denis beau : the challenges of the digital euro speech by mr denis beau, first deputy governor of the bank of france, at the conference " the new challenges of financial regulation ”, organised by labex refi, paris, 19 november 2021. * * * over the past two years, most central banks around the world have been giving increasing thought to the idea of creating a digital form of their currency, a central bank digital currency ( cbdc ), to maintain the stabilising role of central bank money in a rapidly changing payments landscape : according to the bis, about nine out of ten central banks have reported that they have launched studies. to date, only two retail cbdcs have been introduced ( in caribbean archipelagos : the sand dollar in the bahamas and dcash for the organisation of eastern caribbean states ), but over twenty pilot projects are underway around the world. this observation naturally raises questions about the timing, form and role of central bank money in tomorrow ’ s payments landscape and about the role of banks and commercial bank money in a world of stablecoins and central bank digital currencies. from my point of view as a central banker responsible for ensuring that our payment system functions properly, it is difficult to answer these questions on the role of banks with anything other than caution yet confidence for two main reasons, on which i would like to focus my introductory remarks at this point : first, the stability of our payment system does not rest solely on our ability to make our central bank money available in digital form, and second, the effective introduction of such a digital currency raises complex problems that cannot be solved to the detriment of commercial banks in order to produce the expected effects. 1. the stability of our payment system does not rest solely on our ability to provide a cbdc changes in payment expectations and habits resulting from the digitalisation of our economies, the implementation of new technologies such as distributed ledgers, the emergence of new players such as fintechs and bigtechs, and the development of the use of new settlement assets such as crypto - assets are likely to profoundly alter our euro payments ecosystem. these innovations have the significant potential to improve the functioning of our payment system, in particular by making payment means simpler, easier and cheaper to use, and faster if not instantaneous. however, these innovations also carry risks for the smooth functioning of our payment system. in order to fully understand the scope of these risks, i believe it is important to recall the organisational

principles of our payment system, which are at the root of its efficiency and stability. a - the organisational principles of our payment system the first is the dominance of currencies linked by a legally binding rule of convertibility at par : central bank or public money, and commercial or private money, issued by regulated financial sector players, first and foremost banks. the second is that only central bank money is legal tender and must therefore be accepted by all. the third is the complementary roles played by the dominant currencies : central bank money fulfills an integrating and anchoring function that guarantees the efficiency and stability of our payment system, while commercial money, and the services associated with it, which are traded on a highly competitive market, plays a key role in trade and the financing of the economy. 1 / 5 bis central bankers'speeches b - the risk of calling into question the foundations of the efficiency and stability of our payment system however, these foundations are threatened by the diffusion of innovations across the payments field, which has been sped up by the health crisis and social distancing, if no measures are taken to preserve them. indeed, the reduction in the use of banknotes for transaction purposes and the prospect of the development, within the networks of the major global players in digital services, of crypto - assets as a means of payment, whose link with central bank money is complex and fragile, to say the least, if not non - existent for some, are likely to call into question the integrating and anchoring role that central bank money plays in our payment system. these threats are reflected in a rise and a change in the dimension of the risks that any wave of innovation naturally carries, and which the health crisis has helped to amplify. first of all, there are risks of a setback in terms of efficiency. two risks are likely to change in scope : - the risk of fragmentation of the payment system, both for everyday trading and between financial players due to a lack of secure and efficient structural interconnection, through convertibility at par between crypto - assets and central bank money, between old and new payment solutions. - the risk of concentration, or even the emergence of monopolistic situations for the benefit of global digital giants and their private settlement assets, and therefore of europe ’ s increased dependence in terms of payment services vis - a - vis foreign players, with the associated issues of personal data protection and industrial and monetary sovereignty. then there are risks of a