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The Macroeconomic Implications of CBDC: A Review of the Literature
The Macroeconomic Implications of CBDC: A Review of the Literature
The US Federal Reserve Board (FRB) published a paper that provides an overview of the literature on how a CBDC would affect the banking sector, financial stability, and the implementation and transmission of monetary policy in a developed economy such as the United States. A CBDC has the potential to improve welfare by reducing financial frictions in deposit markets, by boosting financial inclusion, and by improving the transmission of monetary policy. However, a CBDC also entails noteworthy risks, including the possibility of bank disintermediation and associated contraction in bank credit, as well as potential adverse effects on financial stability. A CBDC also raise questions regarding monetary policy implementation and the footprint of central banks in the financial system. Ultimately, the effects of a CBDC depend critically on its design features, particularly remuneration.
#Fintech#CBDC#UnitedStates#DFC
·federalreserve.gov·
The Macroeconomic Implications of CBDC: A Review of the Literature
Bahamas central bank shares CBDC lessons from Sand Dollar's first two years
Bahamas central bank shares CBDC lessons from Sand Dollar's first two years
In a recent speech, Central Bank of the Bahamas (CBB) Governor John Rolle described four central bank digital currency (CBDC) factors that the Bahamas’ experience suggests are particularly important – and that remain important to its own efforts to encourage CBDC adoption. Those factors are: building a network of merchants that accept and encourage CBDC use; achieving interoperability with the traditional banking system; enlisting participation from the traditional banking sector and credit unions; and the importance of “user education” and “inspiring user confidence”.
#Fintech#CBDC#Caribbean#Bahamas#DFC
·globalgovernmentfintech.com·
Bahamas central bank shares CBDC lessons from Sand Dollar's first two years
Proof of Reserves | Armanino
Proof of Reserves | Armanino
"The digital asset industry lacks the standards to ensure digital asset service providers hold enough assets to cover customer deposits. Gaps in trust result in lower rates of adoption and higher counterparty risks. TrustExplorer is an objective third-party that instills confidence providers have sufficient digital assets to meet users’ liabilities and enables validation that account data was included in the review."
#Fintech#CBDC#FTX#ProofOfReserves#DFC
·armaninollp.com·
Proof of Reserves | Armanino
Russia’s Digital Ruble Integrated Into Banking App
Russia’s Digital Ruble Integrated Into Banking App
VTB Bank has reportedly become the first Russian bank to add the digital ruble to its mobile application. The integration is currently being tested with accounts set up for legal entities. Select customers will be granted access in the coming months and will be able to join the trials.
#Fintech#CBDC#Russia#DFC
·news.bitcoin.com·
Russia’s Digital Ruble Integrated Into Banking App
Bank of England Looking for CBDC Solution Architect
Bank of England Looking for CBDC Solution Architect
The Bank of England is recruiting for Solution Architects within the Technology team of its Central Bank Digital Currency (CBDC) Unit. The CBDC Unit is responsible for analyzing the opportunities and challenges presented by CBDC and developing the design of a CBDC. The Unit’s activities include macroeconomic analysis, work on functional design, exploration of technology options, and engaging private-sector and international counterparts. The responsibility of the job holder will be to explore the technology design and architecture options for a potential retail CBDC.
#Fintech#CBDC#UnitedKingdom#DFC
·bankofengland.taleo.net·
Bank of England Looking for CBDC Solution Architect
A LeVeL Paying Field: Cryptographic Solutions towards Social Accountability and Financial Inclusion
A LeVeL Paying Field: Cryptographic Solutions towards Social Accountability and Financial Inclusion
Crypto-assets rely on fixed public/private key algorithms, which are resting targets for advanced cryptanalysis. BitMint's BitMintLeVeL protocol allows each holder to pick their own public/private key algorithm, so that an attacker would have to compromise all the algorithms used by all previous coin owners - a substantial security upgrade relative to existing crypto-assets. LeVeL can be applied to crypto-assets and fiat currency to effectively serve as a claim check. BitMintLeVeL can achieve decentralization via BitMint's InterMint: Money is minted by many smoothly interchangeable mints competing for traders.
