Distinguished governors, central bankers, regulators, industry leaders,
Ladies and gentlemen,
Dear colleagues and friends,
It is a true pleasure to join you here today. And it is especially meaningful to have this discussion in London - one of the world’s historic financial centres, at a time when the global financial system is entering a period of profound transformation.
Not incremental transformation.
Not another ordinary innovation cycle.
But, real, structural transformation.
A transformation driven simultaneously by technology, geopolitics, fragmentation of global supply chains, changing security realities, demographic pressures, the climate transition, and the accelerating digitalization of economic activity.
For central banks and supervisors, this creates an environment that is both exciting and deeply complex.
Because increasingly, each strategic question we face sits at the intersection of financial stability, monetary policy, technology, resilience, and geopolitics.
The boundaries that once separated these areas are becoming far more murky.
Today, operational resilience can influence monetary transmission. Cybersecurity can become a financial stability issue overnight. Payment infrastructures can become instruments of geopolitical influence. And technological dependence can become a strategic vulnerability.
We are entering what many describe as a 'new world'. A world where resilience matters as much as efficiency. Where strategic autonomy matters alongside globalization. And where trust, once again, becomes one of the most valuable assets in finance.
In this context, we are also witnessing a gradual and important shift in the structure of globalisation itself. We are moving toward a more managed fragmentation of global finance, where cross-border flows remain significant, but are increasingly shaped by regional blocs (US, EU, Asia, China). This has direct implications for how we think about monetary policy and financial infrastructure design.
From the perspective of Latvia, a relatively small financial market, but one of Europe’s most digitalized economies, these developments are especially relevant.
Small economies often feel global shifts earlier, and more directly. While at the same time, they can also excel at adaptability.
We understand that, in the future, competitiveness will not come only from scale. It will come from agility, connectivity, digital capability and from institutional trust. And more increasingly - from resilience.
At Latvijas Banka, where I serve as Deputy Governor responsible for supervision and regulation, we have approached this transformation with precisely this mindset.
We are a fully integrated institution - central banking, supervision, payments oversight, financial stability, and a growing focus on digital finance expertise under one roof.
And, undoubtedly, this integrated perspective is critically important in the environment we are now entering.
This comes from the fact that the future financial ecosystem will not function in silos.
The old distinctions between 'traditional finance', 'digital finance', 'payments', 'capital markets', and 'crypto' are already beginning to blur.
Similarly, the distinction between central banking and broader financial ecosystem stewardship is evolving.
Central banks today are no longer simply guardians of inflation and providers of liquidity. We are increasingly guardians of trust infrastructure. And that trust infrastructure now extends far beyond monetary policy alone.
While at our core is, and will remain, price stability, recent years have reminded us of the crucial role that credible monetary policy plays.
For a long period, many advanced economies operated in an environment of low inflation, low interest rates, abundant liquidity, and relatively stable geopolitical conditions.
In many ways, we became accustomed to predictability.
But the shocks of recent years - the pandemic, energy disruptions, geopolitical conflicts, supply chain fragmentation, and renewed inflationary pressures, demonstrated how quickly that environment can change.
For central banks, this required difficult decisions. It required rapid tightening cycles, strong communication and, perhaps most importantly, credibility.
Because monetary policy ultimately functions through trust. Trust that central banks will act decisively when needed. Trust that inflation expectations remain anchored. Trust that institutions remain independent and forward-looking even under political and economic pressure.
What has become unmistakably clear is: Central bank credibility is no longer only about economics. Institutional resilience is now central as well. And resilience itself has become multidimensional: macroeconomic resilience, financial resilience, operational resilience, cyber resilience, technological resilience and geopolitical resilience.
These dimensions are not separate domains. Cyber risk should now be seen not only as an operational risk, but as a systemic financial stability risk, capable of propagating across payment systems, liquidity channels, and cross-border financial infrastructures within minutes. This makes cyber resilience a macroprudential issue, requiring stress testing frameworks that capture contagion, third-party dependencies, and supply chain vulnerabilities across the entire financial ecosystem.
