STABLECOINS

Michael Salmony 0:12

Hello, my name is Michael Salmony and I'd like to welcome you to another episode of the Payments Trilogue. And this time we have a particularly clever thinker around payments with us who has impressed me over many years on his thinking around open banking, how banks should engage in that and put APIs everywhere. Then on a bank's roles in identity, wrote one of the best papers I know on that topic.

And now he's changed from being a thinker to doing a startup. So this is a really exciting journey. And what we want to talk to Tony McLaughlin about is ⁓ stablecoins. ⁓ Now for those who come more from the TradFI world, can you give us a bit of an introduction why stablecoins are going to conquer the world and what needs to happen?

Tony McLaughlin 0:59

Sure, it's great to be here and thanks very much for the invitation. So the question is why stablecoins are going to conquer the world? Okay, let me give an analogy. I like a good analogy. So in my life, in terms of music consumption, I've seen vinyl, I've seen magnetic tape, mini disc, iPod, Walkman.

CDs. All of these are special purpose technologies which are dedicated to music and they've been replaced, entirely replaced, almost entirely replaced by a general purpose technology which is streaming over a phone.

In my life and payments, I've seen cash, physical cash, all sorts of checks, all sorts of cards, ACH payments, ACH circuits, real-time payment circuits, and these are all special purpose technologies for payments. And my belief is that stablecoins are the general purpose form factor which encompasses all of the

features of those special purpose technologies and that's why it will take over. So stablecoins are to payment, what Spotify is to music.

Michael Salmony 2:21

Okay.

That's a strong statement because as I understand it, stablecoins can carry not only money, but they can also carry gold and they can carry real estate and various other things, at least tokenized assets can. So that's maybe the generic part. Is that roughly what you mean?

Tony McLaughlin 2:45

Yes, indeed. The token is general purpose because the token can represent anything. In the same way that when you go to the Opera Michael, I know that you'll hand in your top hat and cane at the cloakroom and the cloakroom ticket will represent your top hat and cane. But I will go to the I don't know the I will go to a much less expensive venue and hand in my old jacket.

Michael Salmony 2:58

You

Tony McLaughlin 3:13

and the ticket will represent my old jacket. in blockchain, public permissionless blockchains, you've got a general purpose way of recording and keeping track of who owns these cloakroom tickets. And these cloakroom tickets can represent anything. And so these tokens on public blockchains are much, much more general purpose than the technology we've had before. And general purpose technology wins. That's why

You don't have an alarm clock anymore, you've got your phone, you don't have a calculator anymore, you've got your phone. General purpose technologies tend to subsume use case specific technologies, and that's good.

Michael Salmony 3:59

And you can also send these tickets, which represents my top hat and ⁓ cane over the internet, so directly from anywhere to anybody else, right? Which instead of old store and forwards and clearing systems and the traditional banking, so maybe you can talk us a little bit through that, how that will change the payments and banking world.

Tony McLaughlin 4:13

Yes.

Well, of course, again, when you when you move from atoms to to bits and bytes, you get a lot more flexibility. And, we've seen that we've we've had dematerialization of financial instruments, which has been very beneficial, but we've dematerialized those instruments into silos. ⁓ You know, with every FMI being its own silo and every bank being its own silo of record keeping.

And now we have available to us a general purpose technology for record keeping, is open, public and permissionless. Now, of course, it's not ideal in every case that all of the records are in a public registry. There are many use cases where you need to have privacy between the parties. That's also possible to achieve on these infrastructures. And so what I see happening before my eyes is just the steady march of

of technology which is from special purpose to general purpose and public permissionless blockchains are part of that evolution.

Michael Salmony 5:31

That's really interesting. Javier, maybe you could help us a little bit here. What the EPC, you've spent your whole professional life building banking infrastructures. Is that all now going to go away because we can just send money over the internet? Or how do you see this new development?

Javier 5:49

Well, it's not that I have any big idea from my experience at EPC because we didn't enter into this realm of cryptocurrencies or stablecoins. But I can give you my personal opinion. ⁓ When I teach or I give speeches to audiences and students, I usually start by provoking them asking whether the Monopoly money is money.

