DFC

The European Central Bank (ECB) published a working paper that examines how holding limits affect demand for retail central bank digital currency (CBDC). In an incentivized experiment involving 761 participants in France, Germany, Italy, and Spain, the authors distinguish the mechanical effects of limits from behavioral responses. Lower limits reduced overall holdings, whereas higher limits induced some participants to increase balances, apparently because the ceiling acted as a reference point. The experiment also found that a “reverse waterfall” mechanism, which automatically funds CBDC payments from linked bank deposits, increased adoption while reducing average holdings. The findings suggest that combining limits with automatic funding could reconcile usability and financial stability objectives in the ECB’s digital euro design. [ECB]

The IMF published a paper examines how foreign-currency foreign-issued stablecoins, most of which are denominated in U.S. dollars and issued in a small number of jurisdictions, could increasingly affect macro-financial conditions in recipient countries if their use expands beyond crypto-asset trading. Although wider adoption could facilitate cheaper cross-border payments, it introduces significant structural vulnerabilities. Extensive integration may drive de facto capital account liberalization, enable the circumvention of capital controls, and entrench currency substitution, thereby undermining domestic monetary policy transmission. To mitigate these risks, the analysis recommends implementing robust macroeconomic frameworks, stringent regulatory oversight aligned with global standards, and enhanced data collection. Furthermore, it emphasizes that international coordination remains critical to manage balance-of-payments pressures and preserve monetary sovereignty. [IMF]

Sumitomo Mitsui Banking Corporation (SMBC), Mitsubishi UFJ Financial Group (MUFG), Sumitomo ⁠Mitsui Financial Group (SMBC) and Mizuho Financial Group conducted a proof-of-concept from July 17 to July 23, 2026, in regard to joint stablecoin issuance and advanced cross-border payments. Operating with support from Japan’s Financial Services Agency, the initiative evaluated issuing stablecoins as specified trust receivable rights under the Payment Services Act. The trial assessed regulatory compliance, anti-money laundering controls, and user protection within a multi-bank framework managed by SMBC and MUFG. Additionally, the participants simulated transactions across corporate locations to verify the technical feasibility and system reliability for international settlements. [Finextra]

[November 10, 2025] The Center for Economic Policy Research (CEPR) published a paper by Rhys Bidder as a chapter in its Frontiers of Digital Finance book that examines the "singleness of money" principle regarding stablecoins. Bidder challenges the regulatory consensus that any price deviation from par undermines a digital asset's utility as money. The paper distinguishes between minor price fluctuations during normal conditions—which are deemed manageable and likely to decrease as the technology matures—and severe de-pegging events during financial stress. To mitigate systemic risks, Bidder suggests policymakers consider granting narrowly backed, solvent stablecoins access to global lender of last resort facilities and emergency liquidity, ensuring their viability for large-scale economic settlement. [CEPR]

The Bank for International Settlements (BIS) published a paper by Iñaki Aldasoro that argues that money is not primarily a medium of exchange, a commodity or a technology, but a system of interlocking promises sustained by trust based on an institutional architecture featuring a monetary hierarchy anchored by central bank liabilities. The crucial price binding these layers is par, ensuring deposits convert to settlement money without discounts. Furthermore, the system balances the elastic creation of credit against the discipline of funding constraints. Because private monetary innovations ultimately require public validation and backstops during crises, instruments attempting to bypass this framework, such as gold and bitcoin, inherently reject the required social compact. Stablecoins, however, seek validation from authorities at the top of the hierarchy, although their current architectures fundamentally lack the elasticity and institutional backstops necessary to sustain par convertibility under stress. [BIS]

The Bank for International Settlements (BIS) published a paper by Ahmed and Aldasoro that investigates whether stablecoins and bank deposits function as economic substitutes. The authors use weekly 2019 to 2025 U.S. data to argue that increases in bank deposit rates cause a deceleration in stablecoin market capitalization growth. They find that these effects are stronger for USDC than for USDT, consistent with the former’s closer ties to U.S. depositors. However, the authors note that their analysis relies on a sample spanning only a single high-rate tightening cycle and uses aggregate data, which obscures the specific depositor types and bank categories driving the substitution. [BIS]

