WEBVTT - Kopi Time E057: BIS research head Hyun Song Shin on CBDCs 0:00:00.540 --> 0:00:00.690 Yeah. 0:00:07.540 --> 0:00:07.750 Mhm. 0:00:09.340 --> 0:00:13.050 Hello, you're listening to copy Time, a podcast series on 0:00:13.050 --> 0:00:16.010 markets and economies from DBS group research and time Rebecca. 0:00:16.010 --> 0:00:19.060 Chief economist. Welcome to our 57th episode. 0:00:19.540 --> 0:00:22.209 Today we have the honor of having with us all 0:00:22.210 --> 0:00:26.170 the way from Basel Switzerland dr hyun sanction economic advisor 0:00:26.170 --> 0:00:29.190 and head of research at the Bank for International Settlements 0:00:29.200 --> 0:00:32.019 that are known as B. I. S. Tune has been 0:00:32.030 --> 0:00:35.980 holding this position since May 2014, before which he was 0:00:35.979 --> 0:00:38.950 the huge Rogers professor of economics at Princeton University 0:00:39.340 --> 0:00:44.020 In 2010. Only from Princeton, he served as senior adviser 0:00:44.020 --> 0:00:47.169 to the President of Korea, taking a leading role in 0:00:47.170 --> 0:00:51.220 formulating financial stability policy and developing the agenda for the 0:00:51.220 --> 0:00:53.350 G-20 during Korea's presidency. 0:00:54.340 --> 0:00:54.960 Now 0:00:55.940 --> 0:00:58.270 head of P. I. S Research, we can talk to 0:00:58.270 --> 0:01:02.620 him about global macro financial stability impact of the pandemic 0:01:02.630 --> 0:01:06.050 banking sector trends, corporate sector balance sheets. But today we 0:01:06.050 --> 0:01:08.930 will do none of that. Instead we will focus on 0:01:08.930 --> 0:01:12.209 central bank digital currencies, something we follow very closely at 0:01:12.209 --> 0:01:13.460 DBS and Singapore. 0:01:13.740 --> 0:01:15.930 And it's an issue in which B. I. S. Has 0:01:15.930 --> 0:01:17.160 taken a leadership role 0:01:17.340 --> 0:01:21.500 in outlining the use case, best practice, innovation space and 0:01:21.500 --> 0:01:24.750 implication for backup policies and for societies in general. 0:01:25.240 --> 0:01:26.350 With that in mind, 0:01:26.740 --> 0:01:28.660 Hyun, welcome to copy time. 0:01:30.640 --> 0:01:32.760 Thank you Time. It's a great pleasure to join you. 0:01:33.340 --> 0:01:37.720 Uh Our honor uh is a central bank digital currency, 0:01:37.730 --> 0:01:39.550 nothing more than a digital background. 0:01:39.940 --> 0:01:42.360 And if yes, is it at all transformative? 0:01:44.540 --> 0:01:47.090 Well, I'm not sure about nothing more, but it's certainly 0:01:47.100 --> 0:01:50.150 you can think of CBD CS as a digital form 0:01:50.150 --> 0:01:52.650 of cash. And the way you think about this is, 0:01:52.660 --> 0:01:53.750 you know, at the moment 0:01:54.140 --> 0:01:57.760 when an ordinary user makes a digital payment, you have 0:01:57.760 --> 0:02:00.900 to go through a financial intermediary, like a commercial banks. 0:02:00.900 --> 0:02:01.960 So when you make a payment 0:02:02.440 --> 0:02:07.080 digitally, what you're doing is transferring a deposit claim on 0:02:07.080 --> 0:02:07.750 your bank 0:02:08.440 --> 0:02:12.850 to the receivers. Because this balance at his or her bank. 0:02:13.639 --> 0:02:16.330 Now with the C. B. D. C. As you say, 0:02:16.340 --> 0:02:19.160 it's like digital cash. You can pay someone 0:02:19.540 --> 0:02:22.899 just as you would by handing over cash. But you 0:02:22.900 --> 0:02:23.950 can do it digitally 0:02:24.639 --> 0:02:29.160 using your smartphone or other device is now 0:02:29.940 --> 0:02:32.020 by virtue of the fact that C. B. D. C. S. R. 0:02:32.020 --> 0:02:34.950 A claim on the central bank. And it's very cash light. 0:02:35.440 --> 0:02:40.209 It brings all the advantages that are normally associated with 0:02:40.220 --> 0:02:42.250 central bank money. For example, 0:02:42.639 --> 0:02:45.990 it has the property of finality which means that once 0:02:45.990 --> 0:02:46.960 you've made the tank 0:02:47.540 --> 0:02:51.250 the payment is certain and final without leaving things to 0:02:51.250 --> 0:02:53.959 intermediaries to complete the transaction. 0:02:54.340 --> 0:02:57.400 And there's also a very important symbolic element here as 0:02:57.400 --> 0:02:59.460 well because just like cash 0:03:00.040 --> 0:03:03.690 CBD CS would also serve you like an a salient 0:03:03.690 --> 0:03:04.359 marker 0:03:04.840 --> 0:03:08.160 of the trust in sound money provided by the central bank. 0:03:08.540 --> 0:03:11.930 That's right. And and speaking of central banks, you scan 0:03:11.930 --> 0:03:14.640 the globe. What kind of interest in c b D 0:03:14.639 --> 0:03:16.630 C s do you see among the community of central 0:03:16.630 --> 0:03:17.260 banks these days? 0:03:17.840 --> 0:03:20.910 Well, you can imagine uh this is a very important 0:03:20.910 --> 0:03:24.300 topic among central banks right now. Uh the B. I. S. 0:03:24.310 --> 0:03:27.760 Hosts a number of central bank policy committees, 0:03:28.139 --> 0:03:31.870 a very important standard setter. That base at the G. I. S. 0:03:31.880 --> 0:03:36.560 Is the community on payments and the market infrastructures or C. P. M. I. 0:03:37.240 --> 0:03:41.720 Um and it regularly conducts surveys of central banks and 0:03:41.730 --> 0:03:47.250 in the last survey, something around 86% of the survey. 0:03:47.250 --> 0:03:50.290 Central banks have some kind of research going on at 0:03:50.290 --> 0:03:51.760 the moment on CBDC. S. 0:03:52.540 --> 0:03:57.560 And uh you know, as of as of June 56 0:03:57.560 --> 0:04:00.390 central banks as as far as I know here, uh 0:04:00.400 --> 0:04:02.320 this is a number that I have in front of 0:04:02.320 --> 0:04:02.650 me 0:04:03.240 --> 0:04:08.780 have publicly communicated about either their wholesale or retail CBBC 0:04:08.780 --> 0:04:09.450 projects 0:04:10.040 --> 0:04:13.270 and as you know, quite a few central banks, including 0:04:13.270 --> 0:04:17.940 the people's Bank of China, the brics Bank of Sweden 0:04:17.950 --> 0:04:21.260 are now piloting uh C B D C s. I 0:04:21.260 --> 0:04:22.909 think the short answer is there is a lot of 0:04:22.910 --> 0:04:23.450 interest 0:04:24.040 --> 0:04:27.849 and this is a topic that has a lot of momentum, 0:04:27.850 --> 0:04:28.560 I would say, 0:04:28.940 --> 0:04:32.290 and I think it's a very it's a very good 0:04:32.290 --> 0:04:34.970 sign of where we are in in the current debate, 0:04:34.970 --> 0:04:35.450 both 0:04:35.839 --> 0:04:38.410 on the theory, but also on the, on the practice 0:04:38.420 --> 0:04:41.060 on the monetary system more broadly. 0:04:41.440 --> 0:04:44.000 Okay, so I may be at risk of asking a 0:04:44.000 --> 0:04:46.150 dumb question, which is why 0:04:46.640 --> 0:04:51.320 what kind of payment settlement or societal problems that need 0:04:51.320 --> 0:04:54.160 to be solved that require exploring CDCs? 0:04:54.839 --> 0:04:57.260 Yeah, I think the way to think about this is, 0:04:57.270 --> 0:04:59.109 you know, we're in the digital age. I think the 0:04:59.110 --> 0:05:02.250 most important property, the most important 0:05:02.640 --> 0:05:06.750 feature of the digital age is the centrality of data. 0:05:07.339 --> 0:05:11.060 So in the in the digital economy there is a 0:05:11.070 --> 0:05:13.490 there is a massive amount of data that is generated 0:05:13.500 --> 0:05:16.850 in the ordinary operation of digital economy 0:05:17.839 --> 0:05:23.289 and uh the centrality of data both in business models 0:05:23.300 --> 0:05:27.220 and in in data governance and so on, generates a 0:05:27.220 --> 0:05:30.010 number of very important problems which I think you know 0:05:30.010 --> 0:05:30.560 have 0:05:31.040 --> 0:05:35.859 um emerged that were not perhaps as central as before. 0:05:36.440 --> 0:05:39.510 And uh CBD has really come into their own in 0:05:39.510 --> 0:05:41.860 this setting. You know, when when data 0:05:42.540 --> 0:05:46.790 become so central to the way we conduct business. So 0:05:46.800 --> 0:05:49.930 to put it briefly because of their construction at the 0:05:49.930 --> 0:05:50.960 core of the system, 0:05:51.640 --> 0:05:54.160 C B D C s could offer if you're like 0:05:54.160 --> 0:05:55.360 a number of advantages 0:05:55.940 --> 0:05:59.450 flow from this importance of data. So, for example, 0:06:00.040 --> 0:06:03.890 if you're thinking of setting up a payment system with 0:06:03.890 --> 0:06:06.270 the public interest in mind, so that means, you know, 0:06:06.270 --> 0:06:07.960 we want something which is efficient, 0:06:08.540 --> 0:06:11.700 we want something which has low cost for the user. 0:06:11.710 --> 0:06:15.510 Uh There is a competitive level playing field uh and 0:06:15.510 --> 0:06:19.050 that you're interested in the payment system being inclusive, so 0:06:19.050 --> 0:06:22.370 you're not going to be excluding people uh due to 0:06:22.370 --> 0:06:25.470 their high cost or you know, through not having the 0:06:25.470 --> 0:06:28.250 right kinds of, you know, credentials to join. 0:06:28.740 --> 0:06:31.600 Um then CPS has really come into their own. Now, 0:06:31.610 --> 0:06:34.409 at the at the same time, of course, given the 0:06:34.410 --> 0:06:35.760 centrality of data, 0:06:36.140 --> 0:06:39.859 we also need to bear in mind the importance 0:06:40.440 --> 0:06:46.970 of other safeguards. For example, data privacy and uh data 0:06:46.970 --> 0:06:50.320 governance rules. More generally. While at the same time, we 0:06:50.320 --> 0:06:54.260 also need to have a system which also enables 0:06:54.640 --> 0:06:58.390 integrity of the payment system to be maintained whereby when 0:06:58.390 --> 0:07:02.799 I say integrity, I mean protection from illicit activities and 0:07:02.810 --> 0:07:06.250 uh the system being used to facilitate financial crime. 