CBDC & DIGITAL EURO

Michael Salmony 0:02

Welcome to the Payments Trilogue, where three seasoned professionals discuss payments and more, for Europe and beyond.

Michael Salmony 0:13

My name is Michael Salmony and I'd like to welcome you to another episode of the Trilogue. In this time, we want to look at a subject which is causing a lot of discussion in the industry, CBDC and the digital euro. You will know that the Trilogue's theme is that we try to find agreement between banks and fintechs and other market participants. And I think we all agree on this one, on CBDC, that maybe it is a difficult idea.

So let's explore that and see what might be the reasons for CBDC and what the concerns are. Gijs, do you want to start us off because the banks have been quite vocal and quite critical on that topic. Yes, thank you, Michael. Well, not just banks, also payment service providers, at least from my own association's perspective is not just the incumbent banks, also PISPs and others.

Of course, the whole discussion started years ago, especially when Facebook came up with their Libra plans and globally there was a sort of concern that central banks might become irrelevant if huge platforms would create their own currencies and that would have severe consequences for monetary policy, monetary anchors and so on and so forth, combined with the general decline of the use of

physical bank notes, that is. So these two arguments were reason because you couldn't we have a digital version of that which seemed a very logical idea. Of course, we're all digitalizing so why not a central bank money? It makes a lot of sense of course. So things get started. I think we got Sweden with the Riksbank as one of the front runners.

Then you got people in the Bahamas or Nigeria globally. Every central bank is engaged. There's a lot of fear of missing out. And somehow then everybody believes we do need a central bank issued, digital euro too, for, and then it becomes more or less clear for what reasons really do we want that. I think there's a couple of arguments, the initial arguments being, let's say sovereign as central banks, but also the sovereignty of the European Union.

Michael Salmony 2:30

is a big thing, European payment solutions versus non-European payment solutions and a digital euro might fit into that corner. So maybe innovation, maybe financial inclusion, the monetary anchor argument, it seems to make a lot of sense but...

from this initial sort of interesting could work, might work, but there are concerns that were counted already years ago with European Central Bank. We have the do no harm mantra and the no crowding out, meaning we will not crowd out the private bank solutions that are out there. Because then we come to the possible unintended consequences. And that's where we sort of are in a...

funny stuck in the middle scenario, if you wouldn't put any limitations on the digital euros as foreseen, it holds the potential to wipe out the commercial bank solutions or even lay out the red carpet for the large non-European players, ultimately achieving the opposite result from a sovereignty perspective, which really is the only argument I believe that still holds water. But if we're not very careful on

how and how much and who might perhaps even, we might even need regulatory intervention to protect ourselves if we want to do it for the sovereignty perspective. Apart from, then I will go to Ralf, the impacts on the private sector, it will have to be provided for free to the consumers by the current intermediaries, i.e. the account holding institutions.

It will have to be accepted by law for free by the retailers and in a sort of interchange model which will be kept the banks that have to provide that are that wallet for free should sort of recover their costs, which probably will not happen. So and last, the sovereignty thing, which is the only, I believe, argument that really holds water. We are also especially say we from the private sector.

Michael Salmony 4:50

European Payments Initiative, a separate payment account access scheme, any other private initiative to create European payment solutions runs the risk of getting sort of suffocated by the perspective of having to do with digital euro too. Whereas we are now fully committed to making European payment solutions based on the new Instant Payments Regulation and that's what everybody's busy with. And let's do that first and then see if there's still a need.

for a larger scale digital euro. And meanwhile, we have to be really, really careful, I think, with what we're doing here, because we are really playing with fire. That sounds like you're not a fan, Gijs. in a very limited way. You had the arguments that you made at the beginning of why we're doing this, because this is a topic that I've been discussing with lot of central banks around the world, It turns out there are about 40 arguments which are being presented why you need a CBDC, four zero

and their inclusion and sovereignty and innovation and digitization and keeping monetary anchor and etc. etc. I published some articles on this, anybody who wants to read that up. So that already worries me, right? If you're trying to solve 40 things at once, then you're probably not going to solve anything. 40 birds with one stone, right? Exactly. Just the ones that you mentioned, I mean, the fear of another Libra happening. We already have MiCA regulations and things like that, so I think that fear is probably overblown.

