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Securing privacy in offline payments for retail CBDCs

This study focuses on the development of a CBDC protocol that ensures privacy and security for offline payments. Its foundation makes use of blind signature technology, a method that keeps a message's content secret from the signer and upholds the privacy of transaction Data. The zk-SNARK (Zero-knowledge Succint Non-interactive Argument of Knowledge) protocol, which assures that transactions are both private and verifiable without necessitating interaction between the prover and verifier, provides a complement to this. By leveraging blind signature technology and the zk-SNARK protocol, we explore how to overcome privacy-related challenges in retail CBDC while ensuring resilience against quantum attacks.

#Fintech #CBDC #Privacy #BlindSignatures #DFC

·fime.com·Dec 1, 2023

Securing privacy in offline payments for retail CBDCs

Interoperability aspects of CBDC across ecosystems and borders

The Journal of Payments Strategy & Systems published a paper by Gieseke+Devrient's Lars Hupel that describes the state of the art for interoperability between different digital ecosystems, including bridges, exchanges and wrappers. The precise design of such solutions is highly context-dependent and requires careful analysis of use cases, stakeholders, and operational concerns. With regards to central bank digital currency (CBDC) the challenges relate to the multiple connection points, and the absence of a single technological means to address all of them uniformly. The paper puts forward some suggestions around different CBDC design options and potential use cases, and discusses some case studies.

#Fintech #CBDC #Interoperability #DFC

·papers.ssrn.com·Dec 1, 2023

Interoperability aspects of CBDC across ecosystems and borders

CBDC information security and operational risks to central banks

The Bank for International Settlements (BIS) published a report that analyses the operating, technology, third-party and business continuity risks for the central banks that issue central bank digital currency (CBDC). It proposes an integrated risk-management framework that can be applied to the entire life cycle of a CBDC. For CBDCs to be a reliable means of payments, central banks need to address, among others, the risks of interruptions or disruptions and ensure integrity and confidentiality. Key risk are the potential gaps in central banks' internal capabilities and skills. While many of the CBDC-related activities could in principle be outsourced, doing so requires adequate capacity to select and supervise vendors.

#Fintech #CBDC #CyberSecurity #BIS #DFC

·bis.org·Nov 30, 2023

CBDC information security and operational risks to central banks

Retail CBDC implications for banking and financial stability

The U.S. Federal Reserve (Fed) published a review of the literature that examines the risks to the banking sector associated with retail CBDC introduction. These include the possibility of bank disintermediation and associated contraction in bank credit, as well as potential adverse effects on financial stability. The recycling of the new CBDC liability through asset purchases or lending by the central bank plays an important role in determining the economic consequences of the introduction of a CBDC. Ultimately, the effects of a CBDC depend critically on its design features, of which remuneration is the one discussed most often in the literature.

#Fintech #CBDC #DFC

·federalreserve.gov·Nov 29, 2023

Retail CBDC implications for banking and financial stability

Rwanda's CBDC development process still underway

The National Bank of Rwanda (NBR) reportedly has determined that a retail CBDC is needed in the country. However, the central bank is still in the early stages of its CBDC research, and it will take about two years before it would ready for launch.

#Fintech #CBDC #Rwanda #DFC

·allafrica.com·Nov 29, 2023

Rwanda's CBDC development process still underway

Central Bank of Solomon Islands to start CBDC proof of concept

The Central Bank of Solomon Islands (CBSI) started a retail CBDC ("Bokolo Cash") proof-of-concept (PoC) on November 1, 2023. The CBSI has been testing the Soramitsu-provided system for domestic and foreign payments, including simulated international remittances. Within the PoC, users will be able to seamlessly scan a QR code with their Bokolo Cash wallet to send instant cash payments to selected merchants or make peer-to-peer transfers.

#Fintech #CBDC #SolomonIslands #Soramitsu #DFC

·finextra.com·Nov 29, 2023

Central Bank of Solomon Islands to start CBDC proof of concept

Bank of Canada publishes report on digital dollar consultations

The Bank of Canada published a report on the feedback it has received to date about a potential digital Canadian dollar. It confirmed that Canadians place a high value on central bank-backed cash and want to maintain access to bank notes. Also, Canadians value their right to privacy and many expressed concerns that a digital dollar could compromise that right. In addition, they don't want a digital dollar that will add to financial stability risks. The Bank reconfirmed that likelihood of a digital loonie being needed is still uncertain, and the ultimate decision whether to go ahead with one depends on the Parliament.