0:07:06.740 --> 0:07:11.130 So it's uh so ensure what I would say is 0:07:11.140 --> 0:07:12.460 uh C B D C s 0:07:12.940 --> 0:07:15.060 are important because of data 0:07:15.540 --> 0:07:19.650 and the data has emerged because of the digital economy 0:07:20.340 --> 0:07:25.260 and it's less about the technology and more about the economics, 0:07:25.270 --> 0:07:29.380 I would say. And the and how you can channel 0:07:29.380 --> 0:07:30.860 the digital um 0:07:31.240 --> 0:07:33.160 how you can channel the economic forces 0:07:33.740 --> 0:07:36.600 in a digital economy in a way that would serve 0:07:36.600 --> 0:07:37.550 the public interest 0:07:38.640 --> 0:07:42.120 even just as a thought experiment in the middle of 0:07:42.120 --> 0:07:45.060 the Covid outbreak, say last summer, 0:07:45.440 --> 0:07:49.780 if there were indeed CBBC facilities available in countries that 0:07:49.780 --> 0:07:51.820 were being afflicted by the pandemic, 0:07:51.830 --> 0:07:53.230 what kind 0:07:53.230 --> 0:07:56.100 of gains would we have seen in terms of distributive 0:07:56.100 --> 0:07:58.250 policies or policy action? 0:07:59.040 --> 0:08:01.800 Yeah, I think this is a very good question in 0:08:01.810 --> 0:08:05.030 uh an entry into the point that I raised earlier 0:08:05.030 --> 0:08:08.040 about the public interest. So, so what could we have 0:08:08.040 --> 0:08:09.630 done with C B D. C. As well? I think 0:08:09.630 --> 0:08:11.360 the answer is um 0:08:11.740 --> 0:08:16.220 the technology as such is probably secondary. But the way 0:08:16.220 --> 0:08:18.060 that you design the payment system 0:08:18.840 --> 0:08:22.030 with the public interest in mind is more important. And 0:08:22.030 --> 0:08:23.920 I think the, so let me just put it in 0:08:23.920 --> 0:08:26.380 very broad terms then I'll get to some details. So 0:08:26.380 --> 0:08:29.500 I think the the proposition that I put on the 0:08:29.500 --> 0:08:32.580 table is it's much more important that we bear in 0:08:32.580 --> 0:08:34.050 mind the architecture 0:08:34.640 --> 0:08:36.350 rather than the technology, 0:08:37.240 --> 0:08:42.140 but the technology will enable architecture which is more versatile. 0:08:42.140 --> 0:08:45.700 So let me give you a specific example. Um and 0:08:45.700 --> 0:08:47.670 this is something that you raise just now which is 0:08:47.679 --> 0:08:49.060 uh during the pandemic, 0:08:49.740 --> 0:08:53.960 we have a sudden stop of economic activity. 0:08:54.440 --> 0:08:55.160 Um 0:08:55.740 --> 0:09:00.380 There are you know there is financial stress because of 0:09:00.390 --> 0:09:01.050 a 0:09:01.440 --> 0:09:05.320 a stop in the cash flows and many businesses and 0:09:05.330 --> 0:09:07.050 there are households that are 0:09:07.540 --> 0:09:11.860 uh that are seeing um hardship and so on. 0:09:12.340 --> 0:09:15.040 Now one way you can deal with this is to 0:09:15.050 --> 0:09:18.550 infuse fiscal transfers directly to 0:09:19.040 --> 0:09:23.689 businesses and households. Uh So one part of that could 0:09:23.690 --> 0:09:27.430 be just direct transfers, a fiscal transfer if you like. 0:09:27.440 --> 0:09:30.429 They could also be uh you know, guaranteed loans and 0:09:30.429 --> 0:09:31.059 so on. 0:09:31.440 --> 0:09:33.450 Now if you have a payment system 0:09:33.840 --> 0:09:36.260 that has a 0:09:36.940 --> 0:09:40.100 has a fairly complete record of the of the users 0:09:40.100 --> 0:09:43.189 in the system. Uh If everyone has a bank account 0:09:43.200 --> 0:09:46.260 um and you have a good record of uh 0:09:46.640 --> 0:09:51.950 uh the participants in the economy through the payment system, 0:09:52.340 --> 0:09:55.809 you could uh you know, once there is a political 0:09:55.809 --> 0:09:57.559 will to do this, 0:09:58.240 --> 0:10:02.650 you could quite easily make fiscal transfers through the banking system. 0:10:03.540 --> 0:10:06.890 So uh you know one example I would I would 0:10:06.900 --> 0:10:09.260 uh you know, put here, I think Singapore was a case, 0:10:09.640 --> 0:10:12.910 but in many countries when you know, the banking system 0:10:12.910 --> 0:10:14.050 itself is 0:10:14.440 --> 0:10:18.700 pretty well established and uh you have a very inclusive 0:10:18.710 --> 0:10:19.660 payment system, 0:10:20.440 --> 0:10:25.230 um you can make those transfers directly through through people's 0:10:25.230 --> 0:10:27.160 bank accounts. You have 0:10:27.540 --> 0:10:32.230 a good record of uh of the users from the 0:10:32.240 --> 0:10:36.410 from the banking system itself, you can you can use 0:10:36.410 --> 0:10:38.760 that for the public policy purposes. 0:10:39.440 --> 0:10:42.360 And so it doesn't really need a C B D C. 0:10:42.370 --> 0:10:45.970 As such to to really put that into effect so 0:10:45.970 --> 0:10:49.570 that uh so so Korea was a was an example 0:10:49.570 --> 0:10:52.730 where you could, you know, once there was the was 0:10:52.730 --> 0:10:54.349 the political will to do this, 0:10:54.840 --> 0:10:58.110 you could actually put it into practice in a matter 0:10:58.110 --> 0:10:58.650 of days. 0:10:59.240 --> 0:10:59.960 Now, 0:11:00.340 --> 0:11:02.360 what you can also say at the same time, if 0:11:02.360 --> 0:11:04.260 you had a retail CBD see 0:11:04.740 --> 0:11:05.550 as well, 0:11:06.440 --> 0:11:11.020 um it would be like having the same kind of architecture, 0:11:11.030 --> 0:11:15.429 but on a much firmer footing. Um, and so there 0:11:15.429 --> 0:11:19.300 are things you could do on that platform that even 0:11:19.300 --> 0:11:22.699 the well functioning banking system, you know, retail fast payment 0:11:22.700 --> 0:11:24.260 system could not have done. 0:11:24.840 --> 0:11:27.319 And uh so I think that would be, you know, 0:11:27.320 --> 0:11:30.340 one way to think about this now, the important thing 0:11:30.340 --> 0:11:33.640 is just to reiterate that it's about the economics and 0:11:33.640 --> 0:11:36.860 the public policy oriented goals of the payment system 0:11:37.540 --> 0:11:39.760 rather than the technology. The technology 0:11:40.240 --> 0:11:43.189 is pretty neutral as to the outcome in that, you know, 0:11:43.190 --> 0:11:47.059 the same technology that could lead to this virtuous circle 0:11:47.059 --> 0:11:52.849 of greater inclusion, lower costs, better innovation could equally in, 0:11:52.860 --> 0:11:55.689 you know, less favorable circumstances lead to the opposite outcome. 0:11:55.690 --> 0:11:56.650 It could lead to 0:11:57.140 --> 0:11:58.850 a much less favorable loop, 0:11:59.240 --> 0:12:02.449 a feedback loop of, you know, walled gardens, 0:12:02.840 --> 0:12:08.560 um, greater shielding from competition, greater data. Uh, you know, 0:12:08.559 --> 0:12:12.350 holding and entrenchment of incumbents. So it's less about the 0:12:12.350 --> 0:12:14.960 technology and much more about the architecture would say. 0:12:15.740 --> 0:12:17.530 Absolutely. And I want to talk about some of those 0:12:17.530 --> 0:12:19.560 things a little later, but I since we are doing 0:12:19.559 --> 0:12:23.359 a thought experiment, indulge me for another moment, please. Um um, 0:12:23.740 --> 0:12:26.970 liquidity trap is one area where, you know, you issue 0:12:26.970 --> 0:12:29.860 a lot of banknotes, you carry out asset purchases, but 0:12:29.860 --> 0:12:32.059 they just end up as balances in the central bank 0:12:32.059 --> 0:12:34.510 because banks don't have the confidence to land or even 0:12:34.510 --> 0:12:37.460 if people want to, you know, have people have the cash, 0:12:37.460 --> 0:12:39.570 they don't have the confidence to spend savings straight 0:12:39.570 --> 0:12:40.750 jump. So 0:12:40.760 --> 0:12:41.760 the ultimate 0:12:41.940 --> 0:12:45.520 time bomb helicopter money I issue CBD sees that expire 0:12:45.520 --> 0:12:48.479 in a week, which forces people to spend. Uh that's 0:12:48.480 --> 0:12:50.199 something that no cash or anything 0:12:50.200 --> 0:12:50.960 else can do, right? 0:12:53.240 --> 0:12:56.470 Yes. You know, there are things you could do with C. B. D. C. S, 0:12:56.470 --> 0:13:00.070 that you could not do in the conventional banking system. 0:13:00.080 --> 0:13:03.760 Um And what you described as a version of what 0:13:03.770 --> 0:13:06.859 has been called programmable money. 0:13:07.540 --> 0:13:10.840 Now, in a sense, the term programmable money is a 0:13:10.840 --> 0:13:13.660 bit of a bit of an oxymoron because, you know, 0:13:13.660 --> 0:13:15.250 the nature of money 0:13:15.840 --> 0:13:17.459 is um 0:13:18.040 --> 0:13:21.080 of something which is immutable, something which uh you know, 0:13:21.080 --> 0:13:23.460 is not information and sensitive, you know, the 0:13:23.840 --> 0:13:25.960 uh in the economics literature, 0:13:26.340 --> 0:13:29.400 uh you know, liquidity and manliness has to do with 0:13:29.400 --> 0:13:32.060 the fact that it is it is non contingent 0:13:32.740 --> 0:13:36.100 uh programmable money. You know, you could think about that 0:13:36.100 --> 0:13:39.140 as a kind of a voucher. Uh It's a it's 0:13:39.140 --> 0:13:42.250 a claim that has certain contingencies built into it. 0:13:42.840 --> 0:13:45.959 So you can do that. But I wouldn't pin 0:13:46.340 --> 0:13:50.850 the rationale for CBD CS on merely its program ability. 