DFC

The IMF's Staff Report for the Nigeria 2022 Article IV Consultation noted that the uptake of the Central Bank of Nigeria's eNaira in the first year has been slow with retail wallet downloads amounting to 942,000 at end-November 2022—only 0.8 percent of active bank accounts. Also, the total number of eNaira retail transactions since the inception (around 802,000) is less than the number of eNaira wallets, which indicates that wallets are not actively used. The IMF report recommended that the eNaira be integrated into the existing mobile payment system to facilitate interoperability between mobile money operators, and optimize the last-mile delivery of social assistance.

The Reserve Bank of Australia (RBA) and Digital Finance Cooperative Research Centre (DFCRC) announced 14 use case proposals, along with their providers, that will participate in RBA/DFCRC central bank digital currency (CBDC) pilots. The cases include offline payments, tax automation and a CBDC for “trusted Web3 commerce,” with participants ranging from banks — such as Commonwealth Bank and Australia and New Zealand (ANZ) bank — to payment providers like Mastercard. According to the September 2022 RBA white paper, use case end users will be selected by the use case providers. A report on the project is expected to be published around the middle of the year.

"In general, the digital euro — as is the case with digital money in general — is desired as many benefits can be envisioned. There are substantial benefits for having digital cash as long as key principles of privacy and freedom rights are not affected. Given this, the digital euro is generally desired — be it in the form of the ECB’s digital euro or in the form of euro-denominated stablecoins. These topics need more investigation, also because the market share of US dollar-denominated stablecoins yields more than 95%. In other words, other currencies besides the US dollar do not play a significant role today with regards to stablecoins."

Financial interoperability requires a stable price as means of value exchange. The first implementation of wrapcbdc is Convexity eNaira(CNGN) which is currently available on the Bantu Network as well as Binance Smart Chain. CNGN creates possibilities in payments, lending, investing, trading and trade finance.

The Bank of Canada (BoC)published an article that considers the pros and cons  of offline central bank digital currency (CBDC). An offline CBDC would allows users to transact while none of them are connected to the internet and could complement bank notes. A balance must be struck between compliance, security requirements and user needs, for example, by limits on holdings, transaction amounts and the duration of offline functionality. The article mentions that, while some central banks have deployed offline devices as part of pilots, no commercial, turn-key solutions are available to implement lengthy and indeterminate ("extended") offline functionality. I don't know what is meant by "commercial turnkey solutions" but a number of production-ready solutions offer extended offline functionality, such as those of Crunchfish, G+D, IDEMIA and WhisperCash. Also, those firms would disagree with the article's assertion that "adopting a security posture in terms of limits, controls and functionality, where risks are sufficiently mitigated, is still a challenge for technology available today"! But otherwise it's good to see a G20 central bank advocating for offline CBDC functionality, which I view as essential to successful CBDC take-up in many countries.

Oz Shy, Senior Policy Advisor and Economist at the Federal Reserve Bank of Atlanta, has compiled a spectacularly comprehensive literature review on consumer demand for cash covering 271 papers. Its publication in the Journal of Economic Literature is forthcoming. “Why is economic research on cash needed?” asks Shy. “A short and simple answer to this question is that cash does not seem to be going away.

Tom Emmer, a member of the US House of Representatives, has introduced a new bill to prohibit the Federal Reserve from issuing a retail CBDC. “My bill, which prohibits the Fed from issuing a CBDC directly to individual Americans, is a statutory prohibition on a surveillance tool that could be used to kill private sector innovation and deflate the dollar’s dominance.”

High-level summaries of sessions on digital euro cross-currency and conditional payments, scheme access, form factor and interface, on-boarding, end-user services and dispute management, compensation model, rollout approach, and rulebook development.

The IMF published a technical report that analyzes the retail payments markets of Jordan to identify pain points that retail central bank digital currency (CBDC) could address. It found that retail payment systems in Jordan are highly integrated, enabling customers to make interoperable transactions between banks and non-bank payment service providers. The country’s cross-border remittance market was competitive, but could benefit from the reduced transactions cost associated with retail CBDC. Despite generally accessible and appropriate product offerings and an enabling environment, various barriers prevent customers from extensively using digital means of payment. Hence, retail CBDC might create an opportunity to overcome these barriers, thus making a cross-border retail CBDC worth consideration. However, it recommended that the Central Bank of Jordan (CBJ) rigorously evaluate benefits against risks and costs before forging ahead. Meanwhile, the CBJ should develop capacity to address technology, cybersecurity, financial integrity, and legal issues. [IMF]

Bank for International Settlements (BIS) General Manager Agustín Carstens called for  the development of a  “unified ledger” that would allow different parts of the digital financial ecosystem to work together seamlessly. More specifically, such a ledger could bundled together central bank digital currencies (CBDCs) and tokenized deposits, linked with smart contracts, to create a "money Lego" ecosystem. And Mr. Carstens claimed that all of a unified ledger's potential benefits  could be achieved on permissioned platforms with various degrees of centralization.

