Christina Segal-Knowles: Responding to leaps in payments - from unbundling to stablecoins

Speech by Ms Christina Segal-Knowles, Executive Director for Financial Market Infrastructure Directorate of the Bank of England, at the Westminster Business Forum, London, 22 January 2020.

The views expressed in this speech are those of the speaker and not the view of the BIS.

Good morning. I would like to thank the Westminster Business Forum for inviting me to speak at today's seminar on 'Payments policy and regulation - infrastructure, innovation and end-user priorities'.

I'd like to start today by telling two short (and seemingly unrelated) stories.

The first is the story of perhaps the first giant leap forward in payments - the introduction of paper money.

Paper money was invented in China as early as the tenth century. Merchants seeking to avoid carrying around heavy iron coins began issuing IOUs written on mulberry bark. The state eventually took over - outlawing private IOUs and banning counterfeit - and the first state-backed currency was born. When

Marco Polo arrived in the mid thirteenth century, he was so amazed by this invention that he devoted an entire chapter of The Marvels of the World to Kublai Khan's tree bark money.

But, the first big leap forward in payments ultimately ended in a leap backwards. By the mid-fifteenth century, China had eliminated paper money entirely. The state had issued too much money and counterfeit was rife. Ultimately, mismanagement of the new invention resulted in what was perhaps the world's first hyperinflation. China didn't adopt paper money again for several hundred years. Although paper money eventually made a comeback, it took generations.