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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.

#Fintech #CBDC #ECB #DFC

·ecb.europa.eu·May 13, 2023

CBDC and business cycle dynamics in a New Monetarist New Keynesian model

Governor Ron DeSantis Signs Bill Prohibiting Use of Central Bank Digital Currencies in Florida – Bitcoin News

"On Friday Florida’s governor Ron DeSantis signed legislation that bans the use of a central bank digital currency (CBDC) in the state. Following the bill SB 7054 being signed into law, Florida’s Uniform Commercial Code (UCC) now explicitly forbids the use of a federally adopted CBDC as money."

#Fintech #CBDC #Regulation #UnitedStates #DFC

·news.bitcoin.com·May 13, 2023

Governor Ron DeSantis Signs Bill Prohibiting Use of Central Bank Digital Currencies in Florida – Bitcoin News

Cash And Car Keys Work Offline: This Means Digital Wallets Must Too

"Digital cash, just like digital car keys, has to work offline. That is, I need to be able to get into my car and drive off where there is no mobile signal and I need to be able to buy milk if the internet is down or if the power is out at the grocery store. Fortunately, we have the technology and Apple and Google are building with it."

#Fintech #CBDC #Offline #IoT #DFC

·forbes.com·May 13, 2023

Cash And Car Keys Work Offline: This Means Digital Wallets Must Too

"Enabling Offline Payments in an Online World: Privacy Considerations"

Lipis Advisors published a paper that explores potential enhanced privacy benefits of offline payment functionality. One key takeaway is that it is important that payment system operators consider how other facets of the system design (e.g., security, interoperability) interact with privacy and how these different aspects should be prioritized.

#Fintech #CBDC #Offline #Crunchfish #DFC

·lipisadvisors.com·May 11, 2023

"Enabling Offline Payments in an Online World: Privacy Considerations"

BIS publishes guide on offline CBDC use

The BIS Innovation Hub published a handbook on offline central bank digital currency (CBDC). It covers the complex matrix of issues including security, privacy, likely risks, the types of solution, their maturity and applicability, and operational factors, as well as objectives for resilience, inclusion, cash resemblance, accessibility and other desired attributes. The degree to which CBDCs will be provided or used offline will vary significantly by country, region, demographics and specific contexts, which will also influence the solutions chosen. https://www.bis.org/publ/othp64.htm

#Fintech #CBDC #Offline #BIS #DFC

·finextra.com·May 11, 2023

BIS publishes guide on offline CBDC use

IMF Cautions Zimbabwe Against Plan for Gold-Backed Digital Money

The IMF has reportedly called on the Reserve Bank of Zimbabwe to carefully consider the benefits of issuing a gold-backed digital currency versus the potential macroeconomic, financial stability, governance, legal and operational risks, plus the cost of forgone FX reserves. The IMF urged country authorities to rather use conventional measures to address economic challenges, such as maintaining a tight monetary-policy stance and accelerating the liberalization of the foreign-currency market.

#Fintech #CBDC #Gold #Zimbabwe #IMF #DFC

·bloomberg.com·May 11, 2023

IMF Cautions Zimbabwe Against Plan for Gold-Backed Digital Money

Jonas Gross commentary on the ECB 3rd digital euro progress report

"The European Central Bank published its third progress report on the investigation phase of a digital euro, a #CBDC for the euro area. The report discusses the Eurosystem’s perspectives and recommendations on the digital euro access, holdings and onboarding, distribution and functionalities"

#Fintech #CBDC #Eurozone #DFC

·linkedin.com·May 11, 2023

Jonas Gross commentary on the ECB 3rd digital euro progress report

Hungary's Central Bank MNB Sees No Imminent Need for Digital Forint

Hungary reportedly sees no urgent need for a widely available retail central bank digital currency (CBDC) but it is exploring possibilities via a series of pilots, and would like to remain in the forefront of CBDC research.