Coinbase will support for Euro Coin (EUROC) on the Ethereum network (ERC-20 token) and trading will commence as soon liquidity conditions are met, in regions where trading it is supported. The EUROC token will launch with the "experimental" label, designated for new or low volume tokens on the exchange.

The Central Bank of Nigeria (CBN) is in talks with potential technology partners to develop a new system to run and manage its eNaira central bank digital currency (CBDC). The CBN wants to develop its own CBDC software so that it can keep full control of the underlying technology. The CBN, in collaboration with Bermuda-based Bitt inc., launched the eNaira in October 2021 which, like other CBDC pilots and launches, has struggled to win wide adoption, although not necessarily because of the technology platform.

"Papers in this BIS volume were prepared for a meeting of emerging market Deputy Governors organised by the Bank for International Settlements on 9–10 February 2022. "

"There’s an excellent chance governments worldwide will soon force their citizens to use central bank digital currencies (CBDCs). CBDCs enable all sorts of horrible, totalitarian things."

FinDev Gateway published a paper that draws on the growing number of central bank digital currency (CBDC) launches, pilots and experiments since 2013, as well as findings from the latest Alliance for Financial Inclusion (AFI) report on the role of CBDCs for financial inclusion in the developing world, to consolidate key learnings to empower decision-makers on their CBDC journeys.

"It's good to see people getting more critical about cashless society, but often their main concern is about governments doing surveillance of our digital payments. In reality, there are at least 9 other reasons to fight cashless society, all of which are just as important" [Brett Scott]

"In part one, we looked at the Bank of England’s difficulties establishing the “need” for a digital pound (“Britcoin”). Here we’re moving on from the cheap thrills of theorisation to the fibrous goodness of pragmatics."

"If you build it, maybe they will come, maybe not. Or maybe you don’t care, and you just want to build it anyway. That seems to be the attitude being taken by the Bank of England, which launched its consultation on a ‘digital pound’ — which, painfully, appears to have assumed the moniker Britcoin — to mild fanfare last week."

To advance in the design of Real Digital, on 11/30/21, BC launched a special edition of the Real Digital Challenge Laboratory of Financial and Technological Innovations, the LIFT Challenge Real Digital, which aims to evaluate its use cases and technological viability . Based on the results obtained in the challenge, BC will advance in a pilot phase, which should start in the second half of 2023 and extend throughout 2024.

"Proof of reserves is all the rage on crypto platforms. The idea is that if the platform can prove to its customers' satisfaction that their deposits are fully matched by equivalent assets on the platform, their deposits are safe. And if the mechanism they use to prove this uses crypto technology, that's even better. Crypto tech solutions have surely got to be much more reliable than traditional financial accounts and audits - after all, FTX passed a U.S. GAAP audit. No, they aren't. Proof of reserves as done by exchanges like Binance does not prove that customer deposits are safe. It is smoke and mirrors to fool prospective punters into relinquishing their money, just like claims that exchanges and platforms are "audited" or have "insurance". There are no audits in the crypto world, there is no insurance, and as I shall explain, proof of reserves proves absolutely nothing." [Frances Coppola]

"For stablecoins to flourish as widely used payment vehicles they require a proper regulatory framework. A good starting point is to adhere to the principle of “same risk, same activity, same regulation.” Another worthwhile principle is to not recreate the wheel. With this in mind, this Commentary offers some suggestions as to how stablecoins and their issuers could be regulated using the existing regulatory frameworks that are applied to retail payments-system providers and deposit-taking institutions. These existing frameworks include the Bank Act, its provincial statutory counterparts, and the relatively recent Retail Payments Activities Act. We paraphrase the Financial Stability Board’s high-level recommendations for global stablecoins – many of which apply in a domestic setting as well – and assign the legislation/recommendations/authority based on the Canadian context." [Jeremy Kronick & Mark Zelmer, CD Howe]

SUERF published an abbreviated version of the 2022 BIS paper on African CBDC developments.  Like their peers, a key motivation for African central banks is achieving greater payment system efficiency, but they place more emphasis on financial inclusion and potential benefits for monetary policy. But Africans are more worried than other regions about cyber risks and cross-border spillovers and are also concerned about high operational costs.

"Let’s take a look at one of the biggest stablecoins in crypto, the USDC token. Using a few specific examples, we will show: (1) stablecoins are regularly used by dubious actors to move massive sums of money internationally with minimal oversight, (2) stablecoins are regularly used in fraudulent transactions, and (3) stablecoin issuers provide shadow banking services for other crypto entities that are unable to access traditional banking services. "