We are seeing signs that international banks are delving into the digital asset custody services space, with offerings such as structured products and trading in crypto derivative markets. Through distributed ledger technology, blockchain platforms enable banks to offer payments capabilities for settlement through tokenised assets. Crypto assets are rapidly growing, offering decentralised finance. As recent turmoil in digital asset markets have illustrated, the waters between where we are now and a digitalised world are particularly choppy. Established banks must not let commercial pressure to adopt new technologies or enter digital asset markets get in the way of first ensuring that they can properly understand and manage the associated risks. I would place particular emphasis on our operational resilience expectations and how banks should use these to inform technology investment decisions. As regulators we are considering the impact of technological developments on the sector and the future of finance, both for new entrants and existing entities. Our operational resilience expectations help in this regard. But we also want to see firms working together on market disciplines towards operational resilience in the financial sector. A good example is critical thirdparty providers, a subject on which HMT published a policy statement. [3] In the new world, relationships with critical third-party suppliers are becoming as important as the relationships with large financial counterparties that international banks had established over many years. That is a sign of the rising prominence of operational vs. financial matters in that new world – less of an afterthought.

Over the last two decades, China has grown into one of the two largest economies in the world. At the same time, authorities are constantly announcing new steps to increase the renminbi (RMB) convertibility and develop its use in international transactions. It is therefore natural to wonder whether the RMB will emerge as a major international currency in the foreseeable future. In line with my introductory remarks, I will refrain from any geopolitical speculation on this question and present a few technical – and personal – remarks on the nature of a global currency. What does it take to become a reserve currency? It is generally assumed that this status brings important privileges, some of them “exorbitant”. It is also forgotten that it comes with significant obligations. First, being a reserve asset means that the currency enjoys full and unconditional capital account convertibility towards both residents and non-residents. The economy is therefore fully integrated with global capital markets and fully exposed to external financial shocks. This creates a very demanding environment. Convertibility essentially means that you accept the judgment of “foreigners” as to the true value and purchasing power of your domestic currency. Although it is not often perceived as such, it entails some abandonment of sovereignty, through the loss of some independence in monetary policy. This is the famous “Mundell trilemma”: no country can simultaneously have a fixed exchange rate, full capital  2  BIS central bankers’ speeches  convertibility and monetary policy independence. Indeed, all reserve currencies today have fully flexible exchange rates.