denis beau : digital finance, market disruption, and financial stability speech by mr denis beau, first deputy governor of the bank of france, at the bank of france toulouse school of economics joint conference, paris, 12 november 2018. * * * ladies and gentlemen, i am very pleased to welcome you all today, for the tenth edition of the banque de france and toulouse school of economics joint conference. this year, we have decided to shed light on how digital - based financial innovations are affecting the robustness and efficiency of the financial system. it is a good time to talk about digital finance and market disruption for at least two reasons : - 2018 is both the 10th anniversary of the lehman bankruptcy and that of nakamoto ’ s paper underlying bitcoin. - those events have unleashed regulatory and market developments and innovations that should contribute to both strengthen and change the role and structure of financial intermediation. as a result, we see a complex set of interactions, involving competition and cooperation, which are developing between “ old ” and “ new ” players and which are likely to coexist in the intermediation space going forward. “ what does that mean in terms of financial stability? ” and “ how does this coexistence affect central banking? ” are two questions open for discussion at today ’ s conference. but for the time being, let me quickly follow two leads. i. promises of digital finance : redefining financial intermediation? first point : the digitalization of finance is prospering on the ground of cutting - edge technologies. the combination of big data analytics, cloud computing, artificial intelligence and blockchain is transforming the way financial products are designed and distributed. for its proponents, this transformation is promising better consumer experiences, a better financing of the economy and a better efficiency of the financial system. beyond those promises, cutting - edge technologies also lower the barriers to entry into the financial sector for tech firms and make it possible to unbundle financial services into an array of distinct core functions such as channeling payments and money, providing financing, sharing risk and allocating capital. this new competition also implies that incumbents ’ business model should be prepared to adapt : the unbundling of services will challenge business models built around the logic of an exclusive and comprehensive customer relationship possibly involving elements of cross subsidization ; more mobile customers could limit the ability to cross - sell products ; and higher deposit volatility may unbalance the funding of maturity transformation.

, a lack of data and the novelty of these monetary and financial objects, four options to tackle them from a public policy standpoint can be considered and have actually been under consideration to drive action : monitoring, isolating, regulating or banning. vibrant economic research is needed to help us dealing with these challenges, notably in three key areas. the first relates to the economics and implications of blockchain and crypto - assets, and will be the topic of david andolfatto ’ s keynote lecture and of the concluding panel discussion : what are the implications for the financial system in general, and for central banks in particular? will central banks ’ monetary policy become less effective and, if so, are central bank digital currencies a way to restore their effectiveness? the second one, which will be addressed by several research papers today, relates to the financing of the economy : do alternative and innovative ways to finance the economy ( marketplace lending, icos, alternative scoring models ) perform better than traditional financial intermediation without increasing the risks? what roles can incumbent banks play if financial services are to be driven by data? the third one is not on the agenda for today ’ s conference, but should be on the research agenda, relates to the use of artificial intelligence in finance : what would be the dynamics of financial markets if most participants were to rely on ai and machine learning techniques? how should regulation and supervision practices adapt to ensure that ai behaves in accordance with a financial and social optimum? conclusion i would like to conclude my intervention by quoting bill gates himself : “ we always overestimate the change that will occur in the next two years and underestimate the change that will occur in the next ten. don ’ t let yourself be lulled into inaction ”. the banque de france tries to follow this piece of advice. to do so, we have adapted our organization and our governance structure with the creation of a fintech hub within our supervisory function ( which has already supported more than 300 fintechs ), the appointment of a chief digital officer and the launch of a lab to foster innovation within the banque itself. we are experimenting with new technologies : the banque de france has been the first central bank to implement a fully - fledged project based on dlt which is now fully operational 3 and we have successfully ran 8 artificial intelligence projects. we are also hosting discussions between 3 / 4 bis central bankers'speeches regulators and the industry : the latest working group on artificial