DFC

Edgar, Dunn & Company published a survey of the development of stablecoins and central bank digital currencies (CBDCs) across the six Gulf Cooperation Council (GCC) states. It argues that strategic motivations — reducing dependence on dollar-denominated Western payment infrastructure, modernizing domestic financial systems, and reasserting monetary sovereignty — are driving a coordinated, regulation-first approach to digital currency development. The UAE and Bahrain are identified as the most advanced jurisdictions, with Saudi Arabia positioned as a rising participant focused primarily on wholesale CBDC applications via Project mBridge. Kuwait, Qatar, and Oman remain at earlier stages. The report characterizes the regional model as a two-tier architecture in which state authorities define the regulatory perimeter while private-sector institutions handle distribution and adoption. Several case studies — including the Digital Dirham, AE Coin, mBridge, and ADIB Smart Sukuk — are presented to illustrate current implementation status. [Edgar, Dunn & Company]

[January 1, 2019] The RBI reportedly quietly dropped its plan to issue a central bank digital currency (CBDC), despite having set up an inter‑departmental group to study it. Officials reportedly felt it was too early for such a move, and the feasibility report was never published, reflecting limited internal capacity on blockchain and digital currency policy. The proposed CBDC had been framed as a tool to address black money, money laundering, and cyber‑security risks, but industry voices argued that launching it would be premature and that India should watch smaller advanced jurisdictions like the UAE and Singapore first. [Hindu Business Line]

[December 5, 2019] Reserve Bank of India (RBI) Governor Shaktikanta Das reportedly said that it is too early to introduce a central bank digital currency (CBDC) because the necessary technology and safeguards are still at an incipient stage, though it has examined the idea internally and discussed it with other central banks and governments. He stressed that any such CBDC would only be considered seriously when technology matures and adequate safeguards are in place. He firmly distinguished this from private digital currencies, which he rejects on the grounds that currency issuance is a sovereign function and must remain with the state, noting that global central banks and governments broadly oppose private digital currencies for the same reason. [Business Standard]

[February 4, 2026] The Reserve Bank of India (RBI) has issued updated FAQs explaining the design and objectives of India’s Digital Rupee (e₹) pilots in retail and wholesale segments. Retail e₹ is presented as legal-tender central bank digital currency equivalent to cash, distributed via banks and non-banks through mobile wallets, interoperable with existing QR infrastructure, and supporting offline and programmable features to enable cash-like use, targeted transfers, and constrained spending. Wholesale e₹ is framed as restricted-access central bank money for interbank and securities settlement, using programmability and smart contracts to reduce settlement risk and infrastructure costs in government securities, call money, and tokenized certificates of deposit. The document signals an incremental, pilot-based approach focused on testing technology, scalability, and institutional roles rather than rapid scale-up, leaving open questions about future onboarding models, governance of programmability, and long-run integration with systems like UPI. [RBI]

The IMF published a paper that develops a theoretical framework to analyze the tension between stablecoin stability and issuer incentives. The central finding is that unregulated stablecoin issuers hold excessive risky assets to maximize profits, thereby elevating run risk while failing to internalize the welfare consequences for households. A regulator acting in the broad public interest can improve upon this outcome by mandating high-quality liquid asset backing, ideally central bank reserves, but strict liquidity requirements alone reduce issuer profitability and suppress stablecoin supply below socially optimal levels. The authors argue that achieving both stability and adequate issuance requires two complementary policy instruments: a safe backing asset requirement and a supplementary revenue source for issuers, such as remuneration on reserves or regulated data monetization. The paper draws supporting parallels from China's e-money experience and situates its findings relative to emerging regulatory frameworks including the U.S. GENIUS Act and the EU's MiCA regulation. [IMF]

The Federal Reserve Bank of Kansas City (Kansas City Fed) published an article in which Franklin Noll estimates that stablecoins are used predominantly for crypto‑finance trading, with payments accounting for less than 1 percent of supply. He finds roughly half of outstanding stablecoins sit in exchanges, decentralized finance, and related infrastructure, with another large share used for high‑value transfers and a material portion idle in rarely used wallets. This usage pattern implies that stablecoins currently function more as market plumbing and speculative liquidity than as a broad retail or commercial payments instrument, and that reliance on bridges and exchanges highlights interoperability and concentration risks in the ecosystem. [Kansas City Fed]

