Hyperledger Foundation Hyperledger and #CBDC, 6 Oct 2022

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From YouTube: Keynote Panel: The CBDC Journey: Research, Live Deployments, and Policy Considerations

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Keynote Panel: The CBDC Journey: Research, Live Deployments, and Policy Considerations - Nicolas de Labarre, Banque De France; Mai Santamaria, Department of Finance, Ireland; Sarah Palurovic, Digital Euro Association

Over the last several years, central banks around the world have been ramping up central bank digital currency (CBDC) research, experimentations, and pilot projects. These banks are seeking to define new currency models that bring innovation to a national financial system. This keynote panel will bring a unique perspective from leaders in government who are actively exploring and testing how CBDCs can help with financial inclusion, emergency relief, a more efficient financial system, and more.

Sessions Details & Slides (if available): https://sched.co/14QVA
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A

Good morning, I hope, you're all well caffeinated I think the topic of cbdc's can seem a bit daunting at first, a bit Dusty almost. But actually, if you take a look around the world right now, I mean there's news coming from Russia that they're actually going to roll out a cbdc, the digital Ruble by next year, by the political pressure that is put on them.

A

So I personally, don't think that cbdc deserves the let's say dusty um stereotype that it can sometimes be adhered to, and this is what we're here to to discuss today, amongst other things, but just because we were already on the topic of the topic being quite International, just by show of hands how many of you are actually outside or came in from outside of the Eurozone. Just for this event, right here, oh brilliant, wow,.

B

That's very good I'm glad we did this WOW.

A

Excellent, that's impressive I mean for many of you.

A

This must be the first um time back in Europe as well after covid, so the world certainly has changed and, as we know, central banks have changed their attitudes towards cbdc's as well in the last couple of years, and this is exactly what we're going to be discussing today and we have Financial I mean leaders from financial institutions from different European countries, in this case right here, but we'll make sure to obviously touch on the developments worldwide as well to get the first-hand experience on the research that was being done in France on a cbdc for interbank settlement, but then also touch on the infrastructure that is used in different countries around the world other than the Eurozone itself.

A

So, as I've said before, the keynote panel will bring together those those unique perspectives from our leaders that are sitting right here. Next to me, May Santa, Maria great great, that you're here with us, I.

B

Want to call myself a leader, but uh thank you- that's quite uh I just happen to have been looking at a blockchains for over five years in winter, in way of intro I joined the Department of Finance, as I said exactly five years ago, I started looking at Bitcoin at the time towards Christmas when it was looking at twenty thousand dollars. Those are the days um it all felt. Really strange.

B

um I just felt that clearly, blockchain technology was something that the minister for Finance in Ireland had to look at I thought it was going to be transformative and, as I said, we've been looking um at it and trying to support the department and the development internally here in Ireland, but also at European level and I'm. Also, a member of the OCD cmf meeting thing where we obviously also look at digital finance and I was very very fortunate to work with the world economic Forum during covet.

B

Actually when we spent the gods of 14 16 16 months, looking at stable coins and in particular, for cross-border payments, so that was very, very good. I hear someone nodding so a very long report, but definitely incredible experience, particularly for it does the best person like me so yeah, that's that's my interest in it and why I'm sitting here with you today.

A

Thank you, mate and we'll touch on the work that you're currently doing and as well in your position later on I'm sure and for now. Please also present yourself and your work so.

C

I'm coming from the centralized world so, as mentioned before curiosity and challenge drove me to to work on blockchain years ago, when we built the Eurozone, we had to build market infrastructures and payment system which should be a resilient, strong, so centralized then come the blockchain and we started experimenting blockchain five years ago and I'm going to tell about these experiences.

A

Perfect right before we get started, I'll use the opportunity to also introduce myself. My name is Larry palervic and I'm from the digital Euro Association I'm, an executive director there and the DIA in short, is basically picking up on all the developments and that the two next to me are are working on on a daily basis. The papers that are coming out, um seeing where different countries stand, for example, with the cbdc tracker.

A

um So we keep a close.

C

A

Those developments as well now to get everyone leveled. First of all, let's um dive into the attitude of one of the falls and possibly also the Bank of Ireland. um If you can comment on that, may that would be great. What general attitude do your financial, or does your financial institution um have toward um a eurozone-wide um cbdc, so one issued by the central bank and then um attitude towards individual research done by individual countries in the Eurozone.

C

So, let's start so, we have basically two two use cases, one for the banks and one for the customers. Maybe we can start with the customers.

C

um We see that coins and nodes are less used, especially by young people, so we know that we have to move to something new, so we've been working on on a digital Euro for all the citizens of Europe, we've been doing it with the ECB, because we are part of this of a single entity which is the Euro system. So we are really Keen to provide central bank money under the forms of tokens that anyone can use in its wallets.

