Cash, crypto or CBDC? Warwick Economics Summit debate

Transcript

Intro and opening statements

Holland should have never joined the Euro we should have opted out just like Denmark but we were not given a choice there was no referendum and I were stuck within the Euro which I believe is an unsustainable currency throughout history people have suffered from double digit inflation or currency collapse and in order to avoid Debs I believe just like you can choose amongst hundreds of car brands or when you go to the supermarket there's so much Choice when it comes to money you need choice to America is looking at these and thinking how can we retain our power as the pr currency in the world when you've got this massive private sector exercise going on you guys have been getting handed a bad deal um and that is really unfortunate especially for the younger

people in this country while all other assets have gone extraordinarily High your earning capabilities have been decreased the leaders have been selling your future down and I'm sorry to tell you these things but you guys have got to wake up on these topics the bank of England remains committed to cash um so if you take one message away from what I say today I think I think that should be [Music] [Applause] it all right thank you very much everyone and Welcome to our first panel of the day so the rise of cryptocurrencies and Central Bank digital currencies or cbdcs is ushering in a cashless future and it has vast

implications for financial privacy government oversight Taxation and consumer Behavior so as the future of money becomes increasingly digital there is a need for clarity and we can achieve this by examining the diverse perspectives and potential consequences of a cashless economy our first panel today is titled Beyond banknotes navigating the future of a cashless society and will be moderated by noan sorry Nan L here PhD student here at Warick hand over to you now hello hello good morning everyone um today we will be talking about a topic that will influence all of us in

the coming future like all of us we have now cash we have digital money in our pocket in our bank accounts and the question that we wanted today discuss will again be of a concern to all of us and at at the heart of it is to try to understand what is the past present and future of money today we will be talking most about the future but it will be also very important to talk about what is there about the past or the present um today before I introduced the panelists uh I'd like to say one more thing is that what we observe about the blockchain is something that economists have been thinking about for over 200

years so trying to squeeze that into 50 minutes will be tough but we will do our best and one of the main uh ideas for for instance blockchain comes from economists who were talking about taking power from the central banks and giving it to to the people that is introducing competing monies and this was in the 1970s and then eventually this blockchain was introduced and today we will be talking about what are the perspectives for the future of money so for this topic we have in our session uh very uh good and well-balanced panelists and uh the we have people who are on the governing sides of things who

are actually in the business of uh managing uh Society where people access cash and we also have people who are trying to push the frontiers of digital money and uh with that I'd like to ask each panelist to introduce himself for 20 seconds and I'd go by John hows first John please brilliant thank you no thank you for inviting me I'm John hows I run link which is one of the five at Payment Systems in the UK we run the ATM network you also have heard of the other ones which are Visa Mastercard uh we've got pay. UK uh and chaps so we're right at the middle of what's going on in the UK I'm very proud to be here today I think

war is an excellent University um arguably one of the best in the country I think for economics arguably is the best and I've got son who went to work as well so to be here today thank you for inviting me per per thank you and nck M please yeah hi good morning everyone it's a real pleasure to be here at the the work economic Summit um and I'm very much looking forward to to the discussions my name's Nick McLaren and I've uh I'm the head of what we call the future of money division at the bank of England and that's the the central bank for the the UK um my role um I work on both cash so the kind of current form of re of money that you can households and businesses can use that's issued by the the bank of England and I also am

looking helping with our investigative work thinking about whether we should have a dig equivalent of that what people have called a central bank digital currency and what we would call in the UK a digital pound so I'm sure we'll come on to to talk about those those issues as we go through perfect thank you and Paul B please hi I'm Paul Bing nice to meet you all I am co-owner and director of Holland gold we are a precious metals dealer in Europe I also run a independent Financial podcast called reinvent money and I also tried to set up a full Reserve Bank in the Netherlands sort of a digital Euro AV avangard between 2015 and 2019 and it was impossible unfortunately to set it up but it was very useful to understand what the advantages are of a full

Reserve Bank or full Reserve coin like a digital Euro so I'd like I'd like to share my experiences with with you on that topic as well thank you thank you and Nicholas kry uh good morning thank you for joining us um my name is Nicholas KY I'm the co-founder and chairman of blockchain.com which was founded uh here in York in northern England uh we've had some incredible um graduates from the University of War can work for my team and it's always a pleasure to return here to share what we're seeing happen in the space um I'm also the founder and chairman of an organization called skythe limit. org which focuses on helping early stage uh entrepreneurs get Capital get access to networking and um business mentors and advisers and more and so very excited to share some perspectives on what's

happening in the world today and appreciate everyone showing up here on a Saturday morning amazing and why Nicholas you don't go first so what how would you say what is the past present and future of money okay so I prepared a little bit of an overview of this um and I only get about five minutes to talk so that's about seven times longer than the average Tik Tok video so hopefully no one falls asleep um but this really could be the most important five minutes of your life so I please implore you uh to pay attention and if you care about your economic position in the world a lot has changing very quickly um some of it is good news and some of it um may feel intimidating or scary but let's talk a little bit about it so what is money I think this is one of the most

