burkhard balz : is cbdc the money of the future? keynote speech by mr burkhard balz, member of the executive board of the deutsche bundesbank, at the central bank payments conference, kuala lumpur, 10 june 2024. * * * check against delivery 1 introduction ladies and gentlemen, thank you very much for your warm welcome. it is both an honour and a pleasure for me to be here today in the wonderful city of kuala lumpur and to have the opportunity to speak here to such a distinguished audience. a city that has always been a melting pot of cultures and ideas, kuala lumpur is no stranger to innovation and transformation. from the days of trade along the klang river to becoming the financial heartbeat of malaysia, this city has continually adapted to the evolving tides of commerce and technology. as we stand here today amidst the towering skyscrapers and vibrant streets, we are at the cusp of embracing a financial evolution that promises to redefine our experience with money and commerce. this is the context within which i wish to focus the topic of my keynote this morning – central bank digital currencies, or cbdcs for short. a subject that is as timely as it is significant. 2 the future is digital we are living in an exciting time where digitalisation is impacting almost every aspect of our daily lives. it has not only changed the way we communicate, learn, work, and engage with the world around us, it has also reshaped the way that we pay. electronic means of payment have become a widespread alternative to established physical cash and have developed even further in recent times. new digital payment solutions such as instant payments, request - to - pay and pay - per - use are also gaining traction. these are all developments that also pose new challenges for central banks. as central bankers, we need to ask ourselves what our own role in payments should be in an increasingly digital world. after all, citizens'trust in payments depends on this. in an increasingly digital world, banknotes and coins are still the only means of access to central bank money for the general public. it stands to reason that central banks need to provide an additional digital offering to ensure that access to central bank money is maintained for everyone, even in a digital future. note that i deliberately say " additional " here, because in my view, banknotes and coins still have their place as a tried - andtested and still frequently used means of payment. cbdcs

. and regulators need to address this blurriness. let me give you a more concrete idea of this problem by returning to the issue of cloud services. banks increasingly outsource activities using cloud services from external providers. this gives rise to new challenges, as i have already mentioned. from a supervisory perspective, these challenges mean more risks. in order to deal with these risks, someone – first of all – needs to assume responsibility. 3 / 5 bis central bankers'speeches in the status quo, the rules are quite clear. external providers that do not themselves perform business subject to the supervisory rules do not fall within the scope of regulation. it is the supervised institutions that bear full responsibility for any risks arising from cooperation with an external service provider. therefore, the institutions themselves must ensure that the risks remain manageable – for instance, by including relevant terms and conditions to this effect in cooperation agreements. or by considering from the outset how they can keep their business up and running if the partnership is terminated unexpectedly. so this sums up the conditions de jure. but are they always appropriate to the economic conditions? depending on the individual case, the picture can be quite different. where credit institutions work with large technology firms, such firms ’ negotiating power might be so large that institutions have difficulty imposing the conditions needed to make risks manageable. we also have to make sure that certain tasks are not outsourced simply because we can afford to be more relaxed about dealing with the resulting risks outside the regulated enterprise. the more the boundaries between sectors become blurred and the more intensively banks work with non - licensed enterprises, the more relevant discussions like this will become. one could ask whether certain activities of external providers should be supervised. this could indeed help to contain risks to financial services. however, it is by no means clear how such activity - based supervision could be organised. what ’ s more, that should not relieve banks and other supervised financial institutions of their responsibilities. therefore, we are still in the early stages of this debate. let me address another consequence of the digital transformation for supervisors. the sheer complexity of matters becomes challenging. for example, ten years ago, it - related supervisory standards were fairly manageable. nowadays, specialisation within this risk category is playing an increasingly important part. knowledge of it risks needs to be updated constantly. information sharing between supervisory authorities across national borders has become a major factor, and knowledge management is becoming a key task in this regard. this relates to other topics as well.