"Secretarium's Secure-Enclave Distributed Ledger Technology is powered by a Proof-of-Processor consensus mechanism built upon Trusted Execution Environment (TEE) capabilities. This mechanism ensures instant finality and processes orders of magnitude quicker than other consensus mechanisms, while always protecting the confidentiality and integrity of data in memory."
The IMF published a paper that considers stablecoin tax treatment and associated challenges, and the challenges of achieving neutrality. Without greater tax certainty and tax neutrality than what is currently available, stablecoins will not be able to properly fulfill their promise as an alternative means of payment. Gaps and mismatches in tax treatment between tax jurisdictions may create distortions and opportunities for abuse.
The Potential of CBDC for Transforming Public Finance: A Focus on VAT Systems
The Japan Ministry of Finance's Michi Kakebayashi distributed a paper that explores the potential benefits of retail central bank digital currency (CBDC) for value added tax (VAT) systems. These benefits include streamlining and automating transaction, record-keeping, filing, tax payment, refund processes, and auditing reducing compliance and administration costs. While e-invoicing and e-payment may also achieve similar outcomes, the success of such alternatives would depend heavily on the financial institutions. The paper concludes that CBDC can address challenges faced by the VAT system while preserving simplicity, fairness, and effectiveness.
Circle Takes Euro Coin Multi-Chain with Launch on Avalanche
Circle launched its Euro Coin on Avalanche, the first in a series of expected multi-chain launches, following the initial launch on Ethereum last year (2022). Circle currently maintains two fiat-based stablecoins, USD Coin (with a market capitalization of about $29 billion), and Euro Coin ($48 million).
Central bank digital currencies: ongoing policy perspectives
In a follow-up to their October 2020 paper, the Bank for International Settlements (BIS) and seven advanced economy central banks have published a new paper that shares perspectives on how central banks can best engage industry and the public, what are the key legal issues related to retail CBDC, what tools may be needed to manage stressed conditions, and what could be the implications of using blockchain technology and associated concepts in CBDC. It also suggests that central banks consider cross-border payments use cases for wholesale CBDC.
Russia's digital ruble pilot, originally scheduled to commence on April 1, 2023, has reportedly experienced delays due to legislative processes. The latest legislative amendments indicate a significant focus on enabling non-resident access. Other legal changes raise questions about data encryption and enforcement actions. The legal approval for the central bank digital currency (CBDC) is now anticipated by the end of July.
BC publishes list of selected to participate in the Real Digital Pilot
Banco Central do Brasil (BCB) selected 14 financial institutions to test digital real privacy and programmability functionalities through the implementation of a delivery versus payment (DvP) protocol for tokenized federal government bonds between customers from different institutions, in addition to the services that make up this transaction. The BCB received 36 proposals of interest from more than 100 institutions. The testing will involve no real transactions (so it isn't the pilot that the BCB claims it to be).
KAIME : Central Bank Digital Currency with Realistic and Modular Privacy
"In this study, while we offer a solution to the privacy conflict between the user and the regulatory agencies, we also provide a solution to the privacy conflict between the user and the banks. Our solution, KAIME has also a modular structure. The privacy of the sender and receiver can be hidden if desired. Compared to previous related research, security analysis and implementation of KAIME is substantially simpler because simple and well-known cryptographic methods are used."
US : Consumer Payment Behaviour Consistent with Early Pandemic
The U.S. Federal Reserve's 2023 Findings from the Diary of Consumer Payment Choice show that cash payments declined to 18% of all payments in 2022 from 20% in 2021 (and 30% in 2016). During the same time frame, the credit cards share increased to 31% from 28% (31%). Debit cards have remained roughly stable (29% in 2022). The mobile payments share was less than 1%. Average store-of-value cash holdings of $418 in 2022 were little changed from 2021, but up significantly from the 2016 average of $173. https://www.frbsf.org/cash/publications/fed-notes/2023/may/2023-findings-from-the-diary-of-consumer-payment-choice/
OFS and AUGENTIC GmbH reveal the design of the offline "Smart Banknote CBDC"
"Orell Füssli Ltd. Security Printing and AUGENTIC GmbH announced their partnership on a “Smart Banknote CBDC” solution including trustwise.io´s Distributed Ledger Technology (DLT) a week ago. A smart banknote is a physical banknote that interacts with a CBDC solution and acts as a transitional device between traditional and CBDC based payment systems. A smart banknote can be used like a classic banknote; however, the owner can redeem his cold wallet (physical banknote) and transfer the note’s value to a digital wallet by scanning the QR code with the private key. Our smart banknote includes a public and a private key represented by QR codes of which the private one is sealed. When the cover of the private key is removed, the QR code scanned, the value of the banknote can be transferred to a digital wallet. Conceptually after this procedure, the smart banknote cannot be transferred anymore."
