DFC

The Central Bank of Iran published a draft document outlining the "goals, dimensions, threats and opportunities for the development" of a digital rial in August 2022.

"All things considered, then, it seems that blockchains are neither necessary nor desirable for a retail digital currency and since — according to Bank of England, the Fed, the Bank of Japan and others — there is no “burning platform” for retail CBDCs and it will take time for them to reach the general public, there is plenty of time to explore other architectures more suited to an electronic fiat alternative."

The final decision on the National Bank of Kazakhstan's Digital Tenge project has reportedly not yet been made, but is expected to be announced by the end of 2022, the project’s head Ainur Kenzhayeva said in an interview with The Astana Times. The team is working now to expand the platform’s functionality. A pilot project with the participation of real users in a limited loop is also planned for this fall.

The Hong Kong Monetary Authority (HKMA) released a position paper that sets out its policy stance on retail central bank digital currency (CBDC) and outlines its next steps. It was informed by two rounds of market consultation, one on high-level technical design and one on key policy and design issues. Taking into account the feedback received and further study by the central bank's staff, the HKMA will start paving the way for possible implementation of e-HKD in the future. A three-rail approach will be adopted, one of which will be a pilot involving selected banks, payment companies and other technology firms, plus their staff and a small number of clients.

Decentralized finance (DeFi) is expanding into the world of interest rate swaps (IRS), a derivative instrument for exchanging fixed and variable interest rates, which account for more than $1 quadrillion in exchanged value per annum in traditional finance. DeFi firm Voltz Labs has launched a non-custodial automated market making (AMM) IRS trading platform based on the Aave and Compound DeFi USDT, USDC, DAI and ETH lending markets. However, IRS AMMs are challenged by DeFi markets' lack of fixed-rate products off which to price swaps. (Traditional markets offer both variable- and fixed-rate products.)

Project Cedar, which is being run out of the BIS Innovation Center at the New York Fed, is looking into wholesale central bank digital currency (CBDC) from a research standpoint. It's led by Per von Zelowitz, and what they're trying to do, according to the Boston Fed's Robert Bench, is "understand what are the requirements, or what are the things they need to think about, for the obligations of New York, which is the world's leading capital market center?"

"Following the US President’s Executive Order, New Reports Outline Recommendations to Protect Consumers, Investors, Businesses, Financial Stability, National Security, and the Environment."

The U.S. Treasury published a report on the Future of Money and Payments that reviews the current U.S. system of money and payments, including developments in instant payments and stablecoins. It describes design choices for a potential U.S. central bank digital currency (CBDC) and recommends that the Fed advance work on it, in case one is determined to be in the national interest. Among other things, the report also encourages use of instant payment systems to support a more competitive, efficient, and inclusive U.S. payment landscape, the establishment of a federal framework for payments regulation to protect users and the financial system, while supporting responsible innovations in payments, and prioritizing efforts to improve cross-border payments, both to enhance payment system efficiency and protect national security.

The Central Bank of Nigeria eNaira CBDC pilot platform went down for a few hours for "maintenance" on September 15, 2022.

The European Central Bank (ECB) will collaborate with five companies to develop potential user interfaces for the digital euro. The aim of this prototyping exercise is to test how well the technology behind a digital euro integrates with prototypes developed by companies. Simulated transactions will be initiated using the front-end prototypes developed by the five companies and processed through the Eurosystem’s interface and back-end infrastructure. The selected companies will each focus on one specific use case of a digital euro; peer-to-peer online payments (CaixaBank), peer-to-peer offline payments (Worldline), point of sale payments initiated by the payer (EPI), point of sale payments initiated by the payee (Nexi) and e-commerce payments (Amazon).

The BIS Innovation Hub's Hong Kong Centre and the Hong Kong Monetary Authority have launched Project Dynamo, which aims to deliver a prototype for the compliant use of decentralised finance (DeFi) tools, such as blockchain and smart contracts, to improve access to finance for unfunded and underfunded small and medium enterprises (SMEs). The research will extend into related topics such as decentralised identifiers and the interoperability of digital payment methods such as stablecoins and central bank digital currencies.

The first edition of Deloitte's periodic series that sheds light on CBDCs and their impact on payments globally.

"China is trapping African nations into debt and as part of “forgiving” that debt China requires them to use the Chinese CBDC the Digital Yuan for all international commerce, trade and finance payments. Thereby establishing the Digital Yuan as the de facto Central Bank Digital Currency (CBDC) currency to the fastest growing economies in the world. Hence another reason why CBDCs are inevitable. "

"We develop a medium size dynamic stochastic general equilibrium (DSGE) model to assess the macroeconomic consequences of introducing an interest-bearing central bank digital currency (CBDC), an electronic alternative of payment with public use properties of cash and that can furnish as bank settlement balances. The model consists of seven sectors, namely households, retail firms, wholesale firms, capital producing firms, commercial banks, central bank, and government, and offers rich features. The use of cash and CBDC is differentiated with respect to their prices and transaction costs. In particular, we quantify the effects of negative shock on CBDC transaction cost to evaluate the potential of CBDC as an alternate instrument in liquidity holding in addition to cash and bank deposits. We also examine the effects of productivity shock and monetary policy shock on CBDC interest rate and CBDC demand, and their interaction with other main variables of the model."