#Fintech#CryptoAssets#CBDC#BitMint#DFC
·eprint.iacr.org·
A LeVeL Paying Field: Cryptographic Solutions towards Social Accountability and Financial Inclusion
New York Fed and Monetary Authority of Singapore Collaborate to Explore Potential Enhancements to Cross-Border Payments Using Wholesale CBDCs
New York Fed and Monetary Authority of Singapore Collaborate to Explore Potential Enhancements to Cross-Border Payments Using Wholesale CBDCs
The Federal Reserve Bank of New York’s New York Innovation Center (NYIC) and the Monetary Authority of Singapore (MAS) announced Project Cedar Phase II x Ubin+, a joint experiment to investigate how wholesale central bank digital currencies (CBDCs) could improve the efficiency of cross-border wholesale payments involving multiple currencies. Project Cedar Phase II x Ubin+ will enhance designs for atomic settlement of cross-border cross-currency transactions, leveraging wholesale CBDCs as a settlement asset.
#Fintech#CBDC#wCBDC#CrossBorder#UnitedStates#DFC
·newyorkfed.org·
New York Fed and Monetary Authority of Singapore Collaborate to Explore Potential Enhancements to Cross-Border Payments Using Wholesale CBDCs
The Trilemma of Central Bank Digital Currencies
The Trilemma of Central Bank Digital Currencies
"Countries from China to Sweden have a variety of rationales for seeking to modernize their payments technologies. Ultimately, however, central banks weighing whether to launch a digital currency must recognize that if they do, they can have confidentiality of transactions or financial stability, but not both."
#Fintech#CBDC#DFC
·project-syndicate.org·
The Trilemma of Central Bank Digital Currencies
Major stablecoins destabilized as market volatility and redemptions surge
Major stablecoins destabilized as market volatility and redemptions surge
Significant market volatility this week induced by the collapse of the FTX exchange has impacted stablecoins with many of them depegging temporarily. Tether's USDT temporarily declined to $0.97 on November 10 as redemptions reportedly surpassed $600 million over the previous two days. Circle’s USDC fell to $0.977 very briefly. Both rapidly regained their pegs. Yesterday I reported that USDT had spiked down and USDC spiked up, but different sources tell different stories. Yesterday's USDC graphic sourced CoinMarketCap.com whereas CoinGecko.com tells a different story (see below). with USDC also spiking down like USDT did. In any case, lots of volatility!
#Fintech#CryptoAssets#Stablecoins#Circle#Tether#USDT#USDC#DFC
·cointelegraph.com·
Major stablecoins destabilized as market volatility and redemptions surge
IMF proposes DLT, DeFi-inspired alternative to cross border CBDC
IMF proposes DLT, DeFi-inspired alternative to cross border CBDC
"Last week the IMF published a paper on X-C, a platform for cross border payments, co-authored by the IMF and members of MIT’s Digital Currency Initiative. The solution proposes a global centralized ledger for cross border payments in which central banks, banks and payment providers participate. An X-C platform would not just centralize payments and settlement, but also provide a foreign exchange (FX) market, hedging and compliance. "
#Fintech#CBDC#CrossBorder#Payments#IMF#DFC
·ledgerinsights.com·
IMF proposes DLT, DeFi-inspired alternative to cross border CBDC
Project Tourbillon demonstrates cash-like anonymity for retail CBDC
Project Tourbillon demonstrates cash-like anonymity for retail CBDC
The Bank for International Settlements (BIS) published an update on Project Tourbillon, which explores privacy, security and scalability for retail central bank digital currency (CBDC). The experiment proposes a concept of payer anonymity, providing cash-like anonymity to the payer, combining proven technologies such as blind signatures and mix networks with the latest research on cryptography and CBDC design suggested by David Chaum and Thomas Moser’s eCash 2.0 platform. Project Tourbillon explored not only current, but also quantum-safe blind signatures, an important cryptography used in both designs to guarantee privacy and future security. Tourbillon also demonstrated that implementing quantum-safe cryptography is possible, but it severely limits performance.