There's the sovereignty argument which you bring. We have evidence from India where UPI was supposed to guarantee sovereignty. It's actually made the GAFAs stronger. So it's actually produced the opposite effects. And I think the digital euro is obviously going to have to run on the iPhone and on the Android and PayPal will want to send digital. So I don't see the sovereignty argument either. So I'm very concerned about the policy arguments. What is the problem that one's actually trying to solve?

But Ralf, let me give you an opportunity to say what you think about this. Yeah. Well, for me, the main argument is that it is unavoidable. Money is evolving and cryptocurrencies have come up. They're here to stay and possibly to grow. And I believe that there is no way around

Michael Salmony 7:15

a digital version of the central bank money as well, i.e. a central bank - sort of - cryptocurrency, a CBDC. so there are, of course, now whatever, 40, maybe more arguments why you could do it. And there is probably equal number of arguments why you should not do it. I believe that

for what central bank money is today, i.e. cash, i.e. coins in your wallet and bank notes in your wallet. There are many people who like dealing with that, especially here in my home country, Germany. I think it's well known, cash is king and although changing, but anyway, so, and there are many reasons why people like cash and...

For some it's having something tangible in hand. For others it is to do with, well, you're the master of your own money. You have it in your pocket, you do what you want with it and that's it. There is no control, there is no recording of it being done, et cetera. It's mine, it's anonymous. The use of it is anonymous. For, as we all know, for anti-money laundering reasons, then that use is limited. So I can't.

whatever have we don't have a million euro banknotes. We have it. The denomination is limited. We can't spend more on single transactions. Those changes, those rules are changing, are being reduced to make sure that AML is in hand. But within the limits, it is anonymous and people can use it. now I think a digital version of that

is a good idea. And therefore, as it is evolving, I said, cryptocurrency, so we were getting a digital version of cash. And that is what I was expecting from a CBDC. Now, as it stands and with the development, we may get that, but we get a lot of other things as well, which are causing more problems. maybe if I can react, I totally agree with you because

Michael Salmony 9:39

We're not saying it's inevitable. Of course, it's unthinkable that we will not have anything like a digital version of the euro, but we will also still have the banknotes. They will not go away. They will be mandatory by law, stronger than ever before, just to create more than ever before the parity for the physical, the scriptural euro and the digital one in future.

So cash has sort of bottomed out even in my country, still 20 % of point of sale payments are cash and it's stable. So yes, we have cash. Yes, we need cash. if that's one thing very important, something tangible, the digital euro will not solve any accessibility problem because it has the same limitations as other commercial digital instruments. That is why we still need that banknote for a very long time. So that argument. the whole thing. So if it could have...

be contained to this offline person to person, really digital cash like thing as you and I think it should be, then everything would probably be okay. but then the, let's say the Eurosystem said , if we limit it to that, people will probably not very much use it because we still have cash and why on earth would you use it? So we have to make it more attractive. So we need to...

also be able to use it in the digital space, in the e-commerce and all use cases that today are covered by commercial banks. And that is why there's no crowd out, no crowding out. Well intended argument at the beginning is not working out like it's supposed to because it will crowd out. Yeah, well, mean, I'm saying that, sorry, can I just interject here with this cash replacement or cash complement, a sort of modern form of cash?

I have lot of sympathy for that, right? I mean, cash is still a very sort of medieval way of paying, right? With sort of printed bits of paper and milled bits of metal. And you really need a modern version of that. So I fully follow you there. I don't see that though in the online space, right? Because we can already pay digitally in a hundred different ways, right? But in the offline space, I think that is interesting.

