Tag Archives: Digitalisation

Burkhard Balz: Central bank digital currencies – the future of money?

Speech by Mr Burkhard Balz, Member of the Executive Board of the Deutsche Bundesbank, at the American Council on Germany, virtual event, 10 February 2021.

1 Introduction – Central Bank Money

Dear Steve,
Ladies and gentlemen,

I am delighted to have the opportunity to talk to you about one of the most exciting topics facing central banks today:

The future of money. Do we need other forms of money beside the ones we already have? And do we need other forms of central bank money? Should banks’ deposits with the central bank be tokenised? Should banknotes become digital?

There are many questions surrounding “central bank digital currencies” (CBDC). And we still have to find the right answers. But one thing is certain:  central banks around the world have undertaken tremendous efforts to assess the potential and investigate the opportunities of CBDC.

Just recently, the Bank for International Settlement (BIS) published its third survey amongst central banks worldwide. The survey shows a shift from mainly analytical work towards technical experimentation. More than 60% of central banks are engaged in practical experimental work.1

It is clear, then, that even more headway has been made in exploring central bank digital currencies over the past year. On the one hand, the BIS predicts that central banks representing a fifth of the world’s population will issue a general purpose CBDC in the next three years. On the other, a widespread roll out of CBDCs seems some way off. And there are good reasons for this. Because CBDC is a game changer – with potential benefits, but also with a number of challenges.

Central bank digital currencies promise to combine the improved efficiency of their digital form with the safety provided by a central bank in a single means of payment.

However, central bank digital currency would be a third form of central bank money, alongside cash and bank reserves. Introducing a new form of central bank money such as this could have profound impact on the financial system, especially if it is not only available to banks, but instead, like cash today, to the general public. If not properly thought through, such an intervention may lead to unintended consequences.

Today, I would like to outline to you the areas that I believe we need to tackle in order to create a safe, efficient and future-proof currency. But let me start with three trends we are currently observing: digitalisation, declining cash usage and the emergence of new forms of money.

2 Trends in payments

Trend 1: Digitalisation

Our economy is growing more digital by the day. Business processes are becoming increasingly automated and interdependent. Complex value chains arise. The “Internet of Things” enables machine-to-machine communication. E-commerce and online services of all kinds are about to experience an enormous uptake due to the pandemic. The pace of digitalisation has probably never been faster than today. These developments are increasingly calling for a safe and efficient settlement asset which can be seamlessly integrated into almost any kind of business process. 

Trend 2: Declining use of cash

Parallel to this, we can see that the use of cash is waning, even in Germany. The current pandemic has boosted not only the use of credit and debit cards, but contactless payments, in particular. 

In a recently conducted survey on payment behaviour in Germany during the coronavirus pandemic, we found out that the share of cash transactions has fallen from 74% to 60% over the last three years.2 Admittedly, it remains to be seen whether the current behaviour also persists in the post-coronavirus period. But what we are currently seeing is quite a considerable change for a country which is strongly accustomed to paying in cash.

Trend 3: Emerging means of payments other than €

Another trend is the emergence of new forms of digital means of payments. These can be central bank digital currencies issued by foreign central banks as well as privately issued means of payment such as stablecoins. At the moment, these alternative means of payment are still in the development or testing phase. However, given the speed at which technology is developing, their widespread adoption might be far less off than we think. Should these forms of money become widely used as a medium of exchange or store of value in the euro area, significant implications could arise: for the role of the euro or the payment industry, and consequently also for financial stability. 

3 Central banks need to be prepared

The three trends I have just outlined highlight that, if the payments ecosystem is going to expand, central banks need to be prepared.

As highlighted in the report by the BIS and seven central banks, central banks need to be in a position to make an informed judgment when it comes to the decision on a central bank digital currency.3

Any dedicated central bank digital currency should be designed carefully. Possible advantages such as safety and efficiency improvements in everyday payments, productivity gains by promoting money which could be used in programmable environments, or the availability of new services must clearly outweigh the potential risks with regard to monetary policy or financial stability. In any case, it must be properly designed so as to mitigate all of those risks.

