Are we sleepwalking into a cashless society?
"Cash could be crowded out of the payment landscape if current trends continue, but should central banks be responsible for ensuring its survival?"
Introducing Digital Currencies to the Global Interbank Settlement System
The proposed two models would be modest contributions to introducing digital currencies for the sole use of cross-border interbank clearing and settlement. The concerns about verification of AML, CFT, KYC and tax evasion would be addressed as participating banks are properly supervised by their respective supervisory authorities. Transactions in ‘bricks’ would be authorized and executed by them. This would be a China designed and operated cross-border payments infrastructure, first for BRICS countries and later for partner countries of the Belt and Road Initiative. Like this, China and its partner countries could wean themselves off an outdated USD based system, which needs to face the digital age in a reform of its own before long.
Anonymity Vouchers: An Improvement for Private Transactions
A recent ECB paper describe a hypothetical payments system in which citizens are provided with a monthly allotment of ‘anonymity vouchers’. The vouchers expire and cannot be traded. If users wish to make an anonymous payment, they must attach a voucher to each payment request. By doing so neither the issuing central bank nor the anti-money laundering authorities will be privy to the payor’s identity. Once the allotment is used up, payments can no longer anonymous. By rationing anonymity, the authors of the paper hope to allow for lower-value anonymous payments while filtering out larger ones.
NZIA – Enabling transactions for everyone, anywhere, anytime.
The first of its kind, NZIA’s decentralized wireless payment system provides an alternate payment infrastructure for CBDC that augments existing payment networks.
South Korea Forms Task Force for Central Bank Digital Currency Research
In its “Monetary Policy for 2020” brief the Bank of Korea said it will continue to build on its research into distributed ledger technology, crypto-assets, and central bank digital currency. The Bank will organize a CBDC-dedicated task force and recruit additional experts. https://www.bok.or.kr/viewer/skin/doc.html?fn=201912260255367880.pdf&rs=/webview/result/E0000634/201912#
Bahamas Central Bank Will Pilot Digital Currency Starting December 27
The Central Bank of the Bahamas will introduce a digital version of the Bahamian dollar, starting with a pilot phase in Exuma in December 2019, and extending in the first half of 2020 to Abaco. This initiative has acquired the name Project Sand Dollar, with the sand dollar also being the name assigned to the proposed central bank digital currency (CBDC). This is a continuation of the Bahamian Payments System Modernization Initiative (PSMI), which began in the early 2000s.
European Central Bank Announces New DLT Proof-Of-Concept Called EUROchain
The ESCB’s EUROchain research network (with the support of Accenture and R3) uses distributed ledger technology. Based on the R3’s Corda platform, the project is a study on how privacy can be balanced with compliance procedures, like anti-money laundering rules, while DLT helps drive down the cost of transactions.
Japan's quest for cashless payments
"Decades of consumer habit and resistance from retailers, say banking and fintech analysts, are proving hard to dislodge from a society that is used to paying in cash, enjoys the anonymity that comes with it and generally feels safe enough carrying around large sums. "
Why $1.5 Trillion In $100 Bills Have Disappeared
"The world's growing appetite for physical assets such as paper dollars and gold, coupled with the continued interest in cryptocurrencies and other traditional currency alternatives, merely confirms that faith in artificially levitated markets is approaching a tipping point. Meanwhile the world's "top 0.001%ers" continue to quietly cash out, literally, and put their Benjamins in secret vaults in the middle of somewhere, even as central banks do everything in their power to reduce the amount of physical currency in circulation and replace it with easily trackable digital alternatives."
Mu Changchun: The PBOC's digital yuan is ready for pilot testing
According to the People’s Bank of China's Mu Changchun, the top-level design, standard formulation, functional research and development, joint debugging and testing has been completed, and its CBDC is ready for pilot testing.
Carbon launches the first stablecoin on Hedera Network
"CarbonUSD, or CUSD for short, is a compliant fiat-backed stablecoin where users can deposit and withdrawal real USD. To mint new CUSD tokens, users can make fiat deposits via ACH or Wire Transfer with our financial partner, Nevada-based Prime Trust. Frequent third-party attestations by leading auditor Cohen & Co. verify publicly that each token is backed 1-to-1 by escrowed funds in FDIC-insured accounts with Prime Trust’s banking partners."
The impact of Tether grants on Bitcoin
In recent years, Tether issuances have increased significantly, which correlated broadly with a significant rise in Bitcoin valuation. This paper examines the impact of cryptocurrency issuances on subsequent cryptocurrency returns. It is argued that as Tether is the undisputed ‘stable coin’, the minting of new Tether acts similarly to monetary expansion in cryptocurrency markets, inflating the prices of Bitcoin. We construct a VAR model and show contrary to investor expectations, Tether issuances do not impact subsequent Bitcoin returns, however, they do impact traded volumes. We also document an increase in Tether trading following a subsequent decrease in Bitcoin returns.
Libra's second roadmap outlines its final push toward mainnet launch
The Libra Association has published its second roadmap for Libra Core, the key software that underpins the planned Libra network.
Augmenting Fiat Currency with an Integrated Managed Cryptocurrency
In this work, we investigate how the governance features of a managed currency (e.g., a fiat currency) can be built into a cryptocurrency in order to leverage potential benefits found in the use of blockchain technology and smart contracts. The resulting managed cryptocurrency can increase transparency and integrity, while potentially enabling the emergence of novel monetary instruments.