#Fintech #CBDC #Canada #DFC

·bankofcanada.ca·Nov 29, 2023

Bank of Canada publishes report on digital dollar consultations

Whose liability is it anyways? CBDC Edition

Introducing a CBDC risks destabilizing the banking system and worsening panics. The Federal Reserve tried to lessen that risk by “including” banks in the process by proposing an intermediated CBDC. Yet, with an intermediated CBDC, banks would have to cover regulatory and overhead costs to maintain CBDC accounts even though they would have no loan revenue from those funds since the CBDC is still a liability of the central bank. Moreover, shrinking the supply of deposits would likely lead to costlier credit. That means loans will be more expensive for everyone.

#Fintech #CBDC #FinancialStability #Cato #DFC

·cato.org·Nov 28, 2023

Whose liability is it anyways? CBDC Edition

Four foreign banks join China's CBDC pilot trials

Four foreign banks have reportedly integrated China's digital yuan (e-CNY) into their payment platforms (Standard Chartered, Hong Kong-based HSBC and Hang Seng Bank, and Taiwan's Fubon Bank). All four will allow their clients to transfer and withdraw e-CNY. For example, Hang Seng Bank and HSBC allow personal banking customers to bind debit cards within the official e-CNY app and redeem digital renminbi. They can also top up the digital renminbi wallet through the Hang Seng China Mobile Banking App.

#Fintech #CBDC #China #DFC

·cointelegraph.com·Nov 28, 2023

Four foreign banks join China's CBDC pilot trials

Thai government to distribute "time-stamped" digital money

The Thai Prime Minister reportedly announced a 10,000 baht handout of "time stamped" blockchain-based digital money to the 50 million Thais earning less than 70,000 baht per month. It is time stamped in that recipients must begin spending the money within six months on food, nonalcoholic beverages and consumer products bought in stores, and only within their electoral districts.

#Fintech #CBDC #GovCoins #SmartContracts #Programmability #Gesell #Thailand #DFC

·asia.nikkei.com·Nov 28, 2023

Thai government to distribute "time-stamped" digital money

India liaises with US, Hong Kong, Swift for cross border CBDC

The Reserve Bank of India (RBI) is reportedly in discussions with the U.S. Federal Reserve, the Hong Kong Monetary Authority (HKMA) and Swift regarding the potential to use a central bank digital currency (CBDC) for cross border payments. RBI Governor Shaktikanta Das has said the central bank is "even more convinced that CBDC can be the most effective and efficient mode for cross border payments."

#Fintech #CBDC #CrossBorder #India #HongKong #SWIFT #UnitedStates #DFC

·ledgerinsights.com·Nov 28, 2023

India liaises with US, Hong Kong, Swift for cross border CBDC

Freedom House Report

"Freedom House rates people’s access to political rights and civil liberties in 210 countries and territories through its annual Freedom in the World report. Individual freedoms—ranging from the right to vote to freedom of expression and equality before the law—can be affected by state or nonstate actors."

#Fintech #CBDC #Privacy #Democracy #Freedom #DFC

·freedomhouse.org·Nov 27, 2023

Freedom House Report

A digital euro: gauging the financial stability implications

"The envisaged design of a digital euro would address financial stability concerns by applying adequate holding limits. The cap on individual holdings would set an upper bound for the amount of digital euro in circulation and prevent the materialisation of high deposit outflows. Recent studies show that setting a digital euro holding limit of €3,000 per person would be effective in containing the impact on banks’ liquidity risks and funding structures. With such a limit in place, outflows of household overnight deposits from the euro area banking sector could only occur (up to a maximum of 15%) in the following highly unlikely circumstances: (i) if all euro area citizens adopted the digital euro simultaneously, and (ii) they all shifted bank deposits to the digital euro at the upper bound of the holding limit instantaneously and then held these on a continuous basis. However, the actual level of the individual holding limit would be calibrated closer to the possible introduction of a digital euro to reflect the economic conditions prevailing at that time."