And after some hesitation, we come to the conclusion that Monopoly money, the board game money, is a money. It's a money for the purpose of the game, agreed by the players, and according to the rules. That's why it is a money, according also to Aristotle's definition. So ⁓ Monopoly money is a money because it is the consequence of an agreement.

And any money is a consequence of an agreement, it's a consensus. And in fact, it's a social agreement in some sense, going back to Locke and to Rousseau and all those philosophers. ⁓ But when we can agree that money needs to have that backing of the society, but when we come to the current world in which we need some instruments for the purely digital activity, that's...

that was the reason why cryptocurrencies were created, we had a split and there were two views which were opposite. The cryptocurrency ⁓ world, provided a means and a purpose for some usage that was needed and that's why they were successful, but it was seen by the other side of the coin by being wild and unregulated and dangerous. So the official world decided

to coin a term which is CBDC, Central Bank Digital Money, because they understood that money, and that was the tradition, money could only be issued by an authority, the central bank in this case. So those were like two opposite visions. One is fully regulated, very stable, very solid, very unrisky. The other one was even dangerous and it was even connected.

to the underground world and criminal activities and all that. these were like two opposite visions. Stablecoins is ⁓ an evolution. It comes closer to the middle ground where we can find ⁓ pros from the two worlds, maybe fewer cons from the two worlds as well. But it's kind of a trying to make a...

something of a consensus from those two different worlds. That's where I see the beauty and the usage. And the closer we come to that mixture, to that harmony in between those two worlds, the better. Because I think stablecoins will be successful if they can be smartly regulated so that they can be issued and they can be seen by the ⁓ public as being safe enough.

So there needs to be a mixture of ⁓ also regulation aligning the usage of stablecoins. And that's why I think there is something missing in some strategies that they do not think of this hybrid world in which we can have both aspects, which is what I see in the United States. I see that the aim is to have stablecoins, but ⁓ very much linked to the

the US dollar. there must be some overseeing activity, some regulation that allows that to happen and provides a solid foundation to the stablecoins. And maybe still in Europe, we are lagging behind and we don't have this appetite for hybrid solutions, which I personally I think are the best ones because you can combine the

richer elements of both worlds. we need for any money to be successful, it needs to be recognized and accepted and backed by a society, by a large society. And for that you need the functionality provided by, in this case, could be stablecoins, but also that legislation also providing ⁓ safety and recognition and safe.

Yeah, safety nets and all that.

Michael Salmony 10:37

Okay.

I mean, Javier, you make the good point that money is a collective illusion. It's only because we all agree that it has value, that that's what makes it so. And I love your way that sort of from the traditional sense of money to the new. And you could argue that actually Europe is a bit ahead, you know, with MiCA, was the first in the world, which said one-to-one fiat backed stablecoins and

maybe Wisconsin and the US is catching up. What do you think, Tony? Would you agree with Javier's view of the world?

Tony McLaughlin 11:13

Sure, and I agree that, ⁓ you know, nation states, I think, have a strong claim on a monopoly over money as a result of the social contract. It's one of the monopolies that we grant to the nation state, a very strong claim on that monopoly. you know, properly understood stablecoins. Interestingly, in the recent publication of the consultation stuff from the UK,

they class stablecoins as a crypto asset, which is with reference to fiat. I beg to differ. The best way of thinking about a stablecoin is just a new form factor of fiat. And let me give you a by analogy. So if I describe to you an instrument which is denominated in US dollars, issued by a non-bank, it's a negotiable instrument.

Michael Salmony 11:56

Yeah.

Tony McLaughlin 12:11

It's pre-funded and fully collateralized. What am I describing?

Michael Salmony 12:19

I happen to know the answer of what you're getting to, so I'll let you pull the curtain.

Tony McLaughlin 12:23

Well, it's a traveler's check.

So

what's the difference between a traveler's check and the stablecoin? Atoms versus bytes? This is no difference, zero difference. So my first job in banking was in traveler's checks 30 years ago. And here I am 30 years later trying to convince crypto kids that stablecoins are traveler's checks. I'm trying to convince regulators that stablecoins are traveler's checks.

