DFC

Caisse des Dépôts et Consignations (CDC) issued a €100 million digital bond settled using the Banque de France’s DL3S DLT platform using its pilot wholesale central bank digital currency (CBDC). The transaction formed part of the European Central Bank’s wholesale distributed ledger technology (DLT) settlement trials. The Banque de France avoids using the term wholesale CBDC, instead referring to it as a tokenized representation of central bank money. For the CDC issuance, it required synchronizing the issuance of the digitally native note (DNN) on Euroclear’s D-FMI platform with the settlement on the central bank’s DL3S.

The Reserve Bank of Australia (RBA) and the Digital Finance Cooperative Research Centre (DFCRC) published a consultation paper which seeks industry feedback on a new research initiative, Project Acacia. This project will explore how different forms of digital money and associated infrastructure could support the development of wholesale tokenized asset markets in Australia. The consultation paper seeks expressions of interest from industry in participating in an experimental research phase for Project Acacia, and in joining an Industry Advisory Group for the project. Input is also sought on the technical and functional capabilities of new forms of settlement infrastructure and digital money, including wholesale central bank digital currency (CBDC) and tokenized bank deposits, that could promote well-functioning tokenized asset markets and stability in the financial system.

A paper co-written by Federal Reserve Board (FRB) staffer Elena Falcettoni proposes to differentiate individuals without a bank account but would like to have one (the "unbanked") from individuals that do not have a bank account and are not interested in having one (the "out of banking population"). While the unbanked mostly cite financial and past credit or banking history problems as reasons for not having a bank account, the out of banking population cites a growing mistrust toward the traditional banking system. The paper finds that the latter comprises over 70% of U.S. households without a bank account and concludes that to bank the unbanked (the other 30%) policy interventions should be aimed at encouraging financial institutions to offer more accessible and affordable services.

The Swiss City of Lugano issued its third digital bond on SDX, bringing Lugano's digital bond total to CHF 320 million. Aligned with SDX's objectives under Project Helvetia, this bond leverages a wholesale central bank digital currency (CBDC) for settlement. With dual listing on SDX and the SIX Swiss Exchange, this bond also ensures seamless access for investors across both digital and traditional trading channels.

"Most Europeans now juggle different cards, apps and devices depending on each payment situation, finding that the convenience of digital payments doesn’t always live up to the promise. In the euro area, we are stuck in a fragmented system, where digital payment solutions don’t cover all our needs. While you might easily use a card to pay contactless for a meal or a taxi ride in cities like Madrid or Paris, rural areas in Germany or Austria often only accept cash or local debit cards. Similarly, some mobile apps work well for sending money to family or friends but aren’t accepted for online purchases or by local businesses. In a nutshell, we still don’t have a digital payment solution that works effectively everywhere in the euro area in all payment situations." (ECB Executive Board Member Piero Cipollone)

The European Central Bank (ECB) has established a digital euro innovation platform to collaborate with stakeholders. The main goal is to (i) demonstrate how conditional payments could be implemented on a technical level, (ii) provide the opportunity for participants to interact with simulated digital euro interfaces, and (iii) explore additional use cases, ideas and visions that stakeholders may have for the digital euro. The ECB is encouraging all interested stakeholders to contribute, and it will carefully consider all applications before making selections in early January 2025. Selected “visionaries” will be invited to half-day workshops to present their idea to the ECB, and will be asked to provide a summarizing outcome report.

A Russian plan to break the grip of the U.S. dollar through a new international payments network met a cool reception at the BRICS summit in Kazan a few days ago. Despite all of the excitable talk of new reserve currencies and gold-backed BRICSbucks, the greenback’s position is actually strengthening because of an entirely different monetary innovation: dollar-backed stablecoins. (David Birch)

The National Bank of Kazakhstan (NBK) in collaboration with the State Revenue Committee (Tax Authority) of the Ministry of Finance has launched a Digital Tenge pilot project focused on value-added tax (VAT) reimbursement for exporters. This initiative leverages the programmability of central bank digital currency (CBDC) to automatically mark VAT in business-to-business (B2B) transactions. By doing so, the need for manual checks by tax authorities, is eliminated, significantly streamlining the reimbursement process. It reduced the reimbursement time from 70–75 working days to 10–15 days, with the goal of achieving instant reimbursement in the near future. In total, approximately 40 billion worth of Digital Tenge is now in circulation in the various pilot projects.

Singapore’s OCBC bank executed an intraday reverse repurchase (repo) transaction on JP Morgan’s Onyx Digital Assets platform, in which it lent money to JP Morgan, receiving tokenized securities in exchange. Less than four hours later, the transaction was unwound together with interest. JP Morgan said this was the first time an external counterparty had the ability to execute reverse repos. It’s usually JP Morgan that does the cash lending to clients, taking tokenized securities in exchange. So far it has ten clients using the repo platform, which has conducted a cumulative $1.5 trillion in transactions since its launch in 2020.

