The CBDC and Crypto Ecosystem

Transcript

[Music] thank you hello everyone thank you for coming um for this especially crypto topic so we're gonna discuss some sort of digital currencies and the crypto ecosystem and more importantly the message I would like to convey is what are the opportunities for the crypto ecosystem regarding cbdc's we see often it as a boxing match if it was a comp as if it was a competition between the two I think on the contrary there might be Synergy is an opportunity that we will try to discuss so first a little bit on what has been already issued in terms of cbdc so there

are just a few projects that have been launched so for instance in the biomass or in the Caribbean there is a few projects and we have to be honest most have not really succeeded um there has been quite low adoption one of the reason is that the and most and bank people are also the one that are the less digital literate so it's not so easy for them to use this new system there is a question of communication a question of Designing the interface for people to be to be easy to use and we know this in crypto because it's basically the same problem right we have we have this fantastic infrastructures but at the same time they see the low adoption and

in terms of retail payments it's not taking on it doesn't really fit the the bill so one one for the two now if we look at a little bit of what's happening in cbdc's there is not one type of cbdc project there are several very different projects and probably the the thing that you want to learn today is that we should be discussing separately the different type of projects if you look at the digital Euro for instance so they have published recently they are a more clear version of what's going to happen um the digital Euro will have three digital Euros projects that are almost independent one is a pure offline

payments so allowing to pay from one smartphone to another smartphone uh entirely peer-to-peer and so that model should allow us to have fully Anonymous transactions so it's quite Innovative compared to anything that happened currently in payment systems the second version is online payments so this is more like a PayPal a little bit more regulated where payment service provider would onboard you allow you to have a wallet and then every every transaction will be settled by the Central Bank on special system they would create to be a bit faster um and the third one it's a world cell cbdc so in that case it's a settlement

units that would be used only between financial institution to um settle every time there is a depth between them so they already currently use um central bank money to settle certain operations and this is facilitating this by creating a new infrastructures allowing more operation to happen on it and more importantly probably to potentially create different financial instruments on top of this infrastructure and being able to settle those transactions with central bank money if you look at the three version the first one so it's what I call more digital cache so digital cache is something that's Anonymous easy to use

for everyday payments there are very interesting experiments that are happening currently in cbdc's on the left is from the ecash 2.0 Paper from David Chum so the the idea is to have black blank teenager to have some sort of certificate that then you can use to transact so the central banks certified that it's a banknote because it signed it initially but it doesn't know who owns Which banknotes because it's blindly signed and so this has been experimented by for instance project to be owned by the vs and they have tried to to replicate this so actual central banks are looking into it seriously on the left it's a monk of Ghana is experimenting with European actor that

provides currently a lot of banknotes in Europe and they are experimenting on offline payments similarly to what I described just before there is also online payments so online payments are very various different experiment but there are a few that use exactly the technology that we see in blockchain so Norway has published on their GitHub their sandbox that use an ethereum like system and they are trying to look at all the issues like scalability how they make it resilient and so on on the left is Cambodia there is a more dedicated solution that has been a little bit more customized for for this and um and yeah it does it this model and the third model I mentioned was World Cell cbdc so between financial

institutions so to my knowledge there is no cbdc that has been issued for this that's the Central Bank of Brazil as launched a project which I don't know why made the rounds in crypto Twitter in the last weeks um because I don't it doesn't really concern the regular payment it's only between financial institutions they have created basically uh protected ethereum ecosystem and they are inviting different actors to come and participate to do different experiments so they have invited Visa local fintechs like Macado pay but also Ave for instance is going to participate in this project so there is a wide range of different actors that are invited to to create that basically what they are trying to do is reinvent a

little bit D5 in a more control environment experimenting on the same Technologies yeah so what can we conclude from this um oh first sorry um then there is a Next Step which is the world cell International payments so now we have been discussed only the national options but at the international level there is also a need and actually it's the most present need for cross-border transaction are really costly they are complex because you have different ledgers that need to be settled in each jurisdiction when you make a foreign transaction the rates are not super transparent so there is an idea of creating a new infrastructure to facilitate cross-border payments and for this the bank of international settlement has experimented with the

