Covid-19 has led to banknote hoarding in Australia, Brazil, Canada, the eurozone, Russia and the US, fuelled by concerns about financial system stress, according to analysis by Jonathan Ashworth and Charles Goodhart. The data suggests that cash in circulation has surged in a number of countries affected by the coronavirus. Even after the initial March jumps in some countries, subsequent gains have been quite large. The rise likely reflects the use of cash for one of its other traditional functions – panic-driven hoarding.
Soramitsu Starts Testing ‘White Tiger’ Digital Currency in Japan
Japanese blockchain company Soramitsu will start testing a new "White Tiger" digital currency for retailers at the University of Aizu. It will run on the company’s native Hyperledger Iroha blockchain. Testing is starting with the university's cafeterias and shops before gradually being utilized at locations off campus. Soramitsu is one of the blockchain startups behind the development of Cambodia's blockchain-based Project Bakong retail payment system.
Celo Dollars: Powerful new digital money in circulation
Celo Dollars (cUSD) stablecoins are now live on the platform's mainnet, barely two months since the mainnet went live. The project has been making aggressive moves in both development and community growth. With cUSD now accessible, the foundation is optimistic that its vision of an all-inclusive financial ecosystem will be realized. Currently, the 75+ member Alliance's focus is on remittances and international aid.
Compendium of Practices for Central Bank Digital Currencies for Multinational Financial Infrastructures
This paper surveys DLT-based wholesale CBDC experiments with completed proof-of-concept prototypes from across the world for which there is publicly-available information. It also seems to cover projects that go beyond CBDCs into private-sector projects. But it looks to provide a possibly useful classification framework for CBDCs and use cases in the financial services industry.
Fears over privacy are a massive obstacle to switching to CBDCs. The problem is only amplified by suspicions that central banks will, despite claims to the contrary, use the switch to CBDCs to abandon what is by far the most reliable and private form of money available to the public right now – cash. After all, we all have memories we would rather were forgotten.
Cash use is in decline, a trend that has been accelerated by the coronavirus pandemic. Advocates for physical cash argue that the demise of physical cash risks leaving vulnerable members of the population behind. A University London College study suggests that CBDCs will need to replicate the privacy and anonymity of physical cash to achieve widespread acceptance. It argues that CBDCs incorporating privacy by design will be seen as more free and business-friendly than those that rely upon data protection by third parties.
Telegram Agrees to Pay $18.5M Penalty in SEC Settlement Over Failed TON Offering
Telegram will pay $18.5 million and notify the U.S. Securities and Exchange Commission (SEC) if it plans to issue any sort of digital currency in the next three years in a proposed settlement with the securities regulator. The settlement ends a six-month court fight with the agency, and also indicates the messaging platform will be responsible for a $1.22 billion disgorgement that is offset by $1.19 billion paid as “termination amounts” in investors’ purchase agreements and the amounts that some investors loaned to Telegram earlier this year. Telegram has 30 days to pay the SEC penalty and up to four years to pay back investors under the settlement.
The Bank of Canada is exploring how a central bank digital currency (CBDC) could be designed for universal access. One potential concept the it is investigating is a custom universal access device (UAD) to securely store and transfer CBDC. The device could incorporate attributes of cash and take advantage of specialized technologies. Such a device should be manufactured at a low cost and issued by the Bank to ensure maximum inclusion. A UAD could embed a local, secure store of value, be network-independent and operate for long periods on a local power source. If there is an infrastructure failure, a UAD may prevent the interruption of digital transactions.
According to a special chapter of the BIS Annual Economic Report, digital innovation is radically reshaping the provision of payment services, and central banks are embracing this innovation. They promote interoperability, support competition and innovation, and operate public infrastructures - all essential for easily accessible, low-cost and high-quality payment services. And central bank digital currencies (CBDCs) can foster competition among private sector intermediaries, set high standards for safety and risk management, and serve as a basis for sound innovation in payments.
Former U.S. CFTC Timothy Massad weighs in on Facebook's Libra 2.0.
Former U.S. CFTC Timothy Massad finds that Libra's 2nd white paper deals with many of the concerns previously raised. While Libra may not succeed in improving access to financial services for the underserved, he believes we should let it try. That is, we should create a reasonable regulatory framework under which the Libra proposal can be developed and implemented. The competition in payments will be a good thing, but regulators around the world need to work together to construct the proper framework for Libra. The financial regulatory challenge in the United States would be best addressed if Congress created a comprehensive framework for the regulation of payment systems, but that seems unlikely to happen in the short term. He belives that for many the potential benefits Libra might bring to our payment options outweigh the risks associated with an increase in Facebook’s power and its collection of data.
