even if it seems like a distant prospect – every single person will have to have an account with a private entity just to make payments. unfortunately, this may lead to increased levels of financial exclusion. note that we still have vulnerable groups which, for one reason or another, are underbanked. therefore, amid the evolving payments market, one of the key motivations for the retail cbdc is to ensure people ’ s continued access to the central bank money. - - beyond payments, cbdcs could have important and, perhaps, desirable implications in other areas as well. some say that issuance of the interest - bearing retail cbdc could potentially improve the transmission of monetary policy – if indeed it is used widely. first, it may strengthen the passthrough of the policy rates to deposit and lending rates. second, the cbdc may alleviate the effective lower bound constraint, making it possible to go deeper into the negative territory. arguably, the retail cbdc could also have positive effects on financial stability. commercial bank money bears liquidity risks : for instance, the risk of commercial bank default. central bank money – by definition – is more secure than claims on any private financial institution. this holds true despite the existing deposit insurance schemes and no matter how sound the banking system is. even the finest financial supervisor will not beat the textbook truth. knowing this, the retail cbdc would further ensure that the funds stored in bank accounts can indeed be easily converted to risk - free central bank money. this could provide confidence in the 2 / 4 bis central bankers'speeches monetary system. - - dear colleagues, i am not sure if a digital coin has a reverse side. but a proper physical one certainly does. so let ’ s look at the other side of the coin – the underlying risks and uncertainties related to the cbdc. let me begin with the retail version of the currency. as a matter of fact, we could have introduced it a while ago, at least the account - based model. the technology to do so is available. however, this has not been done, and probably for a reason. the issue here is that central bank money being risk - free also means that the retail cbdc would be a safe asset. as such, it might essentially substitute for, let ’ s say, bank deposits. being more secure, and more convenient than cash, it could also be more attractive relative to a claim on a private bank. such a substitution effect could facilitate a flight towards

assets, with the qfii quota fully utilized. portfolio consists of chinese government bonds only. however, i have some very recent news to share. just last week the board of the bank of lithuania made a decision to double our china on - shore exposure – up to an equivalent of eur 200 million. given the diversification benefits of the renminbi denominated assets, we consider this to be a logical next step in terms of our engagement in china. especially seeing that the market is maturing, and that the volatility in market interest rates has been decreasing over the recent years. going forward, we do see a potential of increasing our stake in this geographical region further. but, at the same time, we would like for some of the existing bottlenecks to be removed – encouraging further involvement of international investors. these are obstacles that we ourselves can identify based on our own practical experience. first, more clarity is needed on some of the financial market regulations. for instance, china ’ s foreign exchange regulator has decided to abolish quota restrictions on the qfii. however, an official ruling is yet to come out. some uncertainty remains regarding taxation as well. there is a lack of clarity on whether and how capital gains or coupons on some bonds would be taxed after november 2021 – and this can already influence current investment decisions. another barrier is the lack of interest rate hedging tools – for instance, foreign investors have not been allowed to trade bond futures yet. 2 / 3 bis central bankers'speeches finally, chinese policy bank bonds still remain outside of the eligible investment universe – due to the lack of explicit chinese government guarantees for these issuers. if such guarantees were provided, the highly liquid policy bank bonds could become a very attractive investment option. overall, there is surely room for china to attract more foreign institutional investors to china ’ s government bond market. the foreign institutional investor share has increased over the recent years – but there is a lot of potential for further growth. especially compared to other bond markets. on average, foreigners – both retail and institutional investors – hold a larger share of emerging market government bonds than china government bonds. and foreign ownership share is almost five times larger in case of the us or the oecd, and about eight times larger in case of germany. ladies and gentlemen, let me conclude with a few broader strokes on the future for renminbi internationalization. a more prominent international role for the currency would require a more