This is exactly the synthesis that Javier is pointing to. And frankly, many people around the world are working on stablecoin regulation. It is bizarre to me that they only focus on the issuing side. Now, it's quite correct. We have to have prudential regulations to make sure that the issuers are solid, perfectly correct. But there is one sentence that will make stablecoins good.

Michael Salmony 13:02

Alright, good.

Tony McLaughlin 13:27

And that sentence says we can count the number of words. Enable banks and fintechs to process stablecoins like checks.

Nine words. You put those nine words into stablecoin regulation and everything is good. You get singleness of money, you get cash equivalence and the stablecoin is just a digital check. You can receive a stablecoin into a hosted wallet provided by your bank and your bank will process it like a check. You when you give a check to your bank, they don't buy it from you. They collect the money on your behalf.

So those nine words dropped into any stablecoin regulation and stablecoins are not crypto assets which reference fiat. Stablecoins are just a new form factor of fiat with nine words.

Michael Salmony 14:23

I love that.

Ralf Ohlhausen 14:24

Could I

come in here because I'm curious because you've been the, how to put it, maybe the payments brain of Citi for over 20 years. And you've had all this evolution ⁓ as the lead thinker in a biggest bank or one of the biggest banks in the world. And now you decided to...

Well, depart, go a different way or do it on your own. And is it because you think banks are not moving fast enough there or you want to what's your motivation? If you may share it.

Tony McLaughlin 15:01

Yes, look, simply put, before the US election, I have to be honest, before the US election, I thought that the design space was curtailed because I didn't see a way that banks could use public permissionless networks. And after the US election, it was clear to me that the design space would include public permissionless networks. if you... Well...

Ralf Ohlhausen 15:26

in America.

Tony McLaughlin 15:28

And as America goes, everyone else must follow, otherwise they will be significantly disadvantaged from a competitive perspective. So the logic is simply this. If you assume that stablecoin regulation was coming in America, which I think was a strong, ⁓ you could make a thesis about that after the US election, that was inevitable. Stablecoins live on public permissionless chains.

it would be intolerable only to allow non-banks to play that game. And therefore the banks would lobby very strongly to be allowed to play in the stablecoin space and they would be allowed to do so. And therefore banks will be allowed to participate in public permissionless blockchains. And therefore the design space just opens up and then that design space we can really look, I satisfied myself Ralf that

public that blockchains add something to financial services because at the moment we do messaging between institutions and messaging is fine but there's no state, there's no state machine. And I satisfied myself, I wrote a paper called Ready Layer One and I satisfied myself that the addition of a state machine to financial services is good.

But the problem is getting everyone to agree on using the same state machine. And booting that state machine from zero is very difficult. It's an adoption problem, not a technology problem. The difference in public permissionless networks is that they already exist. There's no boot problem. These venues are there. And if we can use them, then

I think the design space leads to the conclusion that stablecoins will become the dominant form factor. Having said that, it's not the stablecoins that you see today. I don't believe that a stablecoin is an instrument issued by a non-bank. I believe that stablecoins can be issued by banks and non-banks and central banks. And if you follow the check analogy, if you understand the history of checks, you understand the future of stablecoins.

Ralf Ohlhausen 17:48

Yeah, but I mean, well, let me first say that I actually fully agree. So I think there's no way around stablecoins. But ⁓ there is the American way of putting it like an executive order, denying CBDCs and pushing stablecoins. And then we have the European agenda, which does the exact opposite. So we have

all forces behind CBDC, digital euro, et cetera. We have some banks play with tokens, but not stablecoins. so, well, I understand that the US is leading the world a bit and maybe also the thinking of often innovation, et cetera. But for where we are today in Europe, ⁓ well, we are on a different planet, I guess.

Tony McLaughlin 18:41

Well, I think we have to combine the planets and if I had the opportunity to speak to the decision makers in Europe, would say this. ⁓ I would say, do you anticipate an influx of foreign stablecoins? Yes or no? The answer has to be yes. Okay, do you prefer the stablecoins to arrive on unhosted wallets or hosted wallets?

has to be hosted wallets. Do you prefer that once these stablecoins are in the hosted wallets that they are converted to euros or they remain as dollar stablecoins converted to euros? And so that if you this is three questions with you know, it's a very, simple decision tree. But the conclusion of it is every bank and fintech in Europe needs to offer hosted wallets.

and needs to catch the stablecoins coming into Europe and convert them to euros. And this will be beautiful because everyone who catches a foreign stablecoin makes FX. It will be wonderful for the banks and the fintechs. They will make FX and they will make fees. But something else remarkable will happen, which is once every bank in Europe offers hosted wallets to receive foreign stablecoins,

You will also have a European acceptance network for Euro stablecoins. And then we will have a very resilient financial system because every bank will be connected to 10 blockchains and those 10 blockchains will carry foreign stablecoins and Euro stablecoins and the banks and the fintechs will be able to provide the on and off ramps into their balance sheets. And we will have a super, super resilient financial system.

Michael Salmony 20:38

I love, yeah, sorry. No, I absolutely love your vision, Tony, how you see banks at the center of this stablecoin development. It's not against the banks and fintechs exactly, but it's not sort of against the banks, right? It's the banks should issue stablecoins. They should accept them. They should process them. It's another form factor. I love all that. What I am struggling with is, I love your analogy with the traveler's check, but the traveler check is simple.

Tony McLaughlin 20:38

Because frankly, sorry, go on.

And fintechs, not just banks, and fintechs.

Javier 20:48

You

are both.

Tony McLaughlin 20:58

Yes.

Michael Salmony 21:07

⁓ everyone with half a brain can understand how to use it immediately. I have tried to use stablecoins and downloaded wallets and it is just an absolute nightmare. know, all these promises about transparency and ease of use and instant and cheaper, it is all nonsense. It is the complete opposite. But I think you're trying to solve that problem. So tell us about that.

Tony McLaughlin 21:31

Yeah, well, again, I think the best solution for look, I'm not stopping people from having unhosted wallets. I'm not stopping people from selling, buying and selling on exchanges. No problem. That can all continue. That's all good. But for regular folk and for regular businesses, the easiest way to receive a stablecoin is into a hosted wallet provided by your bank or your fintech. And what does that mean? And you know, an IBAN

is 25 characters long. I'm just saying that the next time you log into your bank, you see another address. And that address might be 32 characters long, and that's your Ethereum address. And then I can send you stablecoins to that address. Or you have a Solana address, and I can send you coins to that address. And the bank and the fintech can take care of the user interface.

and you're not going to lose your password or if you lose your password your bank or your fintech will give you back your password and these things will just be transacted like like checks but much much much much faster so the atoms will be replaced by byte bits and bytes everything will take place very quickly and we will have a very very strange historical resonance where we're back in the world of of check processing

⁓ but in the new form factor of stablecoins.

Michael Salmony 22:59

So that's at the front end, but also at the back end, right? ⁓ You need to connect the CBDCs, commercial bank money tokens, the stablecoins into a common clearing and settlement. ⁓

Tony McLaughlin 23:03

Yeah.

Yes,

that's, know, check clearing is something that most people don't spend their time being fascinated by. But a check clearing system is simply a machine for claiming money from an issuer. So you have a you have in checks and ACH and credit cards and debit cards, you have a many to many relationship, many issuers, many accepting points.

And when the instrument goes to the accepting point, the accepting point needs a way of claiming the money back from the issuer. That's what a clearing system is. So you can't resolve the many to many ⁓ network with bilateral connections. You need to have a clearing system. So there will be a clearing system for stablecoins. Whether I'm successful in building it or not, there will be a clearing system for stablecoins. And then this comes to the... This is what I'm doing.

Michael Salmony 24:05

That's what you're doing, right? That's what Ubix, your new company

is, right?

Tony McLaughlin 24:09

And I

appreciate you trying to tease out of me a sales pitch from my new company. I appreciate that very much. So yeah, that's what I'm intending to do is build that clearing system to just make stablecoins regular money, ⁓ not a crypto asset pegged to fiat currency, but a new form factor of fiat currency. And the market structure that that will lead to, I think is pluralistic. Many, many issuers, many accepting points.