0:13:50.850 --> 0:13:51.949 I think those are kind of, 0:13:52.540 --> 0:13:55.920 you know, additional features that you could you could build 0:13:55.920 --> 0:13:56.760 on top. 0:13:57.140 --> 0:13:57.860 Um 0:13:58.240 --> 0:14:03.459 But I think the much more important point is that 0:14:03.940 --> 0:14:05.950 CBD CSR A 0:14:06.440 --> 0:14:12.560 um she like another incarnation of the classical notion of money, 0:14:13.140 --> 0:14:15.859 which is as a non contingent plane. 0:14:16.340 --> 0:14:20.420 It's something which does not change in value because of 0:14:20.420 --> 0:14:22.460 certain circumstances. The economy, 0:14:22.940 --> 0:14:25.760 you know, it is the it is the promise. 0:14:26.240 --> 0:14:28.920 It is a foundational promise, if you like. From which 0:14:28.930 --> 0:14:31.550 all other promises in the economy 0:14:32.040 --> 0:14:36.050 then follow. So yes, we can talk about programmable money, 0:14:36.060 --> 0:14:38.060 but I would think of it more as vouchers 0:14:38.540 --> 0:14:42.190 rather than money. Um and we can do, you know, 0:14:42.190 --> 0:14:45.490 various clever things on top, but I would think those 0:14:45.490 --> 0:14:46.160 are pretty second 0:14:47.740 --> 0:14:51.100 great. Um So so far we have talked about payments 0:14:51.110 --> 0:14:53.290 in the domestic setting. I want to sort of switch 0:14:53.290 --> 0:14:57.720 a little bit toward the cross borders aspect earlier this year. 0:14:57.720 --> 0:14:59.320 I think it was in March, there was a B. I. S. 0:14:59.320 --> 0:15:02.240 Working paper and I think it began with cross border 0:15:02.240 --> 0:15:05.060 payments are inefficient and technology could play a role in 0:15:05.060 --> 0:15:06.060 making them better. 0:15:06.240 --> 0:15:08.900 One means could be through inter operating central bank, digital 0:15:08.900 --> 0:15:11.940 currency Cbc's forming multi C B D. C, or M 0:15:11.940 --> 0:15:13.050 C B. D. C arrangements. 0:15:13.440 --> 0:15:14.450 So if 0:15:14.450 --> 0:15:17.680 you would help us unpack some of the notions embedded 0:15:17.680 --> 0:15:19.560 in those two sentences First, 0:15:19.940 --> 0:15:22.640 how big are cross border payments and how do we 0:15:22.640 --> 0:15:25.160 measure the degree of inefficiency in this area? 0:15:27.440 --> 0:15:30.440 Yeah, So that's, so this is um, you've raised a 0:15:30.440 --> 0:15:33.700 very important policy issue. It's one of the uh, one 0:15:33.700 --> 0:15:35.560 of the top policy questions 0:15:36.240 --> 0:15:40.160 In the G20, for example, in various multilateral setting, 0:15:40.940 --> 0:15:44.790 I think the first thing to say is uh, you know, 0:15:44.790 --> 0:15:48.280 we've so far talked about retail payments. It's it's for 0:15:48.280 --> 0:15:49.660 ordinary users, uh, 0:15:50.040 --> 0:15:52.160 household small businesses. 0:15:52.840 --> 0:15:53.560 Um, 0:15:54.040 --> 0:15:58.280 there is, of course, a much larger volume payment system 0:15:58.290 --> 0:16:02.360 among financial intermediaries. And so the first thing would be 0:16:02.360 --> 0:16:03.460 to 0:16:03.840 --> 0:16:07.260 to distinguish, if you like, the retail CBBC discussion 0:16:07.740 --> 0:16:11.870 from the wholesale cBBC discussion, which is about the payments 0:16:11.870 --> 0:16:16.440 between financial institutions, which tend to be, you know, in 0:16:16.450 --> 0:16:21.560 in uh, face values much larger than the retail payments. 0:16:22.040 --> 0:16:23.750 So, there is a discussion 0:16:24.540 --> 0:16:26.460 on multi 0:16:26.940 --> 0:16:31.540 cBC arrangements uh, in the wholesale setting. The for example, 0:16:31.540 --> 0:16:33.720 you may have seen this week that the B. I. 0:16:33.720 --> 0:16:36.360 S Innovation have announced the 0:16:36.840 --> 0:16:41.460 the euro project, which is this a joint project between 0:16:41.840 --> 0:16:45.430 the Central bank of France? The bomb to France with the, 0:16:45.440 --> 0:16:46.760 with the Central bank of Switzerland, 0:16:47.140 --> 0:16:51.070 the Swiss National Bank and the bees innovation hub is 0:16:51.070 --> 0:16:51.760 also 0:16:52.340 --> 0:16:54.560 part of that, together with the private sector consortium. 0:16:55.040 --> 0:16:58.870 And there the idea is, can we link the payments 0:16:58.880 --> 0:17:03.730 across borders and across currencies? Because, you know, Switzerland users 0:17:03.730 --> 0:17:04.460 with franks 0:17:04.840 --> 0:17:06.760 France uses euros. 0:17:07.240 --> 0:17:09.360 Uh can we think of uh 0:17:09.840 --> 0:17:15.159 linking the payments between the financial systems of uh, of 0:17:15.160 --> 0:17:16.460 Switzerland and France 0:17:17.040 --> 0:17:20.720 using a C B D C, uh, you know, architecture. 0:17:20.730 --> 0:17:24.300 And you know, there are similar projects going on in Asia. 0:17:24.300 --> 0:17:26.460 You know, there was an earlier announcement which I'm sure 0:17:26.460 --> 0:17:29.379 you've seen uh, of the, of the circle c b 0:17:29.380 --> 0:17:33.189 D c bridge between the Hong kong monetary authority and 0:17:33.190 --> 0:17:34.170 the back of Thailand, 0:17:34.340 --> 0:17:37.159 you know, which is now expanded to include 0:17:37.340 --> 0:17:40.940 china and the United Arab Emirates. Uh that is also 0:17:40.940 --> 0:17:43.670 a wholesale CBBC project. 0:17:44.040 --> 0:17:47.090 So, you know, there are projects like this going on 0:17:47.100 --> 0:17:48.169 and 0:17:48.640 --> 0:17:52.830 and they're the main advantage is that because we're talking 0:17:52.830 --> 0:17:57.580 about financial institutions, we we have fewer players that are 0:17:57.580 --> 0:17:58.169 involved 0:17:58.740 --> 0:18:02.960 the issues to do with data privacy and uh 0:18:03.540 --> 0:18:07.210 you know, invasion of personal data, that kind of thing. 0:18:07.220 --> 0:18:08.760 That is less of an issue 0:18:09.340 --> 0:18:13.880 because these are all regulated institutions, you know, we uh 0:18:13.890 --> 0:18:17.320 we have a much more direct way of just extending 0:18:17.320 --> 0:18:19.940 the current system which is already, you know, digital. I 0:18:19.940 --> 0:18:23.920 mean the the helpful payment system is already digital um 0:18:23.930 --> 0:18:27.060 in that banks have an account at the central bank 0:18:27.540 --> 0:18:32.140 and the settlement is done you know, digitally, but the 0:18:32.150 --> 0:18:35.350 but by bringing in a cBC in that context, you 0:18:35.350 --> 0:18:38.159 can bring in additional features like the fact that 0:18:38.640 --> 0:18:41.780 um you don't need to, you know, wait for settlement 0:18:41.780 --> 0:18:44.170 to take place. You can have an immediate settlement. So 0:18:44.170 --> 0:18:47.859 you can have, for example what's called a payment versus 0:18:47.859 --> 0:18:51.260 delivery type of setting where in the context of a 0:18:51.260 --> 0:18:53.760 securities transaction, you can have an immediate settlement 0:18:54.240 --> 0:18:57.910 without having a separate process which takes some time, which 0:18:57.910 --> 0:18:59.760 brings an operational list and so on. 0:19:00.540 --> 0:19:03.669 And in a cross currency setting, we have the payment 0:19:03.670 --> 0:19:07.770 versus payment idea where you can have an immediate transaction 0:19:07.770 --> 0:19:08.959 across currencies 0:19:09.540 --> 0:19:14.510 without necessarily having uh this awkward, you know, gap where 0:19:14.510 --> 0:19:16.720 you have some some settlement. 0:19:17.640 --> 0:19:19.050 So there are these additional 0:19:19.440 --> 0:19:22.360 advantage which somewhat hard back to what we discussed just 0:19:22.359 --> 0:19:24.689 now on the on the program ability. So there are 0:19:24.690 --> 0:19:25.260 ways of 0:19:25.840 --> 0:19:28.659 building in these automatic features 0:19:29.040 --> 0:19:32.550 on top of the system. Now, those are wholesale systems. 0:19:32.940 --> 0:19:36.430 Um, and so they are not something that ordinary users 0:19:36.430 --> 0:19:39.360 would necessarily notice that even if they are rolled out, 0:19:40.040 --> 0:19:43.750 what's really, I think a much more ambitious project is 0:19:43.750 --> 0:19:47.600 what's going on, for example, in the financial stability board 0:19:47.619 --> 0:19:48.770 in the G 20 0:19:49.240 --> 0:19:53.290 which is about how do we improve the retail payment system. 0:19:53.300 --> 0:19:58.330 So this is about ordinary users about remittances. Um, so, 0:19:58.340 --> 0:20:00.550 you know, workers sending money back home 0:20:00.940 --> 0:20:06.130 uh and tourism, for example, tourism expenditures. Now, uh the 0:20:06.140 --> 0:20:09.120 figure that we should have in mind is, you know, 0:20:09.130 --> 0:20:13.170 just before the pandemic, we had something around. Um 0:20:13.540 --> 0:20:16.680 So in the whole of 2019 were something like $720 0:20:16.680 --> 0:20:17.560 billion dollars 0:20:18.240 --> 0:20:22.350 in in in remittances cross border. 