DFC

The National Bank of Rwanda (NBR) is planning to continue its e-FRW central bank digital currency (CBDC) proof-of-concept work in 2026. It will test technical feasibility, evaluate payment system integration, and develop recommendations for the legal framework prior to the overall technical design phase. These tests are being conducted in partnership with selected financial service providers, and the results will determine NBR’s next steps in the CBDC project. In all phases, consultation with the private sector and policy makers has been, and will be, emphasized. [Source: NBR]

At the Currency Research (November 17-20 Cedi@60 Anniversary Currency Conference I had the honor of moderating a panel on central bank digital currency (CBDC) trust establishment with Jean-Michel Godeffroy (ex-ECB), Roman Hartinger (G+D) and Musa Jimoh (Director of the Payments System Policy Department at the Bank of Nigeria). The whole 30 minute session is worth watching (it starts at around the 4h 58m mark), but Musa's interventions are particularly newsworthy, as he explained why the Nigerian central bank is pivoting away from retail CBDC to wholesale CBDC. Recall that Nigeria is one of only three countries where retail CBDC has recently been fully launched.) He explained how the e-Naira story is not a "rosy" one, and ran through some of the reasons. For starters, commercial banks were not willing to support the new payment instrument that they viewed as competition, and that support was essential for e-Naira success because the banks "owned" the merchants. It didn't help that the banks couldn't charge fees on e-Naira transfers, and the central bank wasn't sharing in any of the platform costs. Also, Nigerians are very much into crypto-asset markets and the e-Naira didn't offer the payments privacy expected of a payment medium. In addition, the central bank has been running a popular instant payment system since 2014, which made the e-Naira rather redundant. [Source: Currency Research]

The Bank for International Settlements (BIS) published an article on the fast-growing markets for tokenized money market funds (TMMFs). TMMFs operate as tokenized representations of money market fund shares on public permissionless blockchains. They function both as collateral and as savings vehicles, offering money market yields and regulatory protections of securities, unlike stablecoins, which do not pay interest. Primarily used in decentralized finance (DeFi), TMMFs enforce regulatory compliance through the "allow-listing" of blockchain wallets, limiting direct peer-to-peer trading to pre-approved participants, though this mechanism does not prevent all forms of secondary trading. While TMMFs aim to improve on stablecoins by providing yield and programmability, they also introduce risks, such as liquidity mismatches, as well as the operational and anti-money laundering / countering the financing of terrorism-related risks associated with stablecoins. [Source: BIS]

The NY Fed published an article that examines the potential role of permissionless blockchains in future payment infrastructures, focusing on how stablecoins leverage global, peer-to-peer transfer networks for accessibility and borderless payments. While stablecoin transaction volumes have skyrocketed, automated activity and bot transactions dominate, so true payment adoption still lags. The piece contrasts stablecoins’ borderless nature with faster payments systems like FedNow, noting that existing solutions remain reliant on bank accounts and thus exclude unbanked users and impede international transfers. Permissionless blockchains offer universal access, programmability, and composability, but face hurdles around regulation, security, privacy, and scalability. Despite growing regulatory clarity, mainstream adoption rests on balancing user control, societal safety, and functional integration with the financial system, as the public pivots from legacy account-based money toward digital, peer-to-peer transfers in practice.​ [Source: NY Fed]

In an interview with the Financial Times (FT) the chair of the Basel Committee on Banking Supervision, Erik Thedéen, has called for a reworking of global crypto rules for banks after the US and UK refused to adopt requirements imposing a 1,250% risk weighting on stablecoins and other digital assets that used permissionless blockchains. Thedéen noted that the sharp rise in stablecoin usage and differing regulatory stances have made it difficult to achieve consensus, prompting calls for a new approach. While the current Basel rules, originally focused on assets like bitcoin, would subject many stablecoins to the harshest capital requirements, major regulators such as the US Federal Reserve and the Bank of England have decided not to implement them in full. [Source: FT]

Stablecoin Performance in Cross-Border The Stanford University Future of Digital Currency Initiative (FDCI) published a paper that examines the performance of dollar-based stablecoins in cross-border payments using a dataset of over 41 million transactions from Airtm, a digital dollar wallet platform, spanning May 2019 to May 2024. The analysis benchmarks transaction speed and cost against G20 Roadmap targets for enhancing cross-border payments. The findings indicate that stablecoins demonstrate substantial advantages in speed, with more than 96% of transactions settling within one hour, significantly exceeding the G20's 75% target. Cost performance is more variable: approximately 51% of transactions meet the 3% fee target for remittances and 36.7% meet the 1% target for retail payments, though fees remain elevated for certain transaction types, particularly peer-to-peer marketplace on- and off-ramps. The study also highlights that stablecoins enable previously uneconomical use cases, with nearly half of enterprise disbursements being micropayments under $2. [Stanford FDCI]

The IMF published a Fintech Note that examines whether central bank digital currencies (CBDCs) could enhance competition in retail payment markets. The authors analyze CBDC's potential competitive impact through four channels: pricing discipline, service quality improvements, market contestability, and financial access expansion. The analysis identifies three market scenarios with varying competitive implications. In unregulated markets dominated by private platforms, CBDC could exert substantial competitive pressure by reducing fees and lowering entry barriers, particularly if interoperability with existing systems is ensured. In markets already subject to regulatory interventions such as interchange fee caps, CBDC would likely have more moderate effects, addressing residual gaps rather than fundamentally altering market dynamics. In jurisdictions with well-functioning public fast payment systems, CBDC would offer primarily incremental benefits, mainly extending access to underserved populations. The Note emphasizes that CBDC's actual competitive impact depends critically on design choices—including fee structures, intermediary participation rules, holding limits, and interoperability requirements—and warns that overly aggressive pricing could crowd out private providers, potentially reducing payment system resilience and diversity. [Source: IMF]