This is particularly visible in payment systems and financial market infrastructures.
For decades, efficiency was often the dominant objective. Today, resilience and sovereignty have become equally important.
Questions around cloud concentration risk, cross-border dependencies, cyber threats, and technological control are now central banking questions.
Payment systems, once simply technical infrastructure, are now strategic infrastructure. The ability to connect instant payment systems across countries while preserving safety, compliance, and settlement finality, is vital for financial integration. We need to think in terms of interlinked payment ecosystems supported by shared standards and governance frameworks.
And as digitalization accelerates, this becomes especially relevant.
Digital finance has created enormous opportunities.
We see remarkable innovation in payments, onboarding, identity verification, embedded finance, tokenization, and cross-border financial services.
Consumers increasingly expect financial services to be seamless, real-time, digital, and borderless.
And frankly, they are right to expect this.
On the other hand, digitalization changes the risk landscape dramatically.
The speed of financial flows increases. Operational dependencies increase. Interconnections multiply. And vulnerabilities can spread faster than ever before.
One key aspect of this transformation is data sovereignty and infrastructure dependence.
As financial systems become more cloud-enabled and data-driven, questions about where critical financial data resides, who controls infrastructure layers, and how dependencies are structured become central to financial stability.
This is a governance and resilience issue. Supervisory authorities and central banks must retain effective oversight capability of cloud-based and cross-border data environments, testing their supervisory reach in the coming years.
As a result, the role of supervisors and central banks must also evolve.
20th century tools are now outdated to supervise 21st century finance.
And importantly, we cannot approach innovation simply from the perspective of risk avoidance.
Because innovation itself is becoming essential for competitiveness and resilience.
Europe faces a particularly important challenge here.
How do we remain globally competitive while preserving trust, stability, and high regulatory standards? I believe Europe’s answer should not be deregulation. It should be trusted innovation.
A framework where innovation and regulation reinforce each other rather than compete against each other.
This is one reason why initiatives such as MiCA are so important. MiCA is not only about crypto-assets. It is about Europe demonstrating that it is possible to create legal certainty, consumer protection, market integrity, and innovation within one coherent framework.
And clarity matters enormously. Markets, investors and innovators can adapt to rules. But uncertainty discourages investment, slows innovation, and fragments markets.
At the same time, we must also recognize that regulation alone does not create ecosystems.
The future financial system will increasingly depend on interconnectivity.
And this is one of the key messages I would like to emphasize today.
The future of finance will not be built by incumbents alone. Nor by fintechs alone. Nor by regulators alone. The future will be built through interconnected ecosystems.
Banks bring scale, governance, liquidity, customer trust, and risk expertise. Fintechs bring agility, innovation, speed, and technological experimentation. Technology providers bring infrastructure and digital capability. And central banks and supervisors provide the trust framework within which this ecosystem can function safely.
For many years, fintech discussions focused on disruption. Today, the discussion is about integration.
This is a healthy evolution.
Sustainable innovation rarely comes from isolation, it comes from collaboration. We increasingly see partnerships between banks and fintechs in payments, lending, identity solutions, compliance technologies, and digital assets infrastructure. And this integration is likely to accelerate further as artificial intelligence and tokenization begin reshaping financial services more broadly.
Artificial intelligence introduces new layers of both opportunity and risk. Beyond efficiency gains, AI raises important questions of model risk management, including explainability, validation, auditability, and the risk of automation bias in supervisory and policy-support contexts.
This is why governance frameworks for AI in central banking must go beyond adoption strategies. International alignment on AI standards in financial supervision may become as important as regulatory harmonisation in payments and capital markets.
Tokenization itself may become one of the defining structural shifts of the next decade.
Not because every asset will suddenly move on-chain tomorrow. But because programmable financial infrastructure has the potential to fundamentally reshape settlement, collateral management, securities servicing, and cross-border transactions.