The Eurosystem is taking a comprehensive approach to addressing these challenges. As part of a high-level Eurosystem task force, my colleagues and I identified possible scenarios that would require the issuance of a digital euro and published them last October in the ECB’s “Report on a digital euro”4 The Governing Council of the ECB has not yet reached a decision on whether to introduce a digital euro. We must first be sure that there is a need to issue CBDC and, if so, that we are able to manage the accompanying risks. In the digital age, time is of essence. But we also have to take the time to do our homework.

Therefore, the Eurosystem has started to engage widely with citizens, academia, the financial sector and public authorities to assess in detail their needs, as well as the benefits and challenges they expect from the issuance of a digital euro. In mid-January, a public consultation on the digital euro came to an end with record levels of participation from European citizens.

Experimental work supports the analysis of possible technical designs and their implications. Further outreach to the market and exchange with other international central banks leading the work on central bank digital currencies will follow. And this brings me to my last point.

4 International dimension will be key 

International cooperation will be key in shaping the future ecosystem for central bank digital currencies.

As the BIS and other central banks have rightly emphasised in their report5 regardless of the final design, there are certain core features and common standards that are valuable in guiding a central bank when deciding to issue a digital currency for the public.

The features I consider most relevant in this context are convertibility, interoperability and international standards.

Convertibility is essential to ensure trust in a currency. People must be sure they can exchange the form of the money they hold at par at any point in time.

Interoperability is required to ensure a smooth exchange of money between different kinds of payment systems. In a digitalised world, this is an absolute prerequisite to ensure an efficient financial system.

Finally, appropriate international standards are the focal point in ensuring an efficient cross-border payments flow.

In my view, these three features are the key determinants of a stable and broadly accepted digital currency that fits into the international financial system.

Against this backdrop, safe and efficient payment markets must be brought to the next level, in particular for cross-border and cross-currency payments. This topic has been on the agenda for several years. While we have seen significant progress in improving payments at the domestic or regional level, cross-border payments are, putting it bluntly, still in the medieval age.

The G20 roadmap on enhancing cross-border payments is an important step in this direction. The Committee on Payments and Market Infrastructures, together with the Financial Stability Board and the BIS, has set up a comprehensive working programme encompassing 19 building blocks across five focus areas, including new payment infrastructures and arrangements, which covers central bank digital currencies, amongst other things.

This work can only serve the long-term goal of achieving a fair and sustainable payments landscape, as long as international cooperation thrives.

I am optimistic that this fruitful work initiated by the G20, but also in the form of other international formats, will continue. CBDC might not be the panacea for all challenges that payments are facing. But it might be an option, including for cross-border payments.

In a nutshell, payments are – and always will – be a backbone of the economy. The digital economy has already changed the payment landscape quite significantly and will continue to do so in future. It is the responsibility of the central bank to create trust in its currency and to ensure that payments remain competitive, innovative and safe. We also have to ensure that central bank money will be offered in a way that is compatible with the digital economy.

Let me finish with the words of Abraham Lincoln: “The best way to predict the future is to create it.”

1 BIS Papers No 114, Ready, steady, go? – Results of the third BIS survey on central bank digital currencies (January 2021).

2 https://www.bundesbank.de/en/tasks/topics/making-payments-in-2020-the-year-of-covid-19-card-based-and-contactless-payments-trending-823592

3 https://www.bis.org/publ/othp33.pdf

4 https://www.ecb.europa.eu/pub/pdf/other/Report_on_a_digital_euro~4d7268b458.en.pdf

5 https://www.bis.org/publ/othp33.pdf

Joachim Wuermeling: Combining stability and innovation Bundesbank and fintech players in the digital financial ecosystem

Financial technology. Keynote speech by Prof Joachim Wuermeling, Member of the Executive Board of the Deutsche Bundesbank, at the Plug and Play Fintech Europe Expo 2021, 28 January 2021.

1 Introduction

Ladies and gentlemen, dear colleagues,

Good afternoon, and a very warm welcome from the Deutsche Bundesbank. I am delighted to be taking part in the Plug and Play “Fintech Europe Expo” today. As a central banker, this event offers me a unique opportunity to liaise with you and is certainly my first highlight of 2021. I look forward to a pleasant afternoon and an inspiring conference!

