DFC

The Central Bank of Papua New Guinea (CBPNG) is working with Soramitsu on a central bank digital currency (CBDC) proof-of-concept (POC) aimed at building a common payment platform across the Pacific Island region. Also, some areas of Papua New Guinea are plagued by instability, violence, and frequent occurrences of robberies and muggings, so the POC will explore digital technologies that will allow recovery of funds after such incidents. The project is being funded by the Government of Japan's Ministry of Economy, Trade and Industry’s 2023 supplementary budget “Subsidy for Global South Future-Oriented Co-Creation Projects (Indirect Subsidy Project Related to the Survey on the Overseas Deployment of Infrastructure by Japanese Companies).”

The Bank of Israel (BOI) has chosen 14 teams from the private and public sectors, and academia to study potential use cases for a digital shekel. The use cases that were selected by the BOI deal with a variety of functions: connectivity between the digital shekel, other payment systems, and cash; use of the advanced functionalities offered by the digital shekel, such as subwallets, conditional payments, and split payments; and the implementation of various technologies while using the digital shekel as a means of payment. Participant proposals will be tested in a digital sandbox in August 2024, with products developed to be showcased at a concluding conference at the end of October 2024.

WorldPay published the 2024 edition of its Global Payment Report. It reports that the ubiquitous acceptance of digital wallets is enabling greater consumer choice and control in this era of payments innovation. According to the findings, digital wallets accounted for $13.9 trillion in global transaction value in 2023, representing half of all online and 30% of consumer spend at point-of-sale (POS). In markets where credit and debit cards already had strong consumer attachment, the data suggests consumers remain loyal to these cards, choosing to connect them to their digital wallets. Although cash usage continues to decline, cash accounted for 16% of global transaction value, including double-digit share in 30 of 40 markets in this report.

The Financial Stability Board (FSB) published a report that explores potential factors driving the higher level of activities related to foreign currency-pegged stablecoins in emerging market and developing economies (EMDEs), the associated financial stability risks and regulatory challenges, and provides considerations to address them. EMDEs may be exposed to macro-financial risks arising from the use of foreign currency pegged global stablecoins, which can increase financial stability risks by destabilizing financial flows and straining fiscal resources.

The World Bank published a technical paper on on its practical experiments on fast payments system (FPS) interoperability with central bank digital currency (CBDC) systems. The first experiment investigated the option of settling FPS obligations in a wholesale CBDC system, including the option to reserve funds to guarantee the settlement of FPS net obligations. The second experiment investigated the interoperability between users within the FPS and retail CBDC users, including the transfer of funds among both types of users, using common services such as address resolution services. This experiment illustrated how CBDC systems could interoperate with retail payment systems through an interlinking bridge that was used to route messages and application programming interface (API) calls among different systems. The programmability features of distributed ledger technology (DLT) were used to link the settlement in CBDC to the transfer of funds in the FPS.

Elliptic published its 2024 typologies report on the nexus between crypto-assets and financial crime. This year’s report is designed to equip compliance teams and law enforcement with the practical insights needed to continue to detect new financial crime risks with success. The report includes case studies and insights on the convergence of AI and crypto-assets and how it is impacting criminal activity, the increasing use of stablecoins in financial crime typologies including pig butchering scams and sanctions evasion activity, and major law enforcement and regulatory actions with additional case studies.

State Street is reportedly exploring creating its own stablecoin and deposit token. The bank is already an investor in Fnality, the interbank distributed ledger technology (DLT) synthetic wholesale central bank digital currency (CBDC) payment solution backed by 20 institutions.

Cumulative e-CNY transaction volumes reached RMB 6.6 trillion ($910 billion) through to May 2024 (7.3 times year-over-year growth).

The Bank of Canada (BOC) published a paper that argues that there is now and will continue to be a fundamental need for a relevant retail public money (cash or central bank digital currency (CBDC)) as part of a well-functioning monetary system in which public and private money coexist and complement each other while trading at par, allowing money to move back and forth safely and efficiently. The paper posits that increasing demand for digital payments and the declining use of cash could lead to a loss of the uniformity of money, adoption of alternative units of account and exclusion of some segments of the population. This could lead to frictions and potential abuse of market power by private money providers that could reduce the efficiency of the economy. Also, to perform its interlinking function, retail public money needs to be a viable payment option and a practical mechanism to transfer between private forms of money. The paper argues that a properly designed CBDC would help fill the gap and maintain the relevance of a retail public money in the economy.