#Fintech #CBDC #Hungary #DFC

·coindesk.com·May 11, 2023

Hungary's Central Bank MNB Sees No Imminent Need for Digital Forint

The Role of Central Bank Digital Currencies in Financial Inclusion

The Asian Development Bank (ADB) published a paper that explores the potential for central bank digital currency (CBDC) to help promote financial inclusion. It considers how CBDC could leverage digital finance technologies and enhance the reach and value of formal financial products and services among the unbanked or underserved. It also looks at the challenges involved and how these could be addressed. The paper provides recommendations for policy makers and regulators on designing CBDCs, establishing preconditions, and managing risk.

#Fintech #CBDC #FinancialInclusion #Asia-Pacific #DFC

·adb.org·May 11, 2023

The Role of Central Bank Digital Currencies in Financial Inclusion

ISO 20022 Data Model Holds the Key to CBDC Interoperability

"The achievement of policy aims associated with a CBDC will require adoption by end users. The user value proposition relies in large part on frictionless satisfaction of key payments use cases. The associated CBDC transactions necessitate interoperability along — and most crucially between — payment rails. Harmonization of data models, via international standardization efforts, is a necessary underpinning of effective interoperability."

#Fintech #CBDC #Interoperability #ISO20022 #DFC

·progressoft.com·May 11, 2023

ISO 20022 Data Model Holds the Key to CBDC Interoperability

Tether Boosts T-Bill Holdings, Cuts Banks Exposure

Tether, the issuer of the USDT stablecoin, cut its exposure to cash and bank deposits in Q1 2023, shifting into US Treasuy Bills and leveraging the reverse repo market. Also, as of March 31, 2023, $1.5 billion in assets were held in Bitcoin and 6.5% of its reserves in secured loans to non-affiliated entities. https://assets.ctfassets.net/vyse88cgwfbl/24G4DuQ0HE7h7EQE6vGy4J/8a8a170edf687ea07b3f86048af8b87b/ESO.03.01_Std_ISAE_3000R_Opinion_31-03-2023_BDO_Tether_CRR.pdf

#Fintech #CryptoAssets #Stablecoins #Tether #DFC

·bloomberg.com·May 11, 2023

Tether Boosts T-Bill Holdings, Cuts Banks Exposure

Laboratory of Financial and Technological Innovations

"FINANCIAL AND TECNPOLOGICAL INNOVATIONS LABORATORY (LIFT) is an applied research laboratory, configured as a virtual collaborative environment. LIFT aims to foster technological innovation research projects related to the financial industry and supervisory and regulatory activities carried out by the Central Bank of Brazil with the objective of introducing mechanisms for improvement and innovation. As part of LIFT, the LIFT paper magazine is a biannual publication containing the result of the projects developed in laboratories and articles of experts on topics related to innovation in the National Financial System. "

#Fintech #CBDC #Brazil #DFC

·revista.liftlab.com.br·May 11, 2023

Laboratory of Financial and Technological Innovations

ECB calls for candidates to participate in the digital euro workstreams

The European Central Bank (ECB) is inviting relevant experts to contribute to two new digital euro scheme rulebook workstreams. The first one is focused on identification and authentication the second on infrastructure-related requirements (e.g., IT security, connectivity, reconciliation, and end-to-end service level requirements, plus key performance indicators). Participation will not be remunerated, although an earlier version of the announcements said that participants will not be reimbursed for travel and subsistence expenses in connection with their attendance at workstream meetings, which have now been specified as all virtual. https://www.ecb.europa.eu/paym/intro/news/html/ecb.mipnews230508_1.en.html https://www.ecb.europa.eu/paym/intro/news/html/ecb.mipnews230508_2.en.html

#Fintech #CBDC #Eurozone #DFC

·ecb.europa.eu·May 10, 2023

ECB calls for candidates to participate in the digital euro workstreams

Visa uses CBDC for programmable finance prototype for farmers

Visa developed a programmable finance platform that allows Brazilian soybean farmers to securely fund and sell their crop harvests on a permissioned version of the Ethereum blockchain. Partnering with Agrotoken, Microsoft, and Sinqia, Visa was one of nine finalists tasked with exploring innovative blockchain-based use cases for Brazil's real digital central bank-issued digital currency (CBDC) as part of the Banco Central do Brasil's most recent LIFT Challenge. The CBDC's programmability allows delivery and payment of assets and currencies to be automatically settled only when certain conditions are met, for more efficient capital usage and reduced counterparty risks. https://usa.visa.com/about-visa/newsroom/press-releases.releaseId.19706.html

#Fintech #CBDC #Brazil #Blockchain #DFC

·finextra.com·May 10, 2023

Visa uses CBDC for programmable finance prototype for farmers

Minutes of the CBDC Technology Forum - March 2023

"The Bank of England presented a summary of the Consultation Paper and the accompanying Technology Working Paper, published on 7 February 2023. The presentation covered the proposed distribution model, technology design considerations and conceptual architecture for a UK CBDC, called the digital pound."