An innovative spirit has made financial technology the driving force transforming the world of finance. This technology has now become an essential part of banking, and therefore also central banking.

Looking at our virtual audience today, I see start-ups, venture capitalists, and consultants. To be honest, when you think of central banks, “innovation” might not exactly be the first word that springs to mind. Instead, your first thought might – hopefully – be “stability”.

But take it from me: stability and innovation are not mutually exclusive. In fact, they go hand in hand. Technological progress has always shaped the tasks and activities of central banks.

Although fintechs and central banks cooperate already, I believe they should do so on a much closer basis in the future. And that is why I am so happy to have the chance to speak to you here today.

I would therefore encourage you to keep an eye out for the digital activities of central banks! Here are three reasons why you should:

2 Central banks are relevant actors for digital innovation in finance

All fintech innovation is connected to central banks’ activities in some way or another.

For centuries, central banks have been the backbone of the financial system, issuing currency, providing payment infrastructures, and ensuring that banks are stable.

Digital transformation is relevant to us in two regards. The first is that we need to understand the technical progress in the industry when using our tools, whether it be in the area of monetary policy or in banking supervision. The second is that we make use of new technologies ourselves, be it in analytics, processes or products.

The actions we take might be highly relevant to you, your products, your business cases, or your ideas: Would it matter to you if we issued a digital currency, based gross settlement on a ledger, or if, as banking supervisors, we were to restrict the use of machine learning?

The impact central banks have on innovation is particularly relevant to the euro area, a major currency area which currently covers 19 countries and 350 million people. The Bundesbank, as the biggest central bank in the block, focuses on its role as an integral part of the Eurosystem.

3 Digital innovation can foster financial stability

Besides ensuring the stability of the currency, central banks’ main task is to safeguard the stability of the financial system as a whole. I am sure you will all agree when I say that new technology can simultaneously promote stability and bring about new risks.

As a central bank, we have to play a dual role. On the one hand, we want to enable digital innovation, harnessing its potential for financial stability. On the other, we have to keep an eye on potential risks arising from digital transformation. It is our job to supervise all risks to financial stability.

Be assured that central banks are looking out for this. If I could make one wish here, it would be for digital innovation to factor in financial stability by design.

The COVID-19 crisis is certainly providing an additional boost to digitalisation, particularly in the financial sector. But let me be clear: increasing use of online banking, digital payments and video chats with clients are by no means the digital transformation of the future. This is no more than the adoption of technologies invented in the last century.

But the pandemic might encourage all players in the financial system to pursue innovation more quickly and more radically. Indeed, the digital revolution is still to come in finance as well as in other industries.

Artificial intelligence, machine learning, cloud technology, distributed ledger, quantum computing, an ever-growing volume of data – whatever buzzword you name: all of these have the potential to disrupt each and every business model. And, as we learned recently, including that of central banks.

I believe that we are at the beginning rather than at the end of digitalising the financial system. The magic moment for financial technology and fintech companies may still be to come.

New technologies have the potential to make the whole financial system more resilient. For instance, financial institutions can use AI to better detect and ward off cyber-attacks. Early warning systems for loan defaults based on automatically evaluated economic news could improve risk management.

Digital innovation can enhance the stability of individual institutions and of the entire financial system. If we manage to strengthen financial stability through digital innovation, this could make supervision and central banking more effective and more efficient.

4 Central banks’ digital innovation activities

Central banks are themselves innovators in the financial system – but we need your imagination. A digital approach to finance is not merely limited to private actors. It extends to the entire financial ecosystem. And central banks are joining in, too.

All around the world, we are exploring the risks and benefits of issuing central bank digital currency. The Eurosystem is looking into different concepts for a “digital euro”.

Real-time monitoring of the financial system is a fascinating vision for central banks. Just recently, at the “Bundesbank Innovation Challenge”, 10 start-ups pitched for the most innovative solution for risk monitoring at our institution.

