bis innovation summit – 22 march 2022 central banks in a dlt world speech by francois villeroy de galhau, governor of the banque de france press contact : mark deen ( mark. deen @ banque - france. fr ) page 1 sur 3 ladies and gentlemen, it is a great pleasure and honour to give this opening speech of the second bis innovation summit, which illustrates central banks ’ commitment in new technologies, notably through the bis innovation hub. since their creation almost fifteen years ago, distributed - ledger technologies ( dlts ) have evolved and opened up new possibilities, building alternative circuits and removing intermediaries, supporting new solutions and use cases. are these disruptions as powerful as those brought by the invention of internet three decades ago? it may be too early to tell, but dlts are expanding at a fast pace, and have the potential to bring about far - reaching changes. the invention of bitcoin, the first crypto - asset, stemmed from the desire to build a new “ currency ” – i emphasise the quotation marks here –, outside the remit of states and central banks. that was back in 2008, and what we have observed since then is that the use of bitcoin as a means of payment remains very marginal, because it does not feature any of the fundamental characteristics of currency. nor is it a store of value, but rather a speculative asset, somewhat similar to the dutch tulip bulbs from the 17th century. the most disruptive feature of bitcoin was its underlying technology, which has since then been offered in different versions of dlt underlying various types of assets and uses. second - generation crypto - assets now embed smart contracts that have led to the development of new services and products, the last being nfts ( non - fungible tokens ). among second generation crypto - assets, so - called stablecoins or backed - assets try to reduce their volatility by anchoring themselves to fiat currencies and sovereign assets. still, they create fragmentation, and are fraught with regulatory and operational uncertainties. here too there are historical precedents : free banking in the 18th and 19th centuries, when each private bank issued its own banknotes. it had major drawbacks, such as credit risk embedded in settlement assets. the introduction of central bank money as a common and safe settlement asset was a major breakthrough and since then has become the rule – in the best interest of all

what i call a “ financing and investment union ” ( fiu ). why? because numerous businesses in europe wish to invest and innovate but are unable to find appropriate financing. still, the funds are by no means lacking : the euro area has a savings surplus of 350 billion euro, i. e. more than 3 % of gdp. the fiu would facilitate the mobilisation of these abundant savings towards investment. to achieve this, we must develop synergies between the existing initiatives : capital markets union, the juncker plan and banking union. but we must also go still further, with two clear goals. firstly, diversification of financing to meet businesses ’ needs. equity financing, rather than debt financing, is better adapted to risk taking and therefore to innovation. but europe currently lags very far behind in this area : equity financing of businesses is less than half that in the united states ( 67 % of gdp in the euro area compared with 125 % in the united states ). secondly : increased resilience of the euro area thanks to integrated capital markets. as jens weidmann and i wrote last year, this manner of sharing private risks is the best way to counter asymmetric shocks within a monetary union. in the united states for example, private equity is capable of absorbing around 40 % of an economic shock specific to a state. 3. the new international environment makes action more urgent. some of those around us seem to no longer believe in the benefits of the european union. the new us president has stated this very clearly, and the british chose to leave the union. these changes bring us face to face with our responsibilities : we can no longer afford to wait and see. but how should we respond? not by less europe. that would be a mistake if we wish to have collective control over our destiny in this new world. we should respond with a “ better ” europe, less distracted by details, more focused on its priorities and more efficient. there is no point in just talking about it, we must take the necessary measures to achieve concrete results. there are, of course, non economic areas such as defence, border security, climate change and youth education and training, to mention just a few. but in economic matters, there is also a lot that remains to be done. we in europe have three major assets : our single currency, our single market and our common european social model. i wish to stress the extent to which this “ soziale