0:20:22.840 --> 0:20:25.020 Uh you know that that sounds like a big number 0:20:25.020 --> 0:20:27.600 but it's probably you know smaller than it could be 0:20:27.609 --> 0:20:31.380 because this is a system which has a lot of frictions, 0:20:31.390 --> 0:20:35.260 its high cost, it's about access. 0:20:35.740 --> 0:20:37.260 Uh huh. 0:20:37.840 --> 0:20:40.830 Uh If you compare that with tourism, so tourism was 0:20:40.830 --> 0:20:42.550 something in the order of double that 0:20:42.940 --> 0:20:47.560 1 1/2 trillion. So tourism expenditure in 2019 0:20:47.940 --> 0:20:51.560 is around 1.5 trillion. So that even compared to tourism expenditure, 0:20:51.570 --> 0:20:53.669 remittances 0:20:54.140 --> 0:20:56.100 were fairly small. And so I think this is the 0:20:56.109 --> 0:20:59.060 area where uh there's probably more scope 0:20:59.840 --> 0:21:02.800 but this is also the area where the challenges are 0:21:02.800 --> 0:21:07.550 much greater because if you want to extend a retail 0:21:07.560 --> 0:21:08.450 CBC 0:21:08.940 --> 0:21:11.870 into a cross border context, I mean there are lots 0:21:11.869 --> 0:21:12.770 of 0:21:13.340 --> 0:21:18.140 both technical issues but less technical but more policy issues. 0:21:18.150 --> 0:21:19.060 For example, 0:21:19.640 --> 0:21:23.170 if you want to extend the retail CBD see abroad, 0:21:23.840 --> 0:21:27.280 how do you manage the ledger? how do you manage 0:21:27.280 --> 0:21:28.359 the record keeping 0:21:28.740 --> 0:21:32.360 that actually makes the retail cbc work because 0:21:32.840 --> 0:21:36.379 a retail C. B. D. C. Is in essence a 0:21:36.390 --> 0:21:37.270 digital ledger 0:21:37.640 --> 0:21:41.090 of who has made a transfer to who and therefore 0:21:41.090 --> 0:21:44.359 who owns what balances at what time. 0:21:44.940 --> 0:21:46.670 Now, if you want to extend that 0:21:47.040 --> 0:21:49.429 to the cross border context, you need to have some 0:21:49.430 --> 0:21:52.950 way of keeping track of what people abroad are doing. 0:21:53.540 --> 0:21:57.420 And uh so issues like digital I. D. How do 0:21:57.420 --> 0:22:01.750 you operationalize across border digital I. D. Can we even 0:22:01.750 --> 0:22:04.400 think about a super national ID? So those are really 0:22:04.400 --> 0:22:05.960 very very high level questions 0:22:06.540 --> 0:22:11.240 now. Uh It's I think fair to say that although 0:22:11.240 --> 0:22:12.770 these challenges are very large, 0:22:13.240 --> 0:22:16.179 there are ways of circumventing uh you know, some of 0:22:16.180 --> 0:22:19.240 the uh you know, there are ways of overcoming, I 0:22:19.240 --> 0:22:21.360 would say you know, some of the key challenges 0:22:22.140 --> 0:22:25.600 and this is an area where we need to work 0:22:25.600 --> 0:22:29.320 much harder because it is, it is something that needs 0:22:29.320 --> 0:22:30.270 a lot, 0:22:30.640 --> 0:22:35.000 uh, a lot more forward. So, uh, so ensure, so 0:22:35.000 --> 0:22:37.810 this has been a very long answer, but in short 0:22:37.820 --> 0:22:41.350 for wholesale CBD CS, there's been great progress. And I 0:22:41.350 --> 0:22:43.550 think from the point of view of a commercial bank, 0:22:43.560 --> 0:22:45.689 and I'm sure that you've been following this very closely 0:22:45.700 --> 0:22:50.619 for wholesale settlement. For cross currency, For securities settlement, there's 0:22:50.619 --> 0:22:52.770 been great progress. I think we have 0:22:53.040 --> 0:22:56.390 a pretty clear view, I would say, of how these 0:22:56.390 --> 0:22:57.360 systems would work. 0:22:57.940 --> 0:23:01.179 Um, you know, there's a great deal of, uh, you know, 0:23:01.180 --> 0:23:03.850 continuity with the work that's already been done. 0:23:04.340 --> 0:23:07.780 Um, it's more of an evolution because, you know, CLS 0:23:07.790 --> 0:23:10.760 is something that is already there 0:23:11.140 --> 0:23:15.160 And it's a well established piece of infrastructure 20 years old. 0:23:15.740 --> 0:23:19.240 And these new infrastructures are going to be just building 0:23:19.240 --> 0:23:19.760 on that 0:23:20.240 --> 0:23:22.900 retail c b D c s, that's a whole different matter. 0:23:23.020 --> 0:23:24.560 And 0:23:24.940 --> 0:23:30.450 domestic retail CDCs present challenges to do with privacy, digital idea. 0:23:30.450 --> 0:23:33.310 And so in the cross border context, there are some 0:23:33.310 --> 0:23:35.050 really very difficult policy question. 0:23:35.940 --> 0:23:36.360 Right. 0:23:36.740 --> 0:23:39.180 Um, so one thing that we have been looking with 0:23:39.180 --> 0:23:40.900 some degree of interest in our part of the world 0:23:40.910 --> 0:23:43.790 is that blocking scheme that central Michael cambodia has come 0:23:43.790 --> 0:23:44.350 up with 0:23:44.840 --> 0:23:45.950 precisely to help 0:23:46.340 --> 0:23:48.970 10 million workers in Thailand and elsewhere to send money 0:23:48.970 --> 0:23:52.410 back home. And they have gotten in touch with a 0:23:52.420 --> 0:23:55.620 Japanese dlt companies who use that distributed ledger to create 0:23:55.619 --> 0:23:59.230 a trail so that workers living in Thailand can send 0:23:59.230 --> 0:24:02.240 money home and be sort of, you know, secure in 0:24:02.240 --> 0:24:04.850 the trail with which the money is going. And of 0:24:04.850 --> 0:24:06.170 course the transaction costs 0:24:06.640 --> 0:24:09.820 interior will be substantially lower. But you're right, this is 0:24:09.820 --> 0:24:11.340 you know, early days what's going on. 0:24:11.350 --> 0:24:12.619 So, you know, you've already 0:24:12.630 --> 0:24:17.670 touched upon some of the potential frictions and operational challenges, um, 0:24:18.040 --> 0:24:22.840 from a theoretical perspective shared with us the ideal design feature, 0:24:22.840 --> 0:24:25.960 I mean how would you design like a perfect cbc? 0:24:28.040 --> 0:24:30.520 Yeah, I'm not sure that you know, there is a 0:24:30.530 --> 0:24:33.359 there is a perfect one. I think the the way 0:24:33.359 --> 0:24:36.970 that one would go about doing this is you know, 0:24:36.970 --> 0:24:40.859 there are some things that we cannot really change or 0:24:40.859 --> 0:24:42.980 you know, we shouldn't try to change. So for example, 0:24:42.980 --> 0:24:43.670 if 0:24:44.240 --> 0:24:47.450 uh you know, we have sovereign countries and so, you know, 0:24:47.450 --> 0:24:49.550 they sovereign countries will have their own 0:24:50.040 --> 0:24:53.050 uh, you know, data frameworks. They will have their own 0:24:53.060 --> 0:24:54.770 approach to 0:24:55.340 --> 0:24:59.669 how to think about the linking of administrative dataset and 0:24:59.670 --> 0:25:00.350 so on. 0:25:00.840 --> 0:25:04.990 Uh there are different philosophies and you know, different political 0:25:05.000 --> 0:25:06.450 imperatives if you like. So 0:25:06.940 --> 0:25:09.760 there are some things which are just you know uh 0:25:09.770 --> 0:25:11.460 features that we have to take is given. 0:25:12.140 --> 0:25:15.719 And the question is when we take those features is 0:25:15.720 --> 0:25:19.159 given and those are like beyond the technical design elements. 0:25:20.040 --> 0:25:23.850 What are the design features that we could um 0:25:24.340 --> 0:25:26.350 that would put in place 0:25:26.740 --> 0:25:31.750 that would maximize you know, that would promote the public 0:25:31.750 --> 0:25:32.260 good 0:25:33.340 --> 0:25:35.770 in a way that is um 0:25:36.440 --> 0:25:39.740 going to respect both of those uh you know, both 0:25:39.740 --> 0:25:43.359 the underlying circumstances that we cannot change 0:25:44.140 --> 0:25:50.109 but also tackle uh the frictions that are you know 0:25:50.119 --> 0:25:51.270 much more amenable 0:25:52.340 --> 0:25:55.639 now I think one issue is uh so there is 0:25:55.640 --> 0:25:57.170 a set of issues which are technical 0:25:57.540 --> 0:26:00.159 uh you mentioned back on coin which I think is 0:26:00.160 --> 0:26:01.770 a very important development. 0:26:02.340 --> 0:26:04.669 Uh I um um 0:26:05.140 --> 0:26:06.550 you know it's been 0:26:07.040 --> 0:26:09.350 a couple of years actually when uh 0:26:09.740 --> 0:26:13.360 uh since uh since since back and corn was launched 0:26:13.359 --> 0:26:15.670 and I've been following it very closely obviously. 0:26:16.340 --> 0:26:20.840 Um So there are uh technical issues for example, you know, 0:26:20.840 --> 0:26:22.760 should we used a distributed ledger 0:26:23.440 --> 0:26:28.660 approach or is a centralist ledger approach more appropriate 0:26:29.340 --> 0:26:33.609 and different jurisdictions that will follow, you know, different parts 0:26:33.619 --> 0:26:36.990 um In in china of course it's uh it's more 0:26:36.990 --> 0:26:39.060 the centralised level approach 0:26:39.440 --> 0:26:44.900 uh which has you know, some some technical advantages which 0:26:44.900 --> 0:26:46.760 have to do with greater 0:26:47.340 --> 0:26:50.550 greater processing capacity and uh 0:26:50.940 --> 0:26:53.830 uh there are things that you know, you can also 0:26:53.830 --> 0:26:55.770 do with centralized system 0:26:56.140 --> 0:26:58.919 um which might be easier to link to the to 0:26:58.920 --> 0:27:00.960 the current two tier system and so on. 0:27:01.640 --> 0:27:02.360 Um 0:27:02.840 --> 0:27:04.160 So there are a number of 0:27:04.640 --> 0:27:08.890 technical issues which I think we can uh we can tackle. 