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South Korea Ready to Test its CBDC with Commercial Banks
South Korea Ready to Test its CBDC with Commercial Banks
The Bank of Korea (BOK) wants to commence real-world testing for its prototype central bank digital currency (CBDC) with 10 domestic commercial banks in the second half of the year. Until now, the BOK CBDC work has been limited to proof-of-concept experiments, starting with basic functions such as minting, issuance, distribution, and redemption from August to December last year, and payment, digital asset transactions, and cross-border remittances from January to June this year. Now the central bank wants to know whether the prototype is compatible with various banks’ IT platforms and wants to investigate possible interoperability-related issues
#Fintech#CBDC#Asia#DFC
·bok.or.kr·
South Korea Ready to Test its CBDC with Commercial Banks
Options for access to and interoperability of CBDCs for cross-border payments
Options for access to and interoperability of CBDCs for cross-border payments
The Bank for International Settlements Innovation Hub, Committee on Payments and Market Infrastructures, International Monetary Fund and the World Bank assessed different options for cross-border access and interoperability of central bank digital currencies (CBDCs). They highlight that CBDCs currently have a key benefit in being able to consider cross-border functionality already during the initial development phase, but this "clean slate" advantage has an expiry date. International cooperation and coordination are needed in the early stages of CBDC design. In addition, any system must be built with the flexibility to adapt both to a changing world and the different CBDC designs likely to be chosen by central banks.
#Fintech#CBDC#BIS#IMF#CPMI#WorldBank#CrossBorder#Interoperability#DFC
·bis.org·
Options for access to and interoperability of CBDCs for cross-border payments
FSB issues statement on the international regulation and supervision of crypto-asset activities
FSB issues statement on the international regulation and supervision of crypto-asset activities
The Financial Stability Board (FSB) announced that it will submit to the October meeting of G20 finance ministers and central bank governors a public consultation report on its review of its high-level recommendations for the regulation, supervision and oversight of “global stablecoin” arrangements, including how existing frameworks may be extended to close gaps and implement the high-level recommendations. The FSB will also submit a public consultation report that proposes recommendations for promoting international consistency of regulatory and supervisory approaches to other crypto-assets and crypto-asset markets and strengthening international cooperation and coordination.
#Fintech#CryptoAssets#Stablecoins#Regulation#FSB#DFC
·fsb.org·
FSB issues statement on the international regulation and supervision of crypto-asset activities
The Financial Bubble Era Comes Full Circle
The Financial Bubble Era Comes Full Circle
Matt Taibbi asks some tough questions about the sanctity of the reserve assets that back Circles USDC stablecoin, and the issue of bankruptcy remoteness. Circle is unlike some competitors, whose user agreements specifically spell out that reserves are, say, “fully backed by US dollars held by Paxos Trust Company, LLC,” or “custodied pursuant to the Custody Agreement entered into by and between you and Gemini Trust Company, LLC.” Those describe trust agreements, which are truly bankruptcy remote. However, Circle is not a trust, so customers  are guarded only by protections afforded under state money transmission laws. However, Circle is only regulated  as a money transmitter in the states where Circle has licenses, and the firm has obtained licenses only in those states were licenses are required. There are other reasons to be concerned as a USDC hodler, and I recommend reading the whole post.
#Fintech#CryptoAssets#Stablecoins#Circle#USDC#DFC
·taibbi.substack.com·
The Financial Bubble Era Comes Full Circle
July 4 1995 Mondex Launch Live
July 4 1995 Mondex Launch Live
"Somewhat ahead of its time, Mondex was a peer-to-peer proposition, which we’ll come back to later on. This meant that the value was transferred directly from one chip to another with no intermediary and therefore no cost. In other words, people could pay each other without going through a third party and without paying a charge."
#Fintech#Offline#CBDC#Payments#DFC
·blog.dgwbirch.com·
July 4 1995 Mondex Launch Live
The Unbundling of Fiat Currency
The Unbundling of Fiat Currency
"A CBDC analogous to a digital form of paper money—a digital bearer instrument, would not require intermediaries for most transactions carried out by consumers today. Payments for everyday purchases could be done without revealing the identities of the parties involved in the same way that users may choose to pay in cash. This would help combat cybercrime while freeing up resources to identify truly illicit activities."
