Moneyness: Does it make a difference if Tether lends out new USDt?
"Tether says in its terms of service that it only creates new stablecoin tokens, USDt, in acceptance for money. That is, to get $1 worth of USDt from Tether, you need to send it $1 in actual U.S. dollars. But in reality, Tether does not seem to be waiting for deposits to roll in before issuing new USDt. As the FT's Kadhim Shubber reports, it is directly lending new USDt out, much like how a bank puts new dollar IOUs into circulation by lending them out."
OFS and AUGENTIC GmbH reveal the design of the offline "Smart Banknote CBDC" prototype OFS
"Orell Füssli Ltd. Security Printing and AUGENTIC GmbH announced their partnership on a “Smart Banknote CBDC” solution including trustwise.io´s Distributed Ledger Technology (DLT) a week ago. A smart banknote is a physical banknote that interacts with a CBDC solution and acts as a transitional device between traditional and CBDC based payment systems. A smart banknote can be used like a classic banknote; however, the owner can redeem his cold wallet (physical banknote) and transfer the note’s value to a digital wallet by scanning the QR code with the private key. Our smart banknote includes a public and a private key represented by QR codes of which the private one is sealed. When the cover of the private key is removed, the QR code scanned, the value of the banknote can be transferred to a digital wallet. Conceptually after this procedure, the smart banknote cannot be transferred anymore."
"The company AgAu AG was founded in 2018 and borrowed its name from the merger of the two atomic symbols “Ag” (for Silver) and “Au” (for Gold). As AgAu we plan to issue digital tokens corresponding to the direct ownership of allocated silver and gold bullions in Switzerland. We aim to be the easiest way to transact the direct ownership of allocated and redeemable physical LBMA quality gold and silver. The precious metals are audited and secured in regulated private vaults outside the banking system."
This speech by Tara Rice, Head of Secretariat, Committee on Payments and Market Infrastructures, focuses on three topics related to how CBDCs can help on the international dimension of payments: (i) a taxonomy to describe the different forms and elements of cross-border interoperability; (ii) the conceptual trade-off between cost and complexity on the one hand and benefits on the other (which in this case would be mainly in reducing the frictions of cross-border payments); and (iii) some thoughts on lessons learned and the way forward.
Tether Trials Solution to Comply With FATF Travel Rule
Tether, will test trial a solution that will allow it to comply with the travel rule proposed by the Financial Action Task Force (FATF). The solution that will be tested, provided by Notabene, a software company that offers compliance solutions, will allow this information to be relayed between virtual asset service providers (VASPs). This solution aims to make tether (USDT) more friendly to law enforcement agencies all around the world.
At the dawn of a new age – Money in the 21st century
The Central Bank of Hungary (MNB) has published a book that summarizes the theoretical considerations, the most important practical issues, the motives behind the potential creation of this new instrument and the opportunities offered by central bank digital currency (CBDC). It also covers CBDC monetary policy, financial stability, and cash flow impacts, as well as the issues of infrastructural implementation.
ECB announces members of Digital Euro Market Advisory Group
The European Central Bank (ECB) announced the members of the Market Advisory Group for the digital euro project. The Eurosystem’s High-Level Task Force on Central Bank Digital Currency called for expressions of interest on 14 July, following the Governing Council’s approval of the digital euro project investigation phase. After assessing applications, the selection committee appointed 30 senior business professionals with proven experience and a broad understanding of the euro area retail payments market. Meetings are to be held at least quarterly, starting in November 2021, and written consultations will be organised between meetings. The issues identified will also be considered in the Eurosystem’s established forum for institutional dialogue on retail payments, the Euro Retail Payments Board (ERPB).
The Central Bank of Nigeria (CBN) will launch its eNaira central bank digital currency (CBDC) on Monday, October 24. The launch had been originally scheduled for October 1, but it was delayed in deference to other key activities lined up to commemorate the country’s 61st Independence Anniversary. However, Nigerians have been able to download the eNaira app from either the Google Play or Apple App stores since lte September. The CBN also published a white paper that provides detail on the eNaira's critical dimensions.
RBA is exploring wholesale CBDC applications to securities DVP settlement
The Reserve Bank of Australia (RBA) revealed, in its submission to the Australian Senate Select Committee on Financial Technology and Regulatory Technology, that it has been conducting research on wholesale CBDC, in its in-house Innovation Lab. This included the development in 2019 of a limited proof-of-concept of a distributed ledger technology (DLT) based interbank payment system using a tokenized form of CBDC backed by exchange settlement account (ESA) balances held at the RBA. Currently, the RBA is close to finalising a project with a number of external parties that extends the earlier proof-of-concept in a number of ways, including to incorporate tokenized financial assets. The project explores the implications of delivery-versus-payment (DVP) settlement on a DLT platform as well as other programmability features of tokenized CBDC and financial assets.
