Perry Warjiyo, the Governor of the Bank Indonesia (BI), provided an update on the central banks's CBDC plans. It sounds like the BI is leaning towards a distributed ledger technology (DLT) based platform, but it is undecided as to whther it will be a retail or wholesale digital currency. Building in interoperability will be important to open up the possibility of cross-border payments, particularly in the ASEAN+5 region, where there is already cooperation with Thailand and Malaysia through the support for the implementation of QR Cross Border and Local Currency Settlement (LCS).

The digital yuan payment app reportedly can now be linked to bank accounts to ensure that funds in users' e-CNY wallets never run dry. The app can automatically draw amounts from a linked account at a commercial bank when the e-CNY wallet's balance is not enough. Users also have the option not to link the app to a bank account.

Ningbo Rail Transit, the operator of the subway system in the city of Ningbo in the eastern Chinese province of Zhejiang, has reportedly launched payments in digital yuan at 125 stations. Also, bus riders in Guangzhou will be able to buy tickets with digital yuan. They will be able to use their e-CNY wallets on 10 bus lines.

Members of the Reserve Bank of Australia (RBA) Payment Systems Board discussed the increasing interest in central bank digital currency (CBDC) internationally and in Australia. Many see an increased likelihood of issuing some form of CBDC in the future, especially to support wholesale transactions.

Nigeria’s central bank believes its digital currency, the eNaira, has scored wins in the ten months since it was launched last October. The app has been downloaded 840,000 times, nearly a third of those converting to active wallets. But, the news should be taken with a healthy dose of skepticism as at an average of 1.35 transactions per active wallet, the eNaira has not convinced its users to do a lot with it. At N22,000 ($52), the currency’s average transaction value is way behind the regular naira: in 2021, Nigeria’s financial sector processed electronic payments at an average of N720,000 ($1,700) per transaction.

Given the high interest in participating in the survey on CBDC, originally planned for the months of June and July 2022, the Central Bank of Chile (BCCh) has extended the submission deadline to October 30.

The Governor of Colombia's Banco de la República, Leonardo Villar, reportedly confirmed that the central bank is evaluating the possibility of issuing central banks digital currency (CBDC). No details were provided. [Read more at El Colombiano] A few days ago, Luis Carlos Reyes, head of Dirección de Impuestos y Aduanas Nacionales (DIAN), the country's tax authority, reportedly said that the government was planning to issue a digital currency to curb tax evasion. It's not clear whether these two stories are related.

A Member of the Forum presented on potential business models for Payment Interface Providers (PIPs) in a CBDC ecosystem. The presentation set out that PIPs would likely undertake activities suggested in the Bank's 2020 Discussion Paper on CBDC such as onboarding clients, conducting KYC (Know Your Costumer) and AML (Anti Money Laundering) checks, authenticating users and providing consumer protection and overlay services, among others. The presentation then laid out a set of costs that such a PIP would likely incur in offering those services. A second Member presented a view on how the private sector could collaborate with policymakers to deliver on some of the G7 Principles on CBDC (published in October 2021).

Demand for euro banknotes dwindled after the European Central Bank concluded an eight-year experiment with negative interest rates, suggesting households, businesses and banks are dissolving cash piles created to circumvent deposit charges. Banknotes in circulation started falling in the week through July 22, when policy makers raised rates. Since then, notes worth 16.8 billion euros ($17.1 billion) have left the system -- the biggest drop since early 2020.

Many of the challenges that Fedcoin fans say the central bank digital currency (CBDC) will solve will be addressed by the upcoming FedNow payment service, according to US Federal Reserve Governor Michelle Bowman. “FedNow will… allow consumers and businesses to make payments conveniently, in real time, on any day, and with immediate availability of funds for receivers. Our assessment of these benefits has not changed even as we consider whether a CBDC might fit into the future U.S. money and payments landscape… Completing and implementing FedNow is a high priority, and we expect it to be available by mid-2023.”

The fully reserve-backed HUSD stablecoin lost its peg on August 18, 2022, trading as low as $0.82, although it regained the $1.00 peg the next day. According to the HUSD team, the depeg was caused by a decision to close market maker accounts in some regions to comply with regulations. The time difference in banking hours had created a gap that led to a liquidity problem, leading to HUSD falling from its peg.

BDO Italia has reaffirmed stablecoin issuer Tether's consolidated reserves report that showed a 58% quarterly decline in commercial paper holdings to $8.5 billion as of June 30. Tether also confirmed its expectation that commercial papers will be down to $200 million by the end of August and zero before the end of the year.

The European Central Bank (ECB) published a paper about the Eurosystem’s commitment to the principle that every individual in the euro area should be able to decide how to make day-to-day payments, regardless of their individual payment preference, geographical location or technological savviness. On the basis of the ECB’s most recent data, despite the gradual decline in cash transactions, cash is the most popular payment instrument among euro area citizens for day-to-day transactions at the point of sale or person-to-person payments. In addition, cash is used for savings and liquidity, especially in times of crisis or uncertainty.

The Central Bank of Nigeria Governor, Godwin Emefiele, has reportedly said that Nigerians will be able to transact on eNaira central bank digital currency (CBDC) wallets through the Unstructured Supplementary Service Data (USSD) code on mobile phones. Nigerians will only have to dial *997# from their phones to carry out transactions on their phones. The Governor also reported that the eNaira has been used to carry out transactions worth 4 billion naira ($9.3 million) since it was introduced last October, and there are now about 270,000 active wallets.