#Fintech#CBDC#DFC
·linkedin.com·
The Unbundling of Fiat Currency
Paxos Becomes First Stablecoin Issuer to Disclose Full Monthly Reserve Holdings
Paxos Becomes First Stablecoin Issuer to Disclose Full Monthly Reserve Holdings
Paxos will now disclose on a monthly basis the specific financial instruments backing its USDP and BUSD stablecoins, in addition to its attestations. These reports will provide the CUSIP numbers of all instruments backing USDP and BUSD, showing that Paxos only backs its stablecoins with cash, overnight loans secured only by US Treasuries, and US Treasuries with a less than 90 day maturity. As a Trust Company chartered by the New York State Department of Financial Services (“NYDFS”), Paxos is legally required to hold all regulated stablecoin reserves in bankruptcy remote, fully-segregated accounts and in only cash and cash equivalents.
#Fintech#CryptoAssets#Stablecoins#Paxos#USDP#BUSD#DFC
·paxos.com·
Paxos Becomes First Stablecoin Issuer to Disclose Full Monthly Reserve Holdings
Why Stablecoins Fail: A Look at Terra
Why Stablecoins Fail: A Look at Terra
This article from the Richmond Fed dives into potential answers to these questions about the failed Terra UST stablecoin. UST was backed by LUNA, but the price of LUNA was backed by its option value of converting to UST. When the confidence of this circular backing is shaken, the liquidity of algorithmic stablecoin becomes flighty. In this case, the algorithm does not fully function because Terra needs to (but can't always) defend both UST and LUNA. When market liquidity evaporated, UST and LUNA ultimately relied on the issuer's equity to support the prices, similar to the backing of a more traditional currency as seen in the Asian Financial Crisis. It is the part of economics cannot be replaced by technology.
#Fintech#CryptoAssets#Stablecoins#Terra#DFC
·richmondfed.org·
Why Stablecoins Fail: A Look at Terra
Where do USDC stablecoin owners rank in the event of a Circle bankruptcy?
Where do USDC stablecoin owners rank in the event of a Circle bankruptcy?
FDIC insurance only protects customers in the event of the insolvency of the bank holding the deposits. That leaves open the question of where stablecoin holders rank in the event of the stablecoin issuer's insolvency. This was recently discussed in a Twitter thread launched by JP Koning to which George Selgin and Dan Awry contributed. According to my read of the thread, which focused specifically on the Circle-issued USDC stablecoin, the answer seems to be "maybe" but the question could be tied up in courts for a long time.
#Fintech#CryptoAssets#Stablecoins#Circle#USDC#Bankruptcy#DFC
·twitter.com·
Where do USDC stablecoin owners rank in the event of a Circle bankruptcy?
BoJ Liaison and Coordination Committee on Central Bank Digital Currency Interim Report
BoJ Liaison and Coordination Committee on Central Bank Digital Currency Interim Report
The Bank of Japan (BoJ) published an English version of its Liaison and Coordination Committee on Central Bank Digital Currency interim report. While the BOJ “currently has no plan to issue CBDC, the BOJ considers it important to prepare thoroughly to respond to changes in circumstances in an appropriate manner”.  The report noted the strong preference for cash and high ratio of bank account holding in Japan, as reasons for cautiousness. However, as privately-issued digital currencies proliferate, a CBDC might be called for to provide broadly secure and neutral payment instruments to avoid fragmentation and monopolization of payment services, and to enable private businesses to utilize these as a source for creating new services.
#Fintech#CBDC#Japan#DFC
·boj.or.jp·
BoJ Liaison and Coordination Committee on Central Bank Digital Currency Interim Report
UK Digital Pound Won't Work Like Cash Banknotes, Bank of England Says on CBDC
UK Digital Pound Won't Work Like Cash Banknotes, Bank of England Says on CBDC
Deputy Governor Jon Cunliffe reportedly said that the Bank of England (BoE) is unlikely to offer a digital pound that works like banknotes, opting instead for an instrument managed through some sort of account, reflecting concerns that it could be used in crime and money laundering. The BoE plans to release a consultation paper at the end of the year about how a retail central bank digital currency (CBDC) might look. Cunliffe said it’s unlikely that any digital pounds will be issued within the next three years, that it’s more likely in five or more years.