Central bank targets large merchants for digital wallets
The Bank of Jamaica's push to deepen the mobile money market forms part of the central bank's CBDC drive to reduce cash usage. Governor Byles reportedly appealed to banks and other deposit-taking institutions to encourage their merchant customers to set up CBDC wallets. In particular, he wants to see cash-intensive industries to set up digital wallets to pay pensioners, enable toll road payments, and facilitate remittance flows. The test phase of the Jamaica CBDC, to assess the smoothness of transactions and get a read on the potential market receptivity to a digital currency, is under way and should wrap up by year end, with a public roll-out scheduled soon after.
Iran to Pilot ‘National Cryptocurrency,’ Amend Central Bank Law
"The central bank of Iran is gearing up to begin the pilot phase of its digital currency project in the near future, its new head announced to representatives of local media. The monetary authority is also preparing to move forward with a plan to reform the legislation that governs its own activities."
Bank of England mulls CBDC models in technology engagement forum
The Bank of England published the minutes of its first central bank digital currency (CBDC) Technology Forum meeting held on September 28, 2021. The Forum consists of senior stakeholders from industry, civil society and academia to gather strategic input on policy considerations and functional requirements pertaining to the practical challenges of designing, implementing and operating a CBDC. The meeting featured a discussion around alternative "platform" models for CBDC provision. In one model, the Bank would hold a record of every payment amount, and in another, it might just record the gross transactions with payment service providers (PSPs) in a ‘pooled model’. And they discussed a variant of the pooled model to allow delayed net settlement by the PSPs, even though customer payments would be real-time. Some meeting attendees suggested an alternative anonymous cash-like model without either the PSPs or the Bank keeping a ledger. However, other Members queried the feasibility of this approach, both in terms of the viability of the technology, and in relation to resilience, and prevention of tampering and “double spending” of CBDC units.
Hindenburg Research Announces $1,000,000 Bounty For Details On Tether’s Backing
"Hindenburg Research, a forensic financial research firm, today announces it is launching the Hindenburg Tether Bounty Program (the “Program”) – a reward of up to $1,000,000 for information leading to previously undisclosed details about cryptocurrency “stablecoin” Tether’s backing."
An innovative digital payment solution, PaySe is a financial inclusion enabler created to address the key challenges faced by banks and other financial institutions to make banking services accessible even in the remotest geographies across India. As the world's first offline solution, PaySe can be used to accept and make payments even when completely offline. It does this by using a secured smart card and an NFC enabled device. PaySe also provides financial institutions with the capability to acquire customers efficiently by capturing customer data, verifying documents, conducting KYC / AML checks and creating customer accounts. For us PaySe is more than just a business – we see it as something we should do for the society.
Statement from Diem Networks US Regarding Congressional Interest in Project
Facebook's Novi launched its retail payment app yesterday (October 19) going with Paxos’ USDP stablecoin as its transactional currency while it awaits regulatory approval for its own Diem stablecoin. However, almost immediately, US Senate Democrats addressed a letter to Facebook CEO Mark Zuckerberg questioning the company’s credibility with crypto, and calling for the immediate discontinuance of the Novi pilot and a commitment not to bring Diem to market. Diem replied by clarifying that Diem is an independent organization with Facebook’s Novi being just one of more than two dozen members of the Diem Association, so that Novi’s pilot with Paxos is unrelated to Diem. The response went on to say that "When Diem comes to market [Diem] will do so having reflected the feedback of regulators from around the world and with confidence that Diem’s payment system is secure, will protect consumers, and will combat financial crime.”
Central bank digital currency in an historical perspective
"My overview of the history of monetary transformations suggests that technological change in money is inevitable, driven by the financial incentives of a market economy. Government has always had a key role in the provision of currency (outside money), which is a public good. It has also regulated inside money provided by the commercial banking system. This held for fiduciary money and will likely hold for digital money."
Open questions on the international dimension of central bank digital currencies
"This column identifies open research questions around the international macro-financial dimension of central bank digital currencies, including what is different about them, and what the implications for international central bank cooperation are. Addressing these questions would not only push the frontier of knowledge, it would also provide the conceptual backbone and evidence that could usefully inform future policy decisions on CBDCs. "
Pilot version of Facebook's Novi digital wallet app now available
Facebook's Novi digital wallet app is being rolled out a small pilot in the United States and Guatemala. With it, people can send and receive money instantly, securely, and with no fees. It will use the Pax Dollar (USDP) stablecoin through partnerships with Paxos and Coinbase. A small cohort of users in both countries will be able to download the Novi app on iPhone or Android devices, sign up with valid government-issued ID, and add money to their accounts with a debit card. According to CEO David Marcus, USDP was chosen because it's been operating successfully for over three years and has important regulatory and consumer protection attributes. He also made it clear that Novi's support for the larger-scale Diem project hasn’t changed and they intend to launch Novi with Diem once it receives regulatory approval and goes live. https://www.novi.com/file/pilot-version-of-novi-now-available
France tests CBDC issuance in treasury bond blockchain trial
A consortium of institutions led by Euroclear have completed a test run of the use of wholesale central bank digital currency (CBDC) for settