And, to explore what could be genuinely new under the sun, we are researching the policy and technical issues posed by Central Bank Digital Currencies. On some levels this is appealing; people would have direct access to the ultimate risk-free asset. In the extreme, however, it could fundamentally reshape banking 24  including by sharply increasing liquidity risk for traditional banks. This last point underscores that, in order for FinTech’s potential to be realised, authorities must manage its impact on financial stability. On the positive side, FinTech could reduce systemic risks by delivering a more diverse and resilient system where incumbents and new entrants compete along the value chain. At the 20  Carney, M ‘The Spectre of Monetarism’ speech given at the Roscoe Lecture, Liverpool John Morres University, 5 December 2016 Followed by its regulatory sandbox in 2015. See: https://www.fca.org.uk/firms/project-innovate-innovation-hub/regulatory-sandbox 22 The PRA and FCA launched a New Bank Start-Up Unit in January 2016 to more effectively manage interactions with potential new entrants with innovative business models. To date, some four digital banks have been authorised. 23 Given RTGS is critical infrastructure supporting real economic activity, such access should come with proportionate responsibilities. New non-bank entrants would be required to meet liquidity and operational resilience requirements. A fuller account of the market dynamics can be found in Carney (2016). 24 Carney, M ‘Enabling the Fintech transformation: Revolution, Restoration, or Reformation’ speech given at Mansion House 16 June 2016.

With hundreds of millions now entering the digital financial system every year, could higher economic growth and a quantum leap in social equity be on the horizon? Or will the range of new financial technologies primarily make existing institutions and markets more efficient and effective? No small prize but hardly a transformation. 1  See Ernst and Young, (2016), “FinTech on the Cutting Edge”: http://www.ey.com/uk/en/industries/financial-services/banking--capitalmarkets/ey-uk-fintech-on-the-cutting-edge 2  All speeches are available online at www.bankofengland.co.uk/speeches  2  Of course, technological innovation has long been twinned with finance. Today’s system is the product of past advances, beginning with the simple ledger in the fifteenth century. Building on this foundation, a range of innovations – from the telegraph in the 1860s to the digitalisation of the ledger a century later – have created the plumbing of modern payments, clearing and settlement infrastructure necessary for global financial institutions and cross-border, wholesale markets. More recently, customer access has been opened up with the introduction of the first automated teller machines of the 1960s, the arrival of online banking and brokerage in the 1980s, and the rapid rise of mobile banking since the millennium. Despite these advances, finance continues to be arranged around a series of hubs like brokers, clearing houses and exchanges; whereas in other domains, people are increasingly forming connections directly, instantaneously and openly, revolutionising how they communicate, work, and live. The extent to which finance could be redrawn depends on superficially arcane, but fundamentally vital, enabling technologies.