yannis stournaras : the future of money speech by mr yannis stournaras, governor of the bank of greece, at the international conference & quot ; the future of money : trend - alternatives - potentials & quot ;, the american school of classical studies ( gennadius library ), athens, 24 may 2018. * * * ladies and gentlemen, thank you very much for the kind invitation to this event. i am very happy to be here today and address such a distinguished audience. most people assume that all issues pertaining to “ money ” are an easy task for a central bank governor. on the contrary. some issues are very challenging, including present emerging technologies in the field of finance and mushrooming cryptocurrencies. addressing such issues presents a great opportunity for all interested to revisit the fundamental concepts surrounding money and how best to shape the monetary space in the future. more than 20 years ago bill gates stated : “ banking is essential, banks are not ”. please, allow me to disagree. banks are of utmost importance, but what is true about this quote is that the distrust that emerged towards some banking systems after the 2008 - 2009 global financial crisis and the development of a society - wide taste for decentralized, peer - to - peer, facebook - type, interactions across powerful computer networks, has dramatically altered the landscape in the financial services. and central banking in the age of digitalization is an interesting issue for reflection in the realm of monetary economics. in my speech i will try to explore some key issues in how money evolves, what is the key innovation in private digital currencies, what would a central bank digital currency be like and what might be the impact of introducing one for the central bank monetary policy. * * * “ monetary space ” to assess the possible paths that means of payment, and consequently monetary policy, may take in the coming decades, discussions often focus on the definition of money, its functions and forms. so what is money? a simple answer would probably involve adam smith ’ s example of “ the butcher, the brewer and the baker ”, where money is a solution that arose to address the inefficiencies of the barter economy. money is quite simply an asset that everyone wants. the greek word for money, “ chrima ”, means something that one uses or needs. so money as a means of payment must be efficient and safe to use. money, as we know

time period. 15 as i noted earlier, important innovations have fostered deeper, more efficient and diversified mortgage financing. i ’ ll comment on the two most significant : covered bonds and securitization. covered bonds have been popular in denmark for a long time. they were introduced and have become more widely used in sweden and norway and, to a lesser extent, in canada, australia and new zealand ( chart 8a ). these bonds have played a growing role in mortgage finance in the post - crisis period because they are generally viewed as safer than private - label securitization. they give investors access to dual collateral : the mortgages securing the bonds as well as other assets on the issuer ’ s balance sheet should the mortgages prove insufficient. 16 securitization of mortgages also increased significantly in the pre - crisis period in some countries, especially private - label securitization in the united states ( chart 8b ). while these vehicles were successful in raising large amounts of mortgage funding before the crisis, they were an important source of financial vulnerability during the crisis because the incentives to originate and securitize subprime mortgages were misaligned and the related risks were opaque and not well priced. see international monetary fund “ housing and the business cycle ” in world economic outlook, april 2008 ; and e. cerutti, j. dagher and g. dell ’ ariccia “ housing finance and real - estate booms : a cross - country perspective, ” imf staff discussion note, june 2015. see international monetary fund “ housing and the business cycle ” in world economic outlook, april 2008. comparable time - series data for new zealand are not available. since covered bonds are relatively senior in the creditor hierarchy in the event of insolvency, they have a preferential claim over depositors and other debt - holders. bis central bankers ’ speeches since the crisis, we have seen a dramatic decline in private - label securitizations of residential mortgages, which has not recovered, despite global financial reform efforts led by the g - 20 to address the serious weaknesses in their design. publicly supported securitization has continued to play an important role in funding residential mortgages over this period, however, especially in the united states and canada. other factors supporting demand a number of other related factors have likely supported the demand for houses in our comparison group and in advanced economies more generally. all of the countries in our comparison