#Fintech #CBDC #Eurozone #ECB #DFC

·ecb.europa.eu·Nov 27, 2023

A digital euro: gauging the financial stability implications

Canton of Zurich issues digital bond settled with wholesale CBDC

The Canton of Zurich issued a CHF 100 million digital bond via the SIX Digital Exchange (SDX) that will settle on December 1, 2023 using a wholesale central bank digital currency (CBDC) issued by the Swiss National Bank (SNB), marking the launch of the SNB's Project Helvetia pilot. The pilot will run to June 2024, and according to the SNB "does not constitute a commitment on its part to introduce wholesale CBDC on a permanent basis. Rather, the SNB aims to test the various models for settling tokenized assets". https://www.snb.ch/en/publications/communication/press-releases/2023/pre_20231102

#Fintech #CBDC #wCBDC #Switzerland #Tokenization #Settlement #Blockchain #DFC

·ledgerinsights.com·Nov 26, 2023

Canton of Zurich issues digital bond settled with wholesale CBDC

Currency Network | CBDC Ecosystem Solution

"We have built the most advanced CBDC ecosystem solution based on the concept of Chaum and Moser's eCash 2.0 that holds the promise of cash-like privacy. With our solution, Central Banks will be able to launch a sovereign digital currency that compliments hard-cash and supplements Commercial Bank money, helping them to maintain monetary and fiscal stability with greater control over the economy."

#Fintech #CBDC #Vendor #DFC

·currencynet.io·Nov 25, 2023

Currency Network | CBDC Ecosystem Solution

Kazakhstan central bank pilots digital tenge smart contracts

Binur Zhalenov, CEO of the National Bank of Kazakhstan National Payments Corporation, has described a pilot that uses digital tenge smart contracts to optimize government subsidies, in this case involving school canteen subsidies. Each school student in Almaty has an "ONAY!" transportation card. When a student uses this card in the school canteen, a smart contract is triggered that transfers digital tenge from the school's account directly to the canteen operator's account, but only when the student actually receives the service. This significantly cuts down on unnecessary reporting, canteens receive funds instantly after providing services, and ensures clear visibility of government fund usage.

#Fintech #CBDC #Kazakhstan #SmartContracts #DFC

·linkedin.com·Nov 24, 2023

Kazakhstan central bank pilots digital tenge smart contracts

China Debuts Solar Power Digital Yuan Smart Contracts

State Grid Suzhou Power Supply Company reportedly completed the first digital yuan smart contract transaction in the solar power industry. The deal was struck the CBDC with the materials and textiles firm Suzhou Shicheng Material Technology that had struck a smart contract loan-type financing deal with a local bank branch. After Suzhou Shicheng Material Technology used electricity over an agreed period, State Grid Suzhou Power Supply issued a bill, causing the contract to close, and Suzhou Shicheng Material Technology's digital yuan wallet was automatically debited after the issuance of the bill.

#Fintech #CBDC #China #SmartContracts #DFC

·cryptonews.com·Nov 24, 2023

China Debuts Solar Power Digital Yuan Smart Contracts

Korea shares plans for tokenized deposit, wholesale CBDC trials

The Bank of Korea (BOK) will launch two wholesale central bank digital currency (CBDC) tests. The first will be a pilot in which banks will issue tokenized deposits as programmable vouchers, and settle them between each other using wholesale CBDC. This tokenized deposit pilot will involve up to 100,000 people starting in September or October 2024. The second test will be a proof-of-concept that will involve banks using wholesale CBDC to settle carbon credit transactions on the Korea Exchange. https://www.koreatimes.co.kr/www/nation/2023/11/602_363810.html https://www.bok.or.kr/eng/bbs/B0000359/view.do?nttId=10080772&menuNo=400415

#Fintech #CBDC #wCBDC #Korea #Tokenization #DepositTokens #DFC

·ledgerinsights.com·Nov 23, 2023

Korea shares plans for tokenized deposit, wholesale CBDC trials

Digital renminbi: zero merchant fees negatively impacting CBDC adoption?

