, as would the relationship between a cbdc and euro banknotes and coins, along with the process by which one could be exchanged for the other. should it not be acknowledged that the ecb ’ s exclusive right to authorise issuance in euro would also be applicable to a digital issuance? a retail cbdc could be based on digital tokens, which would circulate in a decentralised manner – that is without a central ledger – and allow for anonymity towards the central bank, similar to cash. some argue that a token - based digital currency might not guarantee complete anonymity. if that proved to be the case, it would inevitably raise social, political and legal issues. we are currently looking into the legal questions raised by the potential use of intermediaries to facilitate the circulation of a cbdc and also the processing of transactions in a cbdc. to what extent are we permitted to outsource public law tasks to private entities? and what would be the appropriate extent of supervision over such entities? alternatively, a retail cbdc could be based on deposit accounts with the central bank. though involving vast numbers of accounts, it would not be a particularly innovative option from a technological viewpoint. for the euro area, it would basically mean increasing the number of current deposit accounts offered from around ten thousand to between 300 and 500 million. a cbdc of this nature would enable the central bank to register transfers between users, thereby providing protection against money laundering and other illicit uses ( or those considered illicit by the rulers of the day ), depending on the degree of privacy granted to users. these are just two of the many ways to design a cbdc. we are currently scrutinising the various options to assess their potential impact – both positive and negative – on the financial system and on our ability to honour our mandate. disintermediation – economically inefficient and legally untenable you may wonder why central banks have not chosen to provide retail access to central bank money, despite the technology for an account - based cbdc already being largely available. the main reason is that introducing a retail cbdc could have major consequences for the financial system. 2 / 4 bis central bankers'speeches if households were able to convert commercial bank deposits into a cbdc at a rate of 1 to 1, they may find it far more attractive to hold a risk - free cbdc rather than bank deposits. during a systemic banking crisis, this could trigger digital bank

the members. even if all supervisors cannot participate directly in the work of the committee, all are given the opportunity to comment before our products are final. the issues the ilg is currently working on were suggested by the non - basel committee members. these issues include risk - based supervision, provisioning and microfinance, which i touched on earlier. this helps the entire supervisory community to have a common understanding of the issues. the development of sound standards is only the first step and the critical next step is implementation. supervisors must diligently implement the standards and consistently ensure that banks are adhering to and practicing the standards. this is another of the lessons learned during the crisis. sound fundamental principles of credit and liquidity risk were not practiced. to help improve implementation of our sound guidance and standards, the committee has broadened the mandate of the accord implementation group. the new standards implementation group ( sig ) will continue to concentrate on issues relating to basel ii implementation but will also focus on all risk management guidance and standards. conclusion i hope my remarks this morning have given you a sense of the direction in which supervision is moving. the stress witnessed over the past two years revealed major weaknesses in risk management or supervision that were not previously identified. there have certainly been a number of lessons that can already be drawn from this crisis. for supervisors, this includes greater focus on taking a system - wide approach to supervision and identifying potential regulatory gaps. it has also reinforced the committee ’ s longstanding commitment to crossborder cooperation. the crisis has focused the spotlight on capital adequacy and strong liquidity and has spurred extensive consideration of ways to mitigate procyclicality. the financial crisis has also exposed many egregious examples where bankers have strayed from the basic principles of risk management and supervisors did not sufficiently follow - up to ensure implementation. getting “ back to basics ” means banks and supervisors need to ensure risk governance and supervisory frameworks are underpinned by a strong foundation. in the case of supervisors, these are the basel core principles. the crisis has reminded us of the importance of sound standards and has underscored that this must be accompanied by implementation and rigorous supervisory follow - up.