Thinking Big on Fed Accounts, Digital Dollars and Financial Inclusion
Chris Brummer gets the sense that most financial experts and economists support the release of a digital dollar, at least of some sort, that would comprise a liability of the Federal Reserve carrying the full faith and credit of the U.S. government. The disagreements appear to lie in what kind of technology should support it. For Chris Giancarlo and Dan Gorfine, a digital dollar would be tokenized, meaning that digital dollars would operate as bearer instruments that could be transferred instantaneously. Meanwhile Morgan Ricks supports an account-based path for digitization that would comprise just one component of a larger, explicit strategy of enabling financial inclusion through the buildout of digital individual accounts at the Fed.
Circle Announces Support for USDC Stablecoin on Algorand Blockchain
The Algorand Foundation has announced that the USD Coin (USDC) stablecoin will be launched on the Algorand (ALGO) blockchain. The integration will allow customers using Circle APIs or Circle Business Accounts to convert funds from their bank account or card network into stable tokens on the Algorand blockchain.
This Fed paper develops a model where persistent trade shocks create demand for a basket- backed stablecoin, such as Mark Carney's "synthetic hegemonic currency" or Facebook's recent proposal for Libra. In numerical simulations, we find four main results. First, because of general equilibrium effects of the basket currency on the volatility of currency values, overall demand for that currency is small. Second, despite scant holdings of the basket, its global reach may contribute to substantial increases in welfare if the basket is widely accepted, allowing it to complement holdings of sovereign currencies. Third, we calculate the welfare maximizing composition of the basket, finding that optimal weights depend on the pattern of international acceptance, but that basket composition does not significantly affect welfare. Fourth, despite potential welfare improvements, low demand for the basket currency from buyers limits sellers' incentives to invest in accepting it, suggesting that fears of a so-called global stablecoin replacing domestic sovereign currencies may be overstated
Project Bakong: Cambodia's Next Generation Retail Payments System
This National Bank of Cambodia report explains the rationale, technology choices, design features and potential implications of Project Bakong "next generation" retail payments system. Rather than focusing on central bank digital currency, the project targets infrastructure modernization to respond to the need to expand financial services access in the Kingdom's rural areas. A pilot test is currently underway to examine the feasibility of the approach and identify potential issues before the official launch.
Sveriges Riksbank central bank digital currency deep dive
The Sveriges Riksbank Economic Review does a deep dive into central bank digital currency, with chapters on e-krona issuance rationale, and on the pros, cons and trade-offs of different design features. It also covers the potential impact of CBDC on bank loan supply and central bank liquidity provision, and discusses how fundamental is central bank currency to the monetary system.
Central Bank Digital Currencies and Asymmetric Disintermediation
Some CBDC designs could fundamentally alter the commercial banking system we know today. This Institute of International Finance paper highlights the need for effective ways to limit the potential for crowding out bank deposits, both structurally and in crisis situations. This may mean considering the particular roles that commercial banks might play in a CBDC ecosystem, and whether there is merit in a combination of bank-provided wallets and deposit insurance. There is still much to do in exploring and examining optimal designs and potential solutions for CBDCs, to ensure such innovations can help reinforce (and not undermine) system stability and economic growth.
Rwanda Reinstates Charges On Cashless Transactions
The National Bank of Rwanda has reinstated charges on all cashless transactions after the three months period with zero charges introduced in March this year, as part of the measures to encourage digital transactions due to the New Coronavirus outbreak, elapsed.
Stablecoins are assets that have price stability characteristics that make it suitable for short-term and medium-term use as a unit of account and store of value, often pegged to a national currency.
Should the U.S. Government Create a Token-Based Digital Dollar?
Larry White is not a big fan of CBDC! "[Although the Digital Dollar Project's] FedCoin retail payment system is likely to be less inefficient than a FedAccount system, it still requires the Fed to step outside its expertise, and into the realm of private enterprise, to launch and maintain a retail digital wallet system. However, the Project's [underspecified] "champion model" provides a useful framework for further discussion of the standards necessary to ensure that a CBDC system does not make the money-using public worse off. So long as its use is entirely voluntary, there is not much to object to other than the likely waste of taxpayer money to subsidize the costs of creating and operating it.
This Bank of Canada note outlines what is technologically feasible for privacy in a central bank digital currency (CBDC) system. Privacy in a CBDC goes beyond binary choices of anonymity or full disclosure. System designers have a range of choices around the type of information to keep private and who to keep it private from. Because privacy is not in the sole purview of the Bank, defining it requires consultation with external parties. Our approach in this note is to: develop a framework to evaluate different privacy models, understand the technical tools to enact various privacy models, suggest a design approach for CBDC privacy, and list the key risks and trade-offs.