History of money

uncomfortable topics that almost anyone can explore it's one we don't tend to spend enough time at at home our parents kind of introduce us to these things usually too late um almost everyone in this room and around the world will spend their whole lives in pursuit of money why maybe to invest in their uh education might be to put a roof over their head uh to maybe have a family someday to go on that holiday or vacation or or maybe go on that date you've been dreaming about so what is money um money is a social construct human beings invented it uh and it's older than written word which is why in prehistoric burial sites in Northern Scotland we find artifacts old types of money we find seashells and beads that

traversed across the world across markets from the Middle East um money is best maybe understood as a collection of beliefs or systems that we use to exchange wealth over time so in other words their techn IES that we have developed that are useful um for trading goods and services and we have tried many forms of money not just in the last 200 years but since the prehistoric age uh we've used seashells feathers gold cigarettes um we've used Fiat currencies which are government created cash instruments and more so um money has persistently evolved to meet the needs of the market in an ever increasing digital world uh where use technology to

keep in touch with our loved ones to consume our entertainment uh to develop incredible breakthroughs using data and more um maybe it makes sense for our money to be digital too uh money requires really three properties and it's important to think about these it needs to be useful as a medium of exchange it ought to be a store of value and it needs to be a unit of account and so it has to be based kind of in the laws of mathematics which is why we have phds studying these things to help us understand them then now money gets to have features too you can think of it a little bit like software what are the features that your money has well your money should be fungible it should be counterfeit resistant we shouldn't be able to go to the library and just make more of it off the printers um it should

be durable indivisible and it should be fit to purpose for the age of the world the market at exists in so now we get to the fun part who gets to make the money uh how much of it should there be where should it come from and maybe in this digital age maybe our money could could be digital too so 18 years ago I was seated in an audience just like this it was 20072 2008 and uh we were in the midst of a great financial crisis I wanted to go work uh and have a great job and an incredible career and I couldn't find one um and sadly to be honest and realistic about your situation um there are cons challenges facing you the office of national statistics um has some very depressing numbers to reveal to you today over the

last four years the cost of gas in this country is increase 94% electricity 78% your groceries are up 25 your rent 25 public transport 18 and unfortunately your real wages have declined by roughly 2.5% you're entering into a challenging era so what's going to be different for you well there's a revolution and also a um I would say a change of how we're thinking about economic and wealth systems and we're entering into a world where there's now all kinds of new competition over the Legacy systems um the incumbent systems are fighting tooth and nail to hold on to the old ways their control over the economic Concepts and social mobility and econom economic

Revolution in money

Mobility doesn't have to be that way though because you're about to inherit this world so I want to talk a little bit about some of these inequalities and we'll have an opportunity across this panel to debate them um but we've now created capabilities that make it possible for all people in the world to instantly send receive secure trade and exchange digital instruments of wealth this makes it possible to create more economic velocity make the pie move a little bit more quickly for everybody and basically put money on uh rails that run on the internet I think these are promising things um they should help us basically make it possible for people regardless of the circumstances of their birth to economically participate in the world uh and that's one of the things we're focused on at my firm and I know some of the other people on this panel

care a lot about these issues too so there's some systemic imbalances that you guys are inheriting and there's going to be a lot of work to do on all those topics but I do think the future can be bright too um we have to continually innovate we have to make things better and uh without the concerted efforts of clever people to work on those things we do stagnate so uh don't be shy about getting involved learning as much as you can about this your education is something you can take with you for the rest of your life but you have to stay curious uh the world is not a stale place it is evolving quickly and even in the last week we've seen some extraordinary changes uh that'll be discussed I'm sure in this panel but um I'll rolling quish there was asked to give sort of a quick overview we do not

have enough time to go through all of it but hopefully that was helpful as a beginning Point brilliant thank you very much now I'd like to give the floor for to Nick uh and ask about how should we move on to the next level yeah thanks very much I I was planning to start my remarks by talking about cash and I thought that was going to be the past but actually Nicholas has definitely beaten me with talk of carry shells and and various other things so great to get that that historical perspective so when talking about the future of money I think the thing I wanted to be very clear up front about is the Bank of England remains committed to cash um so if you take one message away from what I say today I think I think that should be it and um our