One Way to Prevent an SVB-Style Collapse? Fed Bank Accounts
"The Fed has raised several concerns about narrow banks. The main one is that in times of stress they’d be too attractive as a haven. Money could pour out of Treasury bills, high-quality bonds or even accounts at conventional banks, amplifying risks to the broader financial system. Narrow banks could also make it harder for the central bank to manage short-term interest rates. And because conventional banks could end up holding few deposits, they might do less lending, making loans more expensive and credit harder to get."
"Whatever the reason for the Fed’s reluctance to permit TNB to get off the ground, it is sad to see financial policy makers turn down such an obvious boon to financial stability and efficiency, and slow walk it to regulatory death, despite what appear to be clear legal rights of TNB to serve its customers and the economy."
Jamaica's Ministry of Industry, Investment, and Commerce has confirmed the development of a digital marketplace for merchants and residents to interact using the country's central bank digital currency (CBDC). Its aim is to provide a platform for underserved merchants, who do not have access to processing debit and credit transactions, to exclusively use Jam-Dex as a means of exchange. The digital marketplace will also facilitate merchants advertising their products. Onboarding merchants has already started and the platform should be operational by the beginning of summer (2023).
Intelligent design: stablecoins (in)stability and collateral during market turbulence
"How does stablecoin design affect market behavior during turbulent periods? Stablecoins attempt to maintain a “stable” peg to the US dollar, but do so with widely varying structural designs. The spectacular collapse of the TerraUSD (UST) stablecoin and the linked Terra (LUNA) token in May 2022 precipitated a series of reactions across major stablecoins, with some experiencing a fall in value and others gaining value. Using a Baba, Engle, Kraft and Kroner (1990) (BEKK) model, we examine the reaction to this exogenous shock and find significant contagion effects from the UST collapse, likely partially due to herding behavior among traders. We test the varying reactions among stablecoins and find that stablecoin design differences affect the direction, magnitude, and duration of the response to shocks. We discuss the implications for stablecoin developers, exchanges, traders, and regulators."
Adoption of CBDCs can be fostered through multiple approaches. While the strategy may differ, two fundamental components should remain as the foundational pillars of CBDC launch: trust and transparency. The adoption of CBDC will rely on central banks’ ability to address privacy concerns effectively and ensure individual’s rights are protected. The issue of privacy surrounding CBDCs is closely tied to the public's trust in public institutions, which is why commercial banks could play a crucial role. As trusted partners of the public, commercial banks can help promote CBDC adoption by offering assurance regarding the safety and security of CBDC holding. Not limited to trusted partners, commercial banks will also have an active role in CBDC adoption. Finally, it is essential to consider both end-user and merchant perspectives when evaluating CBDC adoption. Merchant and public adoption are two sides of a coin, being interconnected and interdependent.
Samsung explores offline CBDC that works with Galaxy phones
"Samsung said it has signed a memorandum of understanding with South Korea’s central bank to conduct technical research on a central bank digital currency. Payments could be made between devices through the use of near-field communication technology, which is built into smartphones to enable contactless payments, Samsung said."
Ripple improves the capabilities of its CBDC platform
Ripple has enhanced its CBDC Platform launched in March 2022, that is based on the private ledger private version of the public, open-source XRP Ledger. The enhancements enable issuers to manage the full life cycle of their fiat based digital currency, from minting and distribution to redemption and destruction, taking advantage of the XRP Ledger’s built-in multi-signing capabilities. It's billed as a "full stack" platform in that it manages the full CBDC lifecycle, including the provision of end-user wallets. https://www.businesswire.com/news/home/20230518005115/en/Ripple-Launches-CBDC-Platform-for-the-Development-of-CBDCs-and-Stablecoins
NY Fed, MAS Verify CBDC Use for Cross-Border Payments
According to a report published by New York Federal Reserve (NY Fed) and Monetary Authority of Singapore (MAS), wholesale central bank digital currency (CBDC) systems operating on different types of networks can be used for cross-border and cross-currency payments. The study, which used simulated CBDCs and hypothetical payments, found that cross-border transactions could be conducted across different distributed ledger (DLT) and hashed timelock contract (HTLC) technology stacks, with near real-time settlement finality.
Hong Kong Monetary Authority - Commencement of the e-HKD Pilot Programme
The Hong Kong Monetary Authority (HKMA) today announced the commencement of the e-HKD central bank digital currency (CBDC) pilot programme. A total of 16 firms from the financial, payment and technology sectors have been selected to participate in the first round of pilots. The pilots will take deep dives into potential use cases in six categories, including full-fledged payments, programmable payments, offline payments, tokenised deposits, settlement of Web3 transactions and settlement of tokenised assets. https://www.hkma.gov.hk/media/eng/doc/key-information/press-release/2023/20230518e4a1.pdf
The European Parliament published a study that assesses the European Central Bank's (ECB's) first three progress reports on the digital euro from a legal perspective. It looks into what key design choices proposed by the ECB reveal in terms of the legal qualification of the digital euro and discusses legal aspects of the infrastructure supporting it. Overall, the objective of ensuring a strong monetary anchor in the financial system should take centre stage. A simple and cash-like design of the digital euro would not only aid that objective, but also reduce legal risk.