0:27:08.900 --> 0:27:12.390 Um and there I think the circumstances in each jurisdiction 0:27:12.390 --> 0:27:14.560 will take. You know which way you go. 0:27:15.140 --> 0:27:17.790 I think the much more important than more difficult issues 0:27:17.800 --> 0:27:22.290 the ones that have to do with policy. So I've 0:27:22.290 --> 0:27:25.190 already I've already raised one issue which has to do 0:27:25.190 --> 0:27:26.770 with digital ID. 0:27:27.440 --> 0:27:30.070 So you know 11 fork in the road when we 0:27:30.070 --> 0:27:32.950 design CBD. So just do we want to go down 0:27:32.950 --> 0:27:34.850 the route of a I. D. Base? 0:27:35.540 --> 0:27:39.880 Digital I. D. Based account based system where uh membership 0:27:39.890 --> 0:27:42.560 of the network is um 0:27:43.240 --> 0:27:46.100 is granted by virtue of the fact that you are 0:27:46.109 --> 0:27:48.889 a uh that you have a digital I. D. In 0:27:48.890 --> 0:27:51.060 the system and you're granted accounts 0:27:51.640 --> 0:27:55.150 uh in a financial intermediary whereby you become a member 0:27:55.150 --> 0:27:55.859 of that network. 0:27:56.640 --> 0:27:59.660 Or do we go down the route of a token 0:27:59.660 --> 0:28:02.460 based system? Uh You know like Bitcoin 0:28:03.240 --> 0:28:04.460 where um 0:28:04.940 --> 0:28:07.959 you are a member of the network through by by 0:28:07.960 --> 0:28:10.460 virtue of the fact that you have a private key 0:28:11.240 --> 0:28:15.310 to accessing, you know, your address in the inner network 0:28:15.310 --> 0:28:18.480 in the Blockchain. So there uh in the case of 0:28:18.480 --> 0:28:22.670 Bitcoin you have uh you know you have 0:28:23.040 --> 0:28:26.859 a private key, that's your address but you can mask 0:28:26.859 --> 0:28:30.450 your true identity behind you know that private key. 0:28:31.140 --> 0:28:36.070 Now I think there is pretty broad consensus, I would say. 0:28:36.080 --> 0:28:38.850 Um but it's not universal uh 0:28:39.240 --> 0:28:42.580 especially among the among the crypt a crowd, but I 0:28:42.580 --> 0:28:46.170 think there's pretty broad progress that if we want to 0:28:46.180 --> 0:28:50.380 improve the current system, it's almost certainly going to be 0:28:50.390 --> 0:28:52.320 the case that we will need to go down an 0:28:52.320 --> 0:28:56.459 account based system with with with a verified digital I. D. 0:28:56.840 --> 0:29:01.160 It's just I think uh just infeasible to think that 0:29:01.160 --> 0:29:05.340 we can build a whole system around something is elaborate 0:29:05.340 --> 0:29:07.459 and uh 0:29:07.840 --> 0:29:09.360 you know, something is awkwardly 0:29:09.840 --> 0:29:12.510 um uh something is awkward to use as a kind 0:29:12.510 --> 0:29:15.660 of private key based uh a pseudonymous system, 0:29:16.240 --> 0:29:18.360 but once we go down the digital idea route, 0:29:18.940 --> 0:29:22.340 we have to think about how do we link the 0:29:22.350 --> 0:29:25.450 digital ID systems across jurisdictions? 0:29:25.840 --> 0:29:28.310 Um And here, I think this goes back to the 0:29:28.310 --> 0:29:31.560 policy question, this is not about about the technology, 0:29:32.040 --> 0:29:36.860 it's about sovereignty, it's about, you know, the 0:29:37.340 --> 0:29:40.550 the will of the people, if you like, 0:29:40.940 --> 0:29:45.540 because I think that the idea that a foreign entity 0:29:45.540 --> 0:29:48.760 would have access to the digital ID in your jurisdiction, 0:29:48.760 --> 0:29:52.459 I think that would be a very uh you know, 0:29:52.460 --> 0:29:55.760 high hurdle to actually cross. So if we want to 0:29:55.760 --> 0:29:58.360 link C B. D. C systems across borders, 0:29:58.740 --> 0:30:01.610 there would have to be a way of respecting each 0:30:01.610 --> 0:30:03.660 other's sovereignty 0:30:04.040 --> 0:30:09.490 while allowing each of these uh of the jurisdictions to 0:30:09.490 --> 0:30:12.460 make use of the EID systems in the other jurisdictions. 0:30:13.040 --> 0:30:15.200 I think here a cross border cooperation is going to 0:30:15.210 --> 0:30:18.050 be very important and there are ways of doing this. So, 0:30:18.060 --> 0:30:20.340 you know, one principle that I think is very important 0:30:20.340 --> 0:30:20.960 here is 0:30:21.640 --> 0:30:22.170 uh 0:30:22.640 --> 0:30:27.890 we can link payment systems without needing to have a, 0:30:27.900 --> 0:30:32.620 you know, super national I. D. Uh infrastructure, so there's 0:30:32.620 --> 0:30:35.750 no one single entity that is the all seeing eye 0:30:35.760 --> 0:30:36.560 over everything. 0:30:37.040 --> 0:30:39.950 We can actually each have a piece of the jigsaw puzzle. 0:30:40.540 --> 0:30:44.430 Uh I think of it like the jigsaw puzzle, each 0:30:44.440 --> 0:30:47.050 entity has a piece of the jigsaw puzzle, 0:30:47.540 --> 0:30:50.740 so no one actually has the full view, it's only 0:30:50.740 --> 0:30:51.460 the individual 0:30:51.940 --> 0:30:55.560 that has the full view over his or her personal details, 0:30:56.140 --> 0:31:00.160 um but each party has a slice of that. 0:31:00.540 --> 0:31:04.930 Um But there are ways of linking each of these 0:31:04.940 --> 0:31:07.950 uh you know aspects or slivers if you like 0:31:08.440 --> 0:31:12.360 and making the cross border transactions operational. 0:31:12.740 --> 0:31:13.360 So 0:31:13.840 --> 0:31:16.220 you know it so this is where we need to 0:31:16.220 --> 0:31:19.960 draw on cryptography. So it's the same kind of principles 0:31:20.440 --> 0:31:23.780 that power cryptocurrencies in the whole point of cryptocurrencies is 0:31:23.780 --> 0:31:24.060 that 0:31:24.440 --> 0:31:26.970 you know we can use these digital signatures that come 0:31:26.970 --> 0:31:28.160 from the 0:31:28.640 --> 0:31:34.200 from the private keys to validate transactions. You can use 0:31:34.200 --> 0:31:38.050 the same kind of technology but in the current system 0:31:38.050 --> 0:31:43.300 with digital IEDs that mask most of details except for 0:31:43.300 --> 0:31:47.330 the ones that are absolutely essential for that piece of transaction. 0:31:47.340 --> 0:31:49.360 And this is something that's already in place 0:31:49.640 --> 0:31:52.900 uh in many of the retail systems um where you 0:31:52.900 --> 0:31:54.660 know if you have an A. P. I. In the 0:31:54.660 --> 0:31:55.850 retail payment systems, 0:31:56.340 --> 0:31:59.270 you know you can open the app of one bank 0:31:59.640 --> 0:32:01.560 and check the balances in the other bank. 0:32:02.040 --> 0:32:04.140 Um And you can do that because you know when 0:32:04.150 --> 0:32:07.250 when you when you log onto the app of one bag, 0:32:07.740 --> 0:32:12.270 you can send messages to the other bag that authenticate 0:32:12.270 --> 0:32:14.750 the fact that you are the person that you claim 0:32:14.750 --> 0:32:15.270 to be. 0:32:15.840 --> 0:32:20.360 But the other bank doesn't divulge everything to bank A 0:32:20.740 --> 0:32:25.140 the other bank would only divulge the absolutely central pieces. 0:32:25.150 --> 0:32:27.550 So you know, it will tell you your balances 0:32:28.040 --> 0:32:31.400 but not for example your address or your payment record 0:32:31.400 --> 0:32:32.060 and so on. 0:32:32.440 --> 0:32:37.060 So the technology is not that special, it's already there. 0:32:37.540 --> 0:32:40.360 And what the C. B. D. C. S. Would do 0:32:40.740 --> 0:32:45.590 is just make this more seamless. And I guess, you know, 0:32:45.590 --> 0:32:48.440 it was something it would be something that uh would 0:32:48.440 --> 0:32:51.480 just take what's going on right now but make it 0:32:51.480 --> 0:32:54.860 technically smoother and uh 0:32:55.240 --> 0:32:58.100 and more efficient. So sorry for the very long answer. 0:32:58.100 --> 0:32:59.350 But I think that's a 0:32:59.740 --> 0:33:01.450 you know this needed to be said 0:33:02.240 --> 0:33:08.030 great okay so moving on from the architecture issue to 0:33:08.040 --> 0:33:10.720 the issue of exchange rates. We live in a world 0:33:10.720 --> 0:33:14.310 of currency trading. Fx rates being quoted by dealers on 0:33:14.310 --> 0:33:15.950 a second by second basis. 0:33:16.340 --> 0:33:20.210 How would that be impacted by an M. C. B. D. C. 0:33:20.210 --> 0:33:23.860 Type arrangement and will actually make things more stable? 0:33:26.740 --> 0:33:29.800 Yes. I think this goes back to our previous conversation 0:33:29.810 --> 0:33:34.390 about program ability. Um So at the moment there's a 0:33:34.390 --> 0:33:36.060 whole um 0:33:36.440 --> 0:33:39.660 uh you know intermediation system is built on the idea 0:33:39.660 --> 0:33:42.050 that payment is made when you 0:33:42.440 --> 0:33:45.050 you know debit the account of the of the center 0:33:45.050 --> 0:33:47.560 and you credit the account of the receiver. 0:33:48.240 --> 0:33:53.210 Um And if the receiver is uh in another jurisdiction 0:33:53.220 --> 0:33:56.940 um and using another currency you need the whole chain 0:33:56.940 --> 0:33:57.770 of intermediary, 0:33:58.440 --> 0:34:00.600 you know to make that uh you know to make 0:34:00.600 --> 0:34:02.360 that transfer to make that work. 0:34:02.840 --> 0:34:04.850 Um If you have a C. B. D. C. Potentially 0:34:04.850 --> 0:34:08.170 what you can do is to use its functionality 0:34:08.640 --> 0:34:12.959 to have an immediate transfer payment versus payment, 0:34:13.340 --> 0:34:18.469 so to speak, in the jargon transfer um Where you can, 0:34:18.480 --> 0:34:21.310 you know debit the account of the of the center 0:34:21.310 --> 0:34:26.480 and credit the account of the receiver instantaneously. Um Now 0:34:26.489 --> 0:34:29.780 for that to happen you need if you like the 0:34:29.790 --> 0:34:30.860 infrastructure 0:34:31.040 --> 0:34:34.110 that not only allows cbs you use in each jurisdiction, 0:34:34.110 --> 0:34:36.859 you need also some infrastructure that connects 0:34:37.239 --> 0:34:38.969 the two C. B. D. C. Systems. 