#Fintech#CBDC#Privacy#QuantumComputing#Anonymity#BIS#DFC
·bis.org·
Project Tourbillon demonstrates cash-like anonymity for retail CBDC
Is the Digital Euro a Solution in Search of a Problem?
Is the Digital Euro a Solution in Search of a Problem?
"The question does not consider that the digital euro is also to make central bank money available across a broader range of financial market infrastructures to ensure access to central bank money remains equitable and supports competition in payments. The question and more so the responses serve as a reminder that central banks seemingly continue to struggle to present a convincing case for CBDC. Arguments appear largely defensive. During the seminar, the main arguments for a digital euro brought forward were the decline in cash, respond to consumer demand for cheap and secure digital payments, safety of central bank money as the basis of trust, preservation of national sovereignty, protect the transmission mechanism of monetary policy, everyone else is doing one. Those may indeed just not ring persuasive enough. CBDC should be seen as a driver of change and to advance diversification in payments, respond to new payment needs and augment functionality and utility of central bank money."
#Fintech#CBDC#Eurozone#DFC
·linkedin.com·
Is the Digital Euro a Solution in Search of a Problem?
The case for convenience: how CBDC design choices impact monetary policy pass-through
The case for convenience: how CBDC design choices impact monetary policy pass-through
The BIS published a paper that that explores the implications of central bank digital currency (CBDC) remuneration and convenience, focusing on the US monetary system with its large excess reserves, with the rate of interest on reserves (IOR) as the main monetary policy tool. The paper finds that at low IOR rates, large banks are non-responsive to IOR rate changes, leading to weak pass-through of IOR rate changes to deposit rates. Here an interest-bearing CBDC could provide competitive pressure to drive up deposit rates and improve monetary policy transmission. However, increasing remuneration past a point where it becomes a binding floor, increases deposit rates but leads to greater inequality of market shares in both deposit and lending markets, and reducing deposit rate responsiveness to IOR changes... The paper also finds that payment convenience is a crucial aspect of CBDC design that may be more desirable than remunerating CBDC. Payment convenience could be driven by a host of features that enhance the performance of CBDC as a medium of exchange. Examples include the quality of the user interface, processing speed, privacy and access to markets. A highly convenient CBDC produces sufficient competitive pressure in deposit markets to raise deposit rates for any given level of IOR and increases the responsiveness of deposit rates to IOR rate changes. Increasing payment convenience also has favorable effects on market composition by levelling the playing field
#Fintech#CBDC#MonetaryPolicy#BIS#DFC
·bis.org·
The case for convenience: how CBDC design choices impact monetary policy pass-through
Bank of Korea finds performance issues with CBDC blockchain tech
Bank of Korea finds performance issues with CBDC blockchain tech
"The Bank of Korea completed the second phase of its retail central bank digital currency (CBDC) simulations in late June. While it was happy with some aspects of its digital won simulations, such as using CBDC for offline payments and cross border remittances, it found the overall performance of the Ethereum-based blockchain insufficient, including the scaling solutions and privacy technology that was tested. One of its tests simulated peak demand by sustaining 4,200 transactions per second (TPS) for 30 minutes. At that activity level, users sometimes had to wait up to a minute for a response (latency)." http://www.bok.or.kr/portal/bbs/P0000559/view.do?nttId=10073660&menuNo=200690
#Fintech#CBDC#Asia#Korea#Offline#DFC
·ledgerinsights.com·
Bank of Korea finds performance issues with CBDC blockchain tech
Coinbase surviving on USDC interest as YTD losses top $2 billion
Coinbase surviving on USDC interest as YTD losses top $2 billion
"Asked about Coinbase’s claim that traders are moving ‘offshore’ to exchanges like Binance that have rolled out zero-fee BTC transactions, chief operating officer Emilie Choi clarified that “companies that say zero fee are still generating a spread” and Coinbase was “not going to compete on price because of the premium nature of our offering.” Exchanges based in less, er, rigorous regulatory climates also get to offer products that Coinbase can’t legally provide. Armstrong said he repeatedly told policy makers that “by pushing so hard on local companies, you’re not actually protecting investors. You’re just encouraging them to move offshore to even less regulated options, right?”"