C

So we think there is a big interest for the Eurozone to to to to do this move so that we can still use central bank money and the stability of central bank money.

C

Let's start with the retail industry, or you want me to touch upon the interbank as well.

A

Let's touch on the retail first and then you.

B

B

C

For for the digital Euro, that's fine on.

B

The retail go ahead, I think we're in that path. No, no.

C

For the return I just so you know that we started an investigation phase, so it's one year that we have been been working daily, as you mentioned, on on the digital Euro.

C

um We we know that, so what we want to to bring is tokens so that we can still have central bank money in our pocket, but we know that the payment system is today mainly managed by commercial uh money. So we want to find a right balance between central bank money and Commercial and Commercial money, and there are some intensive discussion currently today on these, how we can have a system that is a co-managed by us and by the commercial Banks.

C

This is the the key discussion that we have today and we are still discussing on this, so the updates will come soon on this.

B

A

Just on that topic, what's really interesting to see here is obviously um the Central Bank of France um stands towards cbdc's. We see very different approaches here. Obviously the bank of or the Central Bank of Ukraine, for example, they're very inclined to actually use blockchain um as an infrastructure, whereas the Eurozone they actually just recently announced that web 3 and anything other than person to person and transactions are off the table for now at least very likely to be it's yet to be discussed to be decided.

A

Finally, um but we kind of see it very different, um likelihoods of their actually being blockchained as the foundation for the infrastructure I mean if you could give us an update on um kind of the worldwide developments here. What different approaches new countries in general have towards cbdc? Oh okay,.

B

um Yeah, um what's happening worldwide is I, think it's it's easy to to spot. Anyone can clearly go to the CBC tracker go online and you can check that out for yourself, so I'm sure you're, all more intelligent than I am particularly when it comes to blockchain.

B

So I will certainly not um try to to be able to add value to to that that you can check yourselves the value, maybe that we try to bring in a financial advisory um when it comes to developments really is where's, the focus is where's, the risk might be, but where's the value at um there's. 90 percent of the central banks in the world now looking at cbdc's, most of which I'd say maybe 70 of the people here have put your hands up to say you come from outside the uh the Euro area.

B

The FED just announced late in August that they um they're definitely issuing a a cbdc of sorts and I'm not talking about the digital dollar Foundation, but something doing I think they're going to call it the FED now, which effectively is your infrastructure. So there's a lot of developments out there um and yet from a citizen's perspective, and that's me, the normal person, not my work Persona. Looking at this I'm wondering, why would I want this?

B

um What's the cbdc going to change in my life and how good blockchain actually changed my life and why would I want the Central Bank change that for me and I? Think that's for me when it gets interesting.

B

um Sometimes it feels the discussion that we're having and there is development and we're all looking at it. Is we applying blockchain and the application of that um ability to pay um to a paper-based process, but we're not using that technology to consider what can we do not just digital digital ties or digitalizing that paper exchange? Well? What else could we potentially do that right now we're not even considering and I think that's where the um the discussion it's missed.

B

We can all obviously go in, and eventually the technology will allow us to just digitalize that payment that you know between you and me, or between Banks or between even central banks, which is something I'd love to explore um and a wider and a wider setting. Perhaps, but are the other users we could do with that. Cbdc. That's just not just the payment. It just feels we're not giving credit to what the technology can do and I'm looking at you, because you guys are the experts, um particularly knowing what hyperledger can do so.

B

Could we use a retail cbdc for I know lifting the the um the the hardship of having to pay taxes? What if taxes could actually be deducted through a programmable programmability at the point of payment as an example that to me is where we're missing the point. We have an incredible opportunity to reconsider, clearly how we um digitalize that, as I said this payment.

B

This paper trail that we're doing, but we're just we're just too focused on that and I think it'd be great to do um a bit more Sky, Blue Sky Thinking in terms of what the technology and the opportunities will bring to us. There's many of them um I mean I, know you guys coming in from a hyperledger forum perspective in the cbdc discussions and the and the pilots that Nicholas had mentioned, for example, and bringing in the work that we do to the WF.

B

The sustainable development goal number 10 is about reduce effectively reducing the inequality in humankind, and specifically, there is a goal there to decrease transaction costs like remittance costs to three percent for immigrants and effectively erode all corridors or old, Remington's corridors that charge more than five percent during coffee time in European countries, some European countries transaction costs.

B

This is payment like all of these countries, all you guys here, I, don't know how much you get in charge now to come here and get your your your payments, but in a lot of countries in the world you would covet remittance cost and transaction costs actually went up as digital payments went up so could cbdcf address that and at the same time address the sdg goal, number 10 and at least at the same time address that inequality.

B

um Those are the questions that I think were were missing. Sometimes just looking at retail CNC.