0:34:41.739 --> 0:34:44.180 Right? And and to the fx market because at the 0:34:44.180 --> 0:34:44.669 end of the day 0:34:44.670 --> 0:34:46.920 you need to the fx market so you will need, 0:34:46.930 --> 0:34:49.359 so if you like, you know that infrastructure 0:34:49.739 --> 0:34:54.339 would need to you know have the capacity to have 0:34:54.340 --> 0:34:58.500 a kind of instantaneous uh transaction across currencies as well 0:34:58.500 --> 0:35:02.130 as the transfer across accounts you know across the jurisdiction. 0:35:02.130 --> 0:35:05.850 So there are two dimensions as they cross jurisdictional dimension 0:35:06.340 --> 0:35:07.960 if you like. A cross border dimension 0:35:08.340 --> 0:35:10.560 as well as the cross currency dimension. 0:35:10.940 --> 0:35:11.470 That's right. 0:35:12.239 --> 0:35:15.899 Um Google financial transactions are dominated by the U. S. 0:35:15.900 --> 0:35:20.380 Dollar uh used widely for payments, invoicing goods and financial 0:35:20.380 --> 0:35:21.560 assets pricing and so on. 0:35:22.040 --> 0:35:24.370 Do you see the proliferation of C. B. D. C. 0:35:24.370 --> 0:35:26.860 S changing that in any way? 0:35:29.239 --> 0:35:31.460 Um I think you know um 0:35:31.940 --> 0:35:34.630 perhaps over the very long run but I think it's 0:35:34.640 --> 0:35:37.790 important to bear in mind that the payment system doesn't 0:35:37.800 --> 0:35:42.350 you know, float in a vacuum uh float separately from 0:35:42.739 --> 0:35:45.259 the underlying economic transactions. Um 0:35:45.739 --> 0:35:48.350 The role of the dollar and in fact the role 0:35:48.350 --> 0:35:51.170 of any international currency um 0:35:51.739 --> 0:35:56.190 uh is really predicated on the need of the users. 0:35:56.200 --> 0:36:00.600 So you know, before the dollar was uh it was 0:36:00.610 --> 0:36:01.750 pound sterling 0:36:02.130 --> 0:36:04.850 or even gold even before then 0:36:06.130 --> 0:36:08.250 and they're the 0:36:08.830 --> 0:36:14.370 currency becomes international because users demand that currency for the transactions. 0:36:14.380 --> 0:36:17.200 Uh It has to do with trade, it has to 0:36:17.200 --> 0:36:20.650 do with the certainty of the settlement, it has to 0:36:20.660 --> 0:36:22.240 do with the legal framework it's on. 0:36:22.830 --> 0:36:26.540 So I would say that we should not put too 0:36:26.540 --> 0:36:29.270 much emphasis on the technology as such, so just because 0:36:29.270 --> 0:36:30.450 the currency is digital, 0:36:31.030 --> 0:36:32.989 um it doesn't mean that that's somehow going to be 0:36:32.989 --> 0:36:36.339 adopted universally, there has to be an underlying need 0:36:36.930 --> 0:36:39.930 and so it's the combination I would say of the 0:36:39.930 --> 0:36:43.850 need um and the technology which is going to facilitate 0:36:43.860 --> 0:36:45.660 a currency to become international, 0:36:46.530 --> 0:36:46.950 right? 0:36:47.330 --> 0:36:51.000 Uh And I like the combination aspect that you just 0:36:51.000 --> 0:36:53.450 mentioned because then when I think of china being such 0:36:53.450 --> 0:36:58.120 a large source of global trade and intermediary of capital 0:36:58.120 --> 0:37:01.900 inflows and outflows as they make their currency for international. 0:37:01.910 --> 0:37:04.130 It would seem to me just from a logical perspective 0:37:04.130 --> 0:37:06.730 there will be greater demand of holding it so far. 0:37:06.730 --> 0:37:07.850 We haven't seen much of that, 0:37:08.130 --> 0:37:10.870 but perhaps the E. C. N. Y. On a cross 0:37:10.870 --> 0:37:12.049 border basis compliment 0:37:12.530 --> 0:37:14.840 that that move, we'll have to see about that. 0:37:15.230 --> 0:37:18.060 Uh You know, I wanted to ask you about stable coins, 0:37:18.070 --> 0:37:22.900 why can't private sector stable coins solve all the problems 0:37:22.900 --> 0:37:25.870 that we talked about earlier about the inefficiencies associated with 0:37:25.870 --> 0:37:26.839 cross border payments. 0:37:28.130 --> 0:37:28.340 Oh 0:37:29.130 --> 0:37:31.480 yeah, so this is a very very good question and 0:37:31.489 --> 0:37:34.020 you know this is a this is a live policies 0:37:34.020 --> 0:37:37.370 who and we have that debate about libere a couple 0:37:37.370 --> 0:37:38.160 of years ago. 0:37:38.730 --> 0:37:39.350 Um 0:37:39.730 --> 0:37:40.660 I think the 0:37:41.530 --> 0:37:43.830 the first point to make is that you know, the 0:37:43.830 --> 0:37:47.299 currency is a promise of the central bank. So even 0:37:47.300 --> 0:37:48.460 for stable coins, 0:37:49.030 --> 0:37:53.930 they derive, you know, their value, that the stability of 0:37:53.930 --> 0:37:57.000 their value from the fact that it is building on 0:37:57.000 --> 0:38:00.040 the conventional financial system. It is, it is built. 0:38:00.420 --> 0:38:03.990 The fact that it's a stable coin um is by 0:38:03.989 --> 0:38:06.330 virtue of the fact that is that is building on 0:38:06.330 --> 0:38:08.940 conventional currency. So, you know, either 0:38:09.420 --> 0:38:12.150 uh bank deposits 0:38:12.620 --> 0:38:17.750 or uh government securities, you know, they're holding some assets 0:38:17.760 --> 0:38:21.250 that back the value disabled coins now to that extent, 0:38:21.719 --> 0:38:24.509 um you know, you can think of stable coins as 0:38:24.510 --> 0:38:25.830 being um 0:38:26.219 --> 0:38:29.890 a few, like an appendage of the current system, it's 0:38:29.890 --> 0:38:32.640 not a separate system as such. Now, the problem, 0:38:33.219 --> 0:38:36.149 if a stable coin were to take off is that, 0:38:36.160 --> 0:38:38.040 you know, one of the features of 0:38:38.420 --> 0:38:43.540 the monetary system is the importance of the coordination effect. 0:38:44.320 --> 0:38:48.250 Uh the coordination problems that are solved by money. 0:38:48.719 --> 0:38:51.720 Um There was this natural network effect where the more 0:38:51.719 --> 0:38:55.600 people use one currency, the more people want to use 0:38:55.600 --> 0:38:56.940 that currency. Now 0:38:57.520 --> 0:38:59.240 if you have a stable coin, what it does is 0:38:59.250 --> 0:39:00.840 it fragments that payment system. 0:39:01.420 --> 0:39:05.310 So it's like saying, you know, we have uh the 0:39:05.320 --> 0:39:08.850 uh the currency which is the promise of the central 0:39:08.850 --> 0:39:09.339 bank 0:39:09.920 --> 0:39:12.670 and it's you know being used by the commercial banks. 0:39:12.680 --> 0:39:13.250 Um 0:39:13.620 --> 0:39:16.830 And in turn it's being used by all the retail customers. 0:39:17.520 --> 0:39:19.739 If you have a stable chord, it's like having another 0:39:19.739 --> 0:39:20.340 kind of 0:39:20.820 --> 0:39:21.540 um 0:39:22.219 --> 0:39:27.049 another entity which then has its own closed network. Now 0:39:27.060 --> 0:39:30.650 if you can somehow ensure that there is interoperability 0:39:31.320 --> 0:39:35.230 between the stable coin and the conventional financial systems have resulted. 0:39:35.230 --> 0:39:37.440 If you open, you know you're banking app 0:39:37.920 --> 0:39:41.570 and you can just make a payment to a user 0:39:41.570 --> 0:39:44.150 of the stable coin just this way, just in the 0:39:44.150 --> 0:39:45.030 same way that you could 0:39:45.520 --> 0:39:46.330 um 0:39:46.719 --> 0:39:50.180 to the users in another commercial bank account, then I 0:39:50.180 --> 0:39:53.370 think that would still preserve that network effect and the 0:39:53.370 --> 0:39:55.650 feature of money as a coordination device. 0:39:56.020 --> 0:39:59.640 But if somehow that stable coin were to build its 0:39:59.650 --> 0:40:00.940 own close network 0:40:01.410 --> 0:40:07.280 a walled garden and it has proprietary information it uses, 0:40:07.290 --> 0:40:10.489 you know, it affords data of its users. Perhaps it's 0:40:10.489 --> 0:40:13.600 a big tech firm that has a social media business 0:40:13.600 --> 0:40:14.819 or e commerce business 0:40:15.410 --> 0:40:19.370 and the commercial banks cannot access that information. And that's 0:40:19.380 --> 0:40:22.710 something which would go against this idea of the monetary 0:40:22.710 --> 0:40:25.430 system as a coordination device. And it would lead to 0:40:26.310 --> 0:40:28.320 I feel like a fragmentation of the monetary system. 0:40:29.010 --> 0:40:32.620 And uh it also gives rise to problems that we 0:40:32.620 --> 0:40:35.430 spoke about at the very beginning, which is about 0:40:35.810 --> 0:40:39.440 data privacy, about money as a public good. 0:40:40.010 --> 0:40:44.120 Um and the importance of having a competitive level playing field. 0:40:44.120 --> 0:40:45.640 So if you have a closed network 0:40:46.410 --> 0:40:49.640 um that is very uh you know that's going to 0:40:49.640 --> 0:40:52.379 undermine this public good nature in some respects and that 0:40:52.390 --> 0:40:55.279 uh to be a user of that network, you have 0:40:55.280 --> 0:40:56.240 to be a member. 