Michael Salmony 11:54

cash is still incredibly resilient. It's been growing for years, right? All this topic about cash disappearing is nonsense, right? If you look at the ECB statistics, if you look at all the other statistics around the world, cash is growing. It is being used less for payments. That is true, but the amount of cash is increasing. So the only interesting one seems to me this offline CBDC, like a sort of...

card you can load with digital euros and then we tap our cards together or maybe even our phones together and that's how we transfer money in an offline fashion and that seems to be quite an interesting variant. There are lots of questions about that. Can you remain offline forever because you then need to synchronize it occasionally and also isn't this a bit like the Geldkarte and Proton and Mondex all over again which we know it didn't work?

So I'm a bit of a fan of this offline CBDC, but I don't see that this is worth the billions of investment or am I missing something? And I don't think that is today the main objective. We have, this is what I was expecting three, four, whenever when the project started years ago, a, okay, well, digital version of coins and banknotes, which is the digital version of ECB money.

and all the other monies as we know, bank money, private money, e-money and so forth, a compliment for that. but well, this is not how the design was then focused. It was, as we all know, focused on creating something for online. Initially, was basically all we're all talking about online and I thought, well,

Initially from a TPPs, fintechs perspective, especially TPPs perspective, say, okay, okay, online accounts, account access, initiation of payment. That's right down our alley. So we are fine. We can, as TPPs, we'll be able to get to do what we do on digital euro accounts. But then when you try to think it through, you discover one by one a myriad of problems that come out of the

Michael Salmony 14:12

of having a central bank money in account form in addition to private money in account form. So just the idea of everyone having next to their checking account now having another checking, a digital euro checking account. So people having two accounts at the same bank and making it...

now suddenly visible that a private euro is different from an ECB euro, which no one knows or realizes. a euro is a euro and the basis for that is because we have two different form factors. So we have the ECB euro in cash and it's done in a different way that we have accounts with private money and again handled in a different way.

So yes, you interchange between them at an ATM machine, but people don't sort of see it in parallel. They see it as two variants. And now we are parallelising it in having a digital euro account, sorry, checking out digital euro account, savings account. I think people won't understand it, but just so, you know, I mean, so I was a bit surprised about that focus on account, but then when

when the prioritization of the different use cases was made and I was expecting again, I was expecting well, the current ECB money use cases like buying in a shop or handing money from one person to another. Those are the main use cases P2P or in a shop P2Merchant. Then suddenly, no, that wasn't the priority. The priority was e-commerce.

which is exactly where we do not have any problems with electronic payments because they're all electronic payments. So that made it very clear that the objective here is not to complement cash somehow. It is to make sure that the overall share of ECB money stays at a reasonably high level and is not diminished by

Michael Salmony 16:26

more more retail shopping going into e-commerce shopping and more and more money being spent online and therefore less and less ECB money being used. you think to the ECB is to preserve their cash departments and give them a new role? Yeah, but cash is not going away. As you said, the problem that cash is going away, it is not going away. So we do not have to solve that problem with it.

it is on the decline, it has bottomed out at a higher level, at least in my country, than we had expected. Still 20%, where we would have expected a couple of years ago, that would only be 10%. This is for us the stable situation, which will probably be the same for some time. But Ralf, I totally agree. So this online, offline digital variant of the good old banknote, which still...

maintains unique opportunities which you cannot have with a commercial or CBDC digital product. Some people with functional disabilities, they do need that piece of paper that they can feel, taste, bite in, look at, et cetera. you don't have these digital payment instruments, cash will always have that function. You cannot have that function in the CBDC. However good you will design the user interface.

on a wallet, however simple you make, there still will be a group of people that have to use the physical bank now. There are some central banks who I talk to who have a sort of 20, 30 year horizon and say, OK, you know, when cash has really maybe disappeared in that sort of time frame in decades, what is going to be the next thing after that? And I have some sympathy for that. You know, at the moment, we don't have cash disappearing. But of course, it is going down à la longue and we need a more digital, more modern form of that.

