DFC

The Verkhovna Rada, the governing body of Ukraine, reportedly passed a law regulating payment methods that officially puts central bank digital currency (CBDC) on par with cash, bank accounts and electronic payments. The law mentions the “digital money of the National Bank of Ukraine – electronic form of a unit of account in Ukraine, emission of which is run by the National Bank of Ukraine.”

The Chengdu government is issuing 12 million eCNY through a lottery to 100,000 residents as part of the ongoing central bank digital currency (CBDC) test. However, the free e-CNY embeds a pre-programed utility for paying for subway and bus tickets through Chengdu's Tianfutong mobile app or for shared bikes on the Meituan mobile app, encourage users to take more public transportations. This appears to be the first time that eCNY programability is being tested, in this case to ensure that the e-CNY can only be spent for specific purposes.

"Well-managed and properly regulated stablecoins may be useful for certain purposes and players, like those operating in the DeFi world. But stablecoins will never be as stable as dollars, physical or digital – and may even require a bailout when panic over broken promises spreads."

I'm still investigating the accuracy of this story, but according to an article in the Spanish press, the Spanish Socialist Party (PSE), the governing political body in Spain, has proposed creating a national digital currency. According to the PSOE, a national digital currency would allow for more active Spain-specific monetary policy, such as providing a more direct mechanism to injecting liquidity directly into the system. However, it is my understanding that the European Central Bank has exclusive rights to issue general purpose currency in the Eurozone, so I'm not sure if this is even legally possible.

The Bank of Russia announced the establishment of the first pilot group for testing the digital ruble, bringing together 12 Russian banks. The Bank also reaffirmed its plans to complete a prototype digital ruble platform by the end of 2021 and roll out testing in January 2022.

The Monetary Authority of Singapore launched the Global CBDC Challenge, to seek innovative retail central bank digital currency (CBDC) solutions to enhance payment efficiencies and promote financial inclusion. Partners include the International Monetary Fund, World Bank, and the Organisation for Economic Co-operation and Development. Firms around the world are invited to submit innovative solutions that can address 12 problem statements centred on the CBDC instrument, distribution; and infrastructure.

The Palestinian Monetary Authority is reportedly studying the possible issuance of a central bank digital currency (CBDC). Bound by 1990s accords with Israel, Palestine does not have a currency of its own. Instead, the Israeli shekel serves as the de facto currency, alongside the Jordanian dinar and the U.S. dollar. Palestinian banks are prohibited from making large cross-border cash transfers — including to Israel — and are often forced to borrow money to cover remittances. It is hoped that a Palestinian CBDC may address that issue.

"If you already have a well functioning, retail fast payments system that already ticks the boxes in terms of serving the public interest, data governance, with all the safeguards you need on know-your-customer, then the additional mileage a national financial system would get from having a fully fledged retail CBDC, it’s not that great. If, on the other hand, you are a jurisdiction where you have a lot of very influential Big Tech companies, that are already a very large part of the financial landscape, . . . here a CBDC will be useful."

A Bank for International Settlements (BIS) paper examines how CBDCs can contribute to an open, safe and competitive monetary system that supports innovation and serves the public interest. Like the latest generation of instant retail payment systems, retail CBDCs could ensure open payment platforms and a competitive level playing field that is conducive to innovation. The ultimate benefits of adopting a new payment technology will depend on the competitive structure of the underlying payment system and data governance arrangements. The same technology that can encourage a virtuous circle of greater access, lower costs and better services might equally induce a vicious circle of data silos, market power and anti-competitive practices. CBDCs and open platforms are the most conducive to a virtuous circle. CBDCs built on digital identification could improve cross-border payments, and limit the risks of currency substitution. Multi-CBDC arrangements could surmount the hurdles of sharing digital IDs across borders, but will require international cooperation.

"Central banks can support the development of digital currencies indirectly, by supporting the public provision of safe, privately issued digital currencies, or more directly, by issuing digital currencies themselves, among other possibilities. These approaches are not necessarily mutually exclusive, especially if there are separate reasons to issue a CBDC. In that case, central banks may need to think about how private sector entities could use the CBDC to support the development of their own stablecoins."

The National Bank of Rwanda is reportedly studying the possibilities of issuing central bank digital currency (CBDC). According to John Karamuka, the Director of Payment Systems at the central bank, their assessment and study is looking at economic, financial and technology aspects related to CBDC as well as the operationalization model, taking into account the local context. “The study is also analysing the implication of the CBDC on monetary policy and financial stability.”

USDT issuance has begun to stagnate while the circulating supply of USDC continues. There has also been an increase in USDC deposited onto exchanges while the amount of USDT has declined. This is significant because Tether printing has historically been the impetus for major market moves, but its continued legal challenges and questions regarding assets held in reserve have made holding the token more of a liability as regulators increasingly crackdown on the cryptocurrency market.

"To be clear, we are strong proponents of innovations that reduce costs and improve welfare. But the most important innovations—those that improve the payments system and the supply of credit, do not require universal CBDC and its inherent risks. So, why are central banks so intent on preparing? What is the purpose of such contingency planning? "

A Tether confidence crisis would likely result in a black swan event and a re-shuffling of the market. While there’s a chance that large players would counteract the crisis by buying back large amounts of USDT to restore the peg, or by successfully reassuring the market that all USDT can be redeemed at par, there’s no way to be sure that this will happen, unless you put a whole lot of trust in Tether and its affiliates.

A cryptocurrency has just re-enacted the Weimar hyperinflation. On June 17, 2021, the price of the cryptocurrency TITAN crashed to zero, and its related stablecoin IRON fell off its USD peg, trading as low as 69 cents to the dollar. It was a sudden and dramatic collapse that left investors shocked and bewildered. It was a speculative attack on the IRON stablecoin's peg, aided and abetted by panic selling (which was no doubt what the speculators hoped for).. And it succeeded, because the peg relied on a fundamentally flawed mechanism.

The Central Bank of Nigeria is reportedly preparing to pilot a central bank digital currency (CBDC) by as early as the end of this year. The central bank's director of information technology Rakiya Mohammed said the project had been in the works for two years, and more announcements were likely in the coming weeks.

The Beijing branch of the Industrial and Commercial Bank of China has reportedly become the first bank to fully enable the digital yuan exchange in the Chinese capital city by setting up more than 3,000 digital currency-compatible ATMs. The Agricultural Bank of China (ABC), another major bank involved in China’s CBDC tests, has also deployed more than 10 ATMs in the Wangfujing area, a major shopping street in Beijing.

"We argue that operating a bearer-based payment system to complement an account-based CBDC in order to gain offline and privacy features is not a good trade-off. Adding permanent, regular offline capabilities via the bearer-based payment instrument constantly exposes the CBDC to the severe issues inherent in offline-capable payment systems. Instead, the offline mode of operation should be restricted to scenarios where it is actually required, which mitigates the risks."

Tom Mutton shares the Bank of England's latest thinking on central bank digital currencies (CBDCs). He looks into what they've learned so far, and how they are setting up their work for the future. He explains some of the principles that are guiding the Bank's work, and how they're approaching some of the big debates on CBDC."

"If transactional privacy were to be seen as an important design consideration in a future digital money, one could imagine a government crypto-dollar that users hold in digital wallets, like they hold their Bitcoin, that can be passed between two people without it showing up on any kind of centralized ledger."

Currently in Public Preview, R3 Sandbox for Digital Currencies is a learning and development platform for CBDC experimentation used by global financial institutions and regulatory bodies."

Judge Sarah Netburn of the District Court of New York has denied the US Securities and Exchange Commission's (SEC's) request for documents related to Ripple's lobbying efforts, stating that Ripple's lobbying efforts are not relevant in the case. However, the Judge approved the SEC's request to extend the pre-trial discovery phase by two months, to have more time to respond to Ripple's earlier motion compelling the SEC to turn over the internal BTC, ETH, and XRP documents. In other words, if no settlement is reached soon, the case is likely to drag on to early 2022. The SEC launched its action against Ripple and two of its executives in December 2020, alleging that they raised over $1.3 billion through an unregistered, ongoing digital asset securities offering.

The Covid-19 pandemic has accelerated the decline of cash, with the volume of UK payments made using notes and coins plunging by 35 per cent in 2020 compared with the previous year. Annual payments data from UK Finance, the banking trade body, showed a corresponding rise in contactless payments, online transactions and the use of mobile “wallet” apps that store bank and card details.

"This isn’t just a story about a tiny fraudulent company. As I’m writing this, Tether is now valued at nearly $63 billion, which would rank it amongst the largest financial crimes in history. It’s a ticking time bomb, and this article will provide a quality summary of why Tether is a systemic risk you shouldn’t overlook, or ignore."

How can crypto custodians, crypto trading exchanges, and (ultimately) crypto banking institutions prove to external parties that reserves are indeed what they say they are? This is a pivotal question that continues to come to the surface, with a potential solution recently put forward; Proof of Reserves (PoR).

The Banco Central do Brasil (BCB) is pushing for more time on the rollout of its central bank digital currency (CBDC). BCB told CoinDesk that “according to the current BCB assessment, the conditions for the adoption of a Brazilian CBDC will be achieved in two to three years."