types of open market operations are longer term refinancing operations, fine - tuning operations and structural operations. for more information, see european central bank, the monetary policy of the ecb, 2011, 104 - 108. keynote _ governor _ aedbf _ 30 _ nov _ 2018 _ final. docx 3. secondly, the eurosystem implements monetary policy by setting the interest rates on its standing facilities on the basis of article 18. 1, second indent of the statute of the escb. standing facilities provide or absorb liquidity with an overnight maturity on the initiative of counterparties. two standing facilities are available to commercial banks : the marginal lending facility ( to obtain intraday credit to cover shortages in liquidity ) and the deposit facility ( to make overnight deposits of excess liquidity ). thirdly, according to article 19. 1 of the statute of the escb, the ecb may require commercial banks to hold minimum reserves ( or compulsory deposits ) on accounts with the eurosystem central banks. the intent of the minimum reserve system is to create ( or enlarge ) a structural liquidity shortage : an increase of minimum reserves entails a reduction of liquidity in the market and vice versa. the reserve requirement of each institution is determined in relation to elements of its balance sheet. 2. 2 money creation and fractional reserve banking so how, then, is money created in practice? let me clarify this process through the monetary policy instrument of the minimum reserves. commercial banks are limited in the total amount they can loan to customers by, among others, their required minimum reserve ratios which oblige a commercial bank to keep a minimum, predetermined percentage of its deposits in an account with the central bank. this is called the system of fractional reserve banking because commercial banks are required to only hold a fraction of their total deposits in a central bank account. in practice, if the central bank imposes a required minimum reserve ratio of, say, 0. 10, then each commercial bank is obliged to keep at least 10 % of its total deposits as reserves, i. e. in the account it has with the central bank. the process of money creation can be illustrated with the following simplified example : when a person deposits 100 eur in a commercial bank, this bank will keep 10 eur as reserves in the central bank. to make a profit, the commercial bank loans the remaining 90 eur to another customer. this customer spends the 90 eur

supervision of payment institutions and institutions for electronic money. 17 see article 3, ( k ) of the payment services directive. this article excludes services based on specific payment instruments that can be used only in a limited way when ( i ) the payment instruments allow the holder to acquire goods or services only in the premises of the issuer or within a limited network of service providers, or ( ii ) when these instruments can be used only to acquire a very limited range of goods or services. a third exclusion ground exists when the payment instruments are only valid in a single member state and are provided at the request of an undertaking or a public - sector entity and regulated by a national or regional public authority for specific social or tax purposes to acquire specific goods or services from suppliers having a commercial agreement with the issuer. 18 european central bank, virtual currency schemes – a further analysis, february 2015, 24. 19 idem, 24. the crypto - community is, however, looking for solutions to this problem, e. g. through the creation of stablecoins. see https : / / medium. com / fintech - weekly - magazine / stablecoins - what - are - they - actually - fora1bc0732e472. keynote _ governor _ aedbf _ 30 _ nov _ 2018 _ final. docx 6. used as a medium of exchange, since in this case cryptocurrencies would usually be converted back to regular money as soon as the transaction is settled 20. financial stability risks may, on the other hand, appear if cryptocurrencies were to be widely perceived as a proper store of value, which they are not. this is because unlike commodities such as oil and gold, cryptocurrencies have no intrinsic value. they are nothing more than lines of computer code. neither do they carry any legal value, in that they are not backed by a sovereign entity as is the case for regular money. the value of cryptocurrencies therefore depends on self - fulfilling expectations, which renders them conducive to speculation and to bubbles 21. finally, cryptocurrencies could pose a considerable risk for monetary policy and financial stability if they were to be generally accepted and used as units of account. in this case cryptocurrencies would substitute for the bulk of regular money, including central bank money. there is doubt, however, that cryptocurrencies would ever become trusted units of account,