DFC

The Bank for International Settlements (BIS) published a paper on cross-border payment system interoperability. It illustrates the public and private sector options using four stylized models, ordered in increasing complexity and cost but also greater efficiency – a single access point, bilateral link, hub and spoke or a common platform (see below). The BIS Innovation Hub is putting theory into practice with several innovative projects to foster interoperability across the four stylized models.

ECB Executive Board member Fabio Panetta pushed back on the CBDC redundancy argument, pointing to the central role of public money in the economy, as the monetary anchor and by its fungibility with private money. Also, a digital euro would boost competition by making a free and easy to use digital means of payment available to everyone. In addition, the option to use CBDC would allow all European intermediaries, big and small, to offer products with a higher technological content at a competitive cost, making them better able to compete with global operators.

"Before addressing how the Postal Service might be justifying its authority to launch the pilot program, it’s helpful to consider what exactly is taking place. The pilot program only operates in four locations across four cities, and it offers a rather roundabout form of check cashing. Instead of receiving cash directly, customers can exchange a business or payroll check up to $500 for a single‐​use gift card after paying a flat fee of $5.95. This design may appear odd, but it was chosen quite carefully. Instead of “cashing checks,” the Postal Service is “selling gift cards.”"

The National Bank of Kazakhstan reportedly may soon launch a pilot of its digital tenge retail CBDC. The prototype platform has been completed and the final report on the results of the proof of concept work is set to be published on December 15, 2021. The final decision on whether to issue the digital tenge will be made in December 2022.

"We will likely see more central banks in emerging markets and developing economies than in advanced economies testing and launching CBDCs, with many of the emerging markets/developing economy CBDCs coming seemingly out of the blue from among the 44 central banks that we have labeled as being in the exploratory stage. That is because the benefits of introducing CBDCs are typically more obvious in an emerging market or developing economy, where the upside seemingly outweighs the risks. For example, increasing financial inclusion and decreasing cross-border payments costs are priorities in emerging markets and developing economies."

Meta's WhatsApp has launched a pilot that lets a “limited number” of people in the US send and receive money instantly from within a chat using Pax Dollars (USDP) stablecoins. The feature is powered by Meta's Novi, digital wallet launched as a pilot six weeks ago. There are no fees for sending or receiving money, no limits on how often payments can be sent, and no fees to keep a balance in a Novi account or to withdraw it to a linked bank account.

The People’s Bank of China is reportedly working with the Hong Kong Monetary Authority on adding cross-border payment features to China's e-CNY retail CBDC. They've run preliminary technical tests with a limited number of Hong Kong residents who could create e-CNY wallets with basic features, such as top-up, transfer and payments to certain merchants. And now they're exploring approaches for interlinking the e-CNY and the Faster Payment System in Hong Kong.

The Australian government will announce major reform to payment systems, including broadening the definition of services and products that can be regulated. Crypto exchanges will be brought within the regulatory perimeter, and the treasury will be working on a CBDC with the Reserve Bank. The proposed regulation will also take aim at “buy now, pay later” services.

The Reserve Bank of Australia, Commonwealth Bank, National Australia Bank, Perpetual and ConsenSys, with input from King & Wood Mallesons, today jointly released a report to mark the successful conclusion of Project Atom. The project involved the development of a proof-of-concept (POC) for the issuance wholesale central bank digital currency (CBDC) to fund, settle and repay a tokenized syndicated loan on an Ethereum-based distributed ledger technology (DLT) platform. Integrating a wholesale CBDC on the same DLT platform enabled "atomic" delivery-versus-payment settlement of the drawdown, novation and repayment of the tokenized syndicated loan, demonstrating efficiency gains and operational risk reductions versus the normally highly manual and paper-based processes.

The Bank for International Settlements, Bank of France and Swiss National Bank have shown that wholesale CBDC can be used to settle transactions between financial institutions across borders. The recently completed Project Jura explored settling FX transactions in euro and Swiss franc wholesale CBDC, and issuing, transferring and redeeming tokenized euro-denominated French commercial paper between French and Swiss financial institutions. Project Jura was conducted in collaboration with Accenture, Credit Suisse, Natixis, R3, SIX Digital Exchange and UBS.

Zimbabwe’s central bank is exploring the use of a digital currency rather than allowing cryptocurrencies as legal tender. Governor John Mangudya said that “we believe in central bank digital currency which is basically trying to say ‘how do we have an e-Zimbabwe dollar as opposed to cryptocurrency’.” The central bank plans to send a team to Nigeria to learn from their experiences in launching the first digital currency in Africa in October.

The World Bank published a guidance note to assist central banks and public authorities as they investigate the use of central bank digital currency (CBDC) as an instrument to strengthen or modernize their national payment systems. It articulates the analysis and decision-making process through five fundamental "W" questions (why, what, when, where and who) that should holistically determine whether to issue CBDC.

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.

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.

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.

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.

"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."

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."

"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 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.”

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.

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.

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.