DFC

"Tether is very nearly the same size as the 25th largest mutual fund or ETF. At their average rate of printing for 2021 it will take approximately 20 days until Tether would be larger than entities on this list."

This Bank for International Settlements (BIS) paper explores initial thinking on the cross-border use of central bank digital currency (CBDC) based on a survey of 50 central banks in the first quarter of 2021. While most central banks have yet to take a firm decision on issuing a CBDC, the survey responses show a tentative inclination towards allowing use of a future CBDC by tourists and other non-residents domestically. They have a cautious approach to allowing use of a CBDC beyond their own jurisdiction. Concerns about the economic and monetary implications of cross-border CBDC use and about private sector global stablecoins are taken seriously. At the wholesale level, 28% of surveyed central banks are considering options to make CBDCs interoperable by forming multi-CBDC arrangements. This involves arrangements that enhance compatibility, interlink or even integrate multiple CBDCs into a single payments system. Finally, almost 14% of respondents are considering an active role for the central bank in FX conversion.

The Central Bank of Nigeria (CBN) is reportedly planning to launch a central bank digital currency (CBDC) by the end of 2021. According to Rakiya Mohammed, the central bank’s IT specialist, the CBN has been exploring the technology for the last two years and has made tremendous progress. One of the reasons the CBN is exploring CBDC is to make remittances travel easier from abroad to Nigeria.

International Monetary Fund (IMF) spokesman Gerry Rice reportedly said Fund staff will meet later on Thursday (June 10) with El Salvador President Nayib Bukele to discuss the recently passed bitcoin law that gives bitcoin legal tender status in the country. Rice reportedly said “adoption of bitcoin as legal tender raises a number of macroeconomic, financial and legal issues that require very careful analysis.” El Salvador is also in discussions with the IMF seeking a near $1 billion program.

The Bank for International Settlements (BIS) Innovation Hub, Bank of France and Swiss National Bank launched Project Jura that, together with a private sector consortium led by Accenture, will conduct an experiment using wholesale central bank digital currency (wCBDC) for cross-border settlement on a distributed ledger technology (DLT) platform. The private sector consortium includes Credit Suisse, Natixis, R3, SIX Digital Exchange and UBS. It will involve the exchange of financial instruments against a euro wCBDC through a delivery versus payment (DvP) settlement mechanism and the exchange of a euro wCBDC against a Swiss franc wCBDC through a payment versus payment (PvP) settlement mechanism. These transactions will be settled between banks domiciled in France and in Switzerland, respectively.

"Chea Serey, assistant governor and director general of the National Bank of Cambodia (NBC) was adamant to clarify that although the system is built on DLT, it is not a central bank digital currency (CBDC) that some may be quick to assume. Instead, the platform augments the existing Fast and Secure Transfer (FAST), real-time retail payment system and Cambodian Shared Switch (CSS) that facilitate mainly interbank transactions among commercial banks and MFIs. "

To prepare for the introduction of CBDC in early 2022, a pilot CBDC solution will be tested in Bank of Jamaica’s Fintech Regulatory Sandbox between May 2021 and December 2021.

The European Blockchain Observatory and Forum (EUBOF) published a report identifying and evaluating eight alternative design architectures for the digital euro against the core principles and requirements set by the ECB. It considers how the digital euro will differ based on whether it will account-based or token-based, or whether it's implemented atop existing eurozone-wide payment rails or atop novel technological architectures, such as blockchain. The paper also explores whether a digital euro should be exclusively coordinated by the central bank or distributed and managed in collaboration with Europe's commercial banks and other financial institutions. It addresses interoperability and programmability features, regulatory aspects and end-user experience, along with potential financial stability implications.

The western Beijing district of Shijingshan said on Tuesday that more 200 vendors at and around the venues for the 2022 games were now supporting payments made using e-CNY.

A Bank for International Settlements paper discusses the range of proposed central bank digital currency (CBDC) architectures, how they could complement existing payment options, and what they imply for the financial system and the central bank of the future. It sets out the requirements for a "minimally invasive" CBDC design – one that upgrades money to current needs without disrupting the proven two-tier architecture of the monetary system, which involves both the private and public sectors. It finds that technological developments inspired by popular cryptocurrency systems – based on anonymity and lacking a central authority – do not meet the requirements for a retail CBDC. Instead, digital banknotes that run on "intermediated" or "hybrid" CBDC architectures show promise.

The Hong Kong Monetary Authority (HKMA) will strengthen its research work to increase Hong Kong’s readiness in issuing CBDCs at both wholesale and retail levels. In addition to the continued effort on wholesale CBDCs, the HKMA has been working with the Bank for International Settlements (BIS) Innovation Hub Hong Kong Centre to research retail CBDCs and will begin a study on e-HKD to understand its use cases, benefits, and related risks. The HKMA will also continue to collaborate with the People’s Bank of China in supporting the technical testing of e-CNY in Hong Kong with a view to providing a convenient means of cross-boundary payments for both domestic and mainland residents.

"An oft-cited reason to create a digital dollar — preventing China’s digital yuan from emerging as an alternative reserve currency — seems overblown. Beijing’s controls on capital flows make the yuan unattractive as a store of value and will probably prevent the yuan from displacing the dollar."

This paper jointly written by Bank of England and Bank for International Settlements staff, discusses central bank digital currency (CBDC) and its potential impact on the monetary transmission mechanism. It first offers a general definition of CBDC which should make the concept accessible to a wide range of economists and policy practitioners. It then investigates how CBDC could affect the various stages of transmission, from markets for central bank money to the real economy. It concludes that monetary policy would be able to operate much as it does now, by varying the price or quantity of central bank money. Transmission may even be strengthened for a given change in policy instruments.

The Bank of England published the feedback it received on the "Central Bank Digital Currency: Opportunities, Challenges and Design" discussion paper that was published in March 2020. In short, the feedback is encouraging the Bank to continue examining the case for a CBDC. But at the same time, the it received clear feedback that the use case for a CBDC, which might justify its introduction, needed further research, refinement, and articulation, to inform a comprehensive assessment of the pros and cons of what would be a major decision. Additionally, some respondents expressed doubt that a CBDC was needed at all, given they considered that the intended benefits could be achieved through other forms of payments innovation.

The Bank of England published a discussion paper that set out its emerging thoughts on new forms of digital money, which include both systemic stablecoins and a UK central bank digital currency (CBDC). It builds on the Bank’s previous Discussion Paper on CBDC published in March 2020 and the Financial Policy Committee’s expectations for stablecoins set out in the December 2019 Financial Stability Report. Broadly speaking, the paper proposes that stablecoins should meet equivalent standards to those imposed on commercial banks.

The city of Shanghai is reportedly going to hand out 19.25 million yuan in digital currency. The money will be distributed among local consumers through a lottery system. Lottery winners will receive a total of 350,000 digital red envelopes. Each one of them will be loaded with 55 units of the Chinese central bank digital currency (CBDC).

G7 Finance Ministers and Central Bank Governors remain focused on central bank digital currency (CBDC) and global stablcoins.

Regulators have waited too long to act on so-called stablecoins, to the point where exposure to schemes like that being run using Tether has infected the entire digital asset industry—and even beyond it. This is thanks to a network of exchanges which surround and rely on Tether and who perform a vital role in Tether’s ability to mint new USDT and get them to market, all while maintaining a paper-thin illusion that the so-called stablecoins are backed by anything at all. In return, the exchanges get to sell the apparently value-less USDT in exchange for BTC."

"Digitizing currencies is not an easy proposition, and it raises questions around accessibility, privacy and what architecture to use. Quartz spoke about these and more with Co-Pierre Georg, who is also a research economist with Deutsche Bundesbank, Germany’s central bank."

"The problem remains that the Marshall Islands and similar Pacific island nations are in dire financial straits. They aren’t stupid or dissolute — they’re desperate."

Giesecke+Devrient's (G+D’s) hybrid-deployment Filia model of a value-based CBDC solution involves existing members of the currency cycle playing a vital role in. The creation and issuance of data files that represent monetary value take place in a highly secure offline environment at the central bank, while distribution is carried out by commercial banks or other financial service providers. Payment service providers can integrate Filia into their own offerings – as part of a larger payment ecosystem – to enable new business models, and to foster growth and innovation in an open system. Filia can be utilized through smartphones, smartcards, smartwatches, and other forms of digital wallets, without the need for a bank account, the disclosure of private data, or consumer fees. It also allows for secure offline consecutive offline payments.

A Bank of Japan paper [sorry, it's only in Japanese] surveys the literature on the economics of privacy." The economics of privacy teaches that market mechanisms can address issues such as how to determine socially desirable levels of privacy protection and how to deal with privacy infringements caused by the "negative externalities" of personal information data. It's difficult to solve. This perception can give important implications when considering how to proceed with the utilization of data while giving a sense of security to people who use digital payment systems.

According to Coinmetrics, none of the major stablecoins became seriously unpegged during the May 19 crypto flash crash. As prices drop, investors often rush to trade their crypto-assets into stablecoins, while the liquidations can cause stablecoins being used as collateral to be sold. This sudden shift in supply and demand can potentially knock stablecoin prices from their $1 peg, and threaten their stability. Although I and some others observed some USD stablecoins below 90 cents on some trading screens, apparently none actually traded there.

This is a great summary of the potential systemic risks around Tether by Timothy Massad, ex-Chairman of the US Commodity Futures Trading Commission. He calls for a strengthening of the regulation of crypto-assets generally and in particular stablecoins. He seems supportive of the Stablecoin Tethering and Bank Licensing Enforcement (STABLE) Act, introduced in Congress last December, that would require that stablecoins be issued by a bank and would impose certain standards.

This is a great summary of the potential systemic risks around Tether by Timothy Massad, ex-Chairman of the US Commodity Futures Trading Commission. He calls for a strengthening of the regulation of crypto-assets generally and in particular stablecoins. He seems supportive of the Stablecoin Tethering and Bank Licensing Enforcement (STABLE) Act, introduced in Congress last December, that would require that stablecoins be issued by a bank and would impose certain standards.

Scott Hendry: "It’s been apparent for many years now that, with technology modernizing so many other aspects of our lives, the physical nature of currency should also evolve to meet the changing demands of businesses and consumers. Recognizing this, the Bank started looking at the digitization of money almost a decade ago to prepare for a day when the Government of Canada may take a decision to issue a CBDC."