DFC

"There have been some slight fluctuations in USDD’s price at the start of the new year, as the stablecoin has dipped to the 97-cent range on a few occasions in 2023. After Terra’s stablecoin depegging event in May 2022, USDD started to slip slightly below the $1 peg, causing anxiety in the crypto industry. A number of other stablecoins saw similar deviations. On June 19, 2022, USDD reached a low of 92.8 cents per unit, but the stablecoin managed to regain the $1 peg, trading between 98 cents and 99 cents per unit."

"Even though the rate to borrow Tether is higher than the rate to borrow USD Coin, it may be worthwhile for me to go with the a Tether loan if I think that the odds of Tether failing justify the higher financing cost. We can even go a bit further and say that the 0.9% premium on a Tether loan is the market's best estimate of the odds of Tether losing its peg relative to USD Coin losing its peg. So for all those would-be stablecoin analysts out there, keep your eye on Aave's USD Coin-Tether spread. It's a good indicator of stablecoin risk."

The Bank of Jamaica (BOJ) successfully used its JAM-DEX CBDC to pay wages to, and conduct of transactions by, select workers employed in the Christmas Work Programme from December 19 to 23, 2022. This involved  onboarding three contractors, more than 100 workers and 70 small merchants to the Lynk app within select communities. Onboarded merchants were primarily market vendors and owners of food shops, restaurants and bars.

The Bank of England (BoE) has engaged Consult Hyperion, on a pair of £100,000+ CBDC assignments. The contract award notices for Point-of-sale [PoS] proof-of-concept [PoC] consultancy services and Feasibility study service on the e-commerce of CBDC were published on the UK government’s Contracts Finder service. The website also shows that the BoE is currently working with Oliver Wyman to provide support on paper for research on digital currency and the MIT Digital Currency Initiative. Interestingly, all were awarded under nontransparent procurement processes that allow the BoE to avoid open tenders.

A Mexican central bank digital currency (CBDC) is reportedly still in its initial stages of development, with the general directorate of payment systems and market infrastructures indicating that it is still determining the requirements for its issuance. Also, in response to a transparency request made by El Sol de México, Banxico said that for the fiscal year of 2022 10.22 million pesos (about $535,000) were allocated to the central bank's CBDC project, obtained from the fees charged to financial institutions for using the Interbank Electronic Payment System.

Presentation by Galia Borja Gómez, Subgobernadora, Banco de México* FORO AMFE 2022 "FINANCIAMIENTO ESPECIALIZADO EN UNA ECONOMÍA INTERNACIONAL QUE SE REGIONALIZA. CASO MÉXICO on September 30, 2022.

"Nigeria will ban cash withdrawals from government accounts from March 1 to tackle illicit activity and push toward a cashless economy. "

Algeria's Prime Minister, Aïmene Benabderrahmane, reportedly said that the Bank of Algeria is working to create a digital dinar" as part of the digitization of payments.

"In recent years, the rise in digital payment innovations such as contactless cards and Interac e‑Transfer has spurred a discussion about the future of cash at the point of sale. The COVID-19 pandemic has also contributed to this discussion: While consumers reported that some merchants started to refuse cash early on in the pandemic, such reported refusals dropped as the pandemic progressed. The Bank of Canada’s most recent Merchant Acceptance Survey (MAS) took place in 2018, prompting a need for updated data to study merchant cash acceptance, payment trends and conditions for the potential issuance of a central bank digital currency (Lane 2020, 2021a). Against this background, the Bank conducted the 2021–22 MAS Pilot Study to monitor payment methods accepted by small and medium-sized businesses (SMBs). Survey data was collected from merchants in two batches, in late 2021 and early 2022. Our results show that 97% of SMBs in Canada accepted cash in 2021–22 and only 3% have plans to stop accepting cash. For cards and digital payments, merchant acceptance has increased since 2018. Additionally, the acceptance of different payment methods varies by the size of the merchant, industry and region."

The ECB/Eurosystem is inviting payments/finance experts to express their interest in contributing to the drafting of a rulebook for a digital euro scheme. Applicants will need to be nominated by a relevant European stakeholder association representing key players in the European retail payments market. Candidates will be selected based on their managerial experience in retail payments and the skills required for the role.

A draft law dedicated to the digital ruble has reportedly been filed in the State Duma, the lower house of the Russian parliament. The law introduces rules to determine how the new form of national decree will be issued and amends a series of legal acts to facilitate its implementation. The "Currency Regulation and Currency Control" law will be amended to secure the digital ruble's legal tender status, and changes to the federal law on "Personal Data" will allow the central bank to tap into personal information without asking for consent.

"Here are four things that Tether can do to ensure that the next time the crypto economy undergoes a shock, tether stays steady."