Perspective of the Bank of England on cash, stable coins and CBDC

governor Andrew Bailey um our chief cashier Sarah John theyve said on numerous occasions that as long as the public still want Bank notes we'll continue to provide them um and I think there are some good reasons why we expect cash to continue to be used and needed for some time even in this forward-looking digital world that we're talking about the title of today's panel is navigating the future of a cashless Society um perhaps it's better described as a less cash Society rather than a cash list Society um so transactional use of cash has been falling steadily for a number of years now um so from around 50% of transactions a decade ago to around 12 10% uh today um but there are still um a large number of people who use cash and it Remains the second uh most frequently

used uh payment method behind debit cards um according to estimates from the the financial conduct Authority the FCA there are over 1 million adults in the UK who don't have a bank account and a wholly reliant on cash they then estimate there's a further two million people who use cash for almost all of their transactions um and and importantly these groups contain many of the most vulnerable people in our society um with cash ises particularly prevalent among lower income households the elderly those with disabilities um when we so when we look to the Future and we're thinking about how these new forms of digital money and things are going to evolve I think it's really important to remember that cash probably still has a role to play too it's possible that the size of some of

those groups might fall over time in response to demographic changes progress on digital literacy which I think John you talk very eloquently about and make come on to discuss um but many of these groups would find adopting these digital Alternatives difficult so we do expect um it to be important to maintain continued access to cash um and even for those that don't regularly use cash um Serv EV survey evidence suggests people really value the option of having of using it occasionally that could be when digital payment methods aren't working or simply where the physical nature of cash makes it more convenient or more suitable the problem that we Face uh is that the less often cash is used the more expensive it is per transaction to maintain the infrastructure to provide

it so it's vital that we take steps to ensure that cash remains available for those that need and want to use it and to do that the bank of England's working with uh the other public authorities uh to make that happen so the fca's got new rules to ensure that there will be sufficient access to both withdrawal and deposit facilities for cash across all of the UK and all of the regions um and at the bank of England we've got a new supervision regime uh to to make sure that the plumbing behind the cash system what we call wholesale cash distribution remains effective resilient and sustainable so that's probably the the past but I say also part of the future at least for the foreseeable future um but looking ahead although we think cash will play an important role there's many

environments where C cash can't be used in an increasingly digital economy um and when you think about payments today so the most common payment method is debit cards often contactless and increasing use of of digital wallets like apple and and Google pay generally paying for stuff in the UK works pretty well for the consumer you know you tap your card to pay for your your coffee or your bus Fair it's very quick it's very convenient but it's not perfect uh for instance you usually need to exchange Bank details to transfer money to some one many websites they require you to type in manually your details the things like direct debits can be quite clunky and difficult to change um and the world doesn't stand still Innovation and money and payments I was is coming it's already happening as Nicholas said um

new forms of money uh like private stable coins could they have great promise they could bring many new functionalities so things like smart contracts so that could allow you to for instance make payments automatically once it's verified that your goods have been delivered obviously you could get a picture of you're good on someone else's porch so there needs to be a way of verifying it but that's the type of thing that we could do more seamlessly but if that's not if that Innovation isn't done in the right way H there is a risk uh that these Innovations in money and payments could pose threats to our economy and financial system so these new forms of money uh may not interoperate easily with one another so in extremist you could see different prices for different forms of money so imagine the price of your coffee being

different whether you choose to pay in Mastercard or VISA um currently there's a range of measures like banking regulation rules and faster Payment Systems which prevent that occurring so if someone transfers you1 pound you don't stop for a minute to think about whether that came from say Barkley or or HSBC um and cash also plays an important role in ensuring what we what we sort of call the the uniformity of money you always know you can exchange 10 pound in your bank account for10 pound of Bank notes simply by going to an ATM but as cash becomes used less frequently we're now asking ourselves the question of whether there's a role for a digital equivalent a digital pound this could be a reference asset in this new digital economy uh to support the uniformity of money and it could act as a bridge to

deliver interoperability between new these new exciting forms of money and existing forms of money as we know them today so we're currently undertaking a three-year design phase which ends in 2026 to decide whether we should develop a digital pound no decisions been made on that yet and um and the government has committed that any decision to launch a digital P would need to be supported by both houses of Parliament so to conclude the bank of England's committed to cash we're exploring the case for a digital pound but we see those two is very complimentary in the in the forward looking world so thanks very much thank you very much thank you very much and those are interesting points and then now we'd like to have uh different perspective and this will be from John uh and I'd like to ask what is your take on what you just heard from