But I agree with what Ralf was saying, you Gijs, that nobody will understand this, right? I mean, people don't understand the difference between a debit card and a credit card, right? How will they understand the difference between a central bank money and a... They don't care. They don't even have to understand. They just want to pay for their groceries and something magical happens in the background and they don't understand that one way is...

Michael Salmony 18:45

paying with a claim on a central bank and the other is paying with a claim on your commercial bank. If it's not at all visible to the consumer, right, that he has two different kinds of money, that he's just spending money, then what is this about? You know, we've had

Also in Europe, situations where banks went bust or almost. So we have seen all those situations where people queue up in front of ATM machines and trying to pull up, convert their bank money into ECB money, their bank euros into ECB cash euros. And well, as long as you have this physical tangible form factor, basically coins and notes, or as I like to call it, tokens.

because that's the of digital version where we're coming to. So as long as we're talking about tokens that you pull out of a machine and into your physical wallet, what you can do there is limited. And then whatever you probably have 300, 500 euros at a time, then you've got to queue up again. Now, if you go down the account based route, then there is a series of

difficulties and issues that arise out of the sheer fact that ECB money should be account based. this is one. in order to avoid, so if a bank is running into difficulties, if now you don't have to queue up, but you could do it electronically, you could remove your money electronically from the bank, then of course, well, they could do that much, much faster. And the whole thing would collapse.

quicker. Hence, the policy decision there that there should be a limit on how much you want to use, how much you can get on your account and the talks are like 1000, 2000, 3000 just to give people an idea. that of course is, I mean, for me, it's mind blowing that someone would limit how much money I could have in some form for me. So

Michael Salmony 20:59

That already is a negative consequence. And then if you have such a limit, then now you get to the, okay, well, but then we should really only have one account because if you have multiple ones, it's difficult to control that overall limit. If you have 500 here and 2,500 there. so now we're getting into, well, just by, so we started off with account base, then we said, okay, well, but then you got to be limited.

if you got limited then we in the amount, then we got a limited in amounts or how many accounts you could have. And then if it's account based, then well, you have to open the account. So not everyone can use it. You first before you can use digital year, you have to open an account. have to basically go through some, through some KYC. And so what about kids? Can they use it? Got to go to KYC first. And, and, and so in to be on boarded somewhere before I can use money.

is a strange concept. and yeah, so you get from one problem to the next when you look into the, well, maybe unintended or whatever consequences of having it account based. Exactly. But that is the whole problem of starting out with, let's say, all the good arguments in the post Libra thing. We have come to a complete duplication of the payment system that's already out there.

causes problems, big problems, not only for the existing players, but also it might roll out the carpet for new players that we are just trying to become less dependent of as a possible unintended consequence. just picking up on the point you were saying, let's say the digital bank run, first it's of course very unlikely that a bank would go down in Europe under the supervision of the European Central Bank and the local central banks, we will have the deposit guarantee scheme.

with the 100,000 euros per bank, per account holder, etc. But in the unlikely event today you would have to run and then the ATMs will be empty and in theory you could transfer a million with a flick of the wrist. You could transfer that from your payment account or your savings account to your digital euro wallet were it not that the technical holding limit would only be 3,000 euros. I always remind people that you suggested

Michael Salmony 23:24

holding limit is a technical thing. It's just a parameter. You could set it to basically any value. But for financial stability purposes, it is set at a limit and it's still in the process of recalibration. We understand the European Central Bank still looking at based on data what would be a good holding limit for just retail payment purposes, you will. But if you don't limit it, you have tremendous financial stability problems because banks would not know

how the basis of experience you know, let's say the maturity of money, how long people typically leave their money in their bank and that's why you can lend it and extend credit, et cetera. So if you do not have those safeguards for the money being there in one second and your million that you've just used to base credit on granted for mortgages or whatever credits, the whole system collapses or has the risk to collapse.

macroeconomic factors, and I'm not an expert, we're just looking at, from my association point of view, these macroeconomic effects are beyond me, but they are real. We tried to keep it, what would be the added value for the retail customer when he tries to buy his groceries? We can't see it unless we have this cash-like digital offline thing, which we had the Chipknip in my country a long time ago, and we said, well, it sounds like a sort of Chipknip version 2.0.