Central Bank of the Republic of Turkey (CBRT) provided an update on the proof-of-concept phase of its Digital Turkish Lira Project. Payment transactions were successfully executed on the Digital Turkish Lira Network, and in the first quarter of 2023, closed-circuit tests will be carried out with technology stakeholders. The findings obtained from the tests will be shared with the public in a comprehensive evaluation report. The tests will then be expanded later in 2023 to include selected banks and financial technology companies, followed by broad participation pilot tests. Tests will include checking out how the distributed ledger technology (DLT) based platform will integrate with existing payment ecosystems. Also, throughout 2023, priority will be given to the legal framework and building out digital identification infrastructure.

The Bank of Canada published the results from the 2021 Methods-of-Payment (MOP) Survey. It finds that while fewer Canadians are holding cash, those who do have cash tended to hold higher amounts over time. This is associated with fewer trips to obtain cash, but larger amounts withdrawn for a given trip, on average. Views about the features of cash have changed somewhat in recent years, though cash is still viewed quite positively in terms of acceptance, cost, ease of use and security. Most Canadians have no plans to stop using cash in the future.

As part of its e-CNY central bank digital currency (CBDC) pilot, the People's Bank of China (PBOC) has launched a "hongbao" red packet feature, that allows users to send each other digital yuan-filled red packets. This comes just a month ahead of the Lunar New Year, when the Chinese traditionally give out red envelopes filled with cash to family and friends as a symbol of well wishes. The e-CNY app has been available in limited trials since 2020, but it continues to be an uphill battle to convince the Chinese public to use it. Digital yuan transactions hit $88 billion yuan ($12 billion) at the end of 2021, crossed the $100 billion yuan threshold at the end of August 2022.

The National Bureau of Economic Research (NBER) published a paper that shows how stablecoins can maintain a constant price even though they face run risk and pay no interest. Stablecoin holders are indirectly compensated for stablecoin run risk because they can lend the coins to levered traders. Levered traders are willing to pay a premium to borrow stablecoins when speculative demand is strong. Therefore, the stablecoin can support a $1 peg even with higher levels of run risk. However, when speculative demand falls, stablecoin issuers can keep their debt trading at par only by moving to a safer portfolio or allowing redemptions. Such reallocation or change in stablecoin supply can cause disruptions in the real economy. Stablecoin issuers will need to adjust quickly if expected returns for cryptocurrencies fall; otherwise, they face the risk of collapse. These adjustments can cause disruptions in the markets they invest in, like the commercial paper market that provides financing to the real economy.

President Surangel Whipps Jr. reportedly confirmed that the Republic of Palau continues to work with Ripple on the creation of a government-issued US dollar-backed stablecoin (the US dollar is Palau's national currency). Last year Ripple announced a partnership with Palau to explore a national digital currency and its use cases based on XRP Ledger, initially focusing on cross-border payments.

"People seem to think that cash is free, but it really isn’t. The cost to merchants is significant (which is why an increasing number of them don’t take it) and the cost to society should not be overlooked. So should we really be imposing a stealth tax on merchants by forcing them to accept cash any more than we should be forcing them to accept Bitcoin or, for that matter, cards? The answer is, frankly, no."

"The e₹-R would be in the form of a digital token that represents legal tender. It would be issued in the same denominations that paper currency and coins are currently issued. It would be distributed through intermediaries, i.e., banks. Users will be able to transact with e₹-R through a digital wallet offered by the participating banks and stored on mobile phones / devices. Transactions can be both Person to Person (P2P) and Person to Merchant (P2M). Payments to merchants can be made using QR codes displayed at merchant locations. The e₹-R would offer features of physical cash like trust, safety and settlement finality. As in the case of cash, it will not earn any interest and can be converted to other forms of money, like deposits with banks."

“The combination of Lynk - Jamaica’s most innovative Digital Wallet - and JAM-DEX - Jamaica’s CBDC - offers a solution to three public policy objectives in the financial system - inclusion, security and convenience. As technology rapidly evolves, day-to-day and business payment transaction behaviours are also changing,” said Vernon James, Lynk CEO.

"How might stablecoin affect inflation? It depends on where the stablecoin issuers put the reserve assets at and whether the issuers are bank or non-bank."

"This chapter is organised as follows. To set the stage, it first describes today's monetary system and the high-level objectives it needs to achieve, and to what extent changes in technology and the economic environment have opened up room for improvement. The next section discusses the promise and pitfalls of crypto and DeFi innovations. The chapter then discusses a vision for the future monetary system, built on central bank public goods. The final section concludes."

It's common knowledge that stablecoin issuers like Tether, Paxos, and Circle run pegs. What isn't commonly known is that crypto exchanges like Binance also run their own versions of stablecoin pegs.

A joint research effort between the Federal Reserve Bank of Boston and the Massachusetts Institute of Technology (MIT) into the technical feasibility of a potential central bank digital currency is now complete. Early this year, Project Hamilton published its research on a transaction processor for a theoretical high-performance and resilient CBDC. The processor was developed as open-source research software, called OpenCBDC, and project leaders urged global contributors to continue working on it. The project was announced in 2020, and in February 2022, the Boston Fed and MIT released the OpenCBDC software and a whitepaper describing their initial findings. They plan to release additional retrospectives on Project Hamilton’s findings in the coming months.