bank defense and the bank of Switzerland and the military authority of Singapore and auto automated Market maker using the same Principle as we all know here um to settle between the different currencies so they are really experimenting with the technology and so much that even in their paper when they describe it they mention that they have used specifically the curvature V2 version for reason because it matched the requirements so not only they are using the technology we are moving past the area where balance institutions are just using blockchain because it was cool they are looking in details on the different white papers and ideas and picking what makes the most sense for different

usages um so now how we can compare the the advantages and disadvantages from the crypto ecosystem point of view of cbdc's the First Advantage is compatible Technologies so it's not fully settled most of what I mentioned are just experiments so there is no guarantee that the final production solution will be using the same technology but currently the standard de facto has become ethereum and other technologies that are more or less similar but still the reference model is if they have experimented all with that they have read all the the papers and so on and I'm sure the central Bankers that are going to watch this presentation so

they're on top of this ID and that facilitates for the crypto ecosystem to provide them solution because everything is compatible the IDS have been exchanged and so on inspired model that's what I mentioned with the IMM so the general IDs are shared and more globally the General Vision that is on public blockchain and that is an ethereum to have one settlement layer and then have different layers on which there would be different action and then facilitates a different function operation the general view is the same there is also the advantage of regulatory Center regulatory certainty because of course if a central bank is going to issue a cbdc on top of such infrastructure it's going to be legal and they're not going to be in the mess we are still not knowing what's the

value of this um there is also the advantage of the ability to onboard traditional Finance actors because they can even force them to if they have to so for instance um in some countries they have make it made it monetary to adopt some some of the technology or they can just push them and with the right incentives there is programmability so which could be an advantage especially if we look at War sale and between financial institution because you can reuse all the principle that we we know and importantly what something I would like to emphasize is the diverse motivations there are different actors working in those institutions with

different motivation and one benefit is that there are many people inside them that have been learning the different Technologies but also the principles the value of Open Source the value of privacy the value of creating something that's resilient by Design and so on and that feeds into the papers and you can tell like sometimes there is some some proof toward very Advanced with the ideas also along with the Technologies because people who are knowledgeable in the technology May tend to a line also with some some of the values that are shared um of course the inconvenience we can imagine is Central Bank control by issuing this kind of platform they

would control the platform itself the privacy concerns that are more relevant for retail um action especially online payments when I mentioned because offline could be private if it was chosen to online is most likely to have some privacy issues and then for the world sale it's not so much an issue privacy it's a different question of more governance and yeah there is a compliance burden so I know it's a conflicting Topic in the crypto ecosystem how much compliance should be applied to to crypto in a sense by moving to the cbdcs of course there will be a need to apply a lot of the compliance rules and that would imply

some some burden and so on not so open even if some of the principles are infused there is no way a central bank will create a permissionless infrastructure allow anyone to participate in it there will be some control and so on but the main question is how cumbersome are this control it's not something new I think the permissionless vision is a great Vision but we have already existing examples of markets that are quite open we have examples of different places in the public life where you can participate in the storm so here the question for for CBC would be how much open it would be one example is the question of specific technical specification even if the digital Euro starts to be clear for instance and we have legal publication explaining the

digital Euro we don't have already any technical elements that could help us start to prepare if we had to develop a wallet or something it's difficult to know what's going to be used and this kind of transparency would help to open it and provide more opportunities program media I think you are aware of the potential risk of using programming feature to control some usage of the money the digital Euro claimed that it's not going to be programmable but of course it's a little bit of question of definition how you look at it because as there is also compliance and there will be some application of a lot of rules so there will be some some drawbacks and diverse motivation so it was an

advantage it's also an inconvenience because there are different type of factors feeding into that there is Lobby groups also interacting with cbdcs and so in the results it's not so clear that it will result in something that's necessarily aligned with your vision so what's the future for the future with our purpose to you as an example is the universal exhibition of Paris in 1900s because I think it's a great example of how different private and public actors have come together to create something uh impressive of a new scale and um yeah merging different ideas it was huge absolutely huge so if you

know a little bit Paris you see here in highlighted all the areas that were part of the exhibition so it was to more than two kilometer square square kilometers so including all the patipale and valid so many touristy places you can look if you're coming here for the first time and even the Eiffel Tower Trocadero and so on the main topic of the of this Universal exhibition was technology and advancement I think it was a time where France was really proud of all the technology advancement they had made and they wanted to Showcase a little bit they were a very interesting invention showed at this this event one example was solar technology already so

