Scotti: Trust is core to digital money's future
Banca d'Italia Deputy Governor Chiara Scotti emphasized that trust remains fundamental for digital money's acceptance. Speaking at a workshop, she outlined the institutional architecture needed for CBDCs, stablecoins, and tokenized deposits.
Seven questions for digital money
Banca d'Italia Deputy Governor Chiara Scotti outlined a comprehensive analytical framework for assessing digital forms of money, focusing on seven crucial questions.
These questions span efficiency, trust, financial stability, market functioning, intermediation, monetary policy transmission, and the role of regulation and design.
The first question addresses efficiency and innovation in payments.
While DLT-based solutions promise speed, programmability, and new use cases in cross-border payments and securities, Scotti cautioned that benefits are not automatic.
Realization depends on scale, interoperability across systems, and integration with existing infrastructures.
The risk of fragmentation from multiple non-interoperable platforms could offset technical advantages, making the issue architectural rather than purely technological.
The key is whether network effects and settlement design enable large-scale gains.
Trust, convertibility, and new fragilities
The second question explores trust, par convertibility, and the singleness of money.
Scotti emphasized that tokenization alters how trust is produced and can break down, especially for transferable instruments trading away from par.
She contrasted stablecoins, which may trade away from par, with tokenized deposits, designed to preserve the two-tier monetary system.
Effective convertibility, ensuring acceptance at par even under stress, is critical.
The third question addresses financial stability, operational resilience, and new fragilities.
Scotti noted that while tokenization removes old frictions, its design and settlement structures are paramount for managing new vulnerabilities.
Beyond the hype: A grounded perspective
The speech effectively cuts through technological hype to re-center the debate on fundamental monetary principles.
By framing digital money through an institutional lens, Scotti provides a robust framework for policymakers.
However, the sheer complexity of the "seven questions" highlights the long road ahead for comprehensive regulatory solutions.
Source: Digital Money and the Architecture of Trust
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