Eastern Caribbean Central Bank set to Launch DCash in the Commonwealth of Dominica and Montserrat
The Eastern Caribbean Central Bank (ECCB) DCash officially went live in The Commonwealth of Dominica and Montserrat, expanding the central bank digital currency (CBDC) pilot to seven of the eight member countries.
Japan’s Financial Services Agency is reportedly planning a legislative proposal for the upcoming year to restrict the issuance rights of stablecoins to banks and wire transfer companies.
DCash Launch in the Commonwealth of Dominica and Montserrat
The Eastern Caribbean Central Bank (ECCB) DCash officially went live in The Commonwealth of Dominica and Montserrat, expanding the central bank digital currency (CBDC) pilot to six countries.
US House to hold hearing on digital assets and the future of finance
The U.S. House of Representative's Committee on Financial Services will hold a hearing entitled, “Digital Assets and the Future of Finance: Understanding the Challenges and Benefits of Financial Innovation in the United States” on December 8, 2021 at 10:00 a.m. ET. This hearing will have one panel with the following witnesses: Jeremy Allaire (Circle), Samuel Bankman-Fried (FTX), Brian Brooks (Bitfury), Charles Cascarilla (Paxos), Denelle Dixon (Stellar), and Alesia Jeanne Haas (Coinbase).
The Central Bank of Bahrain plans to offer a digital Dinar through a digital payments platform which will be available 24/7. The announcement came as part of the central bank's 2022-26 Financial Sector Development Strategy.
Raiffeisen, Erste Bank in Austrian wholesale CBDC simulations
Oesterreichische Nationalbank (OeNB) is starting to work on the second phase of its wholesale central bank digital currency (CBDC) Project Delphi. The first phase focused on simulating delivery versus payment for an Austrian Treasury Bond issued on a blockchain and settled by commercial banks on the same platform using CBDC. The second phase will explore more advanced functionality, business models as well as non-fungible tokens and DeFi.
According to its 2022-24 Strategic Plan, the Bank of Namibia will be assessing the viability of central bank digital currency (CBDC). This is part of a plan to automate, modernize and facilitate efficiency utilizing technology. The central bank also plans to set up an innovation hub to provide a conducive environment for the incubation of new fintech concepts without stifling start-ups and innovators, but doing so in a regulatorily responsible manner.
John Rolle, Bahamas Banking Pioneer Behind Sand Dollar
"Since starting the world’s first central bank digital currency in late 2020, the Bahamas now has 300,000-plus “sand dollars” in circulation, and seven mobile payment providers began using the e-money earlier this year."
Central Bank Digital Currency: functional scope, pricing and controls
This European Central Bank (ECB) paper discusses success factors for CBDC and how to avoid the risk of disintermediation crowding out private payment solutions. After examining ways to prevent excessive use as a store of value, the study emphasizes the importance of the functional scope of CBDC for the payment functions of money. The paper also recalls the risks that use could be too low if functional scope, convenience or reachability are unattractive for users. Finding an adequate functional scope – neither too broad to crowd out private sector solutions, nor too narrow to be of limited use – is challenging in an industry with network effects, like payments. The role of the incentives offered to private sector service providers involved in distributing, using and processing CBDC is discussed, including fees and compensation.
A NY Fed blog post considers several long-standing goals of central banks in their support and provision of retail payments, why and how central banks tackle these issues, and where central bank digital currency (CBDC) fit into the array of potential solutions. Because CBDCs are new and a range of approaches to implementation are being tried, central banks can learn more about the costs and benefits of CBDCs, relative to other approaches, by engaging in research and development. Answering these questions and uncovering new challenges would require a central bank to go far down the path of implementing a CBDC, whether that CBDC is ultimately adopted or not.
"LIFT Challenge is a special edition of the LIFT Lab with a specific objective, carried out by Fenasbac in partnership with the Banco Central do Brasil (BCB). These challenges – focused on a mature audience of banks, payment institutions and fintechs – bring together market participants interested in developing a minimally viable product (MVP) that meets the objective of the edition and proposes innovative solutions that benefit the SFN (National Financial System) and the Brazilian population."