#Fintech#CBDC#Offline#UnitedKingdom#DFC
·bloomberg.com·
UK Digital Pound Won't Work Like Cash Banknotes, Bank of England Says on CBDC
Experts invited to join technical talks on digital euro
Experts invited to join technical talks on digital euro
The European Central Bank (ECB) is inviting technology experts to take part in online technical talks to explore options for the design of a central bank digital currency. The talks will focus on the large-scale application of privacy-enhancing technologies in settlement of retail payments. For example, how can the payment asset issuer exert control over settlement rules and maintain adequate, tamper-proof evidence of the amounts in circulation, while also minimizing the accessibility of sensitive information? The talks will be held at expert level as closed sessions with members of the ECB’s digital euro project team.
#Fintech#CBDC#Privacy#Eurozone#DFC
·ecb.europa.eu·
Experts invited to join technical talks on digital euro
Essays on Digital Currencies and Monetary Policy
Essays on Digital Currencies and Monetary Policy
This dissertation by Jonas Gross studies issues related to digital currencies and monetary policy. In particular, it analyzes the determinants of the monetary policy of the European Central Bank (ECB) and examines design aspects of central bank digital currencies (CBDCs), e.g., related to financial stability, monetary policy, and privacy. For example, it finds that CBDCs crowd out bank deposits and negatively affect bank funding, but this crowding-out effect can be mitigated if the central bank chooses to provide additional central bank funds or to disincentivize large-scale CBDC accumulation via low or potentially even negative interest rates (if the CBDC is remunerated).
#Fintech#CBDC#DFC
·epub.uni-bayreuth.de·
Essays on Digital Currencies and Monetary Policy
Minutes of the CBDC Technology Forum
Minutes of the CBDC Technology Forum
"A Forum Member presented a view on why offline functionality should be a key feature of CBDC. The presentation exposed why offline settlement finality was important in a world where physical cash usage is diminishing. The presenter noted that offline settlement finality offered benefits in terms of availability, throughput and operational infrastructure costs, where existing real time (online) settlement systems encountered the biggest challenges. The presentation also mentioned that, without offline finality, any CBDC system would be difficult to differentiate from any other real time payment system. The presenter also mentioned drawbacks of offline systems, including the higher risk of counterfeiting and double spending due to added technical complexity."
#Fintech#CBDC#Offline#UnitedKingdom#DFC
·bankofengland.co.uk·
Minutes of the CBDC Technology Forum
Central bank digital currency (CBDC) – why go slow - FinTech Futures
Central bank digital currency (CBDC) – why go slow - FinTech Futures
"National currency is a foundational element in society. A switch from material coins and banknotes, and their counting balance to a novel cyber entity comprised of a string of bits, is a big move with a lot of promise, alas facing a myriad of risks and unintended consequences. It is therefore advisable to develop a risk-mitigation strategy for this initiative."
#Fintech#CBDC#DFC
·fintechfutures.com·
Central bank digital currency (CBDC) – why go slow - FinTech Futures
Stablecoins and Central Bank Digital Currencies: Policy and Regulatory Challenges
Stablecoins and Central Bank Digital Currencies: Policy and Regulatory Challenges
"Stablecoins and central bank digital currencies are on the horizon in Asia, and in some cases have already arrived. This paper provides new analysis and a critique of the use case for both forms of digital currency. It provides time-varying estimates of devaluation risk for the leading stablecoin, Tether, using data from the futures market. It describes the formidable obstacles to widespread use of central bank digital currencies in cross-border transactions, the context in which their utility is arguably greatest. The bottom line is that significant uncertainties continue to dog the region's digital currency initiatives."