#Fintech#CryptoAssets#Stablecoins#Circle#Coinbase#USDC#Binance#DFC
·coingeek.com·
Coinbase surviving on USDC interest as YTD losses top $2 billion
Payments, money and finance in the digital era (Part 2)
Payments, money and finance in the digital era (Part 2)
Two recent papers by Christian Pfister examine the state of play and short- to long-term prospects for payments, money and finance in the digital era. The second paper, which focuses on longer-term issues, recommends that if a CBDC were to be issued, it should be aimed to stimulate innovation and not lead, even inadvertently, to the marginalization of the private sector. It concludes with a set of recommendations, including that the central bank should continue to issue banknotes, but in order to discourage their illicit use, gradually withdraw the high-denominations. Also, if retail CBDC is issued, it should allow offline transactions. Also there should be a threshold of anonymity for very small-value transactions to facilitate its substitution for cash without facilitating illicit transactions. Above this threshold, allow transactions under pseudonyms, with the possibility for the judicial authorities to request the lifting of pseudonymity, and limit the collection of personal information to what is necessary for reporting entities to fulfil their regulatory obligations. Christian recommends not limiting individual CBDC holdings, except for a transitional period, and remunerating at an interest rate linked by a fixed spread under the monetary policy rate. In addition, he recommends the issuance of wholesale CBDC on a distributed ledger technology (DLT) platform, and allow, but not force, payment service providers, including regulated issuers of retail stablecoins, to back their issuance with them.
#Fintech#CryptoAssets#Stablecoins#CBDC#DeFi#DFC
·fondapol.org·
Payments, money and finance in the digital era (Part 2)
Payments, money and finance in the digital era (Parts 1)
Payments, money and finance in the digital era (Parts 1)
Two recent papers by Christian Pfister examine the state of play and short- to long-term prospects for payments, money and finance in the digital era. The first paper focuses on short- to medium term developments, and two forms of public sector, intervention; regulatory and production-based. He argues that the regulatory approach should be considered against the potential costs, like the creation of barriers to entry and protection of established players, which makes it ambiguous from the point of view of competition. Production-based intervention, such as the introduction of central bank digital currency (CBDC), aiming to provide an alternative to private supply is much stronger than regulation, and has its own ambiguities. Hence, before intervening, the public authority should ensure that private initiatives are unable to meet a clearly expressed need (i.e., there must be a “market failure”), and the benefits outweigh any disadvantages.
#Fintech#CryptoAssets#Stablecoins#CBDC#DeFi#DFC
·fondapol.org·
Payments, money and finance in the digital era (Parts 1)
A Multi-Currency Exchange and Contracting Platform
A Multi-Currency Exchange and Contracting Platform
The IMF published a working paper that presents a vision for a multilateral platform that could improve cross-border payments, as well as related FX transactions, risk sharing, and more generally, financial contracting. It proposes a design that centralizes payments and settlement and that integrates functionality needed for cross-border transactions: streamlining compliance, reducing the cost of FX conversion, and better managing financial risks. The paper also shows how new technologies can be leveraged to better organize payments and associated financial markets. These new technologies are ledgers with unique states, programmability that allows for smart contracts, and encryption which ensures privacy, and can alleviate the underlying obstacles to trade. These technologies allow the design of a multilateral exchange system where participants can truthfully share information with smart contracts but can retain privacy relative to other parties.