Reflections on Stablecoins and Payments Innovations | FRB Governor Waller
"Earlier this year, I spoke about whether the Fed should offer a general-purpose central bank digital currency (CBDC) to the American public. My skepticism about the need for a CBDC, which I still hold, comes in part from the real and rapid innovation taking place in payments. My argument—simple as it sounds—is that payments innovation, and the competition it brings, is good for consumers. The market and the public are telling us there is room for improvement in the U.S. payment system. We should take that message to heart and provide a safe and sound way for those improvements to occur."
Bank Indonesia Wants to Introduce Digital Currency to ‘Fight’ Crypto
Bank Indonesia has reportedly been considering issuing a central bank digital currency (CBDC) since the start of 2021, as a tool to fight crypto, according to Juda Agung, an assistant governor at the central bank. He spoke in parliament while undergoing a fit-and-proper test to be named deputy governor. “We assume that people would find CBDC more credible than crypto. CBDC would be part of an effort to address the use of crypto in financial transactions.”
New York Fed Launches the New York Innovation Center
The New York Fed launched the New York Innovation Center (NYIC), to advance a strategic partnership with the Bank for International Settlements (BIS) Innovation Hub. As part of the New York Fed, the NYIC is collaborating with the Federal Reserve System, the BIS Innovation Hub, and public and private sector experts to validate, design, build, and launch new financial technology products and services for the central bank community.
Bank of Israel accelerating preparations for digital currency
The Bank of Israel is accelerating its study, research and preparation for the possible issuance of a digital shekel aimed at creating a more efficient payments system. Governor Amir Yaron said that, similar to other central banks, the Bank of Israel had not yet decided whether it will issue central bank digital currency (CBDC) and was still examining the issue. "Central banks have a unique role to play in preventing fragmentation and ensuring that the payment system becomes even more uniform and efficient. One way to do this is through CBDC."
Visa's research and product teams are working on a universal payment channel (UPC) initiative, a blockchain interoperability hub that connects blockchain networks and allows for transfers of digital assets. The UPC hub would connect different blockchain networks by establishing dedicated payment channels between them — whether that means connecting central bank digital currency (CBDC) networks between countries or connecting CBDC networks with vetted private stablecoin networks. New, trusted blockchains could easily be added to the network of networks by creating new payment channels within the UPC hub.
What is the Value Proposition of Stablecoins for Financial Inclusion?
A new World Economic Forum white paper investigates the benefits and limitations of stablecoins for supporting financial inclusion in historically excluded or underserved populations. It concludes that, overall, stablecoins do not present features or capabilities that significantly reduce barriers to financial inclusion compared to pre-existing options, once accounting for consistent legal and compliance requirements. Stablecoins are subject to many of the same adoption and inclusion hurdles as other forms of retail finance, such as reliable internet and electricity, digital and financial literacy, and government identity documentation.
Bank of Lithuania continues digital euro experiments by engaging market participants
The Bank of Lithuania is inviting payment market participants and technology vendors to develop a QR code-based payment solution that enables instant settlements in digital euro at points of sale. The solution should be based on an app running on mobile devices, but connectivity based on short-range wireless technologies (e.g., NFC or Bluetooth) so transactions can be done offline.
FOMO Drives Tanzanian Central Bank to Plan Own Digital Currency
Governor Florens Luoga has reportedly revealed that the Bank of Tanzania has begun CBDC launch preparations, at the central bank-organized 20th Conference of Financial Institutions (COFI). As part of preparations the Bank is strengthening the capacity of its officials on digital currencies and expanding research.
UK has no plans for a wholesale CBDC, envisages banks enabling synthetic
The Bank of England dismissed the option of a domestic wholesale CBDC, because the private sector can achieve a similar result themselves. Governor Bailey, at a UK House of Lords Economic Committee meeting, highlighted that banks have existing access to central bank money through its real time gross settlement system. Also, the Bank has introduced an omnibus account that would enable the banks to use digital coins between themselves that settle with the Bank of England. It might also allow nonbanks, like Fnality, to create wholesale digital currency backed by central bank money
Two Sides of the Same Coin: Why Stablecoins and a CBDC Have a Future Together
A new C.D. Howe Institute report advocates for the Bank of Canada issuing central bank digital currency (CBDC) to facilitate the emergence of Canadian dollar stablecoins. The report explains that Canadian-dollar-linked stablecoins could become attractive to Canadians by making them convertible into Bank-issued cash, and ensuring that the stablecoins are well designed and regulated from business conduct, competitive, operational, privacy and prudential perspectives.