#Fintech #CBDC #UnitedKingdom #DFC

·bankofengland.co.uk·May 9, 2023

Minutes of the CBDC Technology Forum - March 2023

Bank of Canada launches public consultations on a digital dollar

The Bank of Canada (BoC) launched an online public consultation on the features that could be included in a digital Canadian dollar. The BoC is also seeking opinions about how people would likely use a digital dollar, what security features are important, and what concerns they have about accessibility and privacy. The BoC says that, at this time, a digital dollar is not needed, but Canada may need one in the future, so BoC wants to be ready.

#Fintech #CBDC #Canada #DFC

·bankofcanada.ca·May 8, 2023

Bank of Canada launches public consultations on a digital dollar

CBDC and privacy

The European Data Protection Supervisor recently published a tech dispatch on CBDCs and privacy. It recommends that a CBDC should follow a clear data protection by design and by default approach. If this is not ensured, a CBDC can be a systemic risk for profiling and surveilling users. For a CBDC, privacy enhancing technologies, including advanced pseudonymisation techniques and zero-knowledge proof, should be used to minimize the information shared between transaction partners. https://edps.europa.eu/data-protection/our-work/publications/techdispatch/2023-03-29-techdispatch-12023-central-bank-digital-currency_en

#Fintech #CBDC #Privacy #Europe #DFC

·linkedin.com·May 8, 2023

CBDC and privacy

Central banks bow to the inevitability of digital currencies

What principles should guide the next phase of CBDC development? First, clarity about the value proposition for users. In many countries, there simply isn’t demand for central bank money for retail payments. China’s payment giants (Alipay, WeChat Pay) and India’s Unified Payments Interface have made low-cost digital payments easily and widely available. In the US, the Federal Reserve’s instant payment service FedNow will increase the system’s efficiency and resilience... Still, a well-designed CBDC could play an incremental role in catalysing payments innovation. Other advantages, such as the ability to facilitate payments using near-field communication even when cellular and wireless networks are down, could also be played up.

#Fintech #CBDC #DFC

·ft.com·May 7, 2023

Central banks bow to the inevitability of digital currencies

Culture clash holds back digital currencies

"It would, however, be a mistake of historic proportions if society stopped using public money and threw away ‘trust’ as a concept. The challenge for central banks and other actors in the existing financial architecture is to create a form of public money on a blockchain that can deliver the promises of a decentralised digital economy. Just as at the beginning of the internet, it can be hard to envisage how the Web 3 world of non-fungible tokens, decentralised finance and cryptocurrencies can be anything more than just a niche fad, but the promise is real and the changes will be far-reaching."

#Fintech #CryptoAssets #Stablecoins #CBDC #Web3 #DFC

·omfif.org·May 6, 2023

Culture clash holds back digital currencies

Mapping the privacy landscape for central bank digital currencies

An article by Raphael Auer, Rainer Böhme, Jeremy Clark and Didem Demirag explores the multiple dimensions of retail CBDC privacy considerations. They point to the number of distinct stakeholders, combined with the technical challenges, as possibly responsible for stalling progress toward deploying retail CBDC. One step forward is understanding who the key stakeholders are and what their interests are in payment records. Knowledge of conflicting interests is helpful for developing requirements and narrowing the range of technical solutions. This article contributes to the literature by identifying three stakeholder groups - privacy enthusiasts, law enforcement, and data holders - and exploring their conflicts. A main insight is that nuanced data-access policies are best to resolve the conflicts, which in turn rule out many technical solutions that promise “hard privacy,” meaning solutions relying on cryptography and user-guarded secrets without room for human discretion. This observation shifts attention to a softer form of privacy-enhancing technologies, which gives authorized stakeholders the capability to access certain payment records in plaintext under defined circumstances. Such a system depends on compliance and accountability, supported with technically enforced access control, limited retention periods, and audits. This is referred to as “soft privacy". See also: https://dl.acm.org/doi/pdf/10.1145/3561796