0:40:56.810 --> 0:40:59.900 You have to if you like consent to your data 0:40:59.900 --> 0:41:01.819 being used only for that network. 0:41:02.510 --> 0:41:07.380 And there are not the links that will ensure the interoperability. 0:41:07.380 --> 0:41:09.140 So in short 0:41:09.810 --> 0:41:12.120 what I would say is stable coins uh you know 0:41:12.120 --> 0:41:14.390 might be okay. They are not a game changer in 0:41:14.390 --> 0:41:16.319 the same way that cryptocurrencies are 0:41:17.210 --> 0:41:20.330 but they may not ensure interoperability 0:41:21.210 --> 0:41:24.140 and in that respect that you know they may fragment 0:41:24.140 --> 0:41:27.250 the monetary system and go against the public good nature 0:41:27.250 --> 0:41:27.630 of money. 0:41:28.610 --> 0:41:32.739 I think we've seen some of these discomforts um displayed 0:41:32.739 --> 0:41:35.250 by the Chinese authorities in recent years, especially with the 0:41:35.250 --> 0:41:38.020 Alibaba and 10 cents. And their nature of those you 0:41:38.020 --> 0:41:40.640 know there are so large and their networks are so 0:41:40.640 --> 0:41:42.140 powerful in some ways. 0:41:43.010 --> 0:41:46.470 The way the nature of money from depositing to lending 0:41:46.480 --> 0:41:49.750 to intermediation, everything is happening within those networks and from 0:41:49.750 --> 0:41:51.910 PBS is perspective. I think it was becoming challenging just 0:41:51.910 --> 0:41:54.100 to keep a track of what was going on independent 0:41:54.100 --> 0:41:56.719 of the notion of those guys coming up with their 0:41:56.719 --> 0:42:00.500 own stable coins. Already. It was becoming challenging. So yeah, 0:42:00.510 --> 0:42:00.920 um 0:42:01.300 --> 0:42:05.540 questions something that you have touched upon earlier uh issue 0:42:05.540 --> 0:42:09.430 related to data privacy will see BDC's undermine that 0:42:11.400 --> 0:42:15.950 I think preserving the safeguards on data privacy will be 0:42:15.950 --> 0:42:18.660 a very important design feature of CVD six. But I 0:42:18.660 --> 0:42:19.319 think it's 0:42:19.700 --> 0:42:20.419 um 0:42:20.800 --> 0:42:23.520 it is actually you know uh 0:42:23.900 --> 0:42:24.820 having 0:42:25.300 --> 0:42:29.460 um safeguards on your on your personal data. This is 0:42:29.469 --> 0:42:31.510 uh not simply an economic 0:42:32.000 --> 0:42:34.299 issue, it is something which is even more basic, it 0:42:34.300 --> 0:42:36.020 has the attributes of a basic right 0:42:36.800 --> 0:42:40.170 and uh you know, there are some differences across jurisdictions, 0:42:40.170 --> 0:42:43.930 I think some countries put more weight on this than others, 0:42:44.300 --> 0:42:47.620 but those are small differences compared to. I think the 0:42:47.620 --> 0:42:49.610 main point, which is that there has to be 0:42:50.100 --> 0:42:53.219 design features which safeguard data privacy. 0:42:53.800 --> 0:42:55.989 On the other hand, we have to make sure that 0:42:55.989 --> 0:42:59.560 the payment system isn't just going to be a playground 0:42:59.560 --> 0:43:02.280 for criminals. So we need to make sure that just 0:43:02.280 --> 0:43:03.120 as the current system 0:43:03.700 --> 0:43:06.930 that we have the way to preserve 0:43:07.300 --> 0:43:10.969 uh that you know, uh integrity of the payment system 0:43:10.980 --> 0:43:13.620 that we can guard against illicit activities as well. 0:43:14.000 --> 0:43:15.930 I think this is where we have to go back 0:43:15.930 --> 0:43:18.109 to that earlier discussion about 0:43:18.700 --> 0:43:23.580 ways of designing safeguards, where no one party has access 0:43:23.580 --> 0:43:24.930 to the full set of data. 0:43:25.300 --> 0:43:28.760 Um The the you know the idea of an all 0:43:28.760 --> 0:43:32.489 seeing eye that has access to everything about you, you 0:43:32.489 --> 0:43:34.509 know your personal details, where you live, 0:43:35.000 --> 0:43:37.719 uh you know what kind of brand of toothpaste you by, 0:43:37.730 --> 0:43:39.320 where you had dinner, 0:43:39.700 --> 0:43:42.720 uh you know what was on your menu and so on. 0:43:42.730 --> 0:43:45.850 So that's really a kind of caricature but that's the 0:43:45.850 --> 0:43:48.090 kind of um So if you like the limit of 0:43:48.090 --> 0:43:52.140 that spectrum where if one party has every piece of information, 0:43:52.150 --> 0:43:55.720 you could potentially have this concentration of data, 0:43:56.300 --> 0:43:59.370 you know, which would undermine this idea of data as 0:43:59.380 --> 0:44:01.880 a as a you feel like a basic right? And 0:44:01.880 --> 0:44:05.120 so we can take a leaf out of the way 0:44:05.120 --> 0:44:10.300 that the data privacy issue has been tackled already. Um 0:44:10.310 --> 0:44:12.460 So for example if you know I have a mobile 0:44:12.460 --> 0:44:15.710 phone and I can access a payment network through the 0:44:15.710 --> 0:44:17.210 mobile phone number. 0:44:17.790 --> 0:44:21.750 Um there's no reason why you can go from the 0:44:21.750 --> 0:44:24.510 mobile number two, everything about who you are and what 0:44:24.510 --> 0:44:26.420 you've done and what you've bought in the supermarket. 0:44:26.890 --> 0:44:30.529 So um if we can keep each of these pieces 0:44:30.530 --> 0:44:33.910 of information separately and have safeguards, 0:44:34.489 --> 0:44:37.469 which means that you know the central bank who is 0:44:37.469 --> 0:44:41.850 going to be executing these transactions uh only have access 0:44:41.850 --> 0:44:44.680 to that piece of data. Those pieces of data there 0:44:44.680 --> 0:44:47.810 are absolutely essential for that transaction to take place 0:44:48.190 --> 0:44:49.810 without having um 0:44:50.190 --> 0:44:54.259 you know all the information that also could be assembled. 0:44:54.270 --> 0:44:57.910 So you know the full picture can only be gained 0:44:57.910 --> 0:45:00.770 by the individual concerns only. You know what you thought, 0:45:00.780 --> 0:45:02.720 you know what brand of toothpaste report, 0:45:03.090 --> 0:45:06.210 you know what money you have transmitted and so on. 0:45:06.690 --> 0:45:09.870 Um for the operator of the payment system. They don't 0:45:09.870 --> 0:45:12.560 need to know you know what brand of toothpaste you book. 0:45:12.570 --> 0:45:15.120 Um They only need to know that you know there 0:45:15.120 --> 0:45:18.739 was this account that remitted that money to that account. 0:45:18.739 --> 0:45:20.910 And so we need to design this kind of you 0:45:20.910 --> 0:45:24.320 know Federated system if you like. Where uh we have 0:45:24.330 --> 0:45:25.410 uh each 0:45:25.989 --> 0:45:29.610 Piece of the system has one sliver of the data. 0:45:30.590 --> 0:45:33.960 Uh so that if you collect all the slivers you 0:45:33.960 --> 0:45:36.710 can construct the whole picture 0:45:37.190 --> 0:45:40.100 so each person has so each party has a piece 0:45:40.100 --> 0:45:41.110 of the jigsaw puzzle. 0:45:41.489 --> 0:45:46.450 But if you connect the dots and construct the whole 0:45:46.450 --> 0:45:48.610 picture you can get the full picture. But there is 0:45:48.610 --> 0:45:50.420 no need for one party 0:45:50.790 --> 0:45:53.400 to have full access to everything. So I think once 0:45:53.400 --> 0:45:57.160 we think along these lines and cryptography has really advanced 0:45:57.170 --> 0:45:58.219 a lot. And so 0:45:58.590 --> 0:46:00.090 if you like the 0:46:00.680 --> 0:46:03.380 the power of public key cryptography is going to be 0:46:03.380 --> 0:46:07.100 a very very sexual pieces of technology for us to 0:46:07.580 --> 0:46:10.489 For us to build on. And this technology has been 0:46:10.489 --> 0:46:13.290 around for decades. I mean this is a technology that 0:46:13.290 --> 0:46:17.730 comes in 1970s and it's already used in um in 0:46:17.730 --> 0:46:19.660 the current system. So for example you know we talked 0:46:19.660 --> 0:46:21.820 earlier about the open banking system where you open the 0:46:21.820 --> 0:46:22.910 bank of 0:46:23.480 --> 0:46:26.520 of one bank and then you can check the balances 0:46:26.520 --> 0:46:29.489 in all your other accounts that is currently based on 0:46:29.489 --> 0:46:32.900 the same technology. So it's just a matter of 0:46:33.380 --> 0:46:36.210 taking you know that kind of architecture and making sure 0:46:36.210 --> 0:46:40.790 that we can preserve privacy um all along the way. 0:46:42.380 --> 0:46:44.640 Is there a fiscal policy 0:46:44.640 --> 0:46:45.590 dimension to all this? 0:46:47.980 --> 0:46:50.219 Yes. Absolutely. And so so this is something that we 0:46:50.219 --> 0:46:54.000 talked about earlier about. How do you disperse um 0:46:54.880 --> 0:47:00.100 payments to households businesses in an emergency like during the pandemic. 0:47:00.780 --> 0:47:05.000 Um So if you had these personal details and the 0:47:05.380 --> 0:47:07.850 uh and the account details you can do that through 0:47:07.850 --> 0:47:09.790 the banking system. So you know um 0:47:10.180 --> 0:47:13.390 if you have a retail payment system that is set 0:47:13.390 --> 0:47:17.420 up already that respects this inclusive nature that everyone has 0:47:17.420 --> 0:47:20.920 access to a bank account, everyone has access to digital payment. 0:47:20.920 --> 0:47:22.089 You can already do it 0:47:22.580 --> 0:47:24.910 um Using the conventional banking system. 