The Central Bank of Ireland published an article in which Rhys Bidder argues that debates on stablecoins and blockchain-based money require a common analytical framework linking them to existing two-tier monetary structures and settlement systems. The article first defines money, settlement assets, and the distinction between public and private money, then maps how European payment “plumbing” centers on TARGET, related real-time gross settlement services, and collateral frameworks. It shows how commercial bank deposits, card networks, and correspondent banking ultimately settle in central bank reserves, while stablecoins function as bearer instruments whose secondary-market transfers bypass real-time gross settlement in central bank money. This matters for how regulators think about singleness of money, settlement finality, liquidity backstops, and access of non‑banks to core infrastructure, and for how tokenized deposits or central bank distributed ledger technology might modernize the two-tier model. The key open question is how far to integrate or constrain blockchain-based payment rails within this architecture. [Central Bank of Ireland]

Tiger Research published a report arguing that late‑entry stablecoin issuers can survive only by abandoning the dominant reserve‑interest model and specializing in distinct market niches. The authors show that Tether uses scale to monetize reserves while gradually repairing transparency and building a diversified real‑world asset (RWA) and investment portfolio, turning regulatory normalization into a way to defend its monetary base. StraitsX instead treats stablecoins as payments infrastructure, monetizing fee‑based transaction velocity under a Monetary Authority of Singapore license that converts compliance into a regional moat. M0 repositions issuance as shared infrastructure, using network effects across issuers and builders to become a neutral standard rather than a competing coin. KRWQ treats regulatory gaps and offshore non‑deliverable forward demand as an entry point, using offshore liquidity as an option on future domestic legitimacy, leaving open whether such sequencing can withstand eventual onshore regulatory choices. [Tiger Research]

WalletConnect and Ubyx published a paper arguing that self-custodial wallets can operate within existing anti–money laundering, sanctions, and tax frameworks if regulators adopt technology-neutral, outcomes-based rules and focus obligations on intermediaries at the “edge.” The authors document concrete mechanisms—such as FATF "travel rule" data capture within wallet flows, cryptographic “sign-In with X” ownership proofs, programmable token-level controls, and blockchain analytics—that allow virtual asset service providers to meet customer due diligence, travel rule, and reporting obligations without banning or custodianizing self-custody. This matters because exclusionary rules would push activity offshore, create a two-tier system, and undermine both financial inclusion and supervisory visibility, whereas regulated interoperability preserves open finance benefits while strengthening compliance. The paper highlights unresolved questions around the precise regulatory status of new wallet architectures (trusted execution environments, multi-party computation, bank-deployed wallets) and the scope and consistency of edge-enforcement obligations across jurisdictions. [Walletconnect and Ubyx]

OMFIF, in partnership with Luxembourg for Finance, argues that the core tokenization policy choice is how to structure legal and market foundations so tokenization’s efficiency gains do not amplify legal and liquidity risks. It distinguishes direct, indirect, and incomplete tokenisation, stressing that only direct structures mainly alter operations, while wrappers and synthetic forms import securitization-style and counterparty risks and can weaken investor protections if entitlements are opaque. And while faster, potentially atomic settlement can cut counterparty and capital charges, fully instant settlement may be undesirable for many investors and instead atomic settlement on demand plus documentation automation may produce the more efficient equilibrium. It notes that tokenized collateral and money market fund units can materially improve intraday liquidity and collateral reuse, but also introduce new run and liquidity-mismatch dynamics and place greater weight on how custodians, depositories, and central securities depositories adapt rather than disappear. [OMFIF]

Federal Reserve Board (FRB) staff outline how regulated “payment stablecoins” for cross‑border use could lower reliance on correspondent banking while altering demand for reserves, deposits, and Treasury bills. They argue that low‑cost, widely accessible stablecoins could shorten payment chains, compress fees and delays, and introduce competitive pressure on concentrated correspondent banking networks, but would still leave some reliance on large banks for foreign exchange risk‑management and on/off‑ramp services. For policy and institutional design, they stress that stablecoin reserve‑asset composition—bank deposits, Treasury bills, or central bank reserves—would shift liquidity, safe‑asset demand, and central bank balance‑sheet management in materially different ways. [FRB]

