constantinos herodotou : navigating the technological revolution the central banker's perspective speech by mr constantinos herodotou, governor of the central bank of cyprus, at the 11th banking forum & fintech expo, nicosia, 7 december 2023. * * * ladies and gentlemen, esteemed guests, it is a pleasure to have the opportunity to speak to you at today's event, and i wish to thank the organisers for the invitation. in our increasingly digitalized world, technology's pervasive influence has brought about significant changes, particularly in the financial sector. the integration of technology into banking processes, has the potential to optimize operations, improve customer experience and redefine interactions between financial institutions and clients. the entry of fintechs and the expected challenge from big techs, has expedited these changes, using platforms like social media to influence retail depositors'responses to market signals. without a doubt, payments are being challenged by disruptive transformation and by the emergence of private actors that might lead to instability and confusion about what is money and what is not money. for example, the so - called crypto - assets are too volatile to be considered a currency or to act as a means of payment. stablecoins are often unbacked by any reserves to be considered as a currency, but rather seek to maintain a stable value through, for instance, algorithms or protocols. moreover, stablecoins are vulnerable to runs, as evidenced in may 2022 by the collapse of terra, which was the fourth - largest stablecoin at the time. another example occurred in march 2023, following the failure of silicon valley bank, by investor runs on usd coin – the second - largest stablecoin. ladies and gentlemen, as bigtechs are further expanding into digital finance, there are risks to our payment system, as well as to our monetary and financial stability, especially from a potential issuance of their own currency. this is not mere speculation, as evidenced by the decision of paypal to launch its own dollar - denominated stablecoin. paypal has a user base 1, 3 times bigger than the eurozone's population therefore such a venture poses challenges at least under three areas : a ) firstly, to the functioning of our payment system. stablecoins are structured as'closed - loop solutions'that restrict payments to users who adopt a particular payment tool. b ) secondly, if citizens prefer to use

and related services, while keeping the responsibility for customer onboarding. in parallel, the digital euro would reduce european dependence on the international card payment schemes, that currently process outside the eu most of european retail payments. moreover, since geopolitical developments make us more vulnerable to power outages and cyberattacks, designing the digital euro as a fall - back option such that it relies on infrastructure rails other to those of non - european card - based payments, would enhance the resilience of the european payment ecosystem. the ecb has completed the consultation phase that was launched in october 2021 and lasted two years. based on the outcome of this phase, at the governing council of the ecb we agreed to design the digital euro, such that it would be widely accessible to citizens and businesses through distribution by supervised intermediaries. as from the 1st november 2023, at the governing council of the ecb we approved the launch of the preparation phase, during which we will develop and test technical solutions and business arrangements for our digital currency, as well as finalise the rulebook and select providers that could develop a digital euro platform and infrastructure. the ecb's project has benefited so far from the expertise of european policymakers, and the rapport with market participants, civil society and the general public. the eurosystem will continue this journey with stakeholders and will adjust the digital euro design upon finalisation of the legislative negotiations that are running in parallel. ladies and gentlemen, what i have briefly summarised is a very challenging and ambitious project and objective. however, i am optimistic that it will ultimately bear fruits and benefits, as our european track record has shown that what seems incredulous now, is tomorrow's new norm. let me now turn to our domestic space and say a few words regarding the digital initiatives that we undertook at the central bank of cyprus. in our commitment to advancing the digitalization of the financial sector and fostering an effective financial ecosystem to bolster the economy, as well as to further encourage, promote and support domestic financial innovation, at the central bank of cyprus we recently undertook two important initiatives : the first one is the implementation of a remote electronic digital on - boarding platform for our banking sector. the digital on - boarding platform project is designed to expedite the process for collecting, identifying and reviewing data of current or new bank clients. it will offer 3 / 5 bis - central bankers'speeches incremental advantages to both individuals and corporations. the