According to Bloomberg, the Bank for International Settlements (BIS) is debating whether to shut down its wholesale central bank digital currency (CBDC) based mBridge cross-border payment project. The platform initially was developed by the central banks of China, Thailand, Hong Kong and the United Arab Emirates under the BIS’s Innovation Hub, and recently reached the minimum viable product (MVP) stage. The U.S. Federal Reserve has not joined the project. During discussions among central bankers and finance chiefs at the October 2024 International Monetary Fund and World Bank Annual Meetings, concerns were reportedly expressed about the fact that China is supplying the platform’s key technological backbone.

According to Politico, a battle is brewing between the European Central Bank (ECB) and several European Union national governments over the holding limits that would be applied to a potential digital euro. Under the European Parliament's draft digital euro regulation, the ECB would decide on holding limits, consistent with a vision of the digital euro as an expression of European monetary sovereignty. However, at least nine countries, including Germany, France and the Netherlands, are reportedly concerned that allowing the ECB to set the limit would leave the institution with exclusive influence over a new tool that could have outsized effects on banking stability.

This paper introduces a subjective measure of cash accessibility in Canada, complementing existing distance-based metrics developed by Chen, O’Habib and Xiao (2023). Analyzing data from the 2023 Methods-of-Payment Survey, this study explores how Canadians perceive their ease of accessing cash from automated banking machines (ABMs) and financial institution branches. The results reveal strong alignment between subjective perceptions and distance-based metrics, with most Canadians reporting easy access to cash sources. Those who reported lower perceived cash accessibility need to travel longer distances and tend to be young, university-educated, low-income, unemployed or cashless.

The Bank of Canada (BOC) published a paper that explores the consumer value proposition of a hypothetical digital Canadian dollar. It employs a methodology that allows participants to interact with research prototypes of increasing complexity to reveal their preferences, constraints, and adoption influences. Qualitative insights are corroborated using quantitative, large-population surveys and contrasted with results from a Bank of Canada open online public survey. The results show that most participants would support the issuance of a digital dollar, but broad early adoption is unlikely given that available payment methods meet most user needs. Important considerations for appeal and adoption include universal merchant acceptance, low costs, easy access, simplified online payments, shared payment features, budgeting tools, and customizable security and privacy settings. Participants cited these features far more often than offline functionality and the ability to make anonymous payments. The results also show that certain groups may strongly resist a digital dollar if they conflate its launch with the end of cash issuance.

The Financial Stability Board (FSB) published a status report on progress made in taking forward the IMF-FSB crypto-asset policy implementation roadmap. Jurisdictions have made progress in implementing the policy and regulatory responses developed by the IMF, FSB, and standard-setting bodies (SSBs). Nearly all FSB member jurisdictions have plans in place to develop new or revise their existing regulatory frameworks for crypto-assets and stablecoins, or they already have those frameworks in place. However, inconsistent implementation of the FSB Framework may hinder its effectiveness and lead to regulatory arbitrage. Cross-border crypto-asset activities that originate from offshore jurisdictions present elevated regulatory and supervisory challenges for authorities.

Circle published a paper that introduces Token Capital Adequacy Framework (TCAF), a risk-based capital framework designed for stable value tokens, including stablecoins, deposit tokens, and tokenized cash. TCAF assesses the capital requirements by considering both financial and non-financial risks that issuers face. Notably, TCAF quantifies the capital needed to absorb losses stemming from technological, infrastructure, and operational risks, particularly in an environment marked by rapid innovation and limited historical loss data. We apply the framework to past stress events involving stablecoins and demonstrate that TCAF is a more effective prudential tool compared to fixed-ratio or single factor capital frameworks.

Bank of Thailand (BOT) staff published a paper that analyzes end-to-end transaction data from the central bank's seven-month 2023 retail CBDC pilot. The pilot's three financial service providers (FSPs) appeared to engage in asymmetric behavior between issuance and redemption of CBDC. They generally front-loaded CBDC to absorb uncertainty of future demand and pursued an adaptive strategy to adjust the level of their CBDC reserve balance following retail transaction observed to minimize the opportunity cost of holding unremunerated CBDC. Retail users tend to use CBDC as a means of payment but not as story of value, managing their CBDC holdings to meet the demand for making payments to minimize the opportunity cost of holding CBDC.

Medium published an English language summary by Norbert Gehrke of the October 17, 2024 meeting of the Bank of Japan's (BOJ's) CBDC Forum Plenary. There have been three such meetings, the last one being in January 2024. The BOJ is conducting proof-of-concept (PoC) experiments in stages to verify the technical feasibility of CBDC. Currently, the BOJ's experiments are focusing on performance, scalability, and privacy considerations. The system is designed to avoid handling personal information within the ledger management section, to ensure that user information and transaction details remain confidential.

Norges Bank Deputy Governor Pal Longva says that the central bank remains on track to finalize a recommendation in 2025 on whether it should introduce a central bank digital currency (CBDC). He said there’s “no urgency” to accelerate the decision-making process, which is looking at both retail and wholesale versions, with increasing weight being put on the latter. Longva’s remarks come less than a month before a November 15, 2024 deadline for a government task force to submit a report on ensuring safe and simple payments.