Nicholas and Nick and as well as how do you think we should navigate the future of a cal Society well I'll talk about the UK but the data I'm going to give but I think is applicable to every um Western European um Asia Pac and North American country to some extent and and the reason particularly the uh the head of the ATM network is here is because in the UK 95% of the cash comes out of the ATMs 50,000 ATMs in the country so we've got really excellent data what's going on what's changing um what's driving these things so that that's why link is at the heart of uh of cash policy in the UK and while we're regulated by the bank

The importance and controverse of cash

of Bank of England strange to be sitting here reg the thing about cash as Nick said you know regardless of why it's not some Wicked conspiracy of governments or something like that it is reducing in use for payments and when I joined link 10 years ago it was what six out of 10 payments just before Co maybe four out of 10 one out of 10 today so cash us the payments is going down very very rapidly and if you'd ask people five years ago who cares does it matter you wouldn't have got much interest but today it's a really politicized subject and on the one hand you've got groups people who who'll say that you got to preserve cash moving us to digital

payments that's wicked Global Elites trying to control how we spend what we do get hold of our data it'll be in the D mail it'll be Nigel FR it'll be GB news you've got the other side of the debate which is digital has made all of our Lives infinitely unrecognizably better both in terms of health and wealth and Leisure and digital payments that the Gateway into that digital world so you got to go there and you've got that polarized debate there and it's a really really tough one and dealing with that polarized debate I think is one of the big policy issues as we move into that more digit digital world if you look at some of the facts about cash and if you ask UK people um 85% still use

cash so it is not true to say that it is a minority activity uh so you got a majority of the population using cash you once a month some more some less um about 95% say we're not ready to go ashless yet some of those concerns are for inclusion perspectives you they recognize that it's going to exclude people who dentify bank accounts they use cash a lot of it is to do with resilience and we've got all sorts sorts of examples only in the last year or so things like the crowd strike um problem we've had visa and MasterCard both go down in the UK and other major markets where it just stops and if you can't use digital payments then you cannot live your life and youve got to divert back

to cash at the moment so we've got a whole bunch of really interesting issues which say in the UK we're not ready to go cashless yet and until we can get the resilience up to 100% we may never be ready to do without cash at all but I think the real practical problem is that political problem the uh the division in society that we've got about whether it is a good thing or a bad thing and you cannot move to a fully digital economy until you've got support from the whole population to do it in the UK we've got about five million people so including the people without bank accounts but also the people who just don't want or can't use digital yet 5 million people who

rely on cash and it's just too many to leave them behind it's 10% of the adult population so from a political and policy point of view it probably is great to go to digital but if you cannot shift those five million people then you've got a problem so I think from Link's perspective the big policy issue is how do you get digital to be completely inclusive from a policy sense and that's not some um not just coming it from a moral that's a good thing to do it is a economic perspective you cannot have 10% of the population less l behind and expect to have a good functioning um a good functioning Society I think the good news um in the UK Nick has mentioned the legislation to protect access to cash so we have got I

reckon at least five to 10 years worth of protection in the UK led by link to make sure that every High Street has got an ATM pre ATM and every town has got a bank of some sort and you'll read in the newspapers if you're reading UK newspaper stories about shared banking hubs and all that kind of stuff and that uh will protect access to cash and I think that will as I say be 10 years it buys us 10 years to deal with digital inclusion because eventually shops will stop accepting cash you'll have to go to the special window at the back of Sainsbury's to go and spend your cash while everyone else is using digital so we've got to get that digital payments inclusion up and I think the good news here interestingly comes from North

America and I realize Donald Trump is deeply divisive so I'm not making any comments about whether he's good bad or not but if you look at one of his executive orders the digital assets executive order which he signed last he signed this week and ignore all the stuff about trumpcoin and the fact he's banned cbdcs in America and actually look through to to read it it's only a few pages long and it talks about a digitally inclusive payment approach so it's explicit about making sure there's open access for Citizens and companies to a new digital system it bases it on dollar stable coin so it is looking at taking that dollar dominance into the

digital world and making it Global so there's a real drive there again it's not just nice and cuddly there's a geopolitical real determination behind what America is going to do the thing about where where America goes it if America goes there that means that Europe the UK everywhere else will have to sit up and take notice and it will drag that digital payments policy really really quickly to the front of economic development in the UK Europe and elsewhere so I think very very positive and exciting times perfect thank you much those are very interesting points and that leads naturally to the question and this I'd like Paul to answer or like try to answer would be what type of digital currency should we try to

develop yeah so maybe first two quick question questions to the audience who's still using cash on a weekly basis okay so it's just a few right the audience being asked who owns some crypto also not that many I'm a little bit surprised yeah so um well first and foremost I think we need freedom of choice so in that sense I'm I'm a Libertarian I like people to choose their own currencies to avoid a currency trap um for example my my parents-in-law they live in Ecuador and in 2000 eor went from the Su to the dollar and they lost overnight 50% of their savings and that happens time again throughout in order to avoid that I believe just