Michael Salmony 24:14

Thank

Tony McLaughlin 24:39

many currencies. European stablecoins can be accepted all around the world. No problem. know, any one of you can fly into New York and use your credit card or debit card issued by a European bank in Macy's or Bloomingdale's. No problem. Someone can fly in from Japan into Frankfurt and use their Japanese yen issued instrument in Frankfurt. No problem. And I see stablecoins developing

in exactly the same way. And it might sound radical, but my prediction for the stablecoin market structure is that everyone, and I mean everyone, every financial institution on the planet will receive and everyone will send.

Michael Salmony 25:25

I mean, that's lovely. Sorry, I keep coming up with problems, but one thing that does concern me is the sovereignty issue. You know, we've seen that with payments in Europe and with stablecoins. looks like the US stablecoins are dominating, Circle and Tether, the providers are dominating. How do you see Europe really playing a big game here?

Tony McLaughlin 25:51

Well, again, I would bifurcate the game into several little parts. ⁓

There's a stablecoin game which ⁓ Europe should play. And the way that Europe plays the stablecoin game effectively is first, I mean, first what we've done is issuing. But the first thing that European banks and fintech should do is offer hosted wallets and accept.

Catch the foreign stablecoins, convert them into euros, make the FX. Lovely. Banks enjoy making FX, believe me.

Then when every bank in Europe has got hosted wallets, European stablecoins can circulate freely within Europe. And then we can connect European stablecoins into overseas acceptance networks and they can be accepted overseas. And Europe can enjoy the same benefits as people believe America will enjoy. people believe that America will enjoy the benefit of diversified

demand for their treasuries because people around the world who buy stablecoins or hold stablecoins, the issuer is buying treasuries. And that you might think of that as being, you know, if you're, if you're running a bank, you can be either retail funded or wholesale funded. You know, which would you rather be retail funded? So would you rather be a retail funded country or a wholesale funded country? Retail funded.

So if we in Europe, you see how I still count myself as a European?

Michael Salmony 27:38

Good.

Tony McLaughlin 27:39

So if we in Europe ⁓ are successful and in the UK are successful, if we have our head straight, we will do two things. We will accept the foreign stablecoins and convert them into local currency. And we will get our stablecoins accepted overseas. And then everyone will be very happy.

Michael Salmony 28:02

Wow, Tony, inspirational as always. Ralf, Javier, you have anything to add?

Ralf Ohlhausen 28:08

Yeah, no,

do. do have a question. I would like to, I mentioned before, but so we see banks in Europe, especially in Germany, ⁓ going or looking at what's called the commercial bank money token, as their apparently preferred way forward into the tokenized world and issuing that and ⁓

Tony McLaughlin 28:26

Yes.

Ralf Ohlhausen 28:37

Well, I guess I have ⁓ some understanding of why that is, but I would like to ask you, what do you think banks should do? Should they do both or should they one or the other? Or where do you see the advantage or disadvantage between the two approaches?

Tony McLaughlin 28:52

Yeah.

So there is, look, I'm with happier on synthesis. ⁓ And if you follow the check analogy, so think about who can issue a check. ⁓ Back in the day, American Express travelers checks were issued by a non-bank. A check can be issued by a big bank or a small bank. In the US, a check can be issued against the money market fund.

And I have a strong recollection of this. I don't know if it still happens, but back in the 1990s, if you had a credit card, the credit card company would give you a checkbook and you could write checks against your credit limit. So here's the thing. Here's the category error that we're making. Imagine that the only kind of check we ever saw was a traveler's check. And you were the regulator and you said, aha.

Here's a new instrument. It's a pre-funded instrument. It's fully collateralized and it's issued by a non-bank. Let's write some rules for checks and forevermore into the future, checks must be pre-funded, fully collateralized and issued by non-banks. This would be ridiculous. So why are we doing it for stablecoins?

Javier 30:12

The analogy I use, very similar to that of the travelers checks, is that of the casino chips or tokens. guess that the token's terminology has been the one that has been used in digital assets for token tokenization and all that. And that's money. Because at the end of the day, a casino chip is money, money issued by a non-bank.

Tony McLaughlin 30:12

A check. Yeah.

Yes.

Yes.