#Fintech #CBDC #Privacy #BIS #DFC

·pulpspy.com·May 6, 2023

Mapping the privacy landscape for central bank digital currencies

Stablecoin Runs and the Centralization of Arbitrage

A paper by Yiming Ma, Yao Zeng, and Anthony Lee Zhang analyzes the run risk of USD-backed stablecoins and uncover a dilemma between stablecoins’ price stability and financial stability. They show that panic runs exist even though general investors only trade stablecoins in secondary markets with flexible prices. Run incentives are reinstated by stablecoin issuers’ liquidity transformation and the fixed $1 at which arbitrageurs redeem stablecoins for cash in the primary market. The authors discover that more efficient arbitrage amplifies run risk. This explains why stablecoin issuers only authorize a small set of arbitragers even though it comes at the expense of maintaining a stable secondary price. In other words, the centralization of arbitrage embeds an inherent tradeoff between run risk and price stability. The paper's findings are based on a model and a novel dataset on stablecoin redemptions, trading, and reserve assets. Calibrating the model, the authors find a higher run risk for USDT, the largest stablecoin, compared to USDC, the second-largest stablecoin. However, even USDC bears significant run risk due to its less concentrated arbitrage and more concentrated deposit holdings.

#Fintech #CryptoAssets #Stablecoins #DFC

·papers.ssrn.com·May 5, 2023

Stablecoin Runs and the Centralization of Arbitrage

A Simple Model of a Central Bank Digital Currency

The National Bureau of Economic Research (NBER) published a paper that highlights the trade-offs between physical and digital forms of retail central bank money based on a general equilibrium model. It finds that the key differences between cash and central bank digital currency (CBDC) include transaction efficiency, possibilities for tax evasion, and, potentially, nominal rates of return. It establishes conditions under which cash and CBDC can co-exist and shows how government policies can influence relative holdings of cash, CBDC, and other assets. The paper illustrates how a CBDC can facilitate negative nominal interest rates and helicopter drops, and also how a CBDC can be structured to prevent capital flight from other assets.

#Fintech #CBDC #DFC

·nber.org·May 5, 2023

A Simple Model of a Central Bank Digital Currency

Overseas Territories and Dependencies of the World

An overseas territory or dependency is a region with ties abroad to a sovereign nation—not a completely independent state, but also not a constituent part or administrative subdivision of the parent country. This graphic maps the overseas territories of various countries, using a variety of sources including WorldAtlas, Statista, and official country releases. There are a total of 71 overseas territories listed on the map spread across the world.

#CBDC #Fintech #DFC

·visualcapitalist.com·May 5, 2023

Overseas Territories and Dependencies of the World

Comparative cross-border payments: Wise vs USDC

"Your own personal estimation for whether to go with a traditional remittance or stablecoins will differ from mine, of course, depending on how cheap your local cryptocurrency exchange is (as well as that of your counterparty), and the availability and price of options like Wise or Western Union. Just make sure you include all stablecoin-related fees so that you're not mistakenly comparing apples to oranges. Stablecoins don't work for me, but they might for you."

#Fintech #TransferWise #Stablecoins #CryptoAssets #USDC #CrossBorder #DFC

·jpkoning.blogspot.com·May 5, 2023

Comparative cross-border payments: Wise vs USDC

Hungary takes a novel approach to blockchain testing

Magyar Nemzeti Bank has collaborated with the Sovereign Official Digital Association (SODA) to issue non-fungible tokens (NFTs) on a private blockchain. By successfully participating in financial literacy quizzes, Hungarian coin collectors and NFT enthusiasts are being awarded central bank-issued tokens and then swapping and trading them on the Money Museum mobile application. This is part of a contest to win a set of limited edition commemorative coins. As any member of the public can use the blockchain to collect, swap and register their ownership of the coins, this type of activity – though gamified – this is arguably a central bank digital currency (CBDC) pilot.