Bank of England (BOE) Deputy Governor Sarah Breeden, speaking at the IMF Annual Meeting in Bangkok, reportedly said that there’s no rush to introduce a retail central bank digital currency (CBDC) because so many other developments in digital payments are underway. “Maybe we don’t need a digital pound quite so quickly, arguing that alternatives such as commercial stablecoins or tokenized deposits developed by banks could fulfill the role just as well." Breeden also reportedly said that the BOE is upgrading its real time gross settlement system (RTGS) so it can be used to settle tokenized asset transactions, and that U.K. firms should develop successful sterling stablecoins to offer an alternative to the dollar dominance in the market. [Bloomberg]

The Reserve Bank of New Zealand (RBNZ) has paused work on "Digital Cash" (I.e., retail central bank digital currency (CBDC)) while it focuses on "modernizing New Zealand's payments system, including real-time payments... New Zealand's payments system works well today, but there is an opportunity to make it faster, more innovative and better prepared for the future. The announcement said that "modern payments system could support new technologies and payment options like new forms of digital money including Digital Cash issued by the Reserve Bank, alongside the money people already hold in their bank accounts". This seems to allude to tokenized commercial bank deposits settled in wholesale CBDC, which is a route being explored by a growing number of other central banks. [RBNZ]

The Hong Kong Monetary Authority (HKMA) published a report that presented the outcomes of a year-long proof-of-concept (POC) with the Bank of Thailand and Hong Kong Exchanges and Clearing Limited, that explored how tokenized deposits (TDs) and central bank digital currencies (CBDCs) coordinated through two central bank platforms could enable seamless cross-border delivery-versus-payment (DVP) for carbon credit transactions. Conducted under Project Ensemble and Project San, the trial evaluated whether distributed ledger infrastructures can synchronize bilateral asset settlement while mitigating principal risk. The findings indicate that programmable wholesale CBDCs and commercial TDs can execute atomic DVP settlement across distinct jurisdictions. However, substantive questions remain regarding cross-chain interoperability standards, secondary market liquidity for tokenized environmental assets, and the enforceability of harmonized regulatory frameworks. Further policy analysis is required to determine whether such decentralized market architectures provide demonstrable efficiency gains over optimized, conventional real-time gross settlement systems. [HKMA]

The Bank for International Settlements (BIS) published an update on Phase 2 of its Project Aurum that explores how privacy-enhancing technologies (PETs) can mitigate the tension between user privacy and regulatory compliance in digital cash. Built on the existing Aurum codebase, the prototype applies privacy-by-design principles to strike a balance between complete anonymity and full transparency. By embedding privacy directly into technical architecture rather than relying strictly on institutional safeguards, the system minimizes data exposure while maintaining compliance and operational integrity. Furthermore, customizable parameters enable central banks and the BIS to calibrate functionalities according to distinct policy objectives, risk appetites, and broader applications for PETs. [BIS]

The Financial Stability Board (FSB) published a summary of its ongoing monitoring work on global stablecoin arrangements. It highlights that the borderless, round-the-clock mobility of stablecoin liabilities fundamentally conflicts with the jurisdictionally anchored nature of their reserve assets and redemption frameworks, escalating run risks and potential spillover into traditional financial markets. Complex, multi-issuer structures further obscure oversight and complicate reserve rebalancing during stress events. Furthermore, the FSB notes severe structural data deficiencies; authorities currently rely on opaque private data compilers, and blockchain pseudonymity impedes accurate geographic or use-case attribution. To mitigate these regulatory blind spots, the FSB advocates for enhanced cross-border cooperation, standardized monitoring metrics, and improved industry data disclosures. [FSB]

[August 29, 2026] Harvard Business School's Wenxin Du presented a paper at the 2026 U.S. Federal Reserve Bank of Kansas City Jackson Hole Economic Policy Symposium that challenges prevailing payment innovation narratives by prioritizing economic architecture over blockchain rails. First, Du questions the viability of 24/7 atomic gross settlement in wholesale markets, noting it sacrifices critical liquidity-saving benefits of multilateral netting. Second, she argues retail cross-border frictions stem from misaligned banking incentives rather than legacy technology. Finally, she remains highly skeptical that stablecoins resolve inefficiencies, highlighting prohibitive fiat conversion costs and thin foreign exchange liquidity within the "stablecoin sandwich". Consequently, central banks should prioritize system interoperability and institutional trust over adopting novel distributed ledgers. [Kansas City Fed]