Why the euro is unsustainable and we need monetary freedom of choice

it comes to money you need choice too because I think that will eventually lead to better money uh take me for example I live in Holland which is part of the Euro Holland should have never joined the Euro we should have opted out just like Denmark but we were not given a choice there was no referendum and I were stuck within the Euro which I believe is an unsustainable currency just if you look at the setup I mean already 90s a lot of economists warned that the Euro would never work in the long run because if you look at optimal currency Theory these countries are just too different to form an effective monetary Union for example the euro is too cheap for Holland which makes inflation higher in Holland but too expensive for Greece so in the end it will probably fill and then a lot of

people in Holland will suffer as a result if we would have freedom of choice we could have devised a different more uh more diverse system in Holland and we could have all benefited from that so I guess it's very much in line with with Nicholas then on the topic of the cbdc um so since I believe the euro is fundamentally flawed it doesn't make sense to add another layer on top of that Euro if you believe the foundation of a house are rotten don't build an extra floor so I strongly Advocate against digital Euro at the moment in in the Euro zone for the UK on the other end it's different because you're a monetary Sovereign Nation and you can have a good discussion in society about how you are going to design your monetary system system because there's a lot of design questions you need to

Be careful with CBDC

answer for example at the moment 97% of the money here is created by commercial Banks when they create credit so only 3% is public money and it's imaginable that as a society you want perhaps a larger share of public money like it used to be the case and then you want to uh ask yourself okay do you want to keep cash or you want to maybe make part of the public money digital and if you have a larger share of public money then also Banks can behave more like free market actors you can remove Deposit Insurance and you can have a free market of of uh commercial Banks and then a save Haven of public digital money um so that that could be possible it's something you could talk about um but it has to be part of a fundamental discussion in

society on how you are going to set up your monetary system and I believe cash is important um as a resilience uh um system because we've seen often just like you mentioned John that sometimes systems are down and it makes sense to have a physical backup in form of cash and when it comes to cbdc make sure you design in such a way that it cannot be used in the future by a government as a tool of censorship and control because maybe the current government is benign and they say we have no bad intentions we are just going to make a beautiful payment option for our citizens H we're not going to program it or or censor it but it could be in the future that some

other uh government is going to abuse that system as an example example in Holland for example in the 30s we had this amazing system where we tracked all citizens so we we knew in the 30s um all ethnic ethnicities of all Dutch people so when Hitler came to Holland he knew exactly where the Jews were just just to um to make the point clear that be very careful what you design and how it's going to be used in the future so I'd like privacy to to remain for for um for Citizens whether it's here in in UK or in the Netherlands very careful what you design and include the whole society not just the banks but also I know for example you have positive money in in the UK that they're really in favor of a

full Reserve um banking system but make sure to to really think about how you design the system for a long term and also allow freedom for people to choose amongst currencies because if you have a good currency it will eventually um be used as such uh and right now also with the digital Euro they the way they're they're designing it it's just it's it's basically solution looking for a problem and it's um it's just going to cost a lot of money and it's going to be built on top of accuracy which is already unsustainable in My View From the Start so um but in UK I think there's more possibility in that sense it's nice to have these different types of gentlemen with different views but I think there's a a big chance in UK to set up something that's sustainable and and good for um

for everyone perfect perfect amazing so now we have heard four very different Market perspectives some what overlapping distinct opinions and we would like to first of all think about it and then take your chance and here is your chance and you can ask questions may I don't exactly know how the question part happens here I don't have the iPad for the online one um and so are there questions so I see one one two three okay there a lot of questions very good very good I don't

know how to proceed I'll just pick um you can go first um lady with glasses I don't really sorry yes thank you um my name is Yasmin sik and I am here for orange magazine um studying in budapes and my question would be um to you Mr buik um I was wondering if you think um the problems with europeo could be counterbalanced by deepening economic integration which is the ultimate goal of the EU yeah there's there's basically two ways to solve the the problem uh in the Euro Zone either you become a political union or you just you abandon Euro basically uh there are no other

Can the euro be saved?