This paper, co-authored by Diem's Chief Economist Christian Catalini, proposes that stablecoin issuers should comply with the capital and liquidity standards encoded in the Basel accords, and put aside appropriate capital buffers to mitigate credit risk, market risk, and operational risk. Furthermore, stablecoin issuers should hold appropriate liquidity to mitigate sudden redemptions and outflows. Compliance could be achieved with a balance sheet centered around short-maturity, high-quality, and liquid assets such as 3 months or less marketable government securities.
A consortium of 74 Japanese firms, including the country's three mega-banks, said it aims to launch a yen-based digital currency in fiscal 2022 after beginning trials in coming months. The digital currency, tentatively called "DCJPY", will be backed by bank deposits and use a common platform to speed up large-scale fund transfers and settlement among companies. Crypto exchange DeCurret, which is leading the consortium, published a progress report and white paper.
Central Bank Digital Currency: Considerations, Projects, Outlook
The Centre for Economic Policy Research (CEPR) has published a freely-downloadable book that brings together contributions from academics and experts from monetary authorities and international organizations to provide a detailed and insightful overview of the key considerations of current central bank digital currency (CBDC) developments worldwide. Specific chapters discuss the economic, legal and political implications of CBDC implementation, as well as assessing existing initiatives and reflecting on the future of the digital financial landscape.
Palau partners with Ripple on national stablecoin using XRP Ledger
The Republic of Palau has partnered with Ripple to develop a U.S. dollar-backed digital currency for the country using the XRP Ledger. If launched, it could be the world’s first government-based national stablecoin (GovCoin). (The Pacific island nation has no central bank and uses the U.S. dollar as its official currency, so a central bank digital currency (CBDC) is out of the question.) The IMF hasn't opined on this yet, but it was only a month ago that it completed its 2021 Article IV mission and no mention was made of any such development.
The Senate Banking Committee has sent letters to stablecoin issuers Coinbase, Gemini, Circle, Paxos, Tether, TrustToken, Centre, and Binance US, asking about general business practices and safeguards. Responses are expected by December 3. This is likely a sign of an upcoming hearing.
India seeks to block most cryptocurrencies in new bill, government says
India is looking to bar most private cryptocurrencies when it introduces Cryptocurrency and Regulation of Official Digital Currency Bill, 2021 in the winter session of Parliament, according to a bulletin posted on Lok Sabha, the Indian parliament’s official website. However, the Bill will permit “certain exceptions” to promote the underlying technology of cryptocurrency and its applications. The Bill also includes the framework for the Reserve Bank of India to issue central bank digital currency (CBDC). Of note, the Bill's description is apparently identical to the one the government listed for the previous parliamentary session earlier this year.
India seeks to block most cryptocurrencies in new bill, government says
India is reportedly looking to bar most private crypto-assets when it introduces Cryptocurrency and Regulation of Official Digital Currency Bill, 2021 in the winter session of Parliament. Through the Cryptocurrency and Regulation of Official Digital Currency Bill, 2021, India is also looking to set up the framework for the Reserve Bank of India to issue central bank digital currency (CBDC).
U.S. federal bank regulatory agencies issued a statement summarizing their interagency crypto-asset "policy sprints" and providing a roadmap of future work related to crypto-assets. It summarizes the agencies' plan to provide greater clarity throughout 2022 on whether certain crypto-related activities conducted by banking organizations are legally permissible, and related expectations for safety and soundness, consumer protection, and compliance with existing law and regulations. The focus includes crypto-asset safekeeping and traditional custody services, ancillary custody services including staking, facilitating crypto-asset lending and distributed ledger technology governance services, facilitation of customer purchases and sales of crypto-assets, loans collateralized by crypto-assets, issuance and distribution of stablecoins, and activities involving the holding of crypto-assets on balance sheet.
The Bank of Jamaica is reportedly slated to commence national rollout of its central bank digital currency (CBDC) platform during the first quarter of 2022. National Commercial Bank is currently the sole deposit-taking institution participating in the CBDC proof of concept (PoC) slated to conclude in December. The PoC is being run with staff and their family members, and individuals and small merchants will be added before this year end. They will test person to person and person to business transactions, and automated banking machines cash-ins and cash-outs.
