BIS Innovation Summit – 22 March 2022 Central banks in a DLT world  Speech by François 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  Page 2 sur 3 economic agents. It is now a public good, and taken for granted at least in advanced economies. We, central bankers, have mixed feelings towards crypto-assets: on the one hand, they bring innovation and meet some expectations, especially in emerging economies; on the other hand, they carry significant potential risks, related to money laundering, breach of data privacy and high volatility among others. Although our mandates fully enshrine stability, resisting innovation is not in our DNA, on the contrary. Financial stability without innovation would mean conservatism; innovation without financial stability would feed distrust, and hence be unsustainable.