C

Just one word: I fully agree that we Define some priorities, but I fully agree that we might still be open to many many use cases. So we didn't decide yet, which would be the first use cases, so they would be surprises, which.

A

Will be the first use cases in terms of the goals for a cbdc, especially I mean now, you've talked about the retail one and then there's also the interbank settlement. Could you just briefly um take us through the objectives for both of these for the month of homes, so.

C

Interbank was mainly driven by all customers, meaning that we have customers with other Banks which are now paying in central bank money. They see a use case to issue tokens security security tokens, and so they want to have central bank money for paying this with a security token.

C

So this is the the first UK UK they. They think that it would be much easier to issue tokens with DLT to sell it around the world. It would be much quicker than today, so they see a real use cases and we have been issuing some security tokens together with them and we had central bank money to to pay these security tokens. So this is the first use case. Then we have the Second Use case, which is close to what you mentioned, which is across border payments. We know that the industry here is not efficient.

C

The issue is that we need to all build this new system around the world. I, don't know whether we will be. We will have only one unique uh cross-border payment versus payment use case or whether we will have a network of regional networks, but we will do something and we are experimenting with a Singapore with other central banks in the world Switzerland as well. So this is. These are the two use cases which are driven by your customers and we want to provide a cash on The Ledger to these uh to these use cases.

B

I um I think use cases are there, technology is there to be used and to be applied, and you know we obviously want to be to use that experience and that brain and that Innovation to to apply to things um again from our from from the angle that we look at in terms of looking at possibilities, but also risks um technology implementation.

B

All technology implementation is going to fail unless there's uptake and acceptance by the EU, the you and me I mean who remembers the mini disks right I mean we just went straight from from CDs to um even shuffles I mean, although it did bring up um a need for shopping, songs and then to a Spotify. But um the point is without acceptance.

B

um You know it's the best I think structured, defined design, CBC original Swedish in the world. It's not going to work and at the same time, without trust is not going to work, um and you know we. Unfortunately we were.

B

We didn't have a chance to have a representative here from the Central Bank of of Nigeria, but would it be great to actually hear how's that worked, um but what's the acceptance of the usage, because in some of those Pilots for central banks outside of Europe, um they citizens have not been that willing to accept it because they don't trust their Central Bank. This is something that ours in Europe just take for granted. We take.

B

We tend to trust our Central Bank, but what happens in a particular country when that trust is not there, because at the end of the day, you're just digital digitalizing such a different work, difficult word, but you know what I mean. um What we're doing is with the paper now we're doing it with a digital currency right. So without that trust, it's not going to work, um and likewise, um in terms of that design, it needs to be easy to work. We just take it for granted.

B

Again, we have smartphones, we don't have even just feature phones of dumb phones, but you need access to the internet we talked about. Do we need a QR code? You need to have a additional year. That's that's offline, the reality in terms of how citizens would accept that and then use it, because it needs to be easy.

B

You know, at the end of the day, it's easier just to figure 100 bill out of your bad note than having to go in and log in and blah blah blah and whatever it is that you have to do so. There's a lot of elements out there that I think that are really important to be mindful of, and sometimes again we tend to forget because we just saved from our perspective and I guess. This is something I wanted to share with you from a hyperledger perspective, because you obviously have a global view.

B

So with that specific country experience and knowing or understanding what the citizens want what's going to work for them with the central bank is in relation to that particular country's citizenship. If you were to actually offer that hyperledger solution in terms of Technology, what's the angle that you need to play, that's probably what I think it would be of interest to you.

A

So, to reiterate: you're talking about user experience on the one hand needing to be easy, which is also very much in line with what we think at the digital Sphero Association and then. Secondly, what you were touching on as well is basically the the acceptance there needs to be a clear advantage in using the cbdc as opposed to different types of money. We see it in Sweden with swish. We see it in Germany, with with PayPal I can't speak to other European countries, what it's like there, um but that needs to be clear and I.

A

Think one of the ways in which this can be achieved is um blockchain as a foundation and, like you were saying, micropayments um enabling um or right now we have the the money that you get once off for the rising Energy prices, which is a political measure um to to help people from beneath the money to actually pay for for gas becoming more expensive, for example.

A

So this is, for example, something that could come in handy because, right now, more is spent in bureaucracy um around those payments than is being paid out to the citizens, to name one real life example- and this is just one example of kind of what you can learn along the way. I guess what we will learn along the way and Nicolas. What's your stance on this?

A

Is there anything that you've learned um in the last couple of years when it comes to your cbdc use cases that you can already derive from you're, saying you're doing things differently? This is how we'll impact the the future research and roadmap rollout I.

C

Would like to come back to the challenges you mentioned, because one you didn't mention was confidentiality. Of course, um that was the first goal we had to to to to check whether we could manage confidentiality within this. uh This blockchain application, unfortunately yeah because I mean people, people don't want to know how they are using their money. I mean we already saw it for the covet.