#Fintech#CBDC#wCBDC#CrossBorder#Payments#IMF#DFC
·imf.org·
A Multi-Currency Exchange and Contracting Platform
Advances in the New York Fed's Digital Currency Experimentation
Advances in the New York Fed's Digital Currency Experimentation
The New York Fed provided an update on its Project Cedar,  the inaugural project of the New York Innovation Center (NYIC). It built and tested a working prototype distributed ledger technology (DLT) solution for wholesale FX settlement that results in instant and atomic settlement in which a wholesale central bank digital currency (CBDC) is the settlement asset. "Results from the experiment indicated that settlement could occur in fewer than 10 seconds on average and that horizontal scaling was possible. This indicates that a modular ecosystem of ledgers has the potential for continued scalability, and that DLT could enable settlement times well below the current industry standard of two days, with the added guarantee of atomic settlement." Download report here: https://www.newyorkfed.org/aboutthefed/nyic/project-cedar
#Fintech#CBDC#wCBDC#FX#Settlement#UnitedStates#DFC
·newyorkfed.org·
Advances in the New York Fed's Digital Currency Experimentation
HSBC, Visa, G+D winners of Hong Kong's Global Fast Track CBDC competition
HSBC, Visa, G+D winners of Hong Kong's Global Fast Track CBDC competition
The Hong Kong Monetary Authority (HKMA) reportedly announced the six winners of its Global Fast Track CBDC competition, who will now work with the HKMA on central bank digital currency (CBDC) research projects: ARTA TechFin Corporation Limited (technology), Bank of China (Hong Kong) (use case), Giesecke+Devrient (G+D Filia) (technology), Hang Seng Bank (use case), HSBC (ecosystem) and Visa (ecosystem).
#Fintech#CBDC#HongKong#DFC
·ledgerinsights.com·
HSBC, Visa, G+D winners of Hong Kong's Global Fast Track CBDC competition
EU Delays Vote on MiCA Crypto Legislation Until February
EU Delays Vote on MiCA Crypto Legislation Until February
"European Union (EU) lawmakers [reportedly] won’t vote on the Markets in Crypto Assets regulation (MiCA) until February, likely meaning further delays in the landmark licensing regime for crypto companies within the bloc. A previous tentative plan for the parliament to vote at its December plenary session has been abandoned given the length and complexity of the text. EU procedures require legal acts such as MiCA, which was negotiated in English, to be available in all the bloc's 24 official languages."
#Fintech#CryptoAssets#Stablecoins#Regulation#Europe#DFC
·coindesk.com·
EU Delays Vote on MiCA Crypto Legislation Until February
Call for interest: technical talks on programmable digital euro payments
Call for interest: technical talks on programmable digital euro payments
The European Central Bank (ECB) is inviting experts from the payment industry to take part in technical talks, in order to explore options for the provision of programmable payment services in digital euro. The talks will center around the questions regarding retail payments use cases, standards, and back-end IT architecture core payment settlement capabilities. The talks are expected to take place in December 2022. They will be held at expert level as closed sessions with members of the ECB’s digital euro project team, and observers from euro area national central banks.
#Fintech#CBDC#Eurozone#ECB#SmartContracts#Programmability#DFC
·ecb.europa.eu·
Call for interest: technical talks on programmable digital euro payments
MAS Launches Expanded Initiative to Advance Cross-Border Connectivity in Wholesale CBDCs
MAS Launches Expanded Initiative to Advance Cross-Border Connectivity in Wholesale CBDCs
The Monetary Authority of Singapore (MAS) launched Ubin+, an expanded collaboration with international partners on cross-border foreign exchange (FX) settlement using wholesale central bank digital currency (CBDC).  Ubin+ will develop technical standards and infrastructure to support cross-border connectivity, interoperability and atomic settlement of digital currency transactions across platforms using distributed ledger technology (DLT), and non-DLT based financial market infrastructures. It will also evaluate the efficiency and risk implications of such platforms, and establish the related policy frameworks. (The BIS Innovation Hub led Project Mariana that is investigating the use of decentralized finance (DeFi) protocols and automated market makers (AMMs) to automate FX trading and settlement, is part of Ubin+.)
#Fintech#CBDC#wCBDC#CrossBorder#Payments#BIS#Singapore#DFC
·mas.gov.sg·
MAS Launches Expanded Initiative to Advance Cross-Border Connectivity in Wholesale CBDCs