For central banks, this raises profound questions.
- How should central bank money function in increasingly digital and tokenized ecosystems?
- What role should wholesale CBDCs play?
- How do we preserve monetary sovereignty in progressively fragmented digital environments?
- How do we ensure interoperability between traditional infrastructures and emerging decentralized architectures?
These are no longer theoretical discussions. They are strategic policy questions.
And they intersect directly with reserve management and monetary operations as well.
Traditionally, reserve management focused heavily on liquidity, safety, and return.
In this context, the definition of 'safe assets' itself is gradually evolving. Liquidity, creditworthiness, and legal certainty remain fundamental, with infrastructure resilience introducing another dimension of what constitutes a safe asset.
Those principles remain unchanged.
But the environment surrounding reserve management is changing rapidly.
Geopolitical fragmentation is influencing reserve diversification strategies globally.
Sanctions regimes, currency blocs, supply chain realignment, and strategic competition are steadily shaping financial architecture.
Central banks around the world are reassessing questions around reserve currency composition, liquidity access, infrastructure dependencies, and operational resilience.
Gold reserves, for example, have regained renewed strategic attention globally, because uncertainty itself changes behaviour.
Reserve managers also need to consider cyber resilience, digital operational risks, and technological concentration risks as part of broader reserve management frameworks.
This would have sounded unusual perhaps ten or fifteen years ago. Today, it is mainstream risk management.
And this broader shift illustrates an important point:
The role of central banks is expanding not because mandates have formally changed, but because the environment around us has changed.
In many ways, central banks today sit at the intersection of economics, finance, technology, security, and geopolitics.
And this requires new capabilities. It requires technological expertise, data and cyber expertise, digital operational expertise. And increasingly, the ability to engage constructively with innovators.
This is particularly relevant for smaller jurisdictions.
Small markets cannot outspend large economies. But we can move faster. We can build closer dialogue between regulators and innovators. We can experiment more rapidly. We can create more agile supervisory frameworks. And we can position ourselves as laboratories for responsible financial innovation.
This has very much been our approach in Latvia. We have consciously worked to build an open, credible, and innovation-friendly financial ecosystem. Not by lowering standards. But by increasing clarity, engagement, and supervisory capability. We have invested significantly in fintech expertise, digital supervision, crypto supervision readiness, and financial innovation dialogue.
Innovation without trust ultimately fails. But trust without innovation eventually becomes irrelevant.
And this balance will define the next decade of finance.
Ladies and gentlemen,
As we look ahead, I believe the future financial ecosystem will be defined by several major characteristics.
First - Interconnectedness. The financial system will become integrated across institutions, technologies, jurisdictions, and infrastructures.
Second - embedded resilience. Resilience will no longer be viewed as a defensive cost centre. It will become a source of strategic advantage.
Third - trusted innovation. The most successful jurisdictions will not necessarily be those with the least regulation, but those capable of combining innovation with institutional credibility.
Fourth - adaptability. The pace of change is accelerating. Institutions that cannot evolve quickly enough may struggle regardless of size.
And finally - cooperation. No country can successfully navigate these transitions alone.
International cooperation between central banks, supervisors, and market participants remains essential.
Particularly in areas such as cyber resilience, payments interoperability, AI governance, digital assets, and cross-border supervision.
The future financial system will not be built in isolation. It will be built through ecosystems, partnerships, and coordinated trust.
And perhaps that is ultimately the central challenge for all of us gathered here today:
- How do we preserve openness in a more fragmented world?
- How do we preserve trust in a more digital world?
- And how do we preserve resilience in a faster and more uncertain world?
I believe the answer lies not in resisting transformation, but in shaping it responsibly.
And central banks have a uniquely important role to play in this process.
Not only as guardians of monetary stability. But as anchors of trust, resilience, and long-term institutional confidence within the evolving financial ecosystem.
Thank you.