#Fintech #CBDC #Hungary #NFT #DFC

·omfif.org·May 5, 2023

Hungary takes a novel approach to blockchain testing

BCB releases the directives of the pilot project of the Brazilian Digital Real technical testing

The Banco Central do Brasil (BCB) published the details of its digital real central bank digital currency (CBDC) technical testing. It will involve no real transactions (so it isn't a pilot). Its aim is to validate the use of a DLT solution on the Hyperledger Besu platform, evaluating programmability and the ability to comply with legal and regulatory requirements, mainly related to privacy, as well as its technological viability. The details include the criteria for selecting the ten participating institutions.

#Fintech #CBDC #Brazil #DFC

·bcb.gov.br·May 5, 2023

BCB releases the directives of the pilot project of the Brazilian Digital Real technical testing

Nearly half of Americans think their money isn't safe in a bank

According to a poll released on May 4, 2023 by Gallup, 48% of U.S. adults are concerned with their money, broken down into 19% who are “very” worried and 29% who are “moderately” worried, despite the fact that the Federal Deposit Insurance Corporation (FDIC) insures deposits up to $250,000 per borrower, per bank. On the other hand, 30% selected “not too worried” and 20% are “not worried at all.” The poll was conducted between April 3 and April 25 following the collapse of Silicon Valley Bank in March. Americans with no college degree tended to be more worried at 54% while only 36% of college graduates expressed concern.

#Fintech #CBDC #Banks #FDIC #UnitedStates #DFC

·fastcompany.com·May 5, 2023

Nearly half of Americans think their money isn't safe in a bank

Reserve Bank of India and BIS launch G20 TechSprint 2023

The Reserve Bank of India (RBI) and the Bank for International Settlements Innovation Hub (BISIH) have launched the fourth edition of the G20 TechSprint, a global technology competition to promote innovative solutions aimed at improving cross-border payments. Developers from around the world should submit application from May 04, 2023 to June 04, 2023 and the TechSprint will conclude around August/ September 2023. The 2023 TechSprint will focus on AML/CFT/Sanctions technology solutions to reduce illicit finance risk, FX and liquidity technology solutions to enable settlement in emerging market and developing economy (EMDE) currencies, and technology solutions for multilateral cross-border CBDC platforms.

#Fintech #CBDC #Payments #CrossBorder #BIS #India #DFC

·rbi.org.in·May 5, 2023

Reserve Bank of India and BIS launch G20 TechSprint 2023

Zimbabwe sets price to sell gold-backed digital tokens

The Reserve Bank of Zimbabwe (RBZ) will start selling its gold-backed digital currency on May 8, 2023. Applications must be for a minimum of US$10 and US$5,000 for individuals and corporates and other entities, respectively, in U.S. dollars and local currency. The US dollar price will be "informed or guided" by the international gold price as determined by the London Bullion Market Association PM fix. Payment in local currency will be at a 20% margin above the willing-buyer willing-seller interbank mid-rate. Applications will close on May 10, 2023. https://www.rbz.co.zw/documents/press/2023/May/Gold-Backed_Digital_Tokens_Prospectus_-_4_May_2023_1.pdf

#Fintech #CBDC #Gold #Zimbabwe #DFC

·cointelegraph.com·May 5, 2023

Zimbabwe sets price to sell gold-backed digital tokens

Nigeria using eNaira CBDC to disperse aid, including farmer loans

In March 2023, the Central Bank of Nigeria unveiled plans to assist local farmers with loans for farm tools using the eNaira digital wallet. The “Agro eNaira Wallet Engagement” project aims to provide Nigerian farmers with a “transparent, accountable, and efficient” platform to access government aid and lending programs. These funds will allow small farmers to obtain loans to purchase tools and equipment using the eNaira digital wallet and will likely be disbursed via local agro-dealers. https://www.cbn.gov.ng/out/2023/ccd/cbn%20update%202023%20march%20edition.pdf

#Fintech #CBDC #Africa #Nigeria #DFC

·ledgerinsights.com·May 4, 2023

Nigeria using eNaira CBDC to disperse aid, including farmer loans