you fill it up, you top it up from your payment account like you could do your sort of prepaid card, right? And you spend it and you top it up again and you spend it, okay. But one thing, just to finish, the 3000 or any limit, holding limit of the wallet is not a spending limit through the waterfall and reverse waterfall. I could easily spend even a million if I had it, continuously emptying my 3000 from my digital euro wallet.

topping it up again automatically, let's say. So it's not like, you can only spend 3,000 a day. No, it's the technical limit at one point in time, but you can have hundreds of points in time each day. So the spending limit is unlimited.

Michael Salmony 25:34

I'm surprised how reticent you're being, Gijs. If I were a bank, I would be really worried about this basically unlimited digital euro holding because you're absolutely right with the waterfall and reverse waterfall, you can always keep refunding your digital euro wallet. So basically spend as much as you like and that has severe monetary policy implications. It reduces liquidity of banks and all sorts of things. So that's a really scary thing.

But an unlimited digital euro wallet would be great for drug dealers who can just hand each other a smart card with one million euros instead of sending lorries of banknotes across the border. So we don't want that either. the thing that there are no holding limits for the drug barris. There are holding limits for banknotes. But the thing I was expecting you to say, Gijs, is

you know, you will want a limit because otherwise the banks lose liquidity and that impacts their core business of lending. But that's only part of the story. You're expected to do the whole distribution of the CBDC to issue the wallets, to do the KYC, to answer all the hotlines, to do all the work and won't get any money for it. Isn't that a bit of a problem? Well, won't get any money. Of course.

the account holding, wallet providing institutions would hope to get some compensation and in the draft regulation to underpin the digital, a digital with the legal framework. Of course, as a famous article 17 and that is about a compensation model, but it's very much in flux and how that would look like and there will have to be cost studies on what it would, I mean, it would be reasonable, it would be fair to assume that the wallet provider has to

provided for free to the consumer. The retailer has to accept it for free, but there is a cost involved, of course. So the retailer is supposed to pay a fee to his bank, if you will, and that bank from that fee would pay a little compensation to the bank that has freely issued the wallet to the consumer. But the way that compensation will be calculated, we fear, will be far below what the real cost will be.

Michael Salmony 27:49

And the retailers we know, EuroCommerce and others have said, well, well, we may want a, we may accept a digital euro, but only to against close to zero fees. And if the retailers say we will only accept it against close to zero fees. And if from close to zero fees, also this little compensation to the bank has to come from. I wonder. Yeah, I don't think that's going to work. mean, plenty of people have looked at that. The

as you say, the retailers is not going to have much margin to pass anything on and the value added services, are all that they don't make make a lot of sense either. So the only ones we've already established that the consumers don't see a huge advantage. In fact, they won't even know the difference. The banks have a lot of extra work without any extra, but it's going to reduce their liquidity. The only beneficiary could be the merchant. So, Ralf, you work a lot with merchants and

Do you see an opportunity there? Definitely yes. So, Gijs already mentioned the expectation from the merchant organizations and no surprise there. Obviously, they want to have lower fees and cheaper services. And they're right because what Gijs was just describing is basically like an interchange model.

where the acquirer gets some fees from the merchant and shares a little bit the interchange that is with the issuer bank, the payer's bank. And that model works well for whatever now more than 50 years or so in a context where we have no real time settlement and we have pull payments.

So basically the money is getting pulled from the merchant side and the issuer bank is paid a little bit to play ball and letting the money get pulled from the account. And the settlement isn't in real time. So the issuer bank is paid a little bit for guaranteeing that money, the authorization being fixed, the money getting reserved for a later settlement the next day or two or three days later.

Michael Salmony 30:17

The reason for paying an interchange to have a real time guarantee and to get money pulled, both are not applicable here. So we are having a push, inherently a push payment, account to account, digital euro to digital euro account or wallet push payment. So there is no pull. And second, it is done in real time.