[April 30, 2025] The Instituto Espanol de Analysts (IEA) published a book that included a chapter by European Parliament rapporteur Fernando Navarette, that argues that a digital euro is a mis-specified response to Europe’s payments challenges and should be downgraded to a contingency “Plan B.” He contends that the core problems—trust in money post‑crisis, overreliance on non‑EU payment schemes, and stablecoin‑driven currency substitution—are better addressed through institutional and regulatory reforms, wholesale central bank digital currency (CBDC), and pan‑European instant‑payment solutions based on commercial bank money. Navarrete stresses that retail CBDC is inherently destabilizing for bank funding, raises unresolved privacy and governance risks, and risks crowding out private innovation, especially if coupled with legal tender and complex “waterfall” mechanics. He instead proposes a three‑pillar architecture: private‑led interoperable instant payments, a narrowly scoped offline digital euro, and wholesale CBDC—leaving a full retail CBDC only as a last‑resort backup if private efforts fail. [IEA]

The Cambridge Centre for Alternative Finance (CCAF) published a report that argues that most digital assets map onto existing legal concepts and that regulation should therefore hinge on underlying rights and functions rather than token form or technology stack. The authors distinguish digital assets that merely represent traditional financial or non‑financial claims from “crypto-assets,” defined as issuer‑less units native to open distributed ledger technology (DLT) systems that perform essential incentive functions and do not themselves embody rights against an issuer. This reframing pushes regulatory perimeter design toward claim‑based and function‑based taxonomies, clarifies when tokenization is simply a new representation of existing instruments, and highlights that property‑law adjustments to accommodate natively digital assets are critical for legal certainty and market development. The central open issue is whether and how different legal traditions will adapt their property and collateral frameworks to accommodate these crypto-assets on a durable basis. (CCAF)

[In 2023] the Central Bank of Nigeria (CBN) published a book on the economics of digital currencies in which there was a review of how the eNaira central bank digital currency (CBDC) was designed, launched, and managed. It argues that weak demand reflects structural and institutional frictions rather than purely technological failure. The review documents a phased rollout focused on financial inclusion, payment efficiency, and monetary control, but shows that limited interoperability, burdensome onboarding, and unclear value propositions constrained uptake. It emphasizes how institutional choices around wallet tiers, distribution architecture, and bank–fintech roles reshaped market incentives, often reinforcing banks’ dominance rather than fostering broader innovation. It highlights the need to recalibrate design toward open interfaces, clearer legal and regulatory frameworks, and better alignment between central bank objectives and private‑sector business models. [CBN]

VISA published an article in which Ezechiel Copic uses an efficient frontier framework to show how new U.S. and EU stablecoin rules compress reserve returns and reorient issuer economics toward liquidity and resilience. The article models pre‑regulation reserve strategies using Tether’s historical mix to illustrate a wide opportunity set, then re‑estimates frontiers under the U.S. GENIUS Act and the EU’s Markets in Crypto‑Assets Regulation. Under GENIUS, a narrow set of high‑quality liquid assets leaves only a thin band of feasible risk‑return combinations, making reserve management resemble liquidity engineering rather than portfolio optimization. Under MiCA, lower euro‑area rates and binding bank‑deposit floors further depress and compress the frontier, especially for “significant” issuers. The analysis implies competition will shift from balance‑sheet yield to technology, distribution, and compliance, while leaving open how far reduced issuer economics may constrain market entry and long‑run innovation. [VISA]

The IMF's Tobias Adrian argues that tokenization is a structural reconfiguration of financial architecture that shifts trust and risk management from institutions to programmable infrastructures. Tokenization enables atomic, real-time settlement and embedded compliance across money, banking, capital markets, and financial market infrastructures, compressing value chains but also accelerating liquidity dynamics and potential stress transmission. For emerging and developing economies, although tokenization may lower payment and market-access frictions, it heightens risks of volatile capital flows, currency substitution, and fragmented liquidity. The note emphasizes that the long-term success of tokenization depends on anchoring digital finance in public trust through clear policy frameworks and safe settlement assets, robust governance of code, legal certainty, and international coordination. Absent such anchors, tokenization risks amplifying financial instability through speed, concentration, and fragmentation, as contract-based risk management alter the nature of settlement, liquidity, and systemic risk. [IMF]

[June 2024 but published in January 2026] The IMF published its findings regarding the plans of the National Bank of Kazakhstan and National Bank and National Payments Corporation to launch a central bank digital currency (CBDC) by end‑2025, emphasizing alignment of pilots with clear policy objectives and realistic technical capacity. It highlighted the need for an explicit legal basis beyond “banknotes and coins,” prioritization of use cases, tailored evaluation frameworks, and careful analysis of macro‑financial risks from broader applications such as crypto‑asset linkages and government or large‑value payments, alongside stress‑testing, minimum cyber‑resilience standards, and stronger internal and cross‑authority coordination. [IMF]

