and the references therein. a closely related debate is whether default is costly or not for sovereigns in the long term ( see for example e. borenzstein and u. panizza, “ the cost of sovereign default, ” imf working paper 08 / 238 ; and m. aguiar and g. gopinath, “ defaultable debt, interest rates and the current account, ” journal of international economics, 2006 ). the case for public intervention when markets collapse has been made in the light of the recent financial crisis in p. bolton, t. santos and j. scheinkman, “ outside and inside liquidity, ” quarterly journal of economics, 2011 ; f. heider, m. hoerova and c. holthausen, “ liquidity hoarding and interbank market spreads : the role of counterparty risk, ” european central bank working paper 1126, 2009. for public intervention in form of asset purchases, see j. tirole, “ overcoming adverse selection : how public intervention can restore market functioning, ” american economic review, 2012 ; and t. philippon and v. skreta, “ efficient interventions in markets with adverse selection, ” american economic review, 2012. see d. diamond and p. dybvig, “ bank runs, deposit insurance, and liquidity ”, journal of political economy, 1983. in fact, it is optimal for ex - ante efficiency to expose banks to liquidity risk, see c. calomiris and c. kahn, “ the role of demandable debt in structuring optimal banking arrangements, ” american economic review, bis central bankers ’ speeches of last resort, but to perform that function at a penalty rate, illustrates both the need for ( liquidity ) insurance and the need to safeguard incentives. in the words of bagehot : “ if the banks are bad, they will certainly continue bad and will probably become worse if the government sustains and encourages them. ” the art of central banking is the art of balancing ex - ante and ex - post efficiency. 3. omts and committing to partial insurance the purpose of the omts is to establish a backstop in the event of negative self - fulfilling market dynamics. we designed this new programme with features that are in line with an efficient trade - off between insurance and incentives. the first feature is to provide effective insurance against redenomination risk. under certain conditions, the ecb stands

more than 1, 500 vcs in circulation, with dozens of new schemes being launched monthly. the total value outstanding has fluctuated sharply, largely because of speculative activity, and most have failed to attract users. yet authorities need to be aware of the potential risks they pose for the economy. are vcs the latest incarnation of money? the answer for now, and indeed for the foreseeable future, is no. what is money? economists identify money as a verifiable asset that serves as a medium of exchange, a unit of account and a store of value. how well do vcs carry out those functions? first, vcs ’ performance as a medium of exchange is weak – to say the least. some have attained patchy acceptance – the largest at present, bitcoin, is accepted by some retail outlets. but on a global scale these outlets remain small in number, and hardly any actual transactions take place. 1 / 5 bis central bankers'speeches on a daily basis, there are around 200, 000 bitcoin transactions globally, compared with 330 million retail payments in the euro area. bitcoin is far inferior to existing payment options. transactions generally require confirmation from six miners, which can take an hour, or potentially much longer due to network congestion. bitcoin payments are also expensive : the cost varies over time, but reached €25 in december 2017. and even if recent claims put the price at between €1 and €30 and the processing time at under ten minutes, this compares poorly to 0. 2 euro cents and a maximum of ten seconds for transactions on the forthcoming target instant payment settlement ( tips ) service. the second function of money is acting as a unit of account, without which buyers and sellers would not be able to measure the value of a particular good or service. vcs fail this test – none of them are generally accepted as a unit of account. in part this is due to the lack of widespread recognition. vcs are not legal tender and are not backed by a central bank. moreover, their prices are too volatile to establish a reference value. but the lack of acceptance as a unit of account is also down to the third function of money – being a store of value. vcs exhibit wild fluctuations in value. for instance, the average volatility of the top ten vcs by market capitalisation was more than 25 times higher than that of the us equities market. such fluctuations mean that businesses setting prices in