Some Questions Regarding the FedNow Project
Instead of increasing its size and scope, the Fed should reconsider its priorities. There does not seem to be an urgent need for real-time payment technologies, which are already being offered and developed by the private sector. The role of public entities such as the Fed is not to compete with the market, but to provide and secure a good competitive environment for the market to develop.
Iran's President proposes crypto for Muslim nations as an alternative to the US dollar
Iran’s President Hassan Rouhani has proposed creating a cryptocurrency for Muslim countries as an alternative to the US dollar. Rouhani said the U.S. has used economic sanctions as the “main tools of domineering hegemony and bullying” of other nations. Last month, BRICS nations also proposed creating a cryptocurrency for settling payment transactions between the group "
Rationing Privacy: ECB suggests digital currency ‘anonymity vouchers’
Planning to score some cocaine before meeting your girlfriend at a hotel? Neither the cops nor your wife will be any the wiser if you use some of the “anonymity vouchers” Europe’s central bank just proposed building them into an e-euro.
Joint statement by the Council and the Commission on "stablecoins"
The Council and the Commission state that no global "stablecoin" arrangement should begin operation in the European Union until the legal, regulatory and oversight challenges and risks have been adequately identified and addressed.
Changing USD Currency Not An Option For The BVI | Government of the Virgin Islands
Contrary to media reports, the Government of the Virgin Islands is not in the process of developing or launching its own national cryptocurrency, neither by itself nor in partnership with any other entity, to replace the US dollar with a digital currency. The British Virgin Islands adopted the US dollar as its currency in 1959 and have made no commitments to replace it as the official currency in any form.
Circle Organizes for Stablecoin Platform Focus in 2020
Payments startup Circle is pivoting its business to solely offering stablecoin services with the sale of its OTC trading desk. As part of the move, the firm confirmed the departure of additional executives, just weeks after co-CEO Sean Neville announced he would be stepping down.
Exploring anonymity in central bank digital currencies
A new ECB paper shows that it is possible to build a simplified CBDC payment system while safeguarding users’ privacy for low-value transactions and ensuring that higher-value transfers are subject to AML checks.
Maduro Plans to Airdrop Petro to Municipal Leaders and Eligible Citizens
Venezuela President Maduro announced that next week there will be an airdrop of 0.5 PTR ($30) to eligible citizens who register with the Petro App.
The design of digital financial infrastructure: lessons from India
Digital finance has the potential to transform emerging market and advanced economies alike. India's approach rests on the principle of providing digital financial infrastructure as a public good. It offers an important case study where the results are relevant and applicable for all economies, irrespective of their stage of development.
World's largest printer of money is running out of money
Despite the rise in cashless payments, the market for cash is expected to continue to grow. The amount of banknotes in circulation is expected to increase annually between 3 percent and 4 percent, according to Edison, exceeding gross domestic product growth rates in most areas. The reason: In uncertain times, cash is still king.
Lessons From the First Digital Gold Boom
Libra is actually a revamped version of a much older payments model. In 1996, Douglas Jackson, an oncologist and fan of the gold standard, founded a payments system called e-gold. Backed one-to-one by reserves of the yellow metal, the e-gold system allowed users all around the world to make instant private electronic payments. Unfortunately, e-gold ran into problems with regulators...
Banks do not create money out of thin air
In recent years, some have claimed that banks create money ‘ex nihilo’. This column explains that banks do not create money out of thin air. From an economic viewpoint, commercial banks create private money by transforming an illiquid asset (the borrower’s future ability to repay) into a liquid one (bank deposits); they would quickly be insolvent otherwise. In addition to bank solvency representing a constraint on private money creation, banks require access to liquid reserves in order to be able to engage in money creation.
New York’s problem with Tether — as set out for the appeal judges
A New York Supreme Court Appellate Division filing claims that Bitfinex and Tether (which share executives and shareholders) had gradually been depleting the reserves backing Tether's USDT stablecoin, by first by going from actual cash in hand to $625 million in an inaccessible Crypto Capital account, and then by replacing that with a $625 million IOU from Bitfinex. That debt, said the NYAG, “seemed unlikely to be repaid,” as Bitfinex required the funds for withdrawals on its exchange.
Countries Where Retail CBDC Is Being Explored
Here's my updated master list of countries where retail central bank digital currency (CBDC) is being actively explored, according to publicly-available information. There are no new entries but some links have been updated (e.g., Australia, Brazil and New Zealand).
The Riksbank sign an agreement with Accenture for its CBDC pilot
The Riksbank will sign a deal with Accenture to create a pilot platform for its e-krona digital currency. The public procurement resulted in eleven requests to participate, from which the Riksbank selected three suppliers who were invited to present tenders. The Riksbank intends to sign an agreement before the end of the year. https://www.riksbank.se/en-gb/press-and-published/notices-and-press-releases/notices/2019/riksbank-develops-an-e-krona-in-a-test-environment/
Swiss Federal Council publishes report on central bank digital currency
Universally accessible central bank digital currency would bring no additional benefits for Switzerland at present. Instead, it would give rise to new risks, especially with regard to financial stability. The Federal Council approved a report examining the opportunities and risks of introducing a cryptofranc (e-franc), and they and the Swiss National Bank will continue to monitor developments in this area closely.