Innovation needs space – mental space, certainly, but also physical space. We at the Bundesbank are currently building InnoWerk, a collaborative workspace in the city centre of Frankfurt not only for our staff, but also for the international central bank community. Together with Banque de France and the European Central Bank, we are establishing one of nine global BIS Innovation Hubs around the globe.

But InnoWerk will not be limited to the central bank community. We wish to involve the broader ecosystem – with you, players from the start-up scene, experts from academia and any other creative minds. We want to make this a win-win situation in which the Bundesbank benefits from technology and creativity from outside, while start-ups become familiar with the world of central banking.

It is safe to say that we are not and will not become a fintech. But we are constantly reaching out to the digital finance community.

5 Conclusion

Now, you might be wondering: “what’s in it for me?” Yes, central banks are relevant to digital innovation in finance – my first point. Yes, digital innovation can foster financial stability – my second point. And yes, central banks are innovators themselves – my third point.

Beyond this, I hope you all agree that digitalisation is not just about making money; it is about making the world a better place, too. For me as a central banker, a better world means a financial system which is sufficiently and sustainably stable.

I am convinced that digital innovation will make us better able contain the threats and vulnerabilities in the financial system. All of you can contribute to this – and I very much hope you will!

The transformation of the financial system may not only make finance more digital, but also more stable and more resilient.

To that end, cooperation between central banks as Bundesbank and the fintech community is key. We are interested in establishing close ties to the digital financial ecosystem.

We might come from different worlds. But we can – and should – learn from each other and work together. Let us bring together stability and innovation!

I am looking forward to an inspiring event today, with insightful panel discussions and many shared ideas. And I hope to see some of you at InnoWerk soon!

Nina Stoyanova: Adaptation and management of digital portfolios, digital banking services and client contacts in a pandemic crisis

Speech by Ms Nina Stoyanova, Deputy Governor and Head of the Banking Department of the Bulgarian National Bank, at the opening of the videoconference “Adaptation and Management of Digital Portfolios, Digital Banking Services and Client Contacts in a Pandemic Crisis”, organized by the Banker newspaper.

I would like to welcome you to the video conference on “Adaptation and management of digital portfolios, digital banking services and customer contacts in a pandemic crisis”, organized by the Banker newspaper.

In its “Strategy for the Digitalisation of EU Financial Services”, the European Commission states that the future of finance is digital. However, we can safely say that not only the future but also the present of finance is inextricably linked to digitalisation. This was clearly seen in the unprecedented situation caused by the coronavirus, in which it was through digital technologies that the continuity of the provision of financial services to consumers and businesses was ensured. The pandemic is about to permanently change our way of life, accelerating the processes of digitalization in all spheres of life – work, entertainment, shopping, administrative services. We are witnessing the emergence of new business models, services and solutions that create value, save time and effort, but at the same time are accompanied by new risks and challenges – both technological,

This trend in the development of the financial sector is particularly visible in the dynamic and customer-oriented area of ​​payments. Undoubtedly, the catalyst for these processes is the European legislation in this area, namely the Second Payment Services Directive, known as PSD2. As the main innovations in it we can highlight two aspects – opening access to payment accounts (the so-called “open banking”) and increasing the requirements for the security of electronic payments. These were the areas in which in 2020 the efforts and attention of both the business and the regulator continued to be focused.

As part of the first aspect, the directive introduced two new types of payment services provided entirely on the Internet – payment initiation and account information services, and regulated the activities of providers offering them. The provision of new services requires interaction between payment service providers who maintain customer accounts (most often banks) and the respective providers that offer new services. Most payment service providers holding accounts in our market have chosen to achieve this interaction by creating special interfaces for automated access to their managed payment accounts (so-called application programming interface – API).

Despite the created interfaces, the offer of the new services in Bulgaria, as well as in a number of other countries of the European Union, is still limited. In order to achieve a harmonized application of legislation at European level and to support payment initiation and account information service providers, the European Banking Authority (EBA) adopted an opinion on obstacles in early June 2020. within the meaning of Art. 32 (3) of the regulatory technical standards for in-depth identification of the customer and common and secure standards of communication1. The opinion highlights a number of technical or organizational obstacles that payment service providers, which maintain accounts, pose to the new services and which should be removed. Examples of such obstacles include the unavailability of all procedures for performing in-depth identification of the customer when using the new services, requiring manual entry of the IBAN on the payment account from which payment is initiated or requesting account information, repeated in-depth establishing the identity when initiating payment, the need to provide prior consent to the client to use the new services, etc.