This column introduces the available stablecoins and discusses the possible impact of the forthcoming Markets in Crypto-assets regulation by the European Commission on e-money issuers. The authors argue that the regulation may spur regulatory arbitrage in Europe and lead commercial banks to offer tokenised deposits on the decentralised ledger of a public blockchain.

The Colombian government is reportedly planning to launch a digital currency to curb tax evasion and enhance the traceability of citizens’ transactions, according to Luis Carlos Reyes, head of Dirección de Impuestos y Aduanas Nacionales (DIAN), the country’s tax authority.

Saudi Central Bank (SAMA) issued a report on the results of an extensive study conducted to measure used payment methods in the Kingdom during 2021, which aimed to assess consumer payment habits (cash and non-cash), across all market sectors; individuals, business, and the government sector. The study indicated that - for the first time in the Kingdom - cash is no longer the most used method of payment by individuals, as electronic payments of individuals have grown significantly to reach 57% in 2021 of the total number of transactions executed, compared to just 36% in 2019.

Will an introduction of CBDC cause disintermediation? I provide empirical and theoretical evidence that CBDC will not necessarily crowd out bank deposits in economies with significant demand for currency. I estimate the model for the US using data on households' payment choices and find that non-interest-bearing CBDC will lead instead to an inflow of deposits caused by cash substitution. Banks then lower deposit rates and lend more. Similarly, banks will not contract lending if CBDC is intermediated even if they experience an outflow of deposits. Finally, I show that CBDC can lead to disintermediation when it is interest-bearing.

This paper identifies three main components of any stablecoin, the peg, token and backing or reserve, that can be interpreted as three dimensions of (exchange) value fulfilled by the three functions of money: a unit of account, means of exchange, and store of value. By doing so, the stablecoin concept is not be characterized as a separate and self-contained asset class, but rather as an overarching and general meta-category from which a multitude of other classes and types of crypto-assets can be derived. By noting that different types of money and financial assets emerge from the different ways in which the three functions of money interact, the paper identifies five main cases from the various ways in which peg, token, and reserve are recombined. Various types of traditional financial assets belonging to each of these five cases and discusses how the various types of crypto-assets (and stablecoins) are identified and mapped into each of them.

The Bank of Russia continues working towards the gradual introduction of central bank digital currency (CBDC) according to the latest monetary policy update. The prototype digital ruble platform is currently being tested, and in 2023 the central bank plans to start pilot testing, including beta tests of digital ruble-based smart contracts for trades by a limited number of participants. If all goes to plan, the connection of banks and credit institutions to the digital ruble platform in will happen in 2024.

"We use economic principles along with evidence from the data and the academic and policy literature to discuss frictions that might lead to inefficient financial exclusion in the United States, defined here as a suboptimal allocation of bank account services. Private market initiatives—such as financial education schemes or new online banks—or new technologies—such as prepaid cards—can help mitigate such frictions. But if the frictions persist, intervention by authorities may be justified."

"The unbanked rate has been decreasing in the United States, but it remains high compared to unbanked rates in other developed economies. Lower-income and racial and ethnic minority households are more likely to lack access to a bank account than white households with higher incomes. Fees and minimum balance requirements are important factors in the decision to be unbanked. However, several studies show that when fees are constrained, banks find low-balance accounts unprofitable, so access to bank accounts can actually decline."

The Reserve Bank of Australia (RBA) has launched a research project to explore use cases for a CBDC in Australia. It is expected to take about a year to complete, and will involve the development of a limited-scale CBDC pilot that will operate in a ring-fenced environment for a period of time. Interested industry participants will be invited to develop specific use cases that demonstrate how a CBDC could be used to provide innovative and value-added payment and settlement services to households and businesses. The Bank and the DFCRC will then select a range of different use cases to participate in the pilot, based on their potential to provide insights into the possible benefits of a CBDC.

The Nepal Rastra Bank has reportedly initiated an exercise to revise the Nepal Rastra Bank Act in order to enable the central bank to issue digital versions of the Nepali currency. Revati Nepal, chief of the currency management department at the central bank. said that “a task force formed by the central bank has drafted an amendment bill to authorize the Nepal Rastra Bank to issue and manage a digital currency."

A Bank of Japan (BoJ) official said the central bank has not scrapped its preparations for a potential CBDC launch, dismissing misleading reports by a number of media outlets. Tomohiro Sugo, head of the payment and settlement system division, told Central Banking that "the Bank of Japan continues preparing for the possible issuance of CBDC in the future and it has not quit its preparations." [Read more at Central Banking] As I mentioned a few days ago the misleading reports started with an Asia Times op-ed that rehashed inaccurately a July 5, 2022 report from the BoJ’s Liaison and Coordination Committee on Central Bank Digital Currency.

David Birch argues that cash reduction via fintech means an increase in net welfare. People who are trapped in a cash economy, the poor in particular, are more likely to get robbed, to get bad deals, and to get shaken down. Although that argues for reducing cash usage,  what do we do about the people people who say they would "struggle to cope" in a cashless society (one in five according to a U.K. survey) and those who say it would be "problematic" (half of those surveyed)?