flavors I believe but in order to become a political union you need to have one deos one uh people in a way and I think the European countries are so beautiful in their diversity that they will never be able to align completely economically linguistically culturally so um in in an ens for example we just need a different monetary policy than for example in France or Spain if you look into the theories of Robert mondel he won a Nobel Prize in in the 60s about when you can form an optimal currency area there's lots of conditions you need to uh you need to uh um meet even the even the United States is not a an optimal currency area it's just basically a

gradient right so maybe us is 90% And we are like 30% but I don't think it will ever meet all these conditions and I think it's probably better to to anticipate and prepare for a a dissolving of the of the European Union because too many people in the different nation states are not willing to become a European like uh Society integrate completely most people love their cultural differences they love to speak their own languages you already look in Brussels all these different languages that are being spoken it doesn't create a sense of unity and I don't think we'll ever ever get there name France for example when you're 62 you can go um uh uh you can retire in Holland at 67 and like these kind of cultural differences

I don't think you'll will ever be able to solve so instead of becoming this political union I think you should focus on trade with each other and and try to um uh slow down when it comes to U becoming what some people en Vision to become one European nation okay perfect so more questions so I'd like to get something from the back yes you can as well yes hi thank you so much for the panel U my questions for Nick McLaren um so I actually found the point on uniformity and the singleness of money very interesting and the fact that I never considered it before means that the bank of England must have been doing a very good job so I actually wanted to ask and better understand what regulation or like efforts does the Bank of England do

The singleness of money and stable-coins

to maintain the singleness of money and also more in relation to the panel what would possibly be the effects of an increase in public money compared to private or commercial money uh because I read that an increase in public money could reduce deposits and therefore increase the cost of funding for commercial Banks so I was just curious about that thank you yeah it's a really good question I think it is it's really interesting this concept of uniformity of money is not one that was discussed much in previously because we just take it for granted right you you don't think about the fact that generally country you have a currency and you know that that unit of account is the one that you'll use for for pretty much everything um the the trickiness from um an an economist's

perspective is it's really difficult to work out the sort of marginal contribution of the different bits to that because you don't really have many examples of where it's broken down to do it you can go back to some historical examples I think there's um some case in the United States in the 19th century where the different commercial Banks issued their own uh paper notes and there's some really interesting stuff there but was a very different very different world um in terms of what happens today there's a few really key components so one is as as was said most of the money is is Commercial Bank money so we need to make sure that we trust our commercial banks that they're very safe you know we've seen the examples of what happens when that breaks down this of 2008 financial crisis although interestingly even then I don't think

there was any breakdown in that that uniformity of money um another important part is things like um Deposit Insurance so that you know that if your bank does fail then you know you still up to £85,000 in the UK will will be able to get your money back and then there also things like the bank of England runs the wholesale settlement which sits behind the Commercial Banking sector and again that that is something that allows all the settlement between the different payments to happen in very safe um you know financially risk-free money at the central bank and that wholesale settlement is incredibly important part of the the financial system in the UK and and globally I I think the thing ahead is we need to make sure that whatever framework we design we need to

make sure that we're kind of working out what are the best bits of the current form of things that allow uniformity of money maybe some of them are too strict maybe there are things that we don't necessarily need to do they're almost belt and braces as people would say um so we need to make sure we get that balance right so that we allow for these new forms of money to be Innovative to offer new functionalities to develop and to support a more digital economy but in a way which retains those some of these core values of monetary and financial stability Nick I have a question for you do you agree that as long as you have Deposit Insurance it doesn't make any sense to put a digital pound next week because people have no incentive to use the digital pound when their banks are

also Sav and insured so I think it's really interesting question of why why would you use a digital pound so it's a great idea potentially from a central bank's perspective like we care about uniformity of money but when you're going out to um pay for something in a shop or pay for something in an online game you're not thinking oh hang on a minute I'm going to check which of these is the best payment option for the uniformity of money or things like that you just want something that's convenient that you know offers the functionality you want so I think the um the answer to that is probably more about how do you you know if you think that you need a digital pound because there are some things that deposit insurance won't deliver it gives you confidence in your banking sector but only for you know 85,000 is a lot of

money for me it's a lot of money for a lot of people but obviously but your holding limits are lower because now the Central Bank dig currencies have low holding limits so even for the wealthy people that maybe look for a safe haven where they can store more than 85,000 it's not going to apply because you have small holding limits so you're basically building a product that's not at least in the in the Euro Zone they're building something that people are not interested in because they have the banks they're insured they get interest on their bank accounts not in a digital Euro account they small holding limits so it's it's basically that on arrival I think that the way I tend to so I think it is a really important thing about making it the people want to use it but the way I would put it would

