yves mersch : virtual currencies ante portas speech by mr yves mersch, member of the executive board of the european central bank, at the 39th meeting of the governor's club of the central asia, black sea region and balkan countries, bodrum, turkey, 14 may 2018. * * * new innovations based on distributed ledger technology ( dlt ) and blockchain have brought about wide - spread euphoria. their use to create “ cryptocurrencies ” or “ virtual currencies ” ( vcs ) – to denote their lack of legal recognition – is often touted as something that could fundamentally change the financial sector. the spectacular rise in the market valuation of vcs over the past year suggests that many people shared this belief. in the course of 2017 the global vc pool both deepened, from usd 30 billion to usd 400 billion, and widened, with the proliferation of “ initial coin offerings ” or “ icos ” – virtual fundraising facilities for start - up investors. 1 but in my view, the subsequent market plunge rather points to a fading fad. from december to february the price of bitcoin, the top dog among vcs, fell from almost usd 20, 000 to below usd 7, 000. don ’ t get me wrong : i am an ardent believer in progress through innovation. technological progress can provide us with significant efficiency gains and increases in general welfare. perhaps dlt and blockchain can do just that2 but i am very sceptical towards the use of these technologies to create currency. although they combine decentralised payments and label them as currency, vcs are still not legitimised by any authority. moreover, vcs rely on financial intermediation via exchanges and wallet providers to reenter the real economy. any fiat money requires trust to gain and maintain the acceptance of those who use it. indeed, history has shown that confidence in public money is best provided by a trusted issuing authority, that is, an independent central bank issuing safe and stable liabilities that people can access and hold. trust in a central bank, in turn, is created and sustained via legal safeguards, a clear price stability mandate and a sufficient degree of democratic accountability. in contrast, nobody is liable for vcs, nor are they backed by any trustworthy authority. under these circumstances, it may well be that vcs will fail, as so many other earlier forms of money did. there are, at present,

campaign ". this campaign focuses on four main themes : the visual appearance of the banknotes, their security features, their denominations and the common changeover modalities. it is designed to complement the other information campaigns on the euro, particularly those run by the national authorities in each euro area country. naturally, and as i mentioned earlier, we are also relying on the efforts of the banking community in this regard. at the end of the day, no television advertisement or billboard can replace the direct and immediate advice which competent bank employees can give to their customers. ladies and gentlemen, roughly a year from now, we shall finally be using the new euro banknotes and coins and our national currencies will no longer be in circulation. however, even then, the euro area will still not completely function as a truly unified currency zone. as i mentioned earlier, euro area financial markets are not yet fully integrated. i would also like to draw your attention to another area, which directly concerns the banking community, and where the potential benefits of the euro have yet to be fully exploited. i am referring to the price differential that continues to exist between cross - border retail payments within the euro area and those within individual member states. like the cash changeover, this is another area where the banking community has a crucial role to play in securing the full benefits of the common currency. i appreciate that this also represents a substantial task. however, once european businesses and citizens are using the euro for their everyday transactions, the provision of low - cost, efficient cross - border retail payment services will undoubtedly become a clear policy priority. finally, returning to the title of my speech " where are we 11 months before e - day? ", i would say that so far we are well on track. even before the introduction of euro banknotes and coins, the euro has already delivered much of what was expected. we regard these achievements with some satisfaction. nonetheless, this does not mean that we are complacent. the enormous challenge of the cash changeover still has to be met and, despite all past and ongoing work, a lot remains to be done. even after the changeover, the ecb does not anticipate settling down to " business as usual " anytime soon. our objective is to make the euro a lasting success. i am confident that - by also building on our good working relations with the banking community - we shall continue to succeed in this endeavour. thank you ladies and gentlemen.