#Fintech#CryptoAssets#CBDC#Stablecoins#Tether#CrossBorder#DFC
·direct.mit.edu·
Stablecoins and Central Bank Digital Currencies: Policy and Regulatory Challenges
ECCB 2021-2022 Annual Report and Statement of Accounts
ECCB 2021-2022 Annual Report and Statement of Accounts
According to the just-released ECCB Annual Report, As at end-March, the value of DCash in circulation amounted $2.27 million, or 0.16% of the $1,407.14 million currency in circulation. More than 20 of the region’s financial institutions and 11 agencies, both groups being key channels for customer onboarding, are now participating in the pilot. Also there has seen steady increase in the merchant base. The second phase of the pilot will see the introduction of government-to-consumer (G2C) payments and an e-commerce functionality to support wider use of DCash.
#Fintech#CBDC#Caribbean#DFC
·user-fc5crhc.cld.bz·
ECCB 2021-2022 Annual Report and Statement of Accounts
ECCB launches DCash in Anguilla
ECCB launches DCash in Anguilla
The Eastern Caribbean Central Bank (ECCB) DCash central bank digital currency (CBDC) pilot expanded to Anguilla, and now the digital version of the EC currency is legal tender in all eight ECCB member countries. Liberty Co-operative Credit Union (LCCU) is the first financial institution in Anguilla to join the Pilot and will begin processing DCash applications for both merchant and consumer wallets for their customers. Citizens and residents who are not customers of LCCU may obtain a DCash value-based wallet by signing up through the app.
#Fintech#CBDC#Caribbean#DFC
·eccb-centralbank.org·
ECCB launches DCash in Anguilla
Central African Republic Dives Into Crypto With The Sango
Central African Republic Dives Into Crypto With The Sango
Central African Republic (CAR) President Faustin Archange Touadera reportedly announced the creation of the Sango Coin and a zero-taxation crypto-hub. The currency is named after Sango, which with French is one of the country’s two official languages. Through a platform called Crypto Island, the Sango will become “the catalyst for tokenizing (CAR’s) vast natural resources,” Touadera declared, providing no timeline or other details. In April Touadera’s office had announced that the CAR had adopted Bitcoin as legal tender alongside the CFA franc, a currency the country shares with five other central African economies.
#Fintech#CryptoAssets#CBDC#Africa#DFC
·barrons.com·
Central African Republic Dives Into Crypto With The Sango
Central Bank Digital Currency and Quantitative Easing
Central Bank Digital Currency and Quantitative Easing
"We study how the introduction of a central bank digital currency (CBDC) interacts with ongoing monetary policies. We distinguish two policies: standard policy, where the central bank holds treasuries, and quantitative easing, where the central bank holds risky securities. We introduce an interest-bearing CBDC in each scenario and study the equilibrium allocations. We reach three main conclusions. First, the equilibrium impact of a CBDC depends on the ongoing monetary policy. Second, when the central bank conducts quantitative easing, the introduction of a CBDC is neutral under two conditions: the cost of issuing a CBDC is equal to the interest on reserves, and the demand for CBDC deposits is smaller than the amount of excess reserves in the system. Third, the introduction of a CBDC might render quantitative easing a quasi-permanent policy, as commercial banks optimally use their excess reserves to accommodate retailers' demand for switching from bank to CBDC deposits."
#Fintech#CBDC#MonetaryPolicy#DFC
·papers.ssrn.com·
Central Bank Digital Currency and Quantitative Easing
Why Fungibility Is Important in Understanding Money and Crypto
Why Fungibility Is Important in Understanding Money and Crypto
Money facilitates business on the market by serving as a medium of exchange, store of value, and a unit of account. The Federal Reserve Bank of St. Louis lists six characteristics of money: durability, portability, divisibility, limited supply, uniformity, and acceptability. The latter two of these attributes are directly impacted by a currency’s fungibility. In order to satisfy Berg’s (2020) fungibility criteria, “each unit of a currency, or any commodity used in a money function, should be indistinguishable from others of the same denomination,” and “an individual unit of said currency should not be reidentifiable through time and change.”
