weakened by the headwinds that may arise in the aftermath of balance sheet recessions. likewise, inherent non - linearities could kick in when interest rates are persistently low and may dampen their impact on spending. the law - and - order case for banning cash also wilts under scrutiny. by acting as a store of value and a means of payment, cash fulfills an important social function for many honest citizens. would anyone suggest forbidding cell phones because criminals use them? harming the lawabiding majority in order to punish a misbehaving minority is a step too far. last but not least, cash is the only central bank liability available to the public. digital claims against central banks already exist – commercial banks and some other types of institutions hold them in the form of deposits. but private citizens have no access to them. although electronic payments provided by the financial industry are used by private customers, these methods are based on commercial bank money. from the perspective of the citizen, a liability vis - a - vis the central bank is more valuable than one vis - a - vis a commercial bank, not least because of the different credit risks. bank deposits and other commercial bank liabilities are highly protected, but they are not absolutely risk - free. a central bank, however, can never become illiquid and can always honour its liabilities. cash therefore maintains a tangible link between the general public and the central bank, a tie which is important for maintaining trust between the two. but cash could be digitalised, too, given recent technological advances such as the distributed ledger technology, or dlt, a variant of which is used for bitcoin. central banks could stop issuing cash and shift to just providing an electronic claim on the central bank. in principle, the introduction of central bank - issued digital currency or digital base money ( dbm ), as i have called it, would be much easier and potentially less expensive than ten years ago. 2 / 3 bis central bankers'speeches but the challenges go beyond the technological sphere. would dbm involve each individual having an account at the central bank, or instead a decentralised system where each individual has an electronic wallet and the central bank is unaware of transactions that take place? either solution could be implemented using distributed ledger technologies, but the set - up would be quite different in each scenario. a further important question is whether dbm would be remunerated ( as excess central bank reserves held by commercial banks currently are

benoit cœure : interview in il sole 24 ore interview with mr benoit cœure, member of the executive board of the european central bank, in il sole 24 ore, conducted by mr alessandro merli on 25 april and published on 27 april 2016. * * * last friday in amsterdam the economic and financial affairs council ( ecofin ) discussed a dutch presidency proposal to change the rules on sovereign debt holdings in banks ’ portfolios. that was opposed by a majority of countries. what happens now? there were clearly different views among ministers and they agreed that the issue needs to be investigated further. it ’ s a long technical process. several participants, including the ecb, made the point that we should seek to achieve global consistency. we should have as level a playing field as possible in banking regulation. to be honest, i was never totally convinced by the argument that there cannot be a european discussion on sovereign risk : the bank / sovereign nexus exists everywhere, but in the euro area it ’ s unique in its intensity and there is an acceptance that it has been a major contributor to the euro area crisis. but any european answer has to be set against a global background. we need to wait and see how the discussion develops in the basel committee. that was very much the tone in amsterdam. the germans, and a few others, make the point that there cannot be a european deposit insurance scheme ( edis ), which the ecb says is an essential part of the banking union, without a solution to banks ’ sovereign exposure. so, if edis is put on hold, does that mean there will be a long delay before a common deposit insurance is introduced? the exclusive link between the two is a political construction. there are at least three dimensions to the issue of sovereign risk. one has to do with the risk in banks : that is clearly tied to edis. progress in risk sharing has to be combined with progress in risk reduction. it makes sense in economic terms and it makes sense in political terms. but if we want to examine all the consequences of putting risk weights on sovereign bonds or setting a limit on exposure, they are not just about risk in banks. they also have an impact on how governments fund themselves. in europe, unlike the us, most government bonds are purchased by banks. so any change in sovereign exposure for banks would also have consequences for government funding. this second dimension ties in with the discussion on fiscal union. there is also a third question : the need