be the way I would put it is at the moment um you're sort of looking at you know banks are doing things I think I would say new forms of money are coming right this not a case of should we have new forms of money or not will people bother to use them I think the things that Nicholas described some of these private stable coins things like that they will offer new things that will be more convenient to people they will start using them they'll move away from the things they just use today the question is how what what do you want those to look like do you want to as you really nicely described some form of public option in amongst those to make sure the system looks about right and I think that's that's how I would put it you know that people are going to use these other

things it's a case of which one will they use okay can can I come in here because the the thing about money and this may be controversial but it's this is this is about power of governance and consumer choice so when when you read stuff around oh we got this exciting technology and what can it do that is all rubbish you need to look at it through the lens of government power and consumers that's what's driving this if you go back to the original work which triggered all of the governments and CB and central banks looking at cbdcs it was Facebook's Libra where they were going to launch a digital currency which was going to be public which could to be privately owned unregulated and was going to remove from

governments the ability to control money in their country so when you look what's going on look at it always through the lens of government power and consumer choice if you look at the growth of stable coins dollar stable coins which is extraordinary it is hundreds of billions of pounds worth of stable coin in circle and tether which are in issue at the moment and Trump is looking at these and think or America is looking at these and thinking how can we retain our power as the predominant currency in the world when you've got this massive private sector exercise going on which is leading him to sign that digital asset executive order this week if you look at the global South they are being

dollarized and their local currencies are being removed as relevant because consumers are choosing to use those two stable coins that is where the growth is coming from and we sit in Western Europe and I I appreciate your points about the Euro and all the rest of it but it's all pretty comfortable in Europe everything works fine but what is worrying the governments in Europe is that power how do we retain the euro or whatever it's going to be is relevant in a world where trade and crossborder flows and activity is increasingly going to be in the most useful and Safe digital assets so that's what's going on that's what's driving all of this and that's why I say look at what's going on in America because once

America decides to do something I mean I think that's where the action is going to be and that's where we need to look maybe China as well but I think North America is where you'll see what's going on perfect and now I think it will complement everything if Nick Nicholas you also make your comments on this issue so that we have like a whole panel making uh comment on this issue I'll try and be brief because I know there are other questions in the audience and uh hopefully we can answer a few more um I think it's extremely interesting that in Donald Trump's executive order this week which was entitled strengthening American leadership in the digital Financial technology directive he prohibited the development of Central Bank digital currencies this is an extraordinary concession from the

government of the United States partially I think because of the concerns of abuse essentially around creating the capability for a government to surveil all the economic activity across potentially the country and around the world so they're basically saying this stuff is powerful and dangerous and even Donald Trump who has a strong I would say ego um is saying we actually need to be very careful with this specific thing and so they're basically encouraging private sector development in this sector and uh to add a couple things around this because it is pretty impressive um they are emphasizing essentially adoption of digital assets and blockchain Technology an emphasis on individual rights in privacy um especially including um everything

related to self- custody of funds to staking among other things these are new uh Concepts in the digital currency world uh support for dollar back stable coins this is a huge deal basically Donald Trump is saying it's it's in the interest of America for everybody on the planet to have a digitally denominated dollar um wallet on applications that they can download on their phones and the extension of dollar hemony I think which has been very strong over the last century um was basically just positioned to be extremely strong in The Next Century finally you're getting real regulatory Clarity um he has revoked essentially everything that happened in the last Administration which was uh a very hostile regime against Innovation and money in general um all the banks

the United States are now going to be able to custody digital assets and among other things uh there's a whole working group that's being established around potentially building a Fort Knox of digital Assets in the United States so to describe the the magnitude of this we won't have time for today um but this will change the composition of the world economy over the coming decade and uh to be on the wrong side of it would be foolish it's moving fast and it is in the interest of people to get um well understood in this and if I had one piece of advice it would be to go do a little bit of homework no one here has talked about going back to the first thing which was reading the original white paper entitled Bitcoin a peer-to-peer electronic cash system it is what sparked this entire argument

this conversation uh over a decade ago and it's worth revisiting it because it describes the concept of an always on financial system for the internet that does settlement and clearing 247 365 it Embraces some really important Concepts around decentralization mitigating risks having a capability the camp be just turned off because there is a crowd strike problem in one country versus another this thing is cloud agnostic and it operates with a lot of resiliency and it's been under constant threat for 15 years now and it has consistently operated um with neutrality designing this type of system would be almost impossible for a central bank to do on its own um and so we now have a market

that's developed a solution and people around the world are adopting it uh voluntarily which is the key perfect thank you very much now I think we have we would collect questions and then I'd ask you to answer very briefly and then the last point would be after we collect questions I'd ask each panel member to make one including remark so that for you to take away so I would collect three brief questions please so one and then I'll collect something from the back two three and that's good okay one here and then we have two over there uh and you have the third one this the man raising hand but we will get your mic as well okay you can