Improving the security of electronic payments is the second major aspect of PSD2. In September 2019, the requirements for payment service providers to apply a procedure for in-depth identification of the customer when the payer accesses his payment account online, initiates an electronic payment transaction or performs another remote action that could occur risk of payment fraud. These requirements have started to apply to credit transfers made through the Internet and mobile banking platforms. However, for online card payment transactions, due to the necessary significant technical changes, both for payment service providers and merchants operating e-shops,

However, the delayed application of security requirements for online card transactions should not adversely affect customers. During the transitional period, payment service providers should recover the value of all unauthorized card payment transactions on the Internet for which no in-depth identification of the customer has been applied, and the BNB monitors compliance with this requirement. Although the pandemic has led to some delays in the implementation of migration plans, according to available data, we expect Bulgaria to successfully complete migration by the end of the year within the projected pan-European deadline.

Along with the work on the implementation of the current legal framework, many efforts are focused on its further improvement with a view to the emergence of innovative market participants, new technologies, changing business models. In September, the European Commission published the Digital Finance Package, part of which is the “EU Strategy for Retail Payments” and the “Strategy for the Digitalisation of EU Financial Services”. The aim of both strategies is to outline the medium-term guidelines and priorities for the development of digitalization in the financial sector. Central to the payment strategy is immediate payments, executed within seconds, 24 hours a day, 7 days a week, 365 days a year, called the “new rule” in the strategy.

Bulgaria is not lagging behind these trends. The project of Borika AD for immediate payments in BGN, based on the requirements of the SEPA scheme for immediate credit transfers, is in an advanced stage of development. As an operator of the real-time gross settlement payment system (RINGS), the BNB assists in the implementation of the project. The company’s ambition is in 2021 for payment service providers in Bulgaria to start providing their customers with immediate credit transfers in BGN.

In order to develop innovative, affordable, secure and convenient payment solutions both in the online environment and in physical stores, it is important to provide an interoperable infrastructure that allows the smooth execution of cross-border immediate payments within the EU, as well as the achievement of additional standardization to ensure compatibility between final payment solutions offered to payment service users (eg common standard for QR codes, provision of access to NFC chips in mobile phones, etc.). These, as well as other aspects related to technological changes in the field of payments, including the risks arising from unregulated services, especially technical ones, which are ancillary to the provision of regulated payment services,

I wish interesting and fruitful work to the participants in the videoconference.

1 Opinion of the European Banking Authority on obstacles under Article 32 (3) of the RTS on SCA and CSC

The future of money – innovating while retaining trust

Article by Christine Lagarde, President of the ECB, in L’ENA hors les murs magazine

Paris, 30 November 2020

Important lessons can be drawn from the past to understand the factors influencing the journey towards the future of money, including the possible introduction of a digital euro. Ensuring the euro meets the needs of European citizens is at the core of the ECB’s mandate.

Throughout history, the nature of money has evolved in response to socioeconomic changes. But the functions of money – as a means of exchange, a unit of account and a store of value – have remained the same for centuries.

One reason why money first emerged was to overcome the limitations and inefficiencies of bartering. As economies became more specialised, trade became all the more essential, and a universal medium of exchange was needed to facilitate it. Coins made from (precious) metals fulfilled that purpose for centuries.

But with the development of international trade, coins became increasingly impractical because they are difficult to store and transport in large volumes.

This led to the next phase in the evolution of money through medieval times into the late middle ages and early modern times. Developments included the advent of Templar’s credit notes in France, private giro banking in Italy, bills of exchange and promissory notes, and the first predecessors of paper money.

Role of the public sector

All of these instruments foresaw convertibility into precious metal coins. The acceptance of these forms of dematerialised and easy-to-carry money depended on the reputation of the issuer, and credit risk became relevant.

