By offering settlement in central bank money, TIPS increases the speed and safety of customers’ daily transactions.5 Since 2016, the ECB has also been exploring the application of new technologies, particularly distributed ledger technologies, to market infrastructures. Together with the Bank of Japan, the ECB is conducting a research project called “Stella” which is investigating innovations that can facilitate safer, faster and cheaper financial transactions.6 But driving change also means identifying and managing the risks that come with breaking new ground. Innovations – including stablecoins – will only be beneficial if the associated risks are mitigated through effective regulation and oversight. So I believe we should follow the golden rule of supervision: “same business, same risk, same rules”. We must ensure that stablecoins do not compromise the safety and efficiency of the payment system or the soundness and stability of the financial and monetary system. And this is all the more important for stablecoins with a global reach. The G7 Working Group chaired by my fellow Executive Board member Benoît Cœuré has made clear recommendations with a view to developing a globally consistent approach to their regulation and oversight.7 As it did for the General Data Protection Regulation, the European Union can show the way here. In line with international standards and recommendations, we – and here I count on you as colegislator – should develop and enforce regulation that strikes the right balance between supporting innovation and addressing risks.
If the government itself is already heavily indebted or has incurred a huge amount of debts after bailing out the private sector or introducing measures to stimulate the economy, the market may start to doubt the sustainability of its fiscal position. A case in point is Ireland, where the government incurred a huge amount of liabilities by bailing out the banking system, calling into question the government’s fiscal sustainability and triggering the sovereign debt crisis. (f)  The crises unfolding in the US and Europe are not new to Asia. This region had its share of suffering during the Asian Financial Crisis of 1997/1998. In Hong Kong we went through almost seven years of painful economic adjustment after the burst of the property bubble in late 1997. Our economy shrank by 8.7% in five quarters. Unemployment increased fourfold from 2.1% to 8.5%. Property prices dropped by 70% in six years while the general price level fell by 15% in five years. The hard lesson we learned from our experience is to face the reality, take the pain in stride and do whatever it takes to restructure the economy, to increase productivity and improve competitiveness. If this can be done, it should be possible to return to the track of sustainable economic growth. BIS central bankers’ speeches  3  4  BIS central bankers’ speeches  BIS central bankers’ speeches  5