DFC

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.

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.

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.

"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."

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.”

"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."

"Prosper-Coin is a money operating system enabling the issue, control and regulation of digital currencies for a wide range of implementations."

"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."

Tether announced further progress towards reducing its commercial paper portfolio. As of July 1, Tether had 8.4 billion of these holdings, of which 5 billion will expire on July 31. The goal remains to bring commercial paper holdings down to zero, switching them into short-term U.S. Treasury securities.

"“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."

"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."

"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."

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.

"Now that the US Supreme Court has overturned Roe v. Wade, Americans are raising concerns about what data police and prosecutors could access to incriminate people who seek abortions, which has happened before. If law-enforcement officials can’t access medical documents, they could turn to financial services companies for data on payment transactions. With abortion now illegal in several US states, paying for abortion services with cash could be one way to avoid detection, posing a challenge to the idea that cash is on its way out."

"Montran Corporation and eCurrency Mint announced today the successful integration of Montran's Real Time Gross Settlement (RTGS) with eCurrency's Central Bank Digital Currency (CBDC) platform. As a result, CBDC is seamlessly interfaced with central bank currency management payment operations. The first implementation is the Bank of Jamaica which currently has Montran's RTGS deployed for final settlement in Jamaican Dollars and is in the process of a national rollout of the eCurrency solution to provide Jamaica's Central Bank Digital Currency, Jam-Dex."

The Basel Committee on Banking Supervision suggested during its second consultation on the prudential treatment of crypto-asset exposures that banks limit their exposure to so-called Group 2 crypto assets to just 1% of their Tier 1 capital. Group 2 digital assets include major non-stablecoin, non-tokenized cryptocurrencies like Bitcoin and most altcoins. Therefore, banks would only be able to commit 1% of their total equity or net asset value in either long or short positions toward Group 2 digital assets. Moreover, the Basel Committee is considering banks adopting a 1,250% risk premium for Group 2 digital assets. In comparison, stocks typically have a 20% to 150% risk premium attached to their nominal values, depending on the company's credit rating. Under Basel III, a bank's risk-weighted assets must not surpass 10.5% of its Tier 1 capital for prudent leverage.

The Basel Committee on Banking Supervision has published a second public consultation on the prudential treatment of banks' crypto-asset exposures. It builds on the preliminary proposals set out in the June 2021 consultation and the responses received from stakeholders. The basic structure of the proposal in the first consultation is maintained, with crypto-assets divided into two broad groups; Group 1 including those eligible for treatment under the existing Basel Framework with some modifications, and Group 2 including unbacked crypto-asset and stablecoins with ineffective stabilization mechanisms,  which would be subject to a new conservative prudential treatment including an overall gross limit on such holdings. The updated proposals provide more detail on the proposed standard and include new elements such as an infrastructure risk add-on to cover the new and evolving risks of distributed ledger technologies.

"The Central Bank of Russia (CBR) is expanding its trails for the digital ruble it is developing. The CBR is now also exploring more use cases for the central bank digital currency (CBDC), including for use in settlement of real estate deals."

In this March 31 speech, the Bank of England's Victoria Cleland introduces Project Meridian, a joint initiative with the BIS Innovation Hub that will prototype and test end-to-end flow of real-time gross settlement (RTGS) platform synchronized settlement, which could be used for different trades such as securities and foreign exchange. Synchronization would enable the cash movements in RTGS to happen if and only if a corresponding asset on another ledger is transferred, which is something that wholesale central bank digital currency (WCBDC) aficionados imply requires a distributed ledger technology (DLT) platform. Ms. Cleland makes a point that I make frequently in webinars and workshops:  "I do wonder though whether the term “wholesale CBDC” is a misnomer. Electronic central bank money has been available to financial institutions for decades via RTGS systems. In the provision of central bank infrastructure the key is not the label, but who can access it and what functionality is provided."

This Asian Development Bank (ADB) report ascertains the current status of technology adoption, including wholesale CBDC applications, by its Cross-Border Settlement Infrastructure Forum member organizations. They include central securities depositories and central banks in the Association of Southeast Asian Nations (ASEAN) plus the People’s Republic of China, Japan, and the Republic of Korea (collectively known as ASEAN+3) region.

"The ongoing digital revolution may lead to a radical departure from the traditional model of monetary exchange. We may see an unbundling of the separate roles of money, creating fiercer competition among specialized currencies. On the other hand, digital currencies associated with large platform ecosystems may lead to a re-bundling of money in which payment services are packaged with an array of data services, encouraging differentiation but discouraging interoperability between platforms. Digital currencies may also cause an upheaval of the international monetary system: countries that are socially or digitally integrated with their neighbors may face digital dollarization, and the prevalence of systemically important platforms could lead to the emergence of digital currency areas that transcend national borders. Central bank digital currency (CBDC) ensures that public money remains a relevant unit of account."

INX, the inter-dealer broker and digital asset trading platform, is planning a joint venture with central bank provider SICPA to develop a central bank digital currency (CBDC) offering. While SICPA is best known for its secure inks that have been used on Euro notes, it also has extensive digital capabilities. The CBDC offering will be based on blockchain and aims to expand interoperability between different stakeholders across borders.

Ripple has announced the CBDC Innovate challenge, with a total prize pool of $150,000. The Ripple CBDC Innovate challenge seeks to inspire programmers to build applications capable of running on the XRP Ledger and supporting retail central bank digital currencies (CBDCs), interoperability and financial inclusion. The deadline for the first batch of submissions is August 25. Competitors are expected to build or update a fintech or payment solution that makes use of CBDC and can run on the XRP Ledger, create a solution that can take advantage of CBDC's advantages or create an interface that allows any human to engage with a CBDC.

ANZ customer Victor Smorgon Group successfully purchased tokenized Australian carbon credits (BCAU) using the ANZ-issued stablecoin A$DC. This transaction is an important step for ANZ as the bank explores greater circulation of the stablecoin. In this transaction, Victor Smorgon Group used A$DC as a medium of exchange to purchase the BCAU carbon tokens from Zerocap, an Australian crypto asset investment platform.

The Central Bank of Iran (CBI) is reportedly preparing a pilot launch of its Crypto-Rial central bank digital currency (CBDC) in August 2022. In the first phase, the pilot process will be launched in one region before it is extended to other areas of the country.

The Central Bank of Russia is continuing to step up efforts to test and issue the digital ruble, with a roadmap for full implementation now expected by the end of 2023, with pilot testing scheduled to begin in April 2023. In February (2022) the central bank had implied that it had started pilot testing already, but this new announcement makes the earlier efforts sound more like proof of concept work ("clients were able to exchange non-cash rubles in their accounts for digital ones, and then they transferred digital rubles between themselves").

To allow CBDC to be broadly accessible and transferable in real-time without continuous dependency upon digital connectivity, an “offline” capability to create secure point-to-point payments through the use of authorized hardware will be critical.

"Congressman Jim Himes (CT-04) today released a proposal for the issuance of a Central Bank Digital Currency (CBDC) by the Federal Reserve. In the white paper, Rep. Himes argues that along with many other benefits, the implementation of digital currency by the U.S. government could play a critical role in preserving the dollar’s role as the global reserve currency of choice."