unfortunately it was the time where coal was super popular so we didn't cut at the time but they were already designing a system to use the sun to hit something and on the right there is a moving pavement so the part on the left was moving faster the second tier was moving a little bit slower so you could leave and and go back to the to the to the pavement and go faster from one place to another one it's great that they wear Edge technology but also bear in mind that there has been several death during the exhibition because they were creating all sorts of crazy building crazy ideas and some have failed burned and and crashed and so a lot of a few

people died during the exhibition and the most hyped technology of course was electricity it was the start of electricity so at night you could see fantastic spectacle and and illumination around the this all those buildings that were made of metal and and glass uh and yeah so that was the the new attraction also with the cinema it was the beginning of the cinema so you could see projection and you could see how you could fly in a balloon from and so immersive experiences the last thing is it was also a moment of national pride because it probably the hype of the nationalism in the traditional sense so if we country was proud to show how they had

become this state nation and they have this vibrant culture they wanted to Showcase so every country built a building that representing their culture they basically each built a castle that represented each country each country a lot of those Castle have been dismantled and moved somewhere else either in the Paris region sometimes back to the country so not everything has been lost but I it was absolutely immense the energy that has been put in this so why I'm talking about this is I think the model we have to bear in mind is not everything for this exhibition was built in one day everything took years and actually there has been several exhibitions in the years before that allowed to prepare to create such a great event and also there's been very

different actors that have been coordinating to create this the effect over for instance was purely privately financed and was designed for the prior exhibition in 89 and it took a few years to be built and yeah and also for the way filter whereas as a side story it wasn't this motto just after as was planned because it was then used as a communication for the war so they found a useful usage for this and the perpetuated but the really important part is how much different kind of people have coordinated and if we look at how cbdc and the crypto ecosystem should cooperate I think the main question is to find the different rules and we are at the moment where cbdc's are just an ID there is some Implement some design

some Inspirations but it's the moment where there is a need of Technologies to help there is a need of public consultation to redesign all the key features there is a need of laying out all the ecosystem around it and I think sometimes some products are not seeing all the scale of what's gonna be necessary around it either if we talk retail or the apps that will connect and so on or word sell how much all the financial system will need to coordinate around this platform and then join it creating Bridges with existing systems and so we can imagine your scale of things for the exhibition there were for instance three major people I might just mentioned so sarabana was a theater woman she owned the theater in Paris she

contributed to create create some of the art events that were on this exhibition gustavi fellow of course was this entrepreneur that so um financed the Eiffel Tower and other buildings he has been successful because he it became immediately a financial successful he he the Eiffel Tower but bear in mind that during the exhibition many entrepreneurs totally fail there were big companies that created huge buildings to promote a new technology a new machinery for instance there was something that would show you the the sky and there was a lens that would allow you to projects like the details of the Moon all the sun on the wall and in equity and and they they went bankrupt at the end of the exhibition because it was too costly to create the

thing and I think it's expected in an ecosystem of different actors participating in the system you will have entrepreneur failing and and that's how it works and finally there were also politicians so here is Amy Lube the president at the time and the politicians in France were actually really Keen to have this event as a way to show the country that were that was a little bit more stabilized after some rough fear in the prior Century that has been Revolution and again a revolution and Invasion by the neighbor and so on so it was a time of peace prosperity of the third Republic establishing the principle that yeah that makes the modern state currently so it wasn't another problem on this and all the sectors are needed

to cooperate currently on cbdc I think we see some sort of a rush to the gold so this is a picture from the time showing the the defect of capitalism and we see a rush for instance of provide the rushing to central banks trying to provide them some bugs and so on but without a clear strategy on how they can continue and maintain the relationship we see a rush of yeah different consultancy trying to on these even Central Bank among themselves are kind of competing in rushing to provision new paper showing that they have the best ideas and I think what we need is a little bit more coordination and be a bit more thoughtful on what's going to be the the next step of this so as a conclusion

this is the rosy feature I envisioned for all of us so it looks a little bit like one century old but I still think it looks pretty cool so one of the tally that was here with different people that attended it was attended by more people that they were in France at the time more than 50 million people attending this exhibition so I think we can consider it a success even if not everything went according to plan and I think that's what we can expect from the interaction between cbdc and the crypto ecosystem thank you [Applause] do we have time for a question

so if you have any question you're welcome thank you [Music] [Music]