So there is no overhead of authorizing, no two step process or whatever required anymore. So, which is also by the way, why already today in account to account based payments, we're typically seeing lower fees and that's what merchants like about it. So, because you would have a, they are more efficient, you're pushing, especially when we get to instant credit transfers now where you're,

having the instant confirmation there as well. So that's why I think it is an unreasonable expectation that a lot of money can be made from merchants sort of going through to the issuer side. I guess acquirers will still have some service like collecting money or whatever other services they do for the merchant, but no reason to split or to share that money in the form of interchange with issuer.

Well, of course, I'm vigorously disagreeing with Ralf. Sorry. Sorry. But don't you think the merchants will be very interested in this? I I agree with you, the interchange discussion will have to be a bit different. It's not for guarantees. It's more to balance the system. So that's also the issuing side gets some money. But I mean, the merchant should be interested, right? It's immediate. It's safe money. It's merchants are always free or less.

Ralf, go ahead. Sorry, Gijs you were going to say something. Merchants are always interested. The mantra is I've learned decades ago from the retailers. Don't come to us with innovation or innovative payment products unless they're better, faster, and you guessed it, cheaper than what we already have. Otherwise, please go away. That is the same thing. That fundamental hasn't changed. The problem here being that if that were true, what Ralf said, there is no reason. There's of course reason because there will be a cost.

Michael Salmony 32:40

at the issuer's side, at the wallet provider's side, they have to develop the wallets, maintain the wallets, there is a cost that needs to be recovered. So there is no such thing as a free lunch Ralf and it may be less, but that is the same discussion we are having with the instant payments. And that is exactly the pain point here, that if we would have a state mandated digital euro, mandatory free issuing, mandatory free acceptance in competition,

with commercial solutions based on instant payments, we better stop all the project right now. If that is what this has to happen, there is no way we can survive in such an unlevel playing field. And I didn't say, to say there is no cost. Of course there is, of course. But what I was trying to highlight is that the issuer is getting in a very difficult position between the rock and the hard place because the

The reasons for getting an interchange are not there anymore, but they still have the cost and have to give the account charge to the consumer, especially not if it's like a public good and all these accounts and all this onboarding and all this customer management, customer service has to be provided for free. You have probably more cost and less revenue.

I think the principle issue is similar, as you say, any within for any account to account. So we have the same in SPAA, as you know, or whatever in other A2A payments finding a sustainable business model. But this sustainability can probably only come from the cost reduction of the actual money transfer, which I guess is there. we have more, it's more efficient. So if

The only reason we need it, we need wallets or we need cards is because the underlying settlement for money from A to B was not real time. So you had to have some overlay to make it real time. The payment guarantee essentially. But if the underlying settlement like a digital euro payment or an SCT inst payment is real time by itself, you don't need that overhead. You will have a cheaper

Michael Salmony 34:53

a cost structure and this is how the savings must come from. Yeah, but that is why in every and we have done that and we are both involved the default fees for the SEPA payment account access scheme. It always has to be based on cost based on an objective cost calculation methodology. And of course, there is it's not impossible to have a mathematical precision there, but it has to be based on an objective cost based methodology. And that is all what is also described, I think.

compensation model here but there are such limits and caps already in the draft regulation that we will see and if there is lower cost then the compensation has to be lower of course it has to be justified but there is a cost and we need a methodology to establish what that cost would be and it has to be fair to all and especially indeed in a two-sided market we need a fair and sustainable business model for all otherwise it will not work.

unless you mandate it by law. So if you mandate everything by law you don't need a sustainable business model. Yeah, no, I think you're both making a very valid point that there's good business model needs to underpin all this. And I would even say even mandating it is not going to be enough. We've seen with PSD2 just mandating is not enough. It's better if all the participants are in there because they want to do it and they see an advantage to them.

not because they're forced to by the regulator. That's a much better approach. We've almost exhausted our time. I'd just like to touch on one last point. I think we all agree that this sort of offline CBDC might actually be an interesting thing because it's a modern form of cash with anonymity and might really solve a problem unlike the online one. But the other one that I also have quite a fancy for is the wholesale CBDC for cross border. What do you think?

