, by making payments more convenient, faster, and more innovative. however, in europe, it also creates challenges, particularly if we become increasingly reliant on a few dominant non - eu players, such as international card schemes and global tech giants. these companies leverage network effects and control proprietary standards in retail payments, hampering competition and innovation in payments. ultimately, this increased reliance on non - eu providers raises concerns about the operational resilience and strategic autonomy of the european payment ecosystem. to help address those challenges, the eurosystem is preparing an important evolution in the central bank money services it provides to the general public, in the form of what 2 / 3 bis - central bankers'speeches is called the " digital euro " – a retail cbdc. and the banque de france is actively contributing to the preparatory work for what is intended to be akin to a " digital banknote " that will be available across the euro area, have legal tender status, be governed by european standards, and be distributed by banks and other financial institutions, to highlight just a few of its key foreseen characteristics, in addition to privacy. let me just stress here that in this retail space our action goes well beyond adapting our central bank money services. it also includes supporting the development of paneuropean payment solutions, such as epi's digital wallet, the wero, and pushing for an ongoing adaptation of regulatory and supervisory frameworks to support innovation. to conclude, let me share two convictions regarding the conditions under which the path towards the digitalisation of payments, including settlement assets, may lead to sustainable benefits. first we need a regulatory framework that does not stifle innovation but that is sufficiently demanding to ensure that stakeholders are protected and that the stability of the payment system, and the financial system more broadly, is guaranteed. second, we must complement this " confidence - prone " framework with central bank money services adapted to the coming digital age of payments, built on strong dialogue and comprehensive experimentation with other central banks – as we are doing with the mas – and with market participants. in the wholesale space, our objective at the banque de france is to adapt those services to ensure that central bank money remains at the heart of settlement processes. in the retail space, our objective is to widen the payment solutions and choices available to include a " digital banknote ". 3 / 3 bis - central bankers'speeches

of the exchange rate for a small open economy the ( real ) exchange rate is one of the two most important macroeconomic variables in a small open economy, the ( real ) interest rate being the other. no central banker in such an economy can be indifferent to the level of the exchange rate. but there are no easy choices in exchange rate management. there is first the choice of the exchange rate system, a choice that is tied up with the question of capital controls. if capital flows can be controlled, then there may be advantages for a country in trying to fix its nominal exchange rate. nonetheless, and without entering the long - running debate over exchange rate systems, i believe that it is better to operate with a flexible exchange rate system and with a more open capital account. bis central bankers ’ speeches “ flexible ” does not mean that a country should not intervene in the foreign exchange market, or that the capital account should be completely open. rather it means that the country should not draw an exchange rate line in the sand and declare “ thus far, and no further ” ; countries should not commit themselves to defending a particular exchange rate. market participants often say that the central bank cannot stand against market forces. however we need to recognize the asymmetry between defending against pressures for depreciation and appreciation of the currency. in the case of pressures for depreciation, at the existing exchange rate the market wants more foreign exchange. the central bank has a limited supply of foreign exchange, and thus cannot stand against the pressure of the market for very long – though as the recent crisis has shown, large foreign exchange reserves can help the central bank deal with market pressures, as for example in brazil, korea and russia. in the case of appreciation, at the existing exchange rate the markets want more domestic currency. the central bank can produce unlimited amounts of domestic currency – that is, it can intervene to buy the foreign exchange flowing into the country. of course to prevent inflation, it will have to sterilize the foreign exchange inflow. but that can be done, as the bank of israel has shown over the last three years. in the case of pressures for appreciation, the central bank has to balance the net costs of holding additional reserves against the benefits of preventing unwanted appreciation. this is a complicated calculus, 16 one which has led to the development of various rules for reserve holdings : when the current account was the dominant factor in the exchange market, the rule was specified in terms of holding reserves equal to