Javier 30:41

is that all the features you mentioned for a traveler check also apply to casino chips, which is another source of inspiration. What I wanted to say is that I fully agree with Tony. Probably we need time. Rome was not built in a day. Since the first coins until the first banknotes, we needed many centuries, so probably we will need time. And I guess that the real issue is that of adoption and the...

Tony McLaughlin 30:48

Yes.

Javier 31:12

user experience what matters probably technology is well tested and what we need is ⁓ the adoption by a large number of users and we'll see what they choose and what the public chooses will be the real solution.

Tony McLaughlin 31:33

Well, waiting to see what happens, think, actually have it with respect is a very bad strategy because we should anticipate in Europe that the foreign stablecoins are coming in large numbers. And if we do nothing, they will arrive in unhosted wallets and they will be invisible to the authorities. They'll be invisible to the tax system. And so if you just look at the market, ⁓

know, forecasts of perhaps there being a few trillion dollars worth of stablecoin circulating, then it would be extraordinarily foolish to just let that happen and for a parallel system of unhosted wallets to emerge where we don't have surveillance. But not only that, it would be an enormous missed opportunity to catch all of those stablecoins and make the effects. So you guys will not.

probably be familiar with the game Pokemon. ⁓ I am because of my son. But Pokemon has a catchphrase, which is, you've got to catch them all. The good strategy for a banker or fintech is I call the stablecoin Pokemon strategy. You've got to catch them all. Every one you catch is FX. And so by chasing, it's a kind of enlightened self-interest. With European banks,

⁓ chasing the cat, fighting each other to catch these stablecoins and win the FX revenue. They're actually doing something good for Europe, which is to make sure that the stablecoins are converted into euros. So they're on the balance sheet of European banks and that they're in the regulated financial system. And by the way, it's also good for the stablecoin issuers because the fundamental thing that they need is the acceptance network.

So the wave is coming. Whether we like it or not, the wave is coming. Digital euro has got nothing to do with the stablecoin game. Nothing to do with the stablecoin. It's a different game. One game is Monopoly and one game is Cluedo. And there are two games going on at the same time. But let's not mix up the two different games. we don't.

play the Monopoly game of stablecoins, then there are very bad consequences.

Ralf Ohlhausen 34:04

There's one angle though to this, which I think is linked to the sovereignty issue already mentioned and how, because the first occurrence really in Europe of stablecoins and maybe seeing it as a threat was some years ago with Facebook, as you will remember with the Diem and then Libra. so how can we avoid that? ⁓

while money and stablecoins and everything has been taken over by a few big techs, which with billions of customers each, especially given that if we go like a regulatory banking way, this is more country specific, maybe regions in Europe, we have at least a region, but otherwise these players are not bound by national boundaries. So they are global.

Tony McLaughlin 34:38

Yeah.

Yes.

Ralf Ohlhausen 34:56

And they have an easier game to run wallets as we've already seen and put stablecoins in there, et cetera.

Tony McLaughlin 35:00

Hmm.

Well, I believe that the market structure will not be oligopolistic. And the reason for that is just because of history. So let's think about previous iterations. In the age of checks, everyone sends, everyone receives. In the age of ACH, everyone sends, everyone receives. In the age of cards, everyone issues, everyone receives. That's the market structure for stablecoins. ⁓

And the way you get to that market structure is again, those nine words allow banks and fintechs to process stablecoins like checks. If you get to that situation, you very quickly get universal acceptance network. once you have a, let's think about this question. Why is it that the smallest bank in Europe can issue a credit card or a debit card?

The only reason it can is because it doesn't have to build the acceptance network.

The only reason. So what we should do to have a good market structure, a pluralistic market structure is build the universal acceptance network and then everyone can issue into that universal acceptance network. then of course there will be big players and small players, but the fact is, Ralf, that you will probably use your chosen banker fintech to receive stablecoins.

and you will probably use your banker fintech to use their stablecoin. And so the relationships, I think, will be largely preserved. The difference is that we'll just be transacting with a new form factor. And we've all seen these transitions before. This is no big deal. We've all, all of us are of an age where we were playing vinyl records. All of us. And they disappeared. In 2004,

When I got my first Blackberry, it was the most amazing technology I'd ever seen in my life. It disappeared. these, know, Joseph Schumpeter described capitalism as creative destruction. It is.