0:47:25.380 --> 0:47:27.600 So there's nothing you know knew about that. 0:47:27.980 --> 0:47:29.960 The C. B. D. C. By itself is not going 0:47:29.960 --> 0:47:32.500 to change that. It's just another way of 0:47:32.880 --> 0:47:37.310 building that inclusive payment system. Um There are some additional 0:47:37.310 --> 0:47:40.420 features that we talked about like the program ability to 0:47:40.420 --> 0:47:43.320 some extent they are you know if you like the 0:47:43.330 --> 0:47:44.790 you know the cream on the top. 0:47:45.280 --> 0:47:48.609 But I think that that would be a secondary feature 0:47:48.620 --> 0:47:50.200 compared to the 0:47:50.880 --> 0:47:55.350 the universality of access and inclusive natural payment system and 0:47:55.350 --> 0:47:56.600 that's already in place. 0:47:56.980 --> 0:47:59.790 Uh And you can go a long way um uh 0:47:59.800 --> 0:48:02.969 without having CBD seeds. And I would say that uh 0:48:02.980 --> 0:48:06.270 you know for many countries you don't need a cbc 0:48:06.270 --> 0:48:09.240 to have these good features if you're already you know 0:48:09.250 --> 0:48:10.200 pretty much there. 0:48:11.370 --> 0:48:12.230 But he was in the 0:48:12.230 --> 0:48:15.390 last few decades, maybe in the last half century. We 0:48:15.390 --> 0:48:18.200 have talked about central bank independence and giving the central 0:48:18.200 --> 0:48:19.290 bank semiautonomous. 0:48:19.670 --> 0:48:20.370 But the way you're 0:48:20.370 --> 0:48:26.550 describing the means of transferring benefits and it seems to 0:48:26.550 --> 0:48:29.520 me that monetary fiscal are all coming together. One entity 0:48:29.520 --> 0:48:32.350 is issuing the currency. The other entity typically is in 0:48:32.350 --> 0:48:34.900 charge of transfers. But it seems like now it's all together, 0:48:36.570 --> 0:48:38.850 I think we have to separate those. Um So I 0:48:38.850 --> 0:48:42.130 think we need to think of this very much in 0:48:42.130 --> 0:48:46.550 terms of the dispersement. Um So once the political decision 0:48:46.550 --> 0:48:47.279 has been made, 0:48:47.670 --> 0:48:50.960 once, you know, there has been a fiscal decision to 0:48:50.969 --> 0:48:51.589 distribute 0:48:52.170 --> 0:48:55.200 um you know, these dispersants to households and firms, 0:48:55.770 --> 0:48:57.980 then it's a you know, then it's a matter of 0:48:57.989 --> 0:49:00.899 getting the money to people who need it. 0:49:01.870 --> 0:49:05.460 I think what you're describing is what uh commonly is 0:49:05.460 --> 0:49:08.010 referred to as helicopter money, where we can just, you know, 0:49:08.020 --> 0:49:11.590 blur the lines between monetary policy and fiscal policy 0:49:11.969 --> 0:49:14.860 and just you know, uh use the central bank balance 0:49:14.860 --> 0:49:16.700 sheet to distribute money. 0:49:17.270 --> 0:49:20.870 Now that's something that is separate from, I think what 0:49:20.870 --> 0:49:24.060 we've been talking about, that's more about the nature of 0:49:24.060 --> 0:49:27.200 the central bank, uh the nature of 0:49:27.570 --> 0:49:30.580 the separation of monetary policy and fiscal policy. So I 0:49:30.580 --> 0:49:31.790 think that is um 0:49:32.170 --> 0:49:35.640 uh an issue that would arise even in a conventional 0:49:35.650 --> 0:49:38.590 payment system. It's not really about the payment system which 0:49:38.590 --> 0:49:41.750 is which is about, so, you know, it's worth bearing 0:49:41.750 --> 0:49:43.390 in mind that 0:49:43.770 --> 0:49:44.700 um 0:49:45.469 --> 0:49:46.569 the level of cash, 0:49:46.969 --> 0:49:49.850 so the amount of cash in circulation is typically a 0:49:49.850 --> 0:49:54.219 very small fraction of the total bank deposit. So bank 0:49:54.219 --> 0:49:54.890 deposits 0:49:55.270 --> 0:49:57.779 which are used as a store of value and which 0:49:57.780 --> 0:50:01.780 are used as a funding source for the loans to borrowers, 0:50:02.160 --> 0:50:05.170 you know, that's a much larger some than the cash 0:50:05.170 --> 0:50:05.880 in circulation. 0:50:06.460 --> 0:50:07.790 You should think of. The C. B. D. C. S 0:50:07.790 --> 0:50:10.930 is very much as digital cash. So we're trying to 0:50:10.940 --> 0:50:13.480 make the access to cash more 0:50:14.060 --> 0:50:14.779 efficient. 0:50:15.160 --> 0:50:17.190 Um And we should not, 0:50:17.760 --> 0:50:19.680 you know, overdramatized 0:50:20.060 --> 0:50:23.420 um the uh you know, these other aspects which I 0:50:23.420 --> 0:50:28.020 think uh you know uh it's easy to see why 0:50:28.020 --> 0:50:31.630 we can uh overdramatize them, but, you know, it is 0:50:31.630 --> 0:50:34.299 important to bear in mind that those are separate issues 0:50:34.300 --> 0:50:37.280 that would already arise in the convention system 0:50:37.660 --> 0:50:41.250 and they go well beyond the issue of dispersement and 0:50:41.250 --> 0:50:42.489 the payment system itself. 0:50:43.360 --> 0:50:45.150 Well, in a way you brought us back to exactly 0:50:45.150 --> 0:50:47.770 where we started trump is a very nice look too close. 0:50:47.780 --> 0:50:50.190 Um Finally, bit of prognostication, 0:50:50.660 --> 0:50:54.580 Your vision for CBD CS, five years from now, 0:50:56.760 --> 0:50:59.040 CBD from five years from now. So, you know, we've made, 0:50:59.040 --> 0:51:02.440 if you if we look back five years, I don't 0:51:02.440 --> 0:51:05.960 think many people would have uh you know, forecast that 0:51:05.969 --> 0:51:07.980 we would have made so much progress by now, 0:51:08.560 --> 0:51:09.279 I think from, 0:51:10.060 --> 0:51:12.529 so five years from now, I would say that some 0:51:12.530 --> 0:51:15.359 countries would have made a lot of progress for C 0:51:15.360 --> 0:51:16.080 b D c S. 0:51:16.560 --> 0:51:19.770 Um I think some jurisdictions which are already fairly close, 0:51:20.160 --> 0:51:22.080 we'll be rolling them out. 0:51:22.660 --> 0:51:25.060 I think some jurisdictions, they will say, well, you know, 0:51:25.060 --> 0:51:29.339 we we can already achieved most of the benefits of 0:51:29.340 --> 0:51:31.490 CBD CS and we don't really need C. B. D. C. 0:51:31.489 --> 0:51:33.650 S as such, to read those benefits. I mean, I 0:51:33.650 --> 0:51:36.690 think it's very interesting to contrast, you know, china on 0:51:36.690 --> 0:51:39.480 the one hand and India on the other, India already 0:51:39.480 --> 0:51:40.570 has the U. P. I. System 0:51:41.160 --> 0:51:43.760 which is based on other the, you know, the the 0:51:43.760 --> 0:51:45.270 biometric digital ID, 0:51:45.660 --> 0:51:47.860 it already has this uh you know, these features of 0:51:47.860 --> 0:51:51.570 universal uh universal universality of access 0:51:52.060 --> 0:51:55.480 um and the efficiency and the public good national payment system, 0:51:55.960 --> 0:51:59.620 so there you've already captured most of the benefits. Um 0:51:59.630 --> 0:52:02.140 whereas in china, as you said, you know, that that's 0:52:02.140 --> 0:52:04.880 a very different system where, you know, you have the 0:52:04.880 --> 0:52:07.400 big text are playing a much bigger role, where the 0:52:07.400 --> 0:52:10.120 public good nature of the payment system, you know, needs 0:52:10.120 --> 0:52:11.880 to be if you like a re established. 0:52:12.450 --> 0:52:15.740 So um countries will go in their different ways. Uh 0:52:15.750 --> 0:52:18.799 I think we will see certainly in the wholesale space 0:52:18.810 --> 0:52:20.270 much more progress, 0:52:20.950 --> 0:52:22.270 but in the retail space 0:52:22.650 --> 0:52:24.670 in the retail sphere, I would say that you know, 0:52:24.670 --> 0:52:27.060 you would see a diversity of approaches 0:52:27.550 --> 0:52:30.170 and you know five years, although it sounds very long 0:52:30.180 --> 0:52:34.330 is going to approach us very quickly and uh these 0:52:34.340 --> 0:52:37.060 projects take a long time and a lot of it 0:52:37.070 --> 0:52:40.120 is unrelated to the technology. A lot of it has 0:52:40.120 --> 0:52:40.979 to do with 0:52:41.350 --> 0:52:44.260 the underlying institutional changes 0:52:44.650 --> 0:52:48.210 um and the underlying policy changes. Um and the political 0:52:48.210 --> 0:52:50.380 conversations that always accompany does 0:52:51.650 --> 0:52:54.920 well, we'll look forward to B. I. S. Bringing us 0:52:54.930 --> 0:52:56.970 continue to bring us you know, sort of in the 0:52:56.969 --> 0:53:01.070 latest views and analysis on this issue for those five 0:53:01.070 --> 0:53:02.680 years that I can't wait to watch 0:53:03.050 --> 0:53:05.239 Hyun. Thank you so much for your insight. This was 0:53:05.239 --> 0:53:06.379 a terrific conversation. 0:53:07.550 --> 0:53:09.680 Thank you so much. It was a pleasure to join you. 0:53:10.250 --> 0:53:13.530 Thank you to our listeners as well. Uh Kobe time 0:53:13.530 --> 0:53:17.390 was produced by martin Tuckey, daisy Sharma and violently provided 0:53:17.390 --> 0:53:18.259 additional assistance. 0:53:18.650 --> 0:53:21.770 It is for information only and does not represent any 0:53:22.150 --> 0:53:26.000 trade recommendations or views. All 57 episodes of copy time 0:53:26.000 --> 0:53:29.570 are available on Youtube and all major podcast platforms including 0:53:29.570 --> 0:53:33.569 apple google and Spotify. 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