Final round of questions

start about literacy generally I'm curious the how how do you so and then we collect question from you already have a m yes please uh hi there um so I had a question regarding uh how commercial Banks often push back against government regulation uh when it comes to increasing transparency uh so how would uh the bank of England or any Bank in general work with commercial Banks such that they would increase or be willing to increase transparency especially when something like a cbdc gets implemented within the economy okay perfect and the third

one hi um I'm from Georg University so my question is directed to Paul um you mentioned that the euro is um it's not the most stable you mentioned something regarding to that so I just wanted to ask if um so do you think one of the reasons to this is is because of the the you know the very fast expansion of the Euro Zone like I know it originally you know to my understanding it started with the Western European countries and then other countries kind of joined it so do you think you to this you know sort of Rapid expansion the whole Euro Zone itself kind of became a bit more

unstable I think one example is Croatia which kind of which recently moved to the euro and then prices shut up after the conversion so I'd like to hear your thoughts on that okay so I would ask very brief uh comments because we are almost running out of time so if you have a brief comments less than 20 seconds please go on okay s because I think otherwise back yes please uh I think was first should I start with the last question then I'll answer that one yeah um in general uh I I agree with you that the more countries you add to this mix the more um uh the more diverse it becomes and in terms of currency unit it's that's not a good thing per se we

would have stuck to certain core U European Union countries such as Hollands maybe if like Finland Austria Germany I think you would have had a better chance of having more sustainable currency so the the worst thing we can do now is adding more countries and that's exactly what they're doing you know it's like we have a bad marriage and then adding more more children basically yeah that's an interesting point and then uh anyone else would like to make a comment I'll answer the the I'll answer it for the UK but I think it's the same um for many other markets you you can't leave five people on five million people on cash because you're excluding them from the economy where all the action is you have to work out how to get them across

some of that is teaching and I think in the UK where we've got a large network of shared banking hubs opening up them you'll see them in the Press I think those High Street vehicles are the sort of place where you can do some of that education if you look in the UK in the past where we've done big programs of changed and the example I'd give would be when we moved from pounds Shillings and Pence to digital back in the 70s that was a topown government Le initiative and my viewers in the UK to get those 5 million in the cross from cash the digital you need a top- down governmental Leed initiative some of it tring in banking hubs and places like that some of it Tech which is designed to be acceptable to the five million

people because for a whole bunch of reasons what's out there at the moment they can't or will not use but we need to do it you can't leave five million people behind if you're going to have a successful growing economy perfect perfect so any other comments you I have to say something um on the question of whether or not Bank will ever uh either through regulation or through their own interests become more transparent that will never happen it is against their interests they make money on your money the whole business model is predatory and uh don't expect that to change that's like asking a horse farm to invent a fter horse in the age of the automobile it's crazy so uh time to to put those things to rest and to invent a better future I think digital currencies and crypto assets reduce barrier centry

increase uh transparency and enable a type of financial inclusion that has never been possible um just to consider really quickly the United Kingdom's position on these things over the last decade they have deliberately made it difficult for entrepreneurs and companies in this uh Market to be successful here and it has made it uh almost impossible for regular people to have access to these assets during one of the most important wealth creation events in the history of mankind and so fewer people have access to these capabilities in this country because of the unintended consequences of regulation for Consumer Protection purposes and meanwhile you guys have been getting handed a bad deal um and that is really unfortunate especially for the younger people in this country

while all other assets have gone extraordinarily High your earning capabilities have been decreased the leaders have been selling your future down and I'm sorry to tell you these things but you guys have got to wake up on these topics it is not okay and uh you guys got to fight harder perfect and yes ni yeah I think from a last thing I think um there's been a real theme of this innovation New Frontiers doing new things and I think that is really important that's something you should definitely take away here I think we need to also take away a theme of that needs to be done in a safe way you know you've seen what happens if you let Financial Innovations go ahead the the benefits of that Innovation can be completely destroyed by a large crisis you know the and the impact on the every

single person in the country of a crisis is absolutely enormous the benefits of some of these Innovations acrw often to quite small groups in the economy so I think that's why really important to think about the broader impact of these things do the Innovation create a great environment for it but do that in a way which sort of doesn't have those risks for your economy perfect thank you very much and uh I do apologize that we didn't have the time to answer all of your questions in detail and with this we conclude this panel thank you very much and we hope you have more questions and answers