Michael Salmony 37:23

Tony, this is terrific. But my ⁓ old vintage device, which has not quite been replaced by a mobile phone here, tells me it's roughly time we wind down. But I just have to give one last question to you because I'm intrigued by your thing about versus CBDC. You're comparing it to two games which are basically in different ballparks to misuse a metaphor.

Tony McLaughlin 37:49

Yeah.

Michael Salmony 37:49

I somehow see that, but there is some competition and they are surely a bit in the same game. And I also see that as a different dimension. I mean, I would compare stablecoins unless you and I are completely wrong. This is going to be a massive thing, right? It's going to be used by institutional investors. It's a global thing. There are huge volumes already. It's going to get even bigger. This is going to be a trillion dollar business. Whereas the digital euro, much as though we like it, might be a more regional and a more sort of for retail.

So it's like comparing ⁓ baseball to cricket, right? I think those are the two games. ⁓

Tony McLaughlin 38:23

Yes, the

digital euro to be successful, ⁓ I think the best strategy would be to issue them onto public blockchains. And here's the rationale. So here's a question, also, Javier, I'd be interested in your view. When a nation state has a monopoly over money, should the money travel to the people or should the people travel to the money? So there are actually

Two ways that this happens today. In cash, the money travels to where the people are. In RTGS, the participants travel to the RTGS. So the cash goes out into the world, but in RTGS, the users come in. So this is the question for CBDC. Should the CBDC travel to the people?

or should the people travel to the CBDC? And I think at the moment, the way that it's being built is that the people have to travel to the CBDC and I don't think they will make the journey. So I think a much better strategy is that the CBDC should travel to the people. And so I would like to see the digital euro issued onto 10 different public blockchains.

Michael Salmony 39:48

wow.

Tony McLaughlin 39:50

but only if people wanted to be successful. If we wanted to be an interesting ⁓ experiment, then by all means, let's build something monoline and very special purpose. But if we wanted to be successful, then the digital euro should be on public permissionless blockchains because that's where the people are. And to the argument where people say, well, they're too dangerous. Well, we send cash into streets.

Michael Salmony 39:53

Yeah.

Tony McLaughlin 40:19

We've sent, you the cash is circulating all over Europe in dangerous neighborhoods. The principle is that the money, the official money needs to flow to where the people are. Because if we don't put the official money where the people are, the people will use unofficial money.

Michael Salmony 40:42

Tony, you've given us so much food for thought as always. I don't think I can bear to look at your spooky image much longer. So we really have to call this time off. But it was so good to have you.

Javier 40:49

and

Tony McLaughlin 40:49

What's happened is that the sun has moved over.

Javier 40:54

Let me share

my very short and last reflection. I find Tony's tales very appealing. He's very, very plausible in his views. But on the other hand, we know that history actually happens and unfolds in very unpredictable ways. So I think...

At the end, it's all about adoption and how people feel and what people prefer. And if it's inconvenient and it is not easy, it will not be adopted unless the instrument is easy and convenient and ⁓ it doesn't create any confusion or any problem, it will be adopted. That is the final issue.

Tony McLaughlin 41:49

Agree.

Michael Salmony 41:49

Good.

Okay. So unless anybody else has anything urgent to say, I would thank you very much, Tony. And we can see there's a huge future both for fintechs and banks in this space. And it's going to be super exciting. And I have an amazing admiration for you leaving a cushy job at Citi to become a CEO of a startup. Not many have that courage and I wish you every success and hope you become rich and famous.

Tony McLaughlin 42:07

Ha ha.

I don't wish to become rich and famous. ⁓ I'm satisfied that the, if people haven't seen the white paper, I'm satisfied that the white paper is a contribution to thinking on stablecoins and that's enough for me.

Ralf Ohlhausen 42:16

Thank

Michael Salmony 42:19

May it happen to you all the same.

Fantastic and modest as always. So thank you very much, Tony and Ralf and Javier for having this very lively episode on a very future looking topic. Okay. Thank you to everybody and see you next time.

Ralf Ohlhausen 42:37

Thank you so much.

Javier 42:45

Bye.

Tony McLaughlin 42:46

Thank