"This paper discusses critical considerations in the design of central bank digital currency (CBDC) in West Africa through a comparative case study of Ghana’s (eCedi) and Nigeria’s (eNaira) design frameworks. This paper analyses CBDC design options framed through context (digital payment landscape and CBDC objectives), technical aspects (design principles, architecture, risks), use cases, and deployment plans. This study conducted a thematic analysis of official CBDC design documents to identify similarities, differences, and patterns. The results indicate more similarities between the eCedi and eNaira designs than differences. "

The UK government and Bank of England are taking steps to intervene to ensure that cash remains a payment option in the future. The key factor to their success is access to cash withdrawal facilities (be it an accessible ATM or a retailer offering cashback), which in turn relies on those outlets having access to cash deposit facilities. Take away the branches and the ATMs and that access disappears with it. A pay-to-use ATM in a shop that is closed when you need it, or a mobile bank that only visits once a week and is hard to reach anyway, doesn’t cut it.

The Alliance for Financial Inclusion (AFI) published a report that evaluates the extent to which retail central bank digital currency (CBDC) can advance financial inclusion in emerging market and developing economy (EMDE) countries. It concludes that, retail CBDC can be designed to alleviate identity gaps, and mobile phone and digital access divides through its unique ability to generate digital identity proxies and enable offline capabilities while being device agnostic. However, CBDC will not automatically advance financial inclusion, and if not designed appropriately, could reinforce existing barriers. Also, in many EMDE jurisdictions, they are likely to be limited by poor electricity coverage, access to (and affordability of) CBDC-enabled devices and limited cash-in and cash-out infrastructure. Finally, the report concludes that CBDC may not always be the right tool for addressing financial inclusion in different EMDE country contexts relative to other digital payment interventions. The unique feature of CBDC, which makes it distinct from other digital payments instruments, is that is issued by the central bank. But this feature does not necessarily make CBDC a better tool.

Intended to prevent unscrupulous merchants from embezzling prepayments made by buyers, a new digital yuan management tool has been unveiled. Merchants can apply to execute the smart contract when they complete services that consumers pay for, and the contract will transfer the prepaid funds to the merchants after verifying that all conditions have been met. This technically rules out the possibility of embezzling the prepayments via artificial operations.

The People's Bank of China (PBOC) has reportedly launched an eCNY smart contract prepaid fund management product - "Yuanguanjia". It aims to provide users with prepaid consumption service scenarios by deploying smart contracts on digital RMB wallets. This stops merchants from running away with prepaid consumption and protects consumers' rights and interests.

Binance will stop supporting trading in spot pairs that include these stablecoins, but will allow users to withdraw funds in the form of these stablecoins. In other words, the trading of these stablecoins will no longer be supported, but Binance users will be able to withdraw amounts denominated in these stablecoins.

"The IMF will soon publish two papers on these topics with coauthors Tobias Adrian, Tommaso Mancini- Griffloli, Dong He and Federico Grinberg of the IMF; Rod Garratt of the University of California, Santa Barbara; and Robert Townsend and Nicolas Xuan-Yi Zhang of the Massachusetts Institute of Technology. The papers will lay out an initial blueprint for such platforms in the hope of stimulating further discussion on these important topics, which are likely to shape the future of cross-border payments. Much remains to be explored, debated, and eventually done. The effort is certainly worth it, if anything to avoid embarrassing questions about what happens today behind the cloak of bilateral handshakes."

Myanmar exiles ousted in a 2021 coup are pressing the US Federal Reserve to endorse their bid to use $1 billion in funds frozen by the US to back a digital currency and a plan to establish a new central bank. If the exiles can get US support, they would then seek to establish a new central bank that could issue the digital currency to help support the opposition’s “revolutionary efforts."

Russia's finance ministry is reportedly looking to stablecoins to avoid international payment rails denominated in the U.S. dollar and euro. "The stablecoins can be tied to some generally accepted instrument like, for example, gold, whose value is understood and appreciable for all parties... It will require additional regulation, and the ministry is only considering approaches to it, there are no ready-made solutions."

"At face value, it’s a vote of confidence for tokens like USDC and USDP, with Binance effectively stating that the value of those tokens are reliable enough to be allowed permanent 1-to-1 redemption with its own BUSD across withdrawals and deposits. Tether’s USDT, the largest stablecoin by market value, was notably left out of the party."

"Binance's move to automatically convert USDC and two other stablecoins may lead to more USDC flowing into the exchange, according to the CEO of Circle, which issues the coin. "Binance is trying to consolidate dollar liquidity w cash equivalent stables. That’s good for liquidity and market depth," said Circle CEO Jeremy Allaire on Twitter."

Binance effectively banished USD Coin (USDC), the second-biggest stablecoin, from trading at its cryptocurrency exchange in favor of its own competing product. On Sept. 29, customers' holdings of USDC will be converted to Binance USD (BUSD). The same will happen with two smaller stablecoins: Pax Dollar (USDP) and TrueUSD (TUSD).  The action effectively removes USDC as a tradable asset on one of the most prominent perches in crypto, and creates a headache for Circle Internet Financial, USDC's issuer, as the company mulls an IPO.

The Reserve Bank of India (RBI) is reportedly in talks with fintech companies and state-controlled banks about a trial run of a central bank digital currency (CBDC) with a possible rollout by the end of the fiscal year ending March 31, 2023. The list of fintechs that the RBI is consulting include US-based FIS, plus four state-run banks to run a pilot CBDC project (State Bank of India, Punjab National Bank, Union Bank of India and Bank of Baroda).