DFC

Tether once backed its USDT stablecoin with commercial paper issued by Chinese firms, according to documents released by New York’s Attorney General (NYAG). However, Tether says that all of those securities were rated A2 or better, for what that's worth. The NYAG released the documents in response to a freedom of information request from Bloomberg News, following an earlier unsuccessful request by CoinDesk. [The whole Bloomberg article is worth a read, as it details a number of other questionable USDT reserves management practices.]

Ripple is partnering with Colombia's central bank to explore blockchain technology use cases. Banco de la República, in conjunction with The Ministry of Information and Communications Technologies (MinTIC) will pilot use cases that will enhance Colombia’s high-value payment system using the Ripple CBDC Platform, powered by the XRP Ledger (XRPL). The pilot will be run with Spain-based blockchain technology firm Peersyst Technology.

"IDEMIA is working alongside the Bank of England to explore new approaches to assured identity, privacy, and offline payments in the design of central bank digital currencies."

Opposition to centralized control of money is deep-seated in American political history — dating back to fights over central banking that split the country’s founders — and one that can confound observers. John Kiff, who worked for 25 years at the Bank of Canada, and now publishes a newsletter tracking global CBDC development, described the U.S. political firestorm as “a bunch of bozos trading bullshit.”

In April 2022, twenty-three Dutch organisations, including major Dutch banks, signed a Cash Covenant, seeking to ensure that cash continues to function as a payment instrument in the face of a steady increase in electronic payments. The Ministry of Finance and De Nederlandsche Bank (DNB) then commissioned a study on the future system for banknote and coin deposits and withdrawals for consumers and retailers. The Finance Minister has now presented the results of the study to Parliament, concluding that legal intervention is needed to ensure that cash remains usable, available, accessible and affordable for users.

"Many types of so-called stablecoins have tried to meet the market’s demands for digital money, only to go wobbly. Instead, the future of online payments lies in commercial bank deposit tokens, which can and should be issued within the current two-tiered monetary system and work in tandem with central bank digital currencies."

"In the euro area, consumers have multiple payment options and a very efficient retail payments system. The currency enjoys high levels of trust and is not challenged by the emergence of private currencies, such as Bitcoin, or by the risk that cash, a monetary system’s anchor, will disappear. Therefore, creating a CBDC for retail purposes in the euro area offers little obvious value added, at least for the foreseeable future. However, there is a strong case for building a CBDC that banks could use for cross-border wholesale purposes (ie with other currencies). "

"Governments should consider an international moratorium on the development of central bank digital currencies (CBDCs) due to the financial stability risk they could pose for small jurisdictions, the former director of research at the Federal Reserve Bank of New York, Stephen Cecchetti, told central bankers in Finland on Thursday."

The IMF published a paper that synthesizes four lessons from the experiences of six Asian e-money schemes (Alipay and WeChat Pay in China; Paytm in India; and GoPay, GrabPay, and ShopeePay in Southeast Asia) for central banks as they consider CBDC issuance: CBDC should embody trust, convenience, efficiency, and security; CBDC service providers can facilitate adoption by leveraging digital technology, targeting use cases, developing business models, and complying with legal and regulatory requirements; central banks could incentivize CBDC service providers to develop these four channels when considering CBDC adoption; and central banks may be able to establish data-sharing arrangements that preserve privacy while leaving room for CBDC service providers to explore the economic value of data.

The European Central Bank (ECB) published an update on the work of its digital euro scheme Rulebook Development Group (RDG) including progress with drafting based on the design choices endorsed by the ECB's Governing Council, and the group's next steps. The ultimate goal of the Group’s work is to define the roles and contributions of the different actors so that the desired digital euro functionalities and user experience can be coherently created by those different actors, while allowing for innovation and competition.

The Bank of Canada published a paper that proposes a pseudonymous credential scheme for use in payment systems to protect users from fraud and abuse while retaining privacy in individual transactions. The scheme is privacy-preserving, efficient for practical applications, and hardened against quantum computing attacks. A practical and interactive credential mechanism was constructed, in which users are issued pseudonymous credentials against their personally identifiable information that can be used to register with financial service providers without revealing personal information. The protocol is shown to be secure and free of information leakage, preserving the user’s privacy regardless of the number of registrations. Comparison reveals that the scheme is more efficient than equivalent, state-of-the-art post-quantum schemes.

Eastern Caribbean Central Bank (ECCB) Governor Timothy Antoine reportedly says he is pleased with the performance of its DCash central bank digital currency (CBDC) pilot aimed at improving financial inclusion and modernizing payment systems. He said that partnerships with licensed financial institutions and regional businesses and organizations have enabled DCash to expand its reach, enhance platform features, and ensure regional impact.

