DFC

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.

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.

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

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.

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.

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 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 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.

Members of the USDF Consortium met with senior officials of the Federal Reserve, Office of the Comptroller of the Currency and Federal Deposit Insurance Corp. about how to issue a regulatory-compliant stablecoin. The group’s approach is purportedly consistent with the recommendations of the President’s Working Group that stablecoin be issued only by insured depository institutions. The Consortium’s USDForward (USDF) stablecoin would be issued, and backed, by dollar deposits at U.S. banks. The USDF Consortium is an association formed by Figure Technologies, JAM FINTOP, and a group of FDIC-insured banks. USDF is currently being used on the Provenance Blockchain in a limited scope to facilitate the real-time, bilateral settlement of transactions.

"Cybersecurity, along with technical resilience and sound technical governance, are the most important elements of CBDC technical design. Failure to implement a robust cybersecurity strategy and consider the risks introduced above could compromise citizen data and funds, the success of the CBDC programme, central bank reputational risk and broader opinions of the new currency. Based on past experiences in cybersecurity failures, the bar for security is not only about “keeping the bad guys out” or minimizing unauthorized account access. It must be comprehensive and consider the full spectrum of risks, ensuring that the system works as it was designed and that its integrity remains intact. Only then will CBDC be successful in achieving its goals."

"The Model Money Transmission Modernization Act, also known as the Money Transmitter Model Law, is a single set of nationwide standards and requirements created by industry and state experts. The law was approved in full by the CSBS Board of Directors in August 2021. As we move forward, CSBS will work to ensure that implementation among states is as uniform as possible, as states may require legislation, regulation or guidance changes to adopt the provisions contained in the law. Please refer to the materials below for the model law language. "

"The Central Bank of Jamaica and eCurrency delve into the topic of CBDCs, based on the pilot that currently tests a digital Jamaican Dollar"

China Galaxy Investment Management will run a digital yuan pilot for securities transactions in association with ICBC Bank. The central bank digital currency (CBDC) project will be used to pay fees for data, consulting and other services, and to settle over-the-counter stock transactions in the tripartite deposit management system.

Bank of Russia is reportedly planning to charge fees for all central bank digital currency (CBDC) transactions. However, the fees will be lower than those within Russia’s Faster Payments System (FPS), a service that lets individuals make instant interbank transfers. The FPS system allows users to transfer up to 100,000 rubles ($1,360) with zero commissions. For transfers beyond this amount, the system charges a 0.5% fee of the transfer amount, but no more than 1,500 rubles ($20) per one transfer.

Tony Richards, Head of Payments Policy at the Reserve Bank of Australia (RBA) revealed that RBA staff are still not convinced that a strong policy case has emerged in Australia for a retail CBDC. Australia's existing electronic payments system already provides households and businesses with a wide range of safe, convenient and low-cost payment services. Also, much (if not all) of the innovation and new functionality that could potentially be enabled by a CBDC could in principle also be enabled by innovation based around commercial bank deposit accounts, e-money or stablecoins. But given the possibility that the balance could shift towards a case for issuance of retail CBDCs, the RBA has been stepping up its CBDC research.

The Reserve Bank of India (RBI) is reportedly going to pilot its CBDC in the first quarter of the next fiscal year. Previously, the central bank governor had said a pilot could be launched by December 2021 but there has been no official timeline committed to by the RBI.

ECB Executive Board member Fabio Panetta pleaded the case for a digital euro in a Financial Times op-ed, arguing that, although Eurozone residents already have access to a vast supply of private digital means of payments that make a retail CBDC redundant. He views a digital euro as important to ensure that central bank money remains the trusted anchor of the payment system, to support financial stability and trust in the currency. This is crucial to preserving the transmission of monetary policy and thus protecting the value of money.

ECB Executive Board member Fabio Panetta gave a speech outlining how the ECB will structure its work in the investigation phase to ensure that it designs a digital euro that is attractive to consumers.

The Banco Central de Reserva del Perú is reportedly working with the central banks of India, Singapore and Hong Kong in developing a central bank digital currency (CBDC).

The IMF published five key observations on Nigeria’s eNaira central bank digital currency (CBDC) that launched on October 25. The article noted that the IMF was involved in the rollout process, including by providing reviews of the product design. The article also said that the IMF is ready to collaborate with the authorities on data analysis, cross-country studies, sharing the eNaira experience with other countries, and discussing further evolution of the eNaira including its design, regulatory framework, and other aspects.

Israel has reportedly begun development of an Ethereum-based digital shekel. Bank of Israel Deputy Governor, Andrew Abir confirmed that a CBDC was in the works and that testing had taken place, but also admitted the pilot program has been met with some challenges. One of the biggest challenges was overcoming potential user privacy concerns and ensuring that the people will use it, as Israelis are still not that keen to completely dump physical cash.

The Bangko Sentral ng Pilipinas (BSP) is reportedly eyeing the use of wholesale central bank digital currency (CBDC) in the near future. Meanwhile, instead of looking at retail CBDC, the BSP is working on its other digital offerings, including InstaPay and PESONet electronic fund transfers, under its National Retail Payment System.

This Article argues that algorithmic stablecoins are fundamentally flawed because they rely on three factors which history has shown to be impossible to control. First, they require a support level of demand for operational stability. Second, they rely on independent actors with market incentives to perform price-stabilizing arbitrage. Finally, they require reliable price information at all times. None of these factors are certain, and all of them have proven to be historically tenuous in the context of financial crises or periods of extreme volatility.

The PBOC has reported that the average weekly transaction volume of e-CNY is growing by 3 billion yuan ($469 million) and consumers are opening private wallets at an average weekly rate of 8.5 million, according to October figures. However, China has no official timetable for launching the digital yuan, notwithstanding reports that an official unveil would coincide with the 2022 Winter Olympics in Beijing. As of Oct. 22, consumers have opened 140 million personal digital wallets with total transaction volume of about 62 billion yuan ($9.7 billion).