both the financial sector and the swiss economy as a whole depend on a secure and efficient fmi. the snb monitors developments in this area very closely given that facilitating and securing the operation of cashless payment systems is one of its statutory tasks. in this speech i will be discussing the significance of fintech for the financial market infrastructure. first, i will address dlt ’ s potential in the fmi. second, i will be talking about the tried - and - tested division of roles between the central bank and commercial banks. i will look at how this two - tier system paves the way for harnessing fintech innovations that could enhance efficiency, while ensuring that this is not to the detriment of either safety or reliability. third, using the example of retail payments, i will show that there is a lot more to fintech than just dlt, and that private sector players are much better suited to providing timely solutions and flexibly addressing the needs of customers in this area. and finally, i will take a brief look at digital central bank money for the general public, a subject currently generating a lot of debate, and will outline why there is no need for it if the system for cashless retail payments is efficient and innovative. the potential of dlt for the fmi so let me begin with the potential that dlt has to offer for the fmi. the fmi is the bedrock of our financial system, facilitating the reliable transfer of securities and money between buyers and sellers. the slide 2 shows a simplified fmi process chain for the settlement of a securities transaction. transactions are first made via a trading platform, for instance a security is bought on the swiss exchange. this purchase is then cleared and settled. security and money are simultaneously transferred between buyer and seller. in switzerland, this takes place via the securities settlement system secom and the payment system swiss interbank clearing, or sic for short. it is entirely possible that distributed ledger technology could take hold in various fields. i would like to look here at two possible areas of application : securities settlement and crossborder payments. page 3 / 8 one of dlt ’ s key characteristics is that it makes verified information available to a large number of parties simultaneously. it is therefore particularly appealing in the case of complex processes where coordination is required across a whole range of participants. this is the case in the securities business, which comprises a network of many different participants trading, settling and managing securities. examples of these market participants –

prospects. the assessment of inflation prospects in the longer term depends on a number of factors, such as the development of monetary and credit aggregates and different asset prices. long - term forecasts are fraught with a high degree of uncertainty. in spite of this, a central bank must make a sound assessment of the effects of its monetary policy in the longer term. the need for a forward - looking stance is due to the fact that monetary policy has its strongest effect on prices only after a lag of two to three years. m1 was 5. 4 % below the year - earlier level in november ; m2 was down by approximately 3 %. m3 increased by 1. 4 %. although there is still ample provision of liquidity, it has dwindled as a result of the latest developments. compared with the september assessment, we have therefore made a downward correction of our inflation projection for the years 2006 and 2007. according to our september forecast - based on an unchanged three - month libor rate of 0. 75 % inflation would have climbed to 2. 9 % in the second quarter of 2007. with an unchanged monetary policy, the current forecast predicts an increase of only 2. 3 %. at the end of the new forecasting horizon in the third quarter of 2007, inflation would stand at 2. 6 %. the lower long - term inflation forecast suggests that there is currently more room for manoeuvre in maintaining an expansionary monetary policy course. 4. exchange rate the dollar has plummeted since october. it has lost 7. 9 % vis - a - vis the swiss franc. notwithstanding the sharp fluctuations of the dollar, the franc has remained virtually unchanged against the euro. the depreciation of the dollar has a direct impact on the swiss economy in that it undermines the price competitiveness of the export industries. moreover, a weak dollar also exerts an indirect influence by clouding growth prospects in europe, our largest sales market. the appreciation of the franc has tightened monetary conditions. at the same time, the weaker dollar has a dampening effect on import prices and, consequently, on inflation prospects. 5. continuation of expansionary monetary policy i will now come to my concluding remarks. the inflation forecast shows that the process of normalisation of monetary policy has not yet ended. in light of my comments it should nevertheless not be difficult to understand our decision to leave the three - month libor rate at 0. 75 %. since inflationary