The Federal Reserve Bank of Atlanta’s published a paper that argues that fiat‑backed stablecoins effectively implement a modern variant of narrow, full‑reserve banking under the 2025 GENIUS Act. The note explains that Chicago‑plan narrow banks and fiat‑backed stablecoin issuers both fund only cash and Treasury bills, provide payments and safekeeping but not lending, and target 1:1 redeemability. It stresses that stablecoins embed extra operational and intermediation layers—wallets, exchanges, blockchain settlement, and dependence on fractional‑reserve banks as custodians—creating additional run, peg‑deviation, and settlement risks relative to narrow banks. For policy and regulatory design, the analysis frames GENIUS‑style stablecoin regimes as functionally similar to narrow banks but with weaker direct supervision, no deposit insurance, and higher contagion channels from the legacy banking system, leaving open how to price, regulate, and backstop these new liabilities over time. [Atlanta Fed]

Columbia University's Brian Z. Zhu develops a global-game model in which stablecoin run risk depends jointly on reserve fundamentals, the behavior of a large seller, and the precision of public versus private information about reserves. The model decomposes total run probability into “collateral risk” (runs driven by weak assets) and “large sale risk” (runs triggered by sizable redemptions), and shows that a large holder unambiguously raises selling pressure and shifts risk weight toward large-sale-driven runs as its size grows. Higher-precision public information reduces runs when fundamentals are strong but can amplify runs when fundamentals are weak, while more precise private signals have the opposite comparative statics, implying that heterogeneous, noisy private beliefs can stabilize fundamentally sound but informationally opaque stablecoins. The paper maps these results to recent events and regulations, arguing that transparency mandates like the U.S. GENIUS Act strengthen the link between runs and fundamentals but may lower capital efficiency and reduce the stabilizing role of belief heterogeneity. [arXiv]

Cointelegraph published an article in which Axis CEO Chris Kim argues that pushing settlement from T+1 toward real-time atomic settlement can degrade market quality by eroding netting and capital efficiency. Shorter settlement horizons reduce counterparty and timing risk but require full pre-funding of each trade, constraining leverage and increasing costs for high‑turnover strategies. This dynamic reinforces the centrality of large intermediaries that can coordinate liquidity at scale, reshaping market structure around new “liquidity gatekeepers” and critical coordination infrastructure. Key open questions concern how far policy and design can recover netting benefits in an on-chain, T+0 environment without re-importing systemic risk. [Coin Telegraph]

The European Central Bank (ECB) set out the Eurosystem’s comprehensive two pronged payments strategy, defining its vision for the evolution of European payments under rapid technological change. The first prong is upgrading core infrastructures such as T2, the real time gross settlement backbone for high value and time critical payments during business days, and TIPS, the 24/7 Single Euro Payments Area (SEPA) instant retail settlement layer, while developing distributed ledger technology based wholesale settlement via Pontes and Appia. The second prong is a retail digital euro, with tokenized deposits and regulated, EU governed stablecoins in a complementary role. The strategy links tokenization choices to preserving the singleness of money, monetary sovereignty, and financial stability, reduces dependence on non European schemes, and embeds strategic autonomy and cyber resilience into core infrastructures and retail acceptance layers. It also promotes deeper integration of cross border and corporate payments through instant payments, standardization, and interlinking fast payment systems. [ECB]

SWIFT announced that its member banks are moving a blockchain-based shared ledger to a minimum viable product (MVP) phase for live cross-border use in 2026. The initiative will use tokenized commercial bank deposits on an Ethereum virtual machine-compatible ledger, operated by Swift as a coordination and validation layer while banks retain control over keys, assets, and settlement through existing real-time gross settlement (RTGS) systems and correspondent channels. This design attempts to add a 24/7 digital orchestration layer atop current messaging and standards rather than create a competing rail, aiming to improve liquidity visibility, reconciliation, and interoperability across 11,500 institutions in 200+ jurisdictions. Open questions include regulatory treatment, access rules, and how this model will coexist with central bank digital currency and domestic instant payment schemes. [SWIFT]