An article in China's Sina news service claims that eCNY uptake may be lagging because of a lack of merchant point-of-sale (POS) terminals that can process eCNY transactions. It's not because of transaction fees, because they are zero on eCNY transactions, and not for a lack of equipment, because existing POS terminals can be adapted to process eCNY transactions. The problem is supposedly that the POS equipment manufacturers get a cut of the transaction fees, so there's no incentive for them to adapt existing POS equipment. However, the People’s Bank of China (PBOC) reportedly said that it actively offers free upgrades to POS equipment or free equipment. https://finance.sina.cn/stock/yjdt/2023-11-20/detail-imzvffna9789519.d.html

#Fintech #CBDC #China #DFC

·ledgerinsights.com·Nov 22, 2023

Digital renminbi: zero merchant fees negatively impacting CBDC adoption?

Circle launches ‘bridged USDC standard’ for deploying to new networks

Circle has introduced a new standard to streamline the process of launching its USDC stablecoin. The new “bridged USDC standard” allows developers to launch the token through a two-phase process. In the first phase, the third-party developer has control of the token contracts, and the token on the new network is backed by a native version on another network. In the second phase, Circle takes control of the contracts, and the token becomes backed directly by Circle’s reserves. The second phase may not occur with all deployments. https://www.circle.com/blog/bridged-usdc-standard

#Fintech #CryptoAssets #Stablecoins #Circle #USDC #DFC

·cointelegraph.com·Nov 22, 2023

Circle launches ‘bridged USDC standard’ for deploying to new networks

Trust in government OECD data

I've looked for cross-country comparisons of residents' trust in government, and so far this OECD metric is the best I've found, and the range is quite significant from Switzerland at the very trusting end (84% responding "yes" to the question of confidence in the government) to 31% from Americans, which could explain their tendency to be anti-CBDC.

#Fintech #CBDC #Privacy #Trust #OECD #Dystopia #DFC

·data.oecd.org·Nov 20, 2023

Trust in government OECD data

CBDCs will further fragment the global economy—and could threaten the dollar

The Atlantic Council published an article that argues that if the U.S. Federal Reserve doesn't initiate a digital dollar strategy domestically there is a significant risk that the United States will be missing in action regarding cross-border payments interoperability. "Driving digital dollar policy through a tokenized banking system and bank-issued stablecoins will do little to address the frictions and costs discussed [in the article]. Markets and central bank reserve policies could easily shift to least-cost alternatives, leaving the Fed with oversight of a smaller universe of economic activity. Actively and publicly exploring CBDC architecture and policy options will at least ensure that U.S. priorities are part of the global conversation - if you are not at the table, you are on the menu!”

#Fintech #CBDC #UnitedStates #DFC

·atlanticcouncil.org·Nov 20, 2023

CBDCs will further fragment the global economy—and could threaten the dollar

Central Bank Digital Currency—Initial Considerations

The IMF published a summary of the first five chapters of its forthcoming central bank digital currency (CBDC) handbook. These cover a framework to guide countries’ CBDC exploration, as well as implications for monetary policy transmission, capital flow management measures, and financial inclusion.

#Fintech #CBDC #IMF #DFC

·imf.org·Nov 20, 2023

Central Bank Digital Currency—Initial Considerations

Exploring the potential of central bank digital currency

"This study delves into the benefits and risks of central bank digital currency (CBDC) and examines social adaptation, and education using expert interviews and conference insights. Vital findings stress the need for targeted educational efforts to facilitate CBDC adoption. The research also emphasizes best practices, engaging external experts, and a phased introduction strategy for safe and efficient implementation. Highlighting key stages, it underscores addressing genuine market needs for successful CBDC introduction. Overall, prudent risk management, strategic education, and well-planned phased deployment are crucial for successful CBDC implementation."

#Fintech #CBDC #DFC

·sciencedirect.com·Nov 20, 2023

Exploring the potential of central bank digital currency

On par: A Money View of stablecoins

"This paper presents a money view analysis of the recent crypto innovation of stablecoins, which have seen a remarkable rise and more recently some spectacular collapses. By analogizing on-chain with offshore, and developing an extended analogy of stablecoins with Eurodollars, we reveal the primitive character of the existing on-chain liquidity mechanism which supports the promise of par settlement by existing on-chain stablecoin models. Liquidity, not solvency, is the issue confronted by par settlement."