The U.S. Federal Reserve Bank of Cleveland published a paper by Zhang and Zimmerman arguing the Guiding and Establishing National Innovation for U.S. Stablecoins (GENIUS) Act of 2025 rewrites priority and estate-property rules for failed stablecoin issuers. By removing required reserves from the bankruptcy estate and granting holders a shortfall-capped superpriority, the Act lets distressed issuers mint fully backed stablecoins to selectively repay favored creditors, structurally subordinate existing debt, and strip the estate of liquid assets necessary for resolution ("stablecoin-on-creditor violence"). If the issuer is a bank subsidiary, this shifts failure costs onto the deposit insurer and taxpayers. Because federal statutory entitlements shield this mechanism, traditional equitable remedies fail, prompting the authors to recommend countermeasures—including capital requirements, transfer restrictions, and lockups—to mitigate systemic risk. [Cleveland Fed]

Bank Al-Maghrib (BAM) published a working paper that evaluates the macro-financial feasibility of a retail central bank digital currency (CBDC) for Morocco. While digital payment adoption is expanding, persistent domestic cash reliance highlights entrenched structural constraints alongside untapped infrastructural efficiencies that a CBDC could help unlock. To mitigate systemic disintermediation and preserve monetary policy transmission, the authors advocate a hybrid, two-tier architecture: the central bank issues an unremunerated e-dirham, while private intermediaries manage client distribution and financial integrity compliance. Ultimately, the paper frames potential CBDC implementation as a long-term prospect requiring a gradual, prudent, and collaborative approach. [BOM]

The Bank of Korea (BOK) affirmed that Project Hangang's digital currency is not a retail central bank digital currency (CBDC). Starting in 2023, the BOK shifted its digital currency research direction from retail CBDC to a focus on commercial bank deposit tokens settled with wholesale CBDC, because the BOK found that there is no significant need to introduce a retail CBDC , and even if one were to be introduced, it is highly likely that it would not be widely adopted. Meanwhile, preparations for the second phase of the Han River Project are in full swing, with the BOK and participating banks being busy with final preparations for the pilot relaunch before the end of 2026. [BOK]

[Asia Asset Management, August 17, 2026] China's Cross-border e-CNY Transfer Services (CBETS) operated by the Digital RMB International Operations Center under the People’s Bank of China’s Digital Currency Research Institute, was launched in September 2025. Its architecture combines centralized payment processing with Chengfang Chain-based transaction relay and on-chain settlement, and overseas institutions access services through a common gateway using existing networks. Applications include remittances, interoperable QR payments, trade settlement and programmable supply-chain finance, with reported links to Hong Kong’s Faster Payment System, Laos’s payment network and mBridge. Strategically, CBETS extends renminbi payment infrastructure through interoperability; the entry’s settlement-speed, cost and payment-versus-payment claims lack detailed supporting evidence. CBETS signed 26 initial direct participants in June 2026 and offers continuous trade, remittance and financing services through a Hong Kong access point. Strategically, CBETS offers an alternative to dollar stablecoins; commercially, success depends on offshore liquidity, bank participation and demonstrable efficiency gains. Capital controls remain the binding constraint: improved settlement cannot ensure recipients can freely invest or recycle yuan balances. [AAM]

The IMF published a Global Financial System Report (GFSR) that discusses the potential benefits of tokenization and the constraints to its development and assesses its implications for financial stability. While distributed ledgers promise reduced intermediation frictions, the ecosystem remains nascent, constrained by lacking legal certainty, regulatory clarity, interoperability, and safe settlement assets. Systemic risks are currently contained, but scaling could amplify vulnerabilities like liquidity runs and procyclical leverage, while introducing novel operational fragilities. Indeed, empirical evidence from tokenized equities reveals elevated volatility and structural illiquidity despite continuous trading. Authorities must implement a technology-neutral framework that removes barriers while mandating robust safeguards for an always-on architecture. [IMF]