Well, I totally get it. I'm not a wholesale. I wanted to make that point earlier on, but I didn't get the chance or I forgot it. I mean, the wholesale side of it is a completely different ballgame. So what I've been saying is in the context of a retail payment instrument from consumers in the B2C, C2B and person to person atmosphere. On the wholesale side, I think that the banking industry at large, especially the German banking industry has always

Michael Salmony 37:12

been much more bullish about the perspectives of using a digital euro in the wholesale, especially in the cross-border environment. But that's not my special agenda. What I do know is that my constituency, my bank, but what other that's a different discussion. What we've been saying, what we've been discussing is predominantly the effects and the sense or nonsense of the digital thing in the retail payment space. But I fully agree with you.

Yeah. And as you know, we already have a wholesale CBDC in Europe, account based in the form of Target2 accounts. So this is where some privileged PSPs like banks can have accounts and some not so privileged, e-money and payment institutions currently cannot, but it's changing. We fought hard to

to get to a more level playing field on that one as well. So it's coming as we know with the Instant Payments and the Settlements Finality Directive changes, et cetera. So we're getting there. anyway, so we are having an account based CBDC in Europe and we had it for quite some time. What is interesting, we never called it like that. Yeah, we didn't call it that way. But what is interesting though, is that there we now see the central banks and the other banks realize that

a token based version of that and not account based version of that. A token based version of that wholesale CBDC would have value because of the more atomic exchange there between sender receiver or also between the money and say securities. So I would say that that is innovation and optimization of infrastructures, etc. That is not changing the whole

ecosystem business model that is innovation that is... Yeah, exactly. it is innovation. It's like, as you know, decentralized technology is there that will help optimize, reduce cost, make better use of it. So there we are moving from account to token-based wholesale. Yeah, that's for sure. And it's not only a European thing we're talking about. I mean, if all the...

Michael Salmony 39:36

Over 100 central banks in the world are developing CBDC or thinking about it. If they were to all come up with their own CBDCs and then you would interlink them, you might get a more efficient cross-border system than we currently have with correspondent banking and Swift and the various other initiatives. So I think there's quite an interesting aspect there. And what I'm seeing is that a lot of central banks are thinking more and more about the wholesale side. They all started with technology for some reason, did all these ridiculous blockchain pilots.

And now they're actually thinking about the policy, you know, what problem are they trying to solve? And I think there's now a move towards wholesale. Because the cross-border thing really needs to be solved. It's really impressive, I think, if you dig into it, the amount of thinking and time and energy and resources at the Financial Stability Board, the IMF, the BIS, the CPMI, there's already so much...

policy thinking around these themes, how to optimize cross-border payments. It's pretty impressive. So I'm pretty bullish about that one indeed. Okay, great. So unless there are other remarks, I would gradually wrap up our session. I think we've had a very lively exchange on CBDC. I think we all agree that the sort of offline CBDC might be a good idea, the wholesale CBDC might be a good idea, and the other stuff we're not so sure about.

Whatever it happens, needs to have a proper business model and not crowd out existing developments. So the whole industry just stops and does nothing until this state's driven taxpayer financed free solution appears. So there are lots of things to watch out and the debate continues on and Europe is leading the world again in this space. I think the ECB is pushing harder on CBDC than any other region that I know of, even China, the US.

abandoned CBDC, at least the retail CBDC. So it's an interesting development to see whether Europe will be leading the world again and whether this will be for the benefit of us all. So thank you very much, Gijs and Ralf, for this very lively discussion. And thank you to all who've watched this episode. I hope you enjoyed it and you will join us for the next episode. Thank you for watching. Many thanks for watching and listening. We hope you enjoyed this episode.

Michael Salmony 41:55

Looking forward to seeing you again next time.