Local currency

• Airbase is the first and only spend management solution in its class to offer full international accounts payable functionality to its users.
• The Bill Payments product within the Airbase spend management platform offers the option to make payments to foreign vendors in either U.S. dollars or local currency all from within the same system and with two simple clicks.
• Managing international payments typically involves several disparate systems, payment processors, and banks for purchasing foreign currency.
• "\nDarragh Collins, PR Manager at Airbase via: [email protected] / +1 604 671 4515\nAirbase is the only truly comprehensive spend management platform for small and midsize companies.

SPEECH

Digital challenges to the international monetary and financial system

Panel remarks by Benoît Cœuré, Member of the Executive Board of the ECB, at the Banque centrale du Luxembourg-Toulouse School of Economics conference on “The Future of the International Monetary System”, Luxembourg, 17 September 2019

• [2] Many observers saw the euro as a natural contender to rival the supremacy of the US dollar in the global monetary and financial system.
• After all, the euro area was (and remains) the worlds largest trading bloc.
• Yet, the US dollar remains the dominant international currency.
• [5] The US dollar today accounts for around half of global foreign exchange transactions worth 6.6 trillion dollars per day.
• [6] It is used to invoice nearly half of global foreign trade, a share far greater than that of the United States in the global economy.
• [7] And it is now as widely used as a reference unit for exchange rate arrangements as it was during the Bretton Woods era.
• [13] Partly in response to these concerns, a G7 working group has been mandated to examine global stablecoins in more detail.

Digitalisation and currency competition

• In the past century or so, competition for pre-eminence in the international monetary system has been confined to currencies issued by sovereigns.
• Economic size, openness and stability were long considered to be among the key determinants of the success and demise of international currencies.
• The fact that the global appeal of the yen, the euro and the renminbi has not risen more forcefully is typically associated with one, or a combination of, these factors.
• [14] There is a vast body of literature assessing the relative importance of these and other factors.

Inertial forces may become less powerful

• Global currencies, much like domestic currencies, serve the three classic functions of money a unit of account, a store of value and a means of payment.
• Both history and theory suggest that being a means of payment is, de facto, the leading function of a global currency.
• For firms, merchants, banks and governments, there are material costs involved in agreeing on one international currency standard, and in switching from one to another.
• High switching costs, lock-in effects and habit persistence were strong forces in favour of the status quo.
• [19] There is an active debate as to how long it takes for one leading currency to replace another.
• [22] It is only natural, then, that new and emerging private payment solutions are mainly targeting consumers and workers, not merchants.
• [24] Third-party mobile payment transactions last year in China were 15 times larger than in 2015.
• There is little reason to believe that such network effects would be less powerful for global networks, possibly making international currency competition a much more dynamic contest in the future.

Drivers of international currency use in the digital age

• This brings me to my second point, namely that the factors driving international currency use are likely to change too.
• Price stability remains, and will remain, a precondition for a currency to gain widespread use, whether digital or not.
• Stablecoins, if they meet their promise of stability, are the natural next step in the evolution of digital assets.
• Next to stability, other factors are likely to play a growing role in the digital age.
• Despite the creation of the single currency 20 years ago, cross-border e-commerce in the euro area has not taken off.
• But it will provide a platform to turn a means of payment into a global currency.
• A second, and related, new driver of international currency use in the digital age relates to privacy.
• [30] To pass the test of faith, therefore, any stablecoin initiative will have to conform to international anti-money laundering and know-your-customer regulations.
• It is hard to tell just how much the privacy dimension will affect international currency use.

The future shape of the international monetary and financial system

All this means that digitalisation may significantly change the way currencies compete with each other. It also means that it will become much more difficult to predict the future contours of the international monetary and financial system. Several equilibria are conceivable. I would like to briefly discuss three of them, each with very different implications for the future shape of our international monetary and financial system.

Preserving the status quo

• A first possible equilibrium may simply be the status quo.
• Concerns expressed about Libra in large parts of the world, including in the United States, has been considerable.
• Some governments have already announced their intention to ban Libra, if and when it gets up and running.
• Libra has undoubtedly been a wake-up call for central banks to strengthen their efforts to improve existing payment systems.
• Progress made by those central banks already operating at the technological frontier can be expected to increase the speed of technological diffusion across borders.

Central bank digital currencies

• A second, and related, equilibrium is what Bank of England Governor Mark Carney recently called a synthetic hegemonic currency that is provided through a network of central bank digital currencies CBDCs for short.
• [36] Sveriges Riksbank and the Central Bank of Uruguay, for example, are among the most advanced central banks in this area.
• The Peoples Bank of China has also reportedly accelerated plans for its own digital currency in response to Libra.
• [38] But cooperation is precisely what Governor Carney is calling for: closer central bank coordination to reap the benefits of recent technological advances more quickly and more efficiently.

Digital currency areas

• It would be in the spirit of what Markus Brunnermeier, Harold James and Jean-Pierre Landau have called digital currency areas that would cut across borders.
• [40] Digital currency areas are networks where payments and transactions are made digitally by using a currency specific to the network be it a fiat currency or not.
• At one extreme, cooperation would cut across continents and lay the ground for the rise of a truly global private digital currency.
• More conceivable are therefore digital regional currency areas.
• But unlike traditional currency substitution, stablecoinisation would potentially relegate key policies that belong to the public sphere to private payment system providers an outcome which citizens clearly cannot accept.
• [45] In other words, the journey towards digital currency areas would be long and full of perils.

Conclusion

• The Western Union Company (NYSE: WU), a leader in cross-border, cross-currency money movement, today unveiled a new payment option that allows Amazon.com customers in Chile to pay in local currency for their Amazon.com purchases.
• After selecting PayCode on the Amazon.com checkout page, customers will be sent a code, along with instructions on how to pay in person at a participating Western Union agent location.
• The move by Western Union and Amazon will provide greater access to online goods for customers who have largely been excluded from e-commerce shopping due to lack of accepted payment methods.
• With our global reach, Western Union moves money for better, connecting family, friends and businesses to enable financial inclusion and support economic growth.

• Online merchants can now accept BSV, the only cryptocurrency based on the original Bitcoin protocol, via the leading virtual currency payment provider, Coinify .
• Whether the merchant wishes to accept BSV directly or have that changed to local currency, Coinify can facilitate those options.
• With their goal of building an international virtual currency payment infrastructure, Coinify's cooperation will further BSV's vision to become a viable global currency.
• Coinify provides cutting-edge and compliant virtual currency products that allow businesses to accept payments both online and in retail stores.