Ripple to demonstrate tokenization in HKMA e-HKD pilot program using new CBDC platform
Ripple will reportedly participate in the Hong Kong Monetary Authority’s (HKMA’s) digital Hong Kong dollar (e-HKD) central bank digital currency (CBDC) pilot program by showcasing a real estate asset tokenization solution. Ripple will partner with Taiwan’s Fubon Bank and others to demonstrate equity release with tokenized assets using a retail version of the e-HKD CBDC. The pilot project will run on the new Ripple CBDC Platform, that uses a new private ledger with XRP Ledger technology and enhanced functionality, including offline transactions and non-smartphone use. It's the same platform that may be piloted in Bhutan, Montenegro and Palau.
Perfinal and IDEMIA’s Partnership to Enable Secure and Reliable Offline Transactions
"Perfinal has partnered with leading payment solution provider IDEMIA, a global leader in offline CBDC wallet solutions, to offer joint solutions for central banks to launch and distribute CBDCs. This partnership represents an exciting step forward in the development of CBDCs, aligning with the European Central Bank’s guidelines for greater privacy and financial inclusion through offline transactions. The technical capabilities required for offline CBDCs demand a flexible account management system, and Perfinal’s partnership with IDEMIA’s offline wallet solution provides an optimal solution to these technical challenges. " https://perfinal.com
The MNB Student Safe mobile application has been renewed
The Magyar Nemzeti Bank (MNB) and the Money Compass Foundation launched a new version of the Student Safe mobile app, to increase financial literacy and strengthen digital financial inclusion among 8 to 14 year-olds. The new app, operated by the MNB and involving commercial banks, is now able to handle real money in the form of an MNB-issued central bank digital currency (CBDC). By successfully completing quizzes children can collect "tallérs" that can be redeemed for webshop (eMAG) vouchers. In addition, the new app allows users to transfer funds to bank accounts, and make QR-code payments. Parents can also send their children forints or student tallérs. https://penziranytu.huhttps://perfinal.com
"This IMF paper reflects on the first year of the eNaira—the first CBDC in Africa. Despite the laudable undisrupted operation for the first full year, the CBDC project has not yet moved beyond the initial wave of limited adoption. Network effects suggest the initial low adoption spell will require a coordinated policy drive to break it. The eNaira’s potential in financial inclusion requires a strategy to set the right relationship with mobile money, given the former’s potential to either complement or substitute the latter. Cost savings from integrating CBDC—as a bridge vehicle—in the remittance process may also be substantial."
A Financial Times (FT) article documented rising public opposition to a digital euro, as the European Central Bank (ECB) struggles to communicate convincing arguments for the central bank digital currency (CBDC) project. The ECB says a digital euro would modernize European payments by giving people an electronic alternative to cash that is riskless and universally accepted. However, detractors don’t see any big market failures that require the public sector to step in, and given that the eurozone’s payment options are already reliable and innovative. There has also been CBDC pushback in other jurisdictions, most notably in the United States, where it has become a political hot potato on account of potential threats to privacy and self control.
G-7 Finance Ministers Show Support for FSB, IMF Crypto Norms
The Group of Seven (G-7) has signaled its commitment to implementing the forthcoming Financial Stability Board (FSB) crypto-asset regulatory norms and IMF central bank digital currency (CBDC) recommendations. The FSB is expected to finalize its high-level crypto-asset recommendations by July 2023. The first installments of the IMF “Retail CBDC Handbook”, to be produced in close cooperation with and drawing from the inputs of experts and stakeholders including other international organizations, standard setters and national authorities, will be published by the October 2023 IMF/World Bank Annual Meetings. https://www.consilium.europa.eu/media/64307/g7-communique-20230513.pdf
CBDCs: Pros and Cons - A Comprehensive List and Discussion
"Central bank digital currencies (CBDCs) have the potential to fundamentally alter the current monetary system. Potentially they could bring about a whole range of advantages compared to the status quo, yet they could also introduce a host of disadvantages. This text provides a comprehensive list of the pros and cons of CBDC along with a description of every single positive or negative outcome. Finally, it weighs the benefits and drawbacks of this new form of legal tender against each other. "
CBDC and business cycle dynamics in a New Monetarist New Keynesian model
The European Central Bank (ECB) published a paper on the impact of an interest-bearing central bank digital currency (CBDC) on the economy. It integrates a New Monetarist-type decentralized market that accounts for the means-of-exchange function of bank deposits and CBDC into a New Keynesian model with financial frictions. It concludes that the introduction of an interest-bearing CBDC does not impair monetary policy transmission. Also it stabilizes the liquidity premium, thereby affecting bank funding conditions and the opportunity costs of money, which dampens and smooths the reaction of investment and consumption to macroeconomic shocks.
