600 Speaker 1: to get very interesting from a sort of macro bond 742 00:45:50,640 --> 00:45:55,240 Speaker 1: market perspective. So um, good times ahead for for markets, 743 00:45:55,280 --> 00:45:59,000 Speaker 1: content for financial journalists. All right, shall we leave it there? Yep, 744 00:45:59,120 --> 00:46:02,279 Speaker 1: let's leave it there. This has been another episode of 745 00:46:02,320 --> 00:46:05,040 Speaker 1: the All Thoughts podcast. I'm Tracy Alloway. You can follow 746 00:46:05,040 --> 00:46:08,759 Speaker 1: me on Twitter at Tracy Alloway and I'm Joe Why 747 00:46:08,800 --> 00:46:11,480 Speaker 1: Isn't All? You could follow me on Twitter at the Stalwart. 748 00:46:11,800 --> 00:46:15,280 Speaker 1: Follow our guest on Twitter, Unsong Shin, the economic advisor 749 00:46:15,320 --> 00:46:17,880 Speaker 1: and head of Research at the Bank for International Settlements. 750 00:46:18,040 --> 00:46:22,480 Speaker 1: His handle is at Unsong Shin. Follow our producer Laura Carlson. 751 00:46:22,680 --> 00:46:26,000 Speaker 1: She's at Laura M. Carlson. Followed the Bloomberg Head of 752 00:46:26,080 --> 00:46:30,279 Speaker 1: podcast Francesca Levie at Francesco Today and check out all 753 00:46:30,320 --> 00:46:34,080 Speaker 1: of our podcasts at Bloomberg unto the handle at podcasts. 754 00:46:34,239 --> 00:47:01,960 Speaker 1: Thanks for listening, a