joachim wuermeling : combining stability and innovation – the bundesbank and fintech players in the digital financial ecosystem keynote speech by prof joachim wuermeling, member of the executive board of the deutsche bundesbank, at the plug and play fintech europe expo 2021, 28 january 2021. * * * 1 introduction ladies and gentlemen, dear colleagues, good afternoon, and a very warm welcome from the deutsche bundesbank. i am delighted to be taking part in the plug and play “ fintech europe expo ” today. as a central banker, this event offers me a unique opportunity to liaise with you and is certainly my first highlight of 2021. i look forward to a pleasant afternoon and an inspiring conference! an innovative spirit has made financial technology the driving force transforming the world of finance. this technology has now become an essential part of banking, and therefore also central banking. looking at our virtual audience today, i see start - ups, venture capitalists, and consultants. to be honest, when you think of central banks, “ innovation ” might not exactly be the first word that springs to mind. instead, your first thought might – hopefully – be “ stability ”. but take it from me : stability and innovation are not mutually exclusive. in fact, they go hand in hand. technological progress has always shaped the tasks and activities of central banks. although fintechs and central banks cooperate already, i believe they should do so on a much closer basis in the future. and that is why i am so happy to have the chance to speak to you here today. i would therefore encourage you to keep an eye out for the digital activities of central banks! here are three reasons why you should : 2 central banks are relevant actors for digital innovation in finance all fintech innovation is connected to central banks ’ activities in some way or another. for centuries, central banks have been the backbone of the financial system, issuing currency, providing payment infrastructures, and ensuring that banks are stable. digital transformation is relevant to us in two regards. the first is that we need to understand the technical progress in the industry when using our tools, whether it be in the area of monetary policy or in banking supervision. the second is that we make use of new technologies ourselves, be it in analytics, processes or products. the actions we take might be highly relevant to you, your products, your business cases, or your ideas : would it matter to you if we issued a digital currency,

based gross settlement on a ledger, or if, as banking supervisors, we were to restrict the use of machine learning? the impact central banks have on innovation is particularly relevant to the euro area, a major 1 / 3 bis central bankers'speeches currency area which currently covers 19 countries and 350 million people. the bundesbank, as the biggest central bank in the block, focuses on its role as an integral part of the eurosystem. 3 digital innovation can foster financial stability besides ensuring the stability of the currency, central banks ’ main task is to safeguard the stability of the financial system as a whole. i am sure you will all agree when i say that new technology can simultaneously promote stability and bring about new risks. as a central bank, we have to play a dual role. on the one hand, we want to enable digital innovation, harnessing its potential for financial stability. on the other, we have to keep an eye on potential risks arising from digital transformation. it is our job to supervise all risks to financial stability. be assured that central banks are looking out for this. if i could make one wish here, it would be for digital innovation to factor in financial stability by design. the covid - 19 crisis is certainly providing an additional boost to digitalisation, particularly in the financial sector. but let me be clear : increasing use of online banking, digital payments and video chats with clients are by no means the digital transformation of the future. this is no more than the adoption of technologies invented in the last century. but the pandemic might encourage all players in the financial system to pursue innovation more quickly and more radically. indeed, the digital revolution is still to come in finance as well as in other industries. artificial intelligence, machine learning, cloud technology, distributed ledger, quantum computing, an ever - growing volume of data – whatever buzzword you name : all of these have the potential to disrupt each and every business model. and, as we learned recently, including that of central banks. i believe that we are at the beginning rather than at the end of digitalising the financial system. the magic moment for financial technology and fintech companies may still be to come. new technologies have the potential to make the whole financial system more resilient. for instance, financial institutions can use ai to better detect and ward off cyber - attacks. early warning systems for loan defaults based on automatically evaluated economic news could improve risk management. digital innovation can enhance the stability of