In fact the public interest in non-banking financial activity has certainly increased in this sense - both in terms of the range of BIS Review 13/1997  -8-  activities covered and the standards of protection demanded - as is reflected in the spread of financial regulation over the past 10-20 years as the activities themselves have expanded. Our own Financial Services Act, for example, which provides for formal regulation of investment business dates only from 1986. A corollary of this broadening public interest is that multifunctional financial services providers are bound to be subject to a broadening range of functional regulation - however such regulation is structured. What I think is less clear is the extent and nature of the public macro-prudential interest in non-banking financial activities. I have argued that other, non-banking, financial activities are not - because of the different characteristics of the related liabilities and assets subject to runs in the same way as banks, and that they are not therefore subject to contagious systemic - disturbance in the same sense as banks. But that does not mean that non-bank financial institutions cannot face liquidity pressures. It does not mean either that the failure of a non-bank financial institution could not - through its direct credit or settlements exposures to other financial institutions (bank or non-bank) - have damaging knock-on effects.
In effect, the mere existence of a digital euro would offer a fallback solution in the event of geopolitical tensions. Moreover, when carefully designed, a digital euro could be a catalyst for innovation at a wider scale in that it could support intermediaries’ role in developing new types of services on top of it while enjoying Pan-European reach. 1  Negroponte, N. (1995). “Being Digital”, Vintage International. Random House, New York. Cunliffe, J. (2022) “Some lessons from the Crypto Winter” (https://www.bankofengland.co.uk/speech/2022/july/joncunliffe-speech-on-crypto-market-developments-at-the-british-high-commission-singapore). 2  1  A digital euro does, however, exhibit a number of non-trivial risks as well. If, for example, anonymity was to be allowed as a means to provide the highest possible level of privacy, we would be compromising our commitment with fighting money laundering and the financing of criminal activity. What’s more, this setup would put into question the effectiveness of the tools to limit the use of digital euro as a store of value, a point on which I will come back later. In that respect, a balance needs to be struck between minimizing the Eurosystem’s and intermediaries’ involvement in the processing of users’ data and still ensuring compliance with the law. A digital euro is likely to increase as well the Eurosystem’s general operational responsibilities over the payments channels irrespective of the role it ultimately intends to play in the settlement of these transactions.