#Fintech #CryptoAssets #Stablecoins #BIS #DFC

·bis.org·Nov 20, 2023

On par: A Money View of stablecoins

CBDCs: A Lesson in the Power to Disobey

R3's Jack Fletcher does a nice dismantling of the dystopian case against central bank digital currency (CBDC). First he points out that there are technical solutions to privacy available through distributed ledger technology (DLT) infrastructure that far surpass anything that is available in existing digital solutions, so a CBDC could be as private as cash. Secondly, in a world of payment options, why would anyone use a surveillance CBDC when they could simply use Visa or Mastercard or cash instead? And access to cash is something that no government or central bank is keen to remove. Indeed, they must now step in as consumer preferences drive it to redundancy. But with cash use declining as a global trend, Jack does acknowledge that society must consider a future world whereby it no longer exists and our privacy and our freedom to disobey is removed with it.

#Fintech #CBDC #Dystopia #DFC

·tabbforum.com·Nov 19, 2023

CBDCs: A Lesson in the Power to Disobey

CBDC and Bank Disintermediation in a Portfolio Choice Model

The IMF published a paper that develops a model to determine the conditions in which the introduction of an interest-bearing CBDC would lead to lower deposits and lending in the banking sector. It finds that richer households increase their holdings of deposits as banks increase deposit interest rates in reaction to the CBDC introduction, which is offset by poorer households switching from deposits to the CBDC. Total deposits are more likely to fall when the mass of poorer households is large and when it is relatively costly to access bank accounts, which tends to be the case in emerging market and developing economy countries. However, even then the impact on lending is quantitatively small if banks have access to other forms of funding, such as wholesale or central bank financing.

#Fintech #CBDC #FinancialStability #DFC

·imf.org·Nov 18, 2023

CBDC and Bank Disintermediation in a Portfolio Choice Model

Meeting the need for higher CBDC privacy

The current draft of the digital euro legislation calls for increased privacy for close-proximity offline payments, which is seen as consistent with the European Union AML/CFT framework risk-based approach. The European Data Protection Board (EDPB) and European Data Protection Supervisor (EDPS) suggest increased privacy for low-value online payments too, but not as private as offline transactions, because online transactions would not be limited to proximity payments, resulting in a potentially attractive model for criminals. Hence, they recommend transaction size limits above which complete checks can occur that are lower for online than offline transactions. However, Atakan Kavuklu suggests equalizing the limits at the higher level for all low-value proximity payments (e.g., those using NFC and Bluetooth connections). He believes this could benefit the acceptance and success of a digital euro.

#Fintech #CBDC #Privacy #DFC

·linkedin.com·Nov 18, 2023

Meeting the need for higher CBDC privacy

CBDC and Privacy: A Randomized Survey Experiment

A Bank for International Settlements (BIS) study found privacy-preserving variations of central bank digital currency (CBDC) design have significant effects on willingness to use CBDC to purchase privacy-sensitive products (e.g., psychiatric services and adult products). It was based on a survey of a nationally representative sample of over 3,500 Korean participants. The willingness to use CBDC substantially increases with the provision of information about the privacy benefits of using it. Finally, these effects vary with respondents' trust in public or private institutions with regard to privacy protection and their demographic characteristics.

#Fintech #CBDC #Privacy #Korea #DFC

·bis.org·Nov 18, 2023

CBDC and Privacy: A Randomized Survey Experiment

How Far Do Canadians Need to Travel to Access Cash?

"This paper develops a travel-based metric to measure Canadians’ access to cash from automated banking machines (ABMs) and financial institution branches. Our findings indicate that the average distance Canadians need to travel to reach the nearest ABM is 2.0 km, while the average distance to the nearest branch is 4.5 km. Moreover, more than 90% of Canadians live within 5 km of an ABM, and 84% live within 5 km of a branch. The total number of ABMs in Canada increased by 3.7% between 2019 and 2022, and our results show that, overall, access to cash remained stable in that period. However, the total number of branches decreased by 5.2%. The decline in branch coverage is concentrated in rural areas at 7.2%. This may increase the challenge of accessing cash in these regions. Rural Canadians already have less access to cash: they need to drive an average distance of 4.0 km to the nearest ABM and 9.6 km to the nearest branch, each distance twice the national average."

#Fintech #Cash #Canada #ATMs #DFC

·bankofcanada.ca·Nov 17, 2023

How Far Do Canadians Need to Travel to Access Cash?