a monetary system to function hinges on the public ’ s confidence in the system. this also applies to the digital euro. if, at the end of the project, a decision should be taken to introduce a digital euro, a further component would be added to our monetary system. however, interventions in a complex system are always also associated with risks, as not all the consequences can be predicted with certainty. two main risks to the financial system are highlighted. one of the two risks is a well - known one : bank runs. in future, the digital euro would enable citizens, in the event of tensions in the financial system, to convert their overnight bank deposits into central bank money in seconds with a few mouse clicks or “ touches ”. in extreme cases, this could bring many banks to their knees if they encounter liquidity problems due to rapid outflows of deposits. us ( united states ) economist perry mehrling put it in somewhat martial terms : “ liquidity kills you quick, ” [ 2 ] naturally meaning a lack of bank liquidity. supervisors, governments and central banks have introduced insurance systems to protect against bank runs. however, we are still well - advised to remain vigilant. identifying and controlling risks at an early stage remains one of the key takeaways from the 2008 financial crisis. depending on the design of the digital euro, however, i believe that these risks can be managed. more on this topic later. the other risk is referred to as structural disintermediation : bank customers could shift a significant proportion of their bank deposits from their current or other deposit accounts to cbdc ( central bank digital currency ). for commercial banks, this would mean losing a cheap and stable source of funding. depending on the market situation, banks can use overnight deposits to obtain funding for a few basis points less than from other sources, such as refinancing operations with the central bank or bond issuance. if commercial banks lose a significant portion of these deposits because citizens are using the digital euro as a store of value, banks ’ credit supply could fall and financing conditions for the real economy could deteriorate. further risks cannot be ruled out if the complex monetary system is expanded. in the event of an introduction, it will initially be necessary to design the digital euro with an eye to keeping the potential risks manageable. however, the fact that i began by looking at the risks does not mean that they should shape our perception of the digital euro. ultimately, there

the anchor currency ’ s monetary policy is leading to rising domestic macroeconomic imbalances. in the history of the global monetary system, this has been quite a usual event ( frankel 1999 ). it merely indicates that one monetary policy does not fit the size of all countries pegging to the anchor currency. by contrast, a decline in demand motivated by rising distrust in the stability of the respective anchor currency per se, in particular, its domestic stability, is a very different scenario. such a scenario could have profound implications for the international role of the respective anchor currency. however, i do not expect this scenario to materialise. indeed, changes in the dominant international currency have been very rare. the third and final reason why implications for the international role of the us dollar and the euro are likely to be limited is that, as in the past, a move towards more exchange rate flexibility is unlikely to signal that emerging markets will implement the textbook rules of a domestic nominal anchor and an independent float, as is the case in the united states and the euro area. emerging markets can be expected to move towards greater exchange rate flexibility if and when the monetary policy stance of advanced economies – for reasons that are either cyclical or structural in nature – becomes increasingly inconsistent with higher inflation rates in emerging countries. but, at the same time, emerging markets are likely to continue paying close attention to exchange rate fluctuations. this will hold, in particular, for fluctuations against the us dollar and the euro. against this backdrop, i would expect that, even if emerging markets adopt a more flexible exchange rate regime, changes in the use of the euro and the us dollar as international currencies will continue to be gradual. thank you very much. references abiad, a., leigh, d. and mody, a., ( 2007 ), international finance and income convergence : europe is different, imf working paper, no. 64, international monetary fund, washington. akin, c. and m. a. kose ( 2007 ), changing nature of north - south linkages : stylized facts and explanations, imf working paper 07 / 280, washington dc. barajas, a., l. erickson and r. steiner ( 2007 ), fear of declaring : do markets care what countries say about their exchange rate policies?, paper presented at the 8th jacques polak annual research conference, 15 - 16 november. bordo, m. and h. james ( 2006 ), one world money