The European Stability Mechanism (ESM) published a paper co-authored by Bindseil, Meuwissen, Mondini and Rohár that examines the implications of global stablecoin adoption for the monetary and financial architecture, with particular emphasis on the euro area. It employs a flow-of-funds framework tracing sectoral and cross-border balance-sheet adjustments as a function of funding sources and reserve asset composition, operationalized through a calibrated three-region model (United States, euro area, rest of the world), embedding alternative stablecoin growth scenarios for USD- and EUR-denominated stablecoins through 2030. While concluding that aggregate systemic impacts remain manageable—primarily involving a shift from inexpensive retail deposits to volatile wholesale funding—the authors acknowledge their model simplifies analysis by ignoring the actual heterogeneity of deposits and securities. [ESM]

The IMF published a chapter of its Central Bank Digital Currency (CBDC) Virtual Handbook that examines how markets for tokenized assets are developing and the implications for central bank money (CeBM). Adoption remains piecemeal, relying on non-native models (existing assets tokenized with ambiguous underlying rights) and hybrid structures (tokenized assets settling via conventional cash rails or separate ledgers). Because private settlement assets currently dominate, critical questions arise regarding settlement finality, liquidity fragmentation, and systemic interoperability. While tokenized CeBM is not a binding prerequisite for nascent markets, its necessity will intensify as transaction complexity demands a unified, risk-free anchor. Ultimately, central banks must preserve optionality through phased strategies, balancing legal readiness and institutional capacity against the risk of preempting market-led innovation. [IMF]

The Journal of Financial Market Infrastructures (JFMI) published a (paywalled) paper by Clément Berthou and Xavier Lavayssière that examines stablecoins and the concept of a "settlement eclipse." The paper shows how stablecoins circulate value globally without requiring traditional fiat redemption, leveraging quasi-bearer claims, programmable platforms, and crypto intermediaries. As a result, stablecoins produce a settlement eclipse, whereby a subordinate layer of the monetary hierarchy internalizes transfers at sufficient scale, and occults the settlement function of layers above it. Such phenomenon obscures systemic risks, transfers financial access control to private operators, and narrows policy options. Analogous occultation occurs when transfer volumes are internalized by large financial institutions, netted within private payment systems, or managed through nested correspondent banking chains. Ultimately, the authors position stablecoins within an emerging "tokenized monetary pyramid," questioning whether this parallel structure will secure a direct public anchor or remain structurally subordinate to the traditional fiat system. [JFMI]

The Hong Kong Monetary Authority (HKMA) published a report that details the experiences gained from the first phase of its Project Ensemble project that tested end-to-end use cases for settling digital asset transactions using experimental tokenized deposits settled using e-HKD wholesale central bank digital currency (CBDC). Although pilots across fixed income, liquidity management, green finance, and trade finance demonstrated atomic delivery-versus-payment execution, the anticipated efficiency gains face substantial friction. True straight-through processing remains constrained by legacy manual workflows, off-chain data lags, and an unproven critical mass. Furthermore, structural hurdles like potential bank liquidity strains and absent secondary market conventions threaten commercial scalability. In addition, the report acknowledges that policy shifts and regulatory interventions are required to support the viability of such new ecosystems. [HKMA]

According to a recent S&P Global report, India's central bank digital currency (CBDC), the digital rupee, should be judged on programmability and settlement efficiency, not retail wallet adoption. Retail transactions lag significantly behind the ubiquitous Unified Payments Interface (UPI). However, the digital rupee could become a foundational layer of India's digital public infrastructure by functioning as programmable money for targeted policy outcomes. Furthermore, its most substantial economic promise lies in wholesale markets, where it could facilitate atomic settlement for tokenized assets and reduce cross-border payment friction. And in a potential tokenized global economy, the digital rupee could prevent a shift of cross-border business-to-business trade and remittances toward foreign-currency stablecoins. [S&P]

