yves mersch : distributed ledger technology - role and relevance of the european central bank speech by mr yves mersch, member of the executive board of the european central bank, at the 22nd handelsblatt annual conference " banken - technologie ", frankfurt am main, 6 december 2016. * * * introduction today ’ s discussions have revolved around digitalisation and new technologies and how they might change the banking business of tomorrow. roy charles amara, a researcher and scientist, once said that “ we tend to overestimate the effect of a technology in the short run and underestimate the effect in the long run ”. the internet is a case in point. some of the wilder predictions during the “ hype ” phase never came to pass. that said, no one can deny how powerfully it has insinuated itself into our daily lives, fundamentally changing how we communicate and process information, and no one can know where it will take us next. whether or not we will overestimate distributed ledger technology ( dlt ) in the short run and underestimate it in the long run remains to be seen. however, i am sure we can agree that dlt currently stands in the limelight. a lot has been said about the potential impact of dlt on the roles and services of central banks. in particular, questions related to whether or not central banks should move central bank money to dlt and whether there is a need for issuing central bank digital currency. consequently, i think it ’ s time to frame the discussion. this speech will : 1. outline the ecb ’ s position on dlt ; 2. discuss possible scenarios for adoption ; and 3. shed light on the global interaction between central banks in the field of dlt. financial innovation transforming market infrastructure services the internet, mobile phones and tablets have changed the way we communicate, the way we shop, the way we store information – frankly, the way we live. the financial industry is experiencing similar change. we refer to it as fintech – innovations that could result in new business models or products with disruptive potential in the financial sector. dlt is a focal point in fintech as its perceived opportunities are the key motivation for market participants, infrastructure providers and central banks to explore the technology. in our reflections around dlt, we need to bear in mind that the possible impact of dlt depends on how market players ultimately decide to embrace it. in the abstract, three scenarios can be imagined :

based tools of monetary policy. figure 2 : monetary base and broad money 2001 - 2022, both in nz $ billion14 broad money ( left axis ) dec 21 feb 21 apr 20 jun 19 aug 18 oct 17 dec 16 feb 16 apr 15 jun 14 aug 13 oct 12 dec 11 feb 11 apr 10 jun 09 aug 08 oct 07 dec 06 feb 06 apr 05 jun 04 aug 03 oct 02 dec 01 monetary base ( right axis ) _ _ _ _ _ _ _ _ _ _ _ _ 12 for example, the federal reserve under greenspan placed increasing emphasis on managing the federal funds rate, and gave less and less prominence to monetary aggregates through the 1980s and 1990s. in september 1998, the federal open market committee ( fomc ) initiated the practice ( which is still in practice ) of announcing a target for the federal funds rate following each of its meetings. in june 2000, the fomc stopped announcing target ranges for money growth. in 2008, the federal reserve was given the authority to start paying interest on reserves ( called interest on reserve balances ( iorb ). see : why did the federal reserve start paying interest on reserve balances held on deposit at the fed? does the fed pay interest on required reserves, excess reserves, or both? what interest rate does the fed pay? | sf fed ( frbsf. org ) and also : keister, t., martin, a., mcandrews, j. ( 2008 ). divorcing money from monetary policy. frbny economic policy review, 41 - 56. and : kiester, t. and mcandrews, j. ( 2009 ). why are banks holding so many excess reserves? frbny economic policy review, 15 ( 8 ), 1 - 10. 13 changes to the liquidity management regime - reserve bank of new zealand - te putea matua ( rbnz. govt. nz ) 14 all data accessible on the rbnz website, specifically : influences on settlement cash ( d10 ) - reserve bank of new zealand - te putea matua ( rbnz. govt. nz ) and depository corporations : money and credit aggregates ( c50 ) - reserve bank of new zealand - te putea matua ( rbnz. govt. nz ) new zealand ’ s monetary policy implementation framework unclassified ref # x750533 v3. 4 broad money creation broad money is the sum of all liquid financial instruments accepted as a