on the stability of mature financial systems 1. 1. i would like to briefly sketch two main features of this financial instability : first, while globalisation and financial integration have decisively contributed to improving overall economic efficiency, experience also suggests that financial asset prices have experienced in many occasions somewhat erratic movements resulting in overshooting and misalignments. this pattern applies to a wide range of markets : exchange rates as well as bond and equity markets in both emerging and mature markets. the very fast ballooning of the " new economy " bubble in 1999 and early 2000 - followed by a series of sharp corrections - illustrates the potential of markets to provide funding to the real economy, particularly to the most innovative sectors ; but it also demonstrates again some tendency of markets to over - react, moving from excessive optimism to disproportionate pessimism. thus, financial authorities have been confronted with boom - bust episodes which must be carefully monitored and assessed since they have the potential to affect the global monetary and financial stability. the second feature is a growing tendency towards volatility on financial markets, in the most advanced economies as well as in emerging markets economies. since the beginning of the mid - nineties, volatility has become higher on both international stock markets and foreign exchange markets. volatility per se is not an issue from a financial stability point of view. not only is volatility inherent to financial markets but it is taken into account in many areas of the operational frameworks of financial markets. however, the micro effects of volatility, particularly of unwarranted or unexpected volatility, may actually impair the smooth functioning of financial markets, through different channels. for instance : the asset pricing process and the determination of equilibrium prices is being complicated ; transaction costs and collateralisation costs increase ; the fragility of financial intermediaries ’ balance sheets increases ; the unequal ability of market participants to tackle volatility movements can increase polarisation among participants, and develop risks of an uneven playing field. ultimately, these effects may unduly raise the costs and bias the allocation of capital, a source of concern from a financial stability point of view. such a higher volatility may have a globally negative impact on market efficiency. indeed, higher volatility may lead to excessive risk aversion among investors and finally to a misallocation of capital, at both the global and sectorial levels. it may also lead to some lack of discrimination between different debt

conference “ unveiling the potential of wholesale cbdc : what insights and prospects? ” - paris, 03 october 2023 “ wholesale cbdc : as decisive as retail cbdc, and actively experimenting ” speech by francois villeroy de galhau, governor of the banque de france press contact : mark deen ( mark. deen @ banque - france. fr ), deborah guedj ( deborah. guedj @ banquefrance. fr ) page 1 sur 6 ladies and gentlemen, it is a great pleasure to welcome you to this conference organised by the banque de france. i would also like to welcome today ’ s distinguished speakers from both the central banking community and the private sector. i am convinced that only broad - ranging and comprehensive cooperation between all of us will make it possible to “ unveil the potential of wholesale central bank digital currency ( cbdc ) ”, which is the theme of today ’ s conference. we are currently facing a wave of technological disruption in the form of the blockchain and tokenisation : our ambition as central bank and supervisor is to explore the embedded – and hugely promising – potential of these technologies as early as possible. this is why no less than 93 % of central banks are currently exploring the possibilities for cbdc. i wholesale cbdc attracts less attention and passion than its retail equivalent ; but it is not less important. its purpose ( the “ why ” question ) is probably even better perceived by market players than that of retail cbdc and i ’ ll hence start with its two very interesting applications, namely the tokenisation of assets and cross - border payments ( i ). secondly, i will discuss the “ how ” question, the technicalities of how this might work. the banque de france is actively conducting experiments at all levels to develop such a system ( ii ). i. wholesale cbdc ’ s twin purposes and potential a. maintaining central bank money as a “ safety pivot ” in a tokenised world the tokenisation of finance is a nascent trend, which is subject to a growing interest from the financial industry and its participants. indeed, digital ledger technologies ( dlt ) could enhance the straight - through processing of trade and post - trade activities and hereby generate enormous savings both for the financial industry and end - users. to make this happen, new private settlement assets such as stablecoins are emerging in this tokenised ecosystem. paypal ’ s project of a global stablecoin