OMFIF published an article in which Biagio Bossone argues that physical cash should be treated as critical national payment infrastructure rather than a legacy instrument to be phased out. He notes that in an era of overlapping climate, cyber, and geopolitical shocks, digital payment systems and central bank digital currencies (CBDCs) share dependencies on power, networks, and cloud infrastructures that fail precisely under stress, whereas cash uniquely preserves transactional capacity and economic agency during systemic outages. This matters for payment-system oversight, as current frameworks focus on digital financial market infrastructures and largely ignore strategic governance of cash, leaving gaps in crisis planning, access monitoring, and retailer acceptance. A strategic cash policy would embed cash into national resilience planning, guarantee minimum access infrastructure, and formalize its role in disaster response, but the extent to which central banks will internalize these resilience externalities and act before cash usage erodes further remains uncertain. [OMFIF]

Norges Bank published a paper that analyzes how tokenized bank deposits and wholesale central bank digital currency (WCBDC) interact with central bank liquidity management under different reserve regimes and settlement designs. They model four configurations combining scarce versus ample reserves with settlement either in traditional reserves via the real-time gross settlement (RTGS) system or in WCBDC on a ledger, showing that liquidity frictions arise mainly when reserves are scarce and tokenized payments can alter banks’ reserve or WCBDC positions close to RTGS cut-off. This matters because late-in-the-day tokenized flows can force abrupt recourse to standing facilities, complicate overnight redistribution, and impair short-term rate control and monetary policy implementation, particularly in corridor or quota systems. Policy responses include deferred settlement for tokenized deposits settled in reserves and time windows or design tweaks for WCBDC activity, but the optimal mix of reserve regime, platform architecture, and operating rules remains unresolved. [Norges Bank]

Rashad Ahmed (Anderson Institute for Finance and Economics) and Iñaki Aldasoro (BIS) posted a paper that analyzes U.S. weekly data from 2019–2025 to test whether deposit rates and reserve‑backed stablecoin holdings are substitutes. They find that higher demand deposit rates significantly slow stablecoin market capitalization growth, exploiting a nonlinear deposit‑rate pass‑through “kink” above a 3% federal funds rate, yielding effects about three times larger. This suggests bank funding conditions and monetary policy transmission now extend into stablecoin markets, with stronger substitution for USDC than USDT, aligning with USDC’s tighter links to U.S. users, and no comparable effect for bitcoin. The findings suggest that deposit‑rate regulation, the design of stablecoin regimes, and the stance of monetary policy can reallocate liquidity between banks and USD stablecoins, although identification relies on a single high‑rate episode and aggregate data that leave user‑level motives and heterogeneity across institutions unresolved. [SSRN]

Norges Bank publishes an assessment arguing that a potential digital euro would have limited structural impact on Norway’s monetary and financial system while marginally increasing competition in niche payment segments. The paper finds that, given Norway’s macro stability, strong institutional credibility, and existing foreign-currency options, a capped, non‑interest‑bearing digital euro is unlikely to trigger material currency substitution away from NOK or meaningfully affect monetary policy transmission, liquidity management, or bank funding profiles. It emphasizes that use would concentrate in tourism-related and cross‑border transactions, where lower fees and pan‑EEA reach could modestly strengthen merchant competition and payment contingency but remain geographically and quantitatively constrained. Legally, enabling use in Norway would require EEA transposition and an ECB–Norges Bank agreement that could constrain domestic discretion on parameters such as holding limits, raising governance questions about central bank independence and rule‑setting. [Norges Bank]

Norges Bank published four reports from its central bank digital currency (CBDC) exploratory work, which last year concluded that introducing a CBDC is currently not warranted. The need for such a currency may, however, change in the future. The four reports published today describe the exploration work and the assessments underpinning the conclusion. Norges Bank will continue to explore tokenization and different forms of CBDC in order to introduce a CBDC should it be necessary The Bank will explore the possibilities and consequences of tokenization through activities such as experimental technology testing, also in collaboration with other payment system participants. One of the papers documents sandbox tests of a two-tier, blockchain-based retail CBDC that central bank exclusively mints and redeems, while banks and other payment service providers manage all customer relationships and data. Tests show that role-based smart contracts can technically enforce this division of responsibilities and give the central bank only aggregate, real-time circulation data, but they also highlight structural privacy risks from linkable pseudonymous addresses and operational rigidity from immutable smart contracts. [Norges Bank]