bis innovation summit – 22 march 2022 central banks in a dlt world speech by francois villeroy de galhau, governor of the banque de france press contact : mark deen ( mark. deen @ banque - france. fr ) page 1 sur 3 ladies and gentlemen, it is a great pleasure and honour to give this opening speech of the second bis innovation summit, which illustrates central banks ’ commitment in new technologies, notably through the bis innovation hub. since their creation almost fifteen years ago, distributed - ledger technologies ( dlts ) have evolved and opened up new possibilities, building alternative circuits and removing intermediaries, supporting new solutions and use cases. are these disruptions as powerful as those brought by the invention of internet three decades ago? it may be too early to tell, but dlts are expanding at a fast pace, and have the potential to bring about far - reaching changes. the invention of bitcoin, the first crypto - asset, stemmed from the desire to build a new “ currency ” – i emphasise the quotation marks here –, outside the remit of states and central banks. that was back in 2008, and what we have observed since then is that the use of bitcoin as a means of payment remains very marginal, because it does not feature any of the fundamental characteristics of currency. nor is it a store of value, but rather a speculative asset, somewhat similar to the dutch tulip bulbs from the 17th century. the most disruptive feature of bitcoin was its underlying technology, which has since then been offered in different versions of dlt underlying various types of assets and uses. second - generation crypto - assets now embed smart contracts that have led to the development of new services and products, the last being nfts ( non - fungible tokens ). among second generation crypto - assets, so - called stablecoins or backed - assets try to reduce their volatility by anchoring themselves to fiat currencies and sovereign assets. still, they create fragmentation, and are fraught with regulatory and operational uncertainties. here too there are historical precedents : free banking in the 18th and 19th centuries, when each private bank issued its own banknotes. it had major drawbacks, such as credit risk embedded in settlement assets. the introduction of central bank money as a common and safe settlement asset was a major breakthrough and since then has become the rule – in the best interest of all

that high inflation imposes significant hardship as it erodes purchasing power, especially for those on fixed incomes and those least able to meet the higher costs of essentials, including housing, transportation, and food. that is why my colleagues at the fed and i are so committed to returning inflation to our target. monetary policy so, what does the current state of the economy mean for the policy rate we set at the fed? at the most recent meeting, three weeks ago, my colleagues and i on the fomc decided to maintain the target range for the federal funds rate at 5 - 1 / 4 to 5 - 1 / 2 - 4percent. i believe that our policy rate is in restrictive territory as we continue to see the labor market come into better balance, and inflation decline although nowhere near as quickly as i would have liked. the fomc noted that it does not expect it will be appropriate to reduce the target range until it has gained greater confidence that inflation is moving sustainably toward 2 percent. in making judgements about the appropriate stance of policy rate over time, i will be carefully assessing the incoming data, the evolving outlook, and the balance of risks. at its last meeting, the fomc also decided to continue the process of reducing our balance sheet, but at a slower pace. the cap on treasury redemptions will be lowered from the current $ 60 billion per month to $ 25 billion per month as of june 1. consistent with the committee ’ s intention to hold primarily treasury securities in the longer run, we ’ re leaving the cap on agency securities redemptions unchanged at $ 35 billion per month. we will reinvest any proceeds in excess of this cap in treasury securities, as detailed in the may 1, 2024 operating policy statement published by the federal reserve bank of new york. 2 the housing market the fed sets policy to promote its dual - mandate objectives of maximum employment and price stability, and employment and inflation depend on conditions in the entire economy. still, given our gathering today, i thought it would be appropriate to dive a bit deeper into the housing and home finance markets. see federal reserve bank of new york ( 2024 ), statement regarding reinvestment of principal payments from treasury securities, agency debt, and agency mortgage - backed securities, may 1, https : / / www. newyorkfed. org / markets / opolicy / operating _ policy _ 240501. - 5as i said earlier, the housing sector is