The challenges faced by stablecoins are not entirely new – a deep dive into 334 historical currency pegs – when a country's central bank or government fixes the exchange rate for its currency – since 1800 reveals valuable lessons. Our analysis of this unique dataset covering more than 300 currency pegs since 1800 found that only 14% of currency pegs survived, with the median lifespan of failed or discontinued pegs ranging from 8-10 years. Among the remaining 51%, 30% were stopped, 6% joined the euro system and only 14% survived. Successful pegs were more often found in smaller, autocratic nations or oil-exporting economies with robust financial backing.

"This article discusses the rationale for the Eurosystem exploring central bank money settlement of transactions registered on DLT platforms, the results of its analysis so far and the envisaged next steps. Section 2 provides background on the role of central bank money in the settlement of wholesale financial transactions. Section 3 discusses market developments regarding the use of new technologies, such as DLT, for wholesale financial transactions. Section 4 discusses the implications of a potential market uptake of DLT for the Eurosystem’s wholesale central bank money settlement infrastructures. Section 5 outlines the Eurosystem’s plans to further explore how wholesale financial transactions recorded on DLT platforms could be settled in central bank money."

Sveriges Riksbank published a paper that analyses central bank digital currency (CBDC) electricity consumption compared to existing retail payment services. Findings indicate that the energy use per transaction of an e-krona is comparable to that of card payments. However, there are significant differences depending on whether the design of the infrastructure for the e-krona is centralized or decentralized, where a centralized solution tend to be less energy consuming than a decentralized solution. Algorand's proof-of-stake public-permissioned network was chosen to represent the decentralized platform, and Hedera's private-permissioned network the centralized platform, and the transactions volumes were assumed to be similar to that of cash-based transactions.

The Digital Euro Association (DEA) published a paper that dissects the Markets in Crypto-Assets Regulation (MiCAR) and its transformative impact on the stablecoin landscape. It explores the diverse regulatory approaches to stablecoins across major jurisdictions and how MiCAR might serve as a model for global regulation. The paper discusses the potential market opportunities MiCAR offers for stablecoin issuers, including enhanced consumer trust, clearer regulatory guidance, and increased access to the European market. Also, it covers the significant challenges stablecoin issuers face under MiCAR, from stringent compliance requirements to operational and technological strains, and how these hurdles might impact smaller issuers and market dynamics.

According to a paper by Leonidas Zelmanovitz and Bruno Meyerhof Salama, retail central bank digital currency (CBDC) can be considered a form of "monetary devolution," that shifts the power, at least in part, from commercial banks to central banks. They discuss the institutional incentives of digital currencies in general and monetary devolution in the United States in particular. Next they outline an alternative that incorporates the technological edge provided by CBDCs. This alternative would be the creation of wholesale CBDCs to serve as the monetary base for settling retail payments with stablecoins. Designed as such, CBDCs could preserve the current balance between private and public money.

The EU is saying if you want to use stablecoins to buy crypto and do DeFi stuff, have at it. But if you want to use stablecoins to pay for goods and services like your coffee or your rent, then you need to use Euro (or other EU currency) stablecoins. The limits are really about monetary sovereignty.

Paxos received full approval from the Monetary Authority of Singapore (MAS) for its Singapore entity to offer digital payment token services as a Major Payments Institution. The approval enables Paxos to issue stablecoins in line with MAS’s upcoming stablecoin framework. With the approval, Singapore becomes the third market, alongside the United States and United Arab Emirates, that Paxos and its related entities are authorized to issue stablecoins. Paxos has selected DBS Bank, Southeast Asia’s largest bank by assets, as its primary banking partner for cash management and custody of stablecoin reserves.

The Bahamas is reportedly preparing regulations that will require commercial banks to provide access to Sand Dollars in a bid to stimulate adoption. Governor John Rolle said with take-up of the central bank digital currency (CBDC) still limited, so commercial banks are being told of forthcoming regulations that will effectively force them to distribute it. Rolle said requiring commercial banks to embed the Sand Dollar in their systems should help usage but acknowledged the bigger problem was to get more merchants to accept it as a form of payment.