yves mersch : digital base money - an assessment from the european central bank's perspective speech by mr yves mersch, member of the executive board of the european central bank, at the farewell ceremony for mr pentti hakkarainen, deputy governor of the bank of finland ( suomen pankki ), helsinki, 16 january 2017. * * * we are living in digital times. the internet and portable online devices have radically transformed the way we use and exchange information, and the way we exchange money. money has been digitalised in many ways and we can now, for instance, transfer bank deposits electronically and pay with e - money. today i will focus on one type of digital money – central bank digital currency, or digital base money ( dbm ). this is money that is characterised by two features : ( 1 ) like banknotes in circulation, dbm is a claim on the central bank ; ( 2 ) in contrast to banknotes, it is digital. of course, dbm already exists. commercial banks and some other types of institution hold digital claims on central banks in the form of deposits. but there has been more recent discussion about whether central banks should provide dbm to a wider range of counterparties, allowing non - banks, including households, to hold accounts at the central bank. the people ’ s bank of china, the bank of england and sveriges riksbank have published on this topic or have indicated that they are conducting some work on it. i see two main reasons why this discussion on dbm has been started. first, electronic payments have become increasingly popular. there are already a number of electronic payment methods provided by the financial industry, such as credit, debit and pre - paid cards. but these methods are based on commercial bank money and people may prefer to hold claims on the central bank to avoid the risk that the commercial bank defaults. from this perspective, an increasing demand for dbm could emerge. second, some technological developments may now render the introduction of dbm much easier and potentially less expensive than ten years ago. this includes distributed ledger technology, or dlt, a variant of which is used for bitcoin. these are good reasons to start a discussion on dbm and for research to understand better the options available for dbm and their implications for central banks in fulfilling their mandates. in some european countries, for instance in sweden and denmark, electronic payments have started crowding out the use of cash. this

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