for those borrowers unable to access other sources of financing. and while there are potential gains from a shift to market - based financing, whether or not they are realised will depend on how the financial system adapts. as part of its responsibility for identifying, monitoring and taking action to remove or reduce systemic risks, the fpc will monitor any implications of a shift to market - based finance for uk financial stability. there could also be implications for money markets. the smooth functioning of these markets is important for the bank to meet its objectives. any large - scale reallocation of cash around the financial system has the potential to impact how money markets function. hence, there is a risk of some disruption to money markets in the short - term, as new forms of digital money emerge. but in the long run, these markets should adapt to the introduction of new forms of digital money. i have talked so far about the impact of innovation in digital money in normal conditions. but, during a system wide stress, the availability of new forms of digital money could increase the proportion of banks ’ deposits that are withdrawn. private liquidity insurance is calibrated to help mitigate liquidity risks. and, in aggregate, given existing liquidity resources, the banking system should be able to withstand sudden deposit outflows. but there is significant uncertainty around how smoothly such a deposit outflow would unfold, emphasising the importance of banks ensuring they have access to the bank ’ s liquidity facilities. i hope from this you can get the sense of how important this potential innovation in digital money is, and why we must – both domestically and working with international partners – ensure that we understand and respond to the public interest issues that arise here, so that we can do our job of protecting stability, but also so that innovation can happen in a world where the public interest is well defined and protected. i am going to end – since time is up – by merely listing the other elements of public interest that i could, and probably should have covered, with respect to the innovation of digital currency, but which will have to wait for another day. i could have talked about monetary policy and controlling interest rates in a world of digital money. i could have talked about the public interest in competition in the financial system, about financial inclusion, and about data protection and privacy. i could have talked about the potential for digital money to speed up and reduce the transactions cost of international payments and transfers. and, finally, we cannot

). https : / / arxiv. org / abs / 1112. 1754 for example, cristelli, pietronero and zaccaria ( 2011 ) and napoletano, gaffard and babutsidze ( 2012 ). baptista et al ( 2016 ) and braun - munzinger, liu and turrell ( 2016 ). baptista et al ( 2016 ). all speeches are available online at www. bankofengland. co. uk / speeches we typically define models as simplified abstractions of reality, partly for reasons of practicality given humans ’ limited capacity to track too many moving parts. but computers these days can keep track far better than any human. if the largest abms have a dimensionality greater than our population, why not model the economy at its highest possible resolution? why be abstract if you can be exact? that would be a very different conception of the term “ micro - founded ”. this may sound like science fiction. yet we already have practical examples of just that, starting at the highest level of resolution – the firm. in 1956, jay wright forrester, an electrical engineer, switched from devising systems for detecting incoming soviet nuclear bombs to designing systems for understanding production problems in companies. he developed the first computer models of how companies operated. in so doing, he founded the discipline that would become “ system dynamics ”. 32 in line with forrester ’ s initial insight, one of the most interesting developments recently when understanding the dynamics of companies is the creation of so - called “ digital twins ”. 33 these are a dna - level digital clone of a company, tracing the interactions among its moving parts. a digital twin is a high - resolution, dynamic model of a firm - level micro - economy that can be used both to understand and to simulate a company ’ s operations, however complex. their use among frontier companies is increasingly commonplace. the data necessary to calibrate these digital twins is considerable, but also increasingly commonplace. 34 twenty years ago, the large american retailer walmart created a system allowing them, and their suppliers, to monitor their complex supply - chain in close to real time. 35 this transformed inventory management at walmart and its suppliers. twenty years on, these real - time data systems are rapidly becoming the norm. at the next level of resolution, could a digital twin be created at a town or city level? having started with the firm, jay wright forrester ’ s next project was