The Bank of England (BoE) updated its webpage dedicated to Phase 2 of its Digital Pound Lab that concluded in July 2026. BoE-developed use cases demonstrated included one-time aliases for privacy-preserving payments, confirmation of payee, group "kitty" payments using conditional locks, external service interface provider connections enabling third-party app integration, allowances extended to e-commerce, and usage-based streaming micropayments. Eleven private sector participants tested additional use cases that the latest update fleshed out in more detail. These included Crunchfish demonstrating deferred offline payments with a reserve-pay-settle lifecycle and double-spend controls, and TECHT Labs demonstrating conditional business-to-business payments via smart contracts. Interestingly, one of the participants listed in the June 2026 update (Focus on Monesave) was quietly dropped. The BoE explicitly disclaimed policy endorsement of any participant designs, or endorsement of the firms, their products or services. [BoE]

Russia’s Ministry of Finance (MOF) reports that, on October 1, 2026, several employees opted to receive salary payments in digital rubles through wallets on the Bank of Russia platform. It follows pilot federal-budget transactions in 2025, covering salaries, stipends and selected government-contract payments, with aggregate volume of nearly 16 million rubles. Since January 2026, federal institutions have been permitted to make and receive budget-related payments in digital rubles without a restricted expenditure list. The initiative therefore marks a shift from controlled pilot use toward routine Treasury and payroll integration, contingent on bank and merchant infrastructure that opened up on September 1, 2026. [Russian MOF]

A paper by Zetzsche, Buckley and Arner that focuses on tokenization of non-financial real-world assets (TRWAs) develops a tokenization taxonomy to better understand what TRWAs entail. The authors contend that TRWAs could transform mainstream custody and securitization through continuous 24/7 settlement and central bank digital currency (CBDC) interoperability, forecasting a gradual shift toward "embedded crypto finance." To govern this transition, they propose adapting existing securitization rules, such as expanding substituted compliance for prospectuses. This approach relies heavily on legacy frameworks to manage the unique operational and cyber risks of distributed ledger technologies, leaving open the question of whether unprecedented on-chain vulnerabilities might ultimately fall through the regulatory cracks. [DC Fintech Week]

The IMF published a working paper by Marco Reuter that analyzes $21.4 trillion in international stablecoin flows across 188 countries from 2018 to 2025. These US dollar-pegged assets are concentrated in emerging markets and developing economies, which hold 75% of the total. Flows are predominantly cross-border, retail-sized transfers with a median size of $300. Furthermore, when countries restrict capital outflows, stablecoin activity rises persistently by roughly 30% over six months. Similarly, currency crises trigger a persistent 75% increase in holdings within a year. However, country-level geography is inferred via machine learning trained on domain-name linguistics and web traffic—proxies vulnerable to virtual private network (VPN) distortions, unrepresentative sampling, and the untestable assumption of equal average transaction sizes across countries. [IMF]

[September 24, 2026] Seven U.K. banks collaborated to complete the first live customer transactions using tokenized sterling deposits on a shared platform developed by Quant, delivered through the Great British Tokenised Deposit (GBTD) initiative convened by UK Finance. The participating banks (Barclays, HSBC UK, Lloyds, Monzo, Nationwide, NatWest and Santander) tested conditional payments in two remortgage completions and a consumer marketplace exchange, in which customer balances were locked and automatically released when specified completion or delivery conditions were met. The pilots seek to preserve the legal and prudential characteristics of bank deposits while adding programmable, interoperable settlement functionality. Planned work includes tokenized bank-issued debt instruments and digital-asset settlement using delivery-versus-payment-versus-reserves. The announcement demonstrates operational feasibility, rather than resolving questions of scale, governance, interoperability, legal finality, or supervisory treatment. [UK Finance]

In a U.S. Federal Reserve Bank of Cleveland Economic Commentary, Dirtzu, Panzitta and Zimmerman surveyed 148 firms in the Fourth District (Ohio, western Pennsylvania, eastern Kentucky, and northern West Virginia) regarding plans to use stablecoins. Despite the 2025 Guiding and Establishing National Innovation for U.S. Stablecoins (GENIUS) Act easing supply constraints, they find negligible latent corporate demand. Only one firm currently uses stablecoins, while seven plan future adoption. Primary deterrents include satisfaction with existing payment rails, knowledge gaps, and absent counterparty demand. While analysis of Securities and Exchange Commission (SEC) nonfinancial corporate balance sheet filings seemingly corroborates this disinterest, the authors dismiss stablecoin holdings below a 2% total asset threshold as trivial, which risks obscuring early-stage corporate experimentation. [Cleveland Fed]