yves mersch : distributed ledger technology - role and relevance of the european central bank speech by mr yves mersch, member of the executive board of the european central bank, at the 22nd handelsblatt annual conference " banken - technologie ", frankfurt am main, 6 december 2016. * * * introduction today ’ s discussions have revolved around digitalisation and new technologies and how they might change the banking business of tomorrow. roy charles amara, a researcher and scientist, once said that “ we tend to overestimate the effect of a technology in the short run and underestimate the effect in the long run ”. the internet is a case in point. some of the wilder predictions during the “ hype ” phase never came to pass. that said, no one can deny how powerfully it has insinuated itself into our daily lives, fundamentally changing how we communicate and process information, and no one can know where it will take us next. whether or not we will overestimate distributed ledger technology ( dlt ) in the short run and underestimate it in the long run remains to be seen. however, i am sure we can agree that dlt currently stands in the limelight. a lot has been said about the potential impact of dlt on the roles and services of central banks. in particular, questions related to whether or not central banks should move central bank money to dlt and whether there is a need for issuing central bank digital currency. consequently, i think it ’ s time to frame the discussion. this speech will : 1. outline the ecb ’ s position on dlt ; 2. discuss possible scenarios for adoption ; and 3. shed light on the global interaction between central banks in the field of dlt. financial innovation transforming market infrastructure services the internet, mobile phones and tablets have changed the way we communicate, the way we shop, the way we store information – frankly, the way we live. the financial industry is experiencing similar change. we refer to it as fintech – innovations that could result in new business models or products with disruptive potential in the financial sector. dlt is a focal point in fintech as its perceived opportunities are the key motivation for market participants, infrastructure providers and central banks to explore the technology. in our reflections around dlt, we need to bear in mind that the possible impact of dlt depends on how market players ultimately decide to embrace it. in the abstract, three scenarios can be imagined :

use cases, whether advances in dlt - based solutions could lead to service levels on a par with or maybe even higher than target2 and t2s. in doing so, we focus on concrete questions ( e. g. can today ’ s liquidity - saving features be offered through smart contracts ) in contrast to 2 / 5 bis central bankers'speeches following a greenfield approach. in order to lead the way the ecb has engaged in international collaboration. together with the bank of japan, we agreed to launch a joint research project which studies the possible use of dlt for market infrastructure. the project is expected to release its main findings next year. this work can help define how new technologies can change the global financial ecosystem of today and ensure that central banks are adequately prepared. however, we will certainly keep market developments and market needs in mind. many players have been vocal on the need for efficient use of central bank money in a dlt environment. ideas have been sparked and generic concepts are being developed by market players, sometimes in cooperation with central banks, on how to " inject " central bank money into the dlt world. these initiatives sometimes seem to go beyond the idea of a central bank bringing its settlement services on dlt and maybe they could alter or even call into question the role the central bank currently plays as operator. some initiatives allocate the role of a " notary " to the central bank – controlling the amount of central bank money circulating in a dlt environment. others foresee that a trustee ensures that the values circulated in a dlt - based solution are fully backed by a corresponding amount of central bank money held " off - chain ". for this discussion, it is important to clarify that a payment can be considered to be in central bank money if – and only if – the beneficiary has a claim on the asset of the central bank – either directly or by means of an explicit commitment of the central bank. anything else remains commercial bank money regardless of the technology used. depending on how potential solutions to bring central bank money onto distributed ledgers are designed, they go beyond functional, operational and legal questions around dlt. they touch upon questions of monetary policy implementation and the role of central banks as infrastructure providers. against this background, the eurosystem jointly needs to assess the matter from the various angles as far as it concerns the euro as settlement asset. the discussion around central bank money on dlt is closely linked to the question of who should