#Fintech#CBDC#Fungibility#DFC
·ecopolresearch.institute·
Why Fungibility Is Important in Understanding Money and Crypto
The Identity, Fungibility, and Anonymity of Money
The Identity, Fungibility, and Anonymity of Money
"The fungibility of money is a characteristic which contributes to the quality of money. Fungibleness is itself related to the technical ability to associate a unit of currency with its past instances of exchange. This history is analogous to the identity of money. The identity of an individual unit of exchange is increasingly important as cash becomes less common, and banks require more information about the provenance of money. Private currencies, including Bitcoin and Libra, are themselves subject to tracking. The prior financial—and potentially political—activities of a user determine the fungibility of the currency they hold. Different money technologies provide varied levels of privacy, while cryptocurrencies offer users the potential to choose the level of information they share."
#Fintech#CBDC#Fungibility#DFC
·papers.ssrn.com·
The Identity, Fungibility, and Anonymity of Money
Prosper-Coin
Prosper-Coin
"Prosper-Coin is a money operating system enabling the issue, control and regulation of digital currencies for a wide range of implementations."
#Fintech#CBDC#Platforms#DFC
·prosperus.tech·
Prosper-Coin
How to insure against the risk of stablecoin runs
How to insure against the risk of stablecoin runs
"Many questions are yet to be answered and many avenues to be explored as part of the financial landscape’s digital revolution. But stablecoin insurance could provide a boost of confidence as more and more regular consumers take part in the blooming digital currency market."
#Fintech#CryptoAssets#Stablecoins#DFC
·omfif.org·
How to insure against the risk of stablecoin runs
Visa: Public willingness to use CBDCs is the biggest challenge
Visa: Public willingness to use CBDCs is the biggest challenge
"“Perhaps the greatest challenge to CBDC deployment will come from the public’s willingness to use it. Inevitably, CBDCs will come up against payment solutions that the public has already come to rely on, and given that there are only a handful of CBDCs in operation, how people will respond to this new innovation is an open question,” the report stated."
#Fintech#CBDC#VISA#DFC
·coingeek.com·
Visa: Public willingness to use CBDCs is the biggest challenge
Basel's bank rules for crypto-assets get stricter for stablecoins, lighter for crypto
Basel's bank rules for crypto-assets get stricter for stablecoins, lighter for crypto
"To fully qualify as a lower risk stablecoin, the price cannot go below 99.9 cents on more than three days in 12 months. A stablecoin outright fails the test if it drops below 99.8 cents more than ten times during a year. We assume this is at any point during the day, but that’s unclear. Using data from Messari, USDC, considered higher quality than Tether, would have failed both tests intraday every day during the past month. Tether managed to pass on six out of 30 days. However, at ‘close’ USDC would have failed the first test just four times compared to 16 times for Tether. But extrapolating to a year, that’s enough for both to be classed as a pure cryptocurrencies."
#Fintech#CryptoAssets#Stablecoins#Basel#Regulation#DFC
·ledgerinsights.com·
Basel's bank rules for crypto-assets get stricter for stablecoins, lighter for crypto
The Case for Central Bank Digital Currencies
The Case for Central Bank Digital Currencies
"Andreas Dombret and Oliver Wünsch see an opportunity in the proliferation of digital currencies and argue for central banks to issue their own digital currencies to create a viable alternative to cash and deposit money that also allows policymakers to ensure that the official monetary system remains the most attractive one."
#Fintech#CBDC#DFC
·atlantik-bruecke.org·
The Case for Central Bank Digital Currencies
Coinbase’s conflation of in-house stablecoin, US dollar sparks liquidity concerns
Coinbase’s conflation of in-house stablecoin, US dollar sparks liquidity concerns
Coinbase announced that the platform will be “unifying USD and USDC order books,” adding that “USDC order books will be merged under USD order books to create a better, more seamless trading experience with deeper liquidity for USD and USDC.” USDC (aka USD Coin) is the stablecoin issued by Centre, a consortium of Circle and Coinbase. This may provide a ‘more seamless’ experience, but it also gets Coinbase out of a potential fiat liquidity crunch, in the wake of massive customer USD withdrawals during the current crypto crash.
#Fintech#CryptoAssets#Stablecoins#Circle#USDC#Coinbase#DFC
·coingeek.com·
Coinbase’s conflation of in-house stablecoin, US dollar sparks liquidity concerns