The Leibniz Institute for Financial Research SAFE published a paper that weighs the pros and cons of a possible digital euro. It concludes that, if the decision on adoption had to be taken today, the arguments against would outweigh those in favor. However, a reasonable case can be made that having in place digital payment infrastructures at the central bank, potentially accessible by a very large user base, may help overcome adverse contingencies. The related operational and legal infrastructures require a long preparatory phase. Preparing in advance can therefore be useful, even though the eventual use may appear uncertain or even unlikely.

Circle's Singapore affiliate received its Monetary Authority of Singapore (MAS) Major Payment Institution (MPI) license for digital payment token services in Singapore, after having obtained in-principle approval last November. It allows Circle Singapore to offer digital payment token services, cross-border money transfer services and domestic money transfer services in the city-state. Circle is the issuer of USDC stablecoin.

The Central Bank of The Bahamas  (CBOB) published a Sand Dollar update in late May. During April and May 2023 they continued with more accelerated outreach, and technical developments to extend proprietary wallet access to the Bahamas Automated Clearing House (ACH) via the Sand Dollar infrastructure were completed. Meanwhile, the first iteration of Wallet 2.0, which will permit user self-activation, progressed to beta testing, with a general release targeted for the middle of the summer of 2023.

The Bank of Israel (BoI) published a paper on how to ensure that a potential central bank digital currency (CBDC) is broadly adopted. The characteristics that should increase digital shekel adoption and network effects among users include (i) making it possible to receive (make) payments from (to) the State, (ii) providing an efficient and convenient payment experience, and (iii) making it broadly useful  for payment between individuals (P2P) including offline. Also, costs to merchants should be less than existing alternatives, and should streamline their operational processes such as the payment of taxes. In addition, defining a digital shekel as “legal tender” will help provide the currency with the status that the public attributes to cash, and thereby support its broader acceptance.

Bangko Sentral ng Pilipinas (BSP) Governor Felipe M. Medalla provided an update to the central bank's digital payments transformation roadmap in which he underscored the lack of interest in issuing retail central bank digital currency (CBDC). He was particularly concerned about the potential loss of payments privacy ("of course, [retail CBDC] saves a lot of money in printing [but] the government will actually know more about you than your wife. In my case, that is not dangerous; there is nothing to know about me. But for many people, that is a bit of a concern. So, all of those things have to be addressed.")

"The new stablecoin using the Bitcoin blockchain was created by Stably, a Delaware-based startup. The dollar-pegged stablecoin is called #USD, and it takes the most fundamental unit of Bitcoin, called a ‘satoshi’ or ‘sat’ for short, and turns those smaller units into tokens that represent a claim against US dollars held by a custodian. It is the first stablecoin that is native to the Bitcoin blockchain, whereas others, like Rootstock or Sovryn, offer Bitcoin-collateralized stablecoins on layer two architectures."

"However, Adam Jordan, director of investments for Paul R. Ried Financial Group, says any American who uses a debit card can already have their payments tracked. “The concern about privacy is a real one, but only if a government went so far as to try to eliminate physical currencies,” Jordan says. “The government already has the ability to track all our digital electronic payments.”"

"But a very different kind of Republican CBDC bill is also making the rounds in Congress. This one, bizarrely, openly allows a CBDC so long so it’s run by a government-chosen company like Ripple or perhaps a Wall Street bank. "

Mitsubishi UFJ Financial Group (MUFG) plans to deploy and distribute bank-backed stablecoins on different public blockchains. The Japanese bank has partnered with Datachain, a blockchain interoperability company, and Toki, a cross-chain bridge, to allow the interoperation of these licensed stablecoins along several blockchains using its Progmat Coin protocol. The announcement comes after Japan's revised funds’ settlement law passed in 2022 came into take effect to allow financial institutions to issue stablecoins. Stablecoin issuance on public blockchains doesn't seem to be explicitly covered in the legislation as summarized in a slide deck from Japan's Financial Services Agency (FSA) and this document, although a white paper published by the country's Liberal Democratic Party implies that clarity on this issue would be forthcoming, which I suppose has indeed arrived.

Binur Zhalenov, CEO of the Kazakhstan Interbank Settlement Center of the National Bank of Kazakhstan, provided an update on the three-year Digital Tenge project. The plan in 2023 is to deliver a production-grade central bank digital currency (CBDC). Pilots will test various specific use cases, starting with building a scalable platform for social aid distribution for the central bank's government partners. The project aims to  provide a scheme that provides business value across the value chain, and there will be several minimum viable products (MVPs) to optimize cross-border payments, wholesale transactions, and distributed ledger technology (DLT) integration

Project Syndicate published an article that claims that a full accounting will show that the benefits of CBDCs outweigh their costs and risks. However, a CBDC would need to be accompanied by strong privacy and due-process protections as well as an upfront, forceful prohibition against inappropriate central-bank lending activity (at least outside of major crises such as a war or pandemic).

"A physical card solution to the “double spending problem” that provides a secure fallback in case of network or device failures. Smartphones communicate locally and use onboard cameras to capture barcodes and security features that they then cryptographically verify."