C

They didn't want to be tracked and so on, but uh for sure, if we want to manage the system, we we need to supervise them in in some way, but we need to manage confidentiality.

C

um That was a one of the key elements we we discovered was doable with a hyperledger fabric.

C

Previously we mentioned some challenges on interoperability and, as was said, the system would not be independent from all the other systems, so we need to be interoperable absolutely for sure. The the ecological footprint, of course, is a is something important for us. We've been working intensively as well on this on these things, uh we need to work as well on performance for sure this is a maybe for not for all the use cases, but for the retail we will need to to work on this uh use. Someone spoke about the U.S project.

C

This was clearly one one of the targets they had, so we need to work on performance, and you mentioned briefly the the offline which was clear for Nigeria to to be put in place here.

C

The the work we've been doing show that it's not fully reliable today and for sure the digital Euro needs to be reliable, so the the offline needs to be secure and not the participant and so on. So so this is uh one of the. These are the changes we still need to face.

C

So we've learned part of these things, but we still need to to achieve.

B

Conscious of the red light and Flash in there as well and Sarah, you mentioned that the somehow the digital Euro would have to be have to be a benefit to using that, um and specifically we're talking about digital Euro here, I'm not talking about potentially what would be another city is another country, but I would challenge that and I would say why do we have to have a preference or why would it have to be a bother with anybody else?

B

The reason I'm saying that is because, when we approach payments the way I'd like to approach, it is a little bit like modes of transports right for long distances. You use planes and just to go down the road. You might use a skateboard now, an electric one. You might go to Bicycle when you use the bus, there's different choices depending on what you can afford, because of the distance and so forth. Why can't we have different ways of payments?

B

Irrespective, oh sorry, not, irrespective, why do we have different things actually respective, as in depending on the transaction, the cost the.

C

B

And that I think weighs the value of a CBC is it might actually allow for the government to diverse and literally pay out certain things. It doesn't mean that maybe the citizens will want to use that for our day-to-day payments. So that's where I think there's there's a lot of scope and room for us to be a lot more groundbreaking and Innovative and actually really consider how we could use a CDC because there's a lot more, we can do we're just limiting ourselves. We that's what I think.

C

One element you didn't mention is that we have a certain stability in Europe since a long time. Maybe people do not see the risk in using such a or such a mean to pay. We want to bring stability to this to this world, so the you have to take as well into consideration things that are not so clear in some of the means you you are using. So that's that's. Why we're doing this project to keep the stability that we have in Europe.

A

You're good another one of your of your goals, basically um in the approach that you're taking right now, just um in terms of being wary of of time, um we will just do one round of closing statements here on what you think the ecosystem needs in terms of of govern of of government um technology providers um policy right now, let's focus on the on the Eurozone for this question.

C

um I, don't know with what to start for policy. We will have a pilot regime in the next year, so we will experiment different policies, so we know we know that we, it will evolve. Technology I mentioned offline because we need to to I mean you you have. You may have to pay without your phone in your hands um in terms of government. I would say um all the things we have said about confidentiality and so on to to work on these, so that the people can really trust the the digital Euro.

C

Maybe you have more elements on this on the policy side.

B

Yeah I mean on the policy side, I think it's great that we're even looking at cbdc's.

B

um We wouldn't be looking at them if it hadn't been I, think because of Libra in June 2019 and that's reality of it, um and this means you can walk into a room, a policy maker or a minister or even the central bank here in Ireland, and we're talking about blockchain, which was impossible three three years ago and that's the reality of it.

B

So I think the more of that I think it's great um listens to be understanding, not just fearing it, and that takes with a lot of um meetings and explanations and presentations and that's the work that, unfortunately, you know people like we we have to do, but it has to be done because if you don't understand something, you can't possibly bring you into your day-to-day job. I mean how can you possibly end up with the right policy if you don't understand, or at least comprehend what a technology can do and cannot do so?

B

I think that that to me is going to be key personally again from a policy maker perspective, I think understanding the risks or where their focus is is key, because otherwise you should end up with the wrong regulation or the not fearful purpose regulation or the wrong policy. And again that's that comes with understanding and asking questions.

B

So if there's anyone here that wants to meet up after and just uh give me an update on somebody to see the night later, I'm always willing to learn, because uh that's where we, where I get I, get my understanding from I.

A

Think you're speaking for all of us here, I was just going to mention that as well. Please do keep the conversation going, I'm happy to to meet all of those that are interested that have updates and that want to learn more about hyperledger um as an infrastructure, for example, um and then keep the discussion going, as you said, keep educating and holding presentations one-on-one in this case hope you have a good rest of the summit of of today's day um and looking forward to the discussions.