Mark Carney: belief

Transcript context

…Topic of the day is central bank digital currencies, as you know. Jay Powell spoke about that just the other day. If we move to some form of a central bank digital currency, how do we avoid or limit disintermediation as people pull their assets out of commercial banks and go directly through the central bank? Well, there’s a couple of ways. I think the most likely route that this is — and I’ll come to an issue with it — is that there are two tiers to the central bank digital currency. The digital currency is as much a wholesaler — it’s principally a wholesale digital currency. What faces you and I and those listening is some form of wallet we have a relationship with, whether it’s a commercial bank or an emerging tech company or a fintech company that is through the wallet. That’s how we access currency. Now as you know, but it bears repeating, most of that currency, most of that money will have been created by the private financial system itself. Very little of it actually is the digital currency. One of the decision points is whether we as citizens have a right to access the ultimate safe asset, or at least a portion of our earnings in the ultimate safe asset. In one model, the safest model, the one that doesn’t avoid the question — it solves the question that you very rightly put on the table — the digital currency is only at the wholesale level. It’s the top tier between institutions, not at the customer-facing, the retail-facing level. As you know, there’s the Modigliani-Miller theorem. Maybe I, Tyler Cowen, can’t legally access the digital currency, but an intermediary will give me an equivalent service, if only through crypto. There can be a private layer that in essence gives me that access.…

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