This led to the public sector playing an increasingly important role in issuing money and ensuring its value remained stable. Examples include the emergence of early public giro banks at the beginning of the 15th century and the first attempts to issue modern banknotes in the second half of the 17th century.[1]

In today’s modern economies, including in the euro area, money is no longer convertible into, or backed by, any commodity. Fiat money, as it is known, serves as legal tender by decree of the government or even constitutional legislation (such as the EU Treaty[2]). The value of money is based on citizens’ trust in it being generally accepted for all forms of economic exchange and in the ability of central banks to maintain its purchasing power through monetary policy. Central banks’ institutional independence also bolsters their ability to maintain trust in money.

Since early modern times central banks have gradually been assuming an increasingly pivotal role in ensuring that money delivers on the three functions I outlined. They must be fully aware of and adapt to changing realities.

Technological progress

As we enter the digital age, the nature of money, but also of goods and services, is changing quickly. Digitalisation and technological advances are transforming all areas of society, accelerating the process of dematerialisation.

Non-cash payments continue to increase. In the euro area, over the last year the total number increased by 8.1% to 98 billion. Nearly half of these transactions were made by card, followed by credit transfers and direct debits.[3]

The coronavirus (COVID-19) pandemic has accelerated this trend towards digitalisation, with a surge in online payments and a shift towards contactless payments in shops.[4] Market participants expect payments to be the financial service that will be most affected by technological innovation and competition over the next five years, according to a survey conducted in 2019.[5]

To meet the demand for digital means of payment, new forms of private money (i.e. a liability of private entities) have emerged. They are available as commercial bank deposits which can be used for transfers and direct debits, and as electronic money through credit cards and mobile payment apps.

In the euro area, the Eurosystem’s supervision mechanisms ensure commercial banks and payment service providers are effective and safe. This enables people to continue to have confidence in private money, which remains an integral part of our financial system.

But central bank money in digital form is still not available for retail payments.

Digital euro

The ECB wants to ensure the euro remains fit for the digital era. Early this year, the Governing Council decided to explore the possibility of issuing of a digital euro – digital central bank money for retail payments, in other words.

The Eurosystem is assessing the implications of the potential introduction of a digital euro, which in legal terms would be a liability of the central bank. In October the ECB published the Report on a digital euro[6] and launched a public consultation[7].

But why issue a digital euro, if other forms of (private) digital money are already available?

Central bank money is unique. It provides people with unrestricted access to a simple, essentially risk-free and trusted means of payment they can use for any basic transaction. But for retail use it is currently only offered physically in the form of cash.

A digital euro would complement cash and ensure that consumers continue to have unrestricted access to central bank money in a form that meets their evolving digital payment needs.

It could be important in a range of future scenarios, from a decline in the use of cash to pre-empting the uptake of foreign digital currencies in the euro area. Issuing a digital euro might become necessary to ensure both continued access to central bank money and monetary sovereignty.

A properly designed digital euro would create synergies with the payments industry and enable the private sector to build new businesses based on digital euro-related services.

A digital euro would also be an emblem of the ongoing process of European integration and ultimately help to unify Europe’s digital economies.

Crypto-assets pose risks

But what about bitcoin or other crypto-assets that have been trying to gain a foothold in the digital payments space and to anchor trust in their technology?

Innovations like distributed ledger technology (DLT), in particular blockchain (which is at the core of crypto-assets such as bitcoin), bring both new opportunities and new risks.

Transactions between peers occur directly, with no need for a trusted third-party intermediary. The trust that is usually inherent in a transaction is replaced by cryptographic proofs and the security and integrity of records is ensured by DLT, which avoids the “double-spending” problem. Nevertheless, trust is not entirely dispensable.

The main risk lies in relying purely on technology and the flawed concept of there being no identifiable issuer or claim. This also means that users cannot rely on crypto-assets maintaining a stable value: they are highly volatile, illiquid and speculative, and so do not fulfil all the functions of money.[8]

Recently, we have seen the emergence of stablecoins, which try to solve crypto-assets’ problem of a lack of stability and trust by pegging their assets to stable and trusted fiat money issued by States.[9] And the issuers of “global” stablecoins, which target a global footprint, further aim to introduce their own payment schemes and clearing and settlement arrangements.[10]

Although stablecoins could drive additional innovation in payments and be well integrated into social media, trade and other platforms, they pose serious risks.

If widely adopted, they could threaten financial stability and monetary sovereignty. For instance, if the issuer cannot guarantee a fixed value or if they are perceived as being incapable of absorbing losses, a run could occur. Additionally, using stablecoins as a store of value could trigger a large shift of bank deposits to stablecoins, which may have an impact on banks’ operations and the transmission of monetary policy.[11]

Stablecoins, particularly those backed by global technology firms (the “big techs”), could also present risks to competitiveness and technological autonomy in Europe, as they would attempt to leverage their competitive advantage and control of large platforms. Their dominant positions may harm competition and consumer choice, and raise concerns over data privacy and the misuse of personal information.[12]

“Money is memory”

In general, end users prioritise ease of use and smooth integration with other apps or services, and therefore welcome new solutions in exchange for providing their personal data. Public authorities are open to innovation and are prepared to act as catalysts for change, while implementing appropriate policy measures to ensure this innovation helps consumers rather than hindering them.

Payment providers and their payment solutions must be subject to appropriate regulation and oversight – in accordance with the principle of “same business, same risks, same rules” – to protect users and safeguard the stability of the economy against new risks that even go beyond financial ones.

Some say that “money is memory”[13], and it seems that this memory is becoming increasingly digital. But consumers’ digital data and records must not be misused. The abuse of personal information for commercial or other purposes could endanger privacy and harm competition. These and other potential risks are being assessed by the Eurosystem and European institutions.

At the same time, public authorities must balance the benefits and risks of innovation in payments and be prepared to take a leading role in ensuring that payments remain efficient, safe and inclusive in the digital age.

As the economy continues to evolve and new expectations about the nature of money emerge, the Eurosystem must be ready to respond and ensure that European payments adapt to changing consumer preferences and remain inclusive and efficient.

Despite all the changes I have mentioned, the foundations of money remain intact. People accept money only if it is highly trusted, maintains its value and respects privacy – an aspect that is becoming increasingly important in the digital age. These foundations have been and will continue to be found in central bank money, irrespective of the form it takes in the future.[1]Bindseil, U. (2019), Central Banking before 1800: A Rehabilitation, Oxford University Press; Le Goff, J. (2010), Le Moyen Age et l’argent, Perrin.[2]Article 128(1) of the Treaty on the Functioning of the European Union.[3]ECB (2020), “Payments statistics: 2019”, 11 September.[4]ECB (2020), “Impact of the pandemic on cash trends (IMPACT)”, forthcoming.[5]Petralia, K., Philippon, T., Rice, T. and Véron, N. (2019), “Banking Disrupted? Financial Intermediation in an Era of Transformational Technology”, Geneva Reports on the World Economy, No 22, International Center for Monetary and Banking Studies and Centre for Economic Policy Research, 24 September.[6]ECB (2020), “Report on a digital euro”, October.[7]ECB (2020), “Public consultation on a digital euro: public consultation (questionnaire)”, October.[8]ECB Crypto Assets Task Force (2019), “Crypto-Assets: Implications for financial stability, monetary policy, and payments and market infrastructures”, Occasional Paper Series, No 223, ECB, May.[9]ECB Crypto Assets Task Force (2020), “Stablecoins: Implications for monetary policy, financial stability, market infrastructure and payments, and banking supervision in the euro area”, Occasional Paper Series, No 247, ECB, September.[10]G7 Working Group on Stablecoins (2019), “Investigating the impact of global stablecoins”, October.[11]See footnote 9 and Panetta, F. (2020), “The two sides of the (stable)coin”, speech at Il Salone dei Pagamenti 2020, 4 November.[12]G7 Working Group on Stablecoins (2019), “Investigating the impact of global stablecoins”, October; Panetta, F. (2020), ibid.[13]Kocherlakota, N. (1998), “Money Is Memory”, Journal of Economic Theory, Vol. 81, No 2, pp. 232-251.