PieDAO releases USD++ for better stablecoin holdings
PieDAO, the decentralized organization building diversified token pools on the Balancer protocol, announced the mainnet release of its USD++ pool on Tuesday. The pool combines several of the top USD-pegged stablecoins into one tradable token. It’s another example of a creative use case of the rapidly growing Balancer protocol—and of the expanding universe of ideas DAOs are working to address. The USD++ pool will contain Maker DAI, Synthetix sUSD, Tether TUSD, and Coinbase USDC.
The Bank of Thailand (BOT) will develop a prototype of a CBDC-based payment system for businesses, which will build upon knowledge from Project Inthanon. The feasibility study will integrate CBDC with the procurement and financial management systems of the Siam Cement Public Company and its suppliers to increase fund transfer flexibility, and deliver faster and more agile payments between suppliers. It will begin in July 2020 and run to the end of the year. Also, the BOT, the Hong Kong Monetary Authority and the participating financial institutions will continue to their Project Inthanon CBDC collaboration and experimentation for cross-border transfer use cases.
Venezuela Is a Testing Ground For Digital Dollarization (and Zelle Doesn't Like It)
Venezuelans are digitally dollarizing using Zelle, a U.S.-based payments network that allows anyone with a U.S. bank account to instantly transfer funds to another U.S. bank account for free. Although Zelle is meant for U.S. usage only, Venezuelans have repurposed the network as a way to make dollar payments among each other. Large Venezuelan supermarket chains have enabled Zelle as a form of payment, and cafes, restaurants and taxis accept it. But business and commercial use infringes on Zelle’s terms of service, which specifies that its network is intended only for personal use. Wells Fargo has notified many Venezeulan account holders their connection to Zelle will be terminated, so the game may soon be over.
Bank of Canada is Looking for a CBDC Project Manager
The Bank of Canada has posted an opening for a CBDC Project Manager, saying that is "embarking on a program to design a contingent system for a CBDC... It will take into consideration a wide variety of factors, including policy considerations, diverse stakeholder needs, difficult technical challenges and the development of a technical architecture to realize a CBDC pilot system.
Atari’s gaming token will be used for sports and esports betting
Atari has partnered with Unikrn, an online betting platform that lets users wager on professional sports and esports matches, as well as on their own performance in select head-to-head online video games. Atari Token holders will be able to use the cryptocurrency on the Unikrn platform, which also sells things like loot boxes and game keys. The Atari Token is a crypto-asset built using the Ethereum protocol (ERC20). https://www.atarichain.com/
The Stellar project released the 13th version of its core protocol on June 13th. Network validators will vote on whether to upgrade the network on June 18th. Like XRP, Stellar does not use Proof-of-work or Proof-of-Stake but uses its own unique approach to solve the Byzantine generals problem called the Federated Byzantine Agreement. The protocol changes focus on three key Core Advancement Protocols, Fee bumps, Fine-grained control of asset authorization, and First-class multiplexed accounts.
Bank of England on payments after the Covid crisis – emerging issues and challenges
Changes in the way we pay and the challenges we’ve seen over the past several months pose two important and interrelated questions for central banks and regulators. First, how do we ensure that we have legislative and supervisory frameworks in place to support development of safe private sector innovation that could respond to these challenges? Here, it is clear that we need to ensure that new ways to pay and new forms of electronic money are offer equivalent protections to existing ones. And second, what is the right role for central banks in provision of the money we use to transact? I’m looking forward to the discussion.
Central Bank Digital Currency: Is It a Good Idea?
The Philadelphia Fed's Daniel Sanches discusses how the merits of central bank digital currency have led economists to rethink the central bank’s role in the provision of liquidity and intermediation services. Based on a review of the CBDC literature, he finds that there are many aspects of the CBDC impact on the monetary system that require additional research, such as the impact on the framework for the implementation of interest-rate policy for business-cycle adjustments.
Why a small town in Washington is printing its own currency during the pandemic
In a bid to lessen the blow of COVID-19, the town of Tenino has started issuing its own wooden dollars that can only be spent at local businesses. Tenino is setting aside $10,000 to give out to low-income residents hurt by the pandemic. But instead of using federal dollars, they are printing the money on thin sheets of wood designed exclusively for use in Tenino, using a 130-year-old newspaper printer from a local museum.
South Korea to Review Legal Issues Surrounding Potential CBDC Launch
The Bank of Korea (BOK) has formed a legal advisory group to evaluate issues surrounding a potential central bank-issued digital currency launch. The group includes six experts; three professors, two lawyers and one BOK official. The panel will reportedly operate until May 2021, although the BOK’s CBDC plans are not set in stone.http://www.bok.or.kr/portal/bbs/P0000559/view.do?nttId=10058761&menuNo=200690
