"Let's go back to our pizza, hopefully by then, it's still warm.. when you buy it at the click of a button, your bank transfers funds to digital currency held at the central bank. In turn, the central bank immediately forwards it to the supermarket's bank which would credit the supermarket's accounts. All of that in a split of a second, all nearly for free and anytime. Do you see what just happened? The central bank is now the trusted intermediary"
What Lagarde is conveying is that the central bank is the trusted intermediary, not your personal bank. This would then hold true for domestic as well as international payments since the example she provided us with was a domestic purchase of a pizza. All payments would thus be routed through the central banks, where the money is held, as she stated. She also mentioned how commercial banks may not provide the required safety, because of their profit-driven nature, with this quote:
"Private firms may underinvest in security, to the extent that they do not measure the full cost to society of a payment failure. Resilience may also suffer, with only a few links in the payment chains, the system may stop working if any of the links actually is deteriorating, if there is a glitch, a bankruptcy, or a firm withdraws from the market"
Lagarde also discusses how we are moving towards a cashless society and how to achieve the middle ground between cash-less payments and privacy.
"Let's return to the trade-off between privacy and financial integrity. Can we find the middle ground? Central banks might design digital currencies so that users' identities will be authenticated through customer due diligence procedures and transactions recorded. But the identities would not be disclosed to either third parties or governments unless it was so required by law."
What Lagarde is conveying is that the central bank is the trusted intermediary, not your personal bank. This would then hold true for domestic as well as international payments since the example she provided us with was a domestic purchase of a pizza. All payments would thus be routed through the central banks, where the money is held, as she stated. She also mentioned how commercial banks may not provide the required safety, because of their profit-driven nature, with this quote:
"Private firms may underinvest in security, to the extent that they do not measure the full cost to society of a payment failure. Resilience may also suffer, with only a few links in the payment chains, the system may stop working if any of the links actually is deteriorating, if there is a glitch, a bankruptcy, or a firm withdraws from the market"
Lagarde also discusses how we are moving towards a cashless society and how to achieve the middle ground between cash-less payments and privacy.
"Let's return to the trade-off between privacy and financial integrity. Can we find the middle ground? Central banks might design digital currencies so that users' identities will be authenticated through customer due diligence procedures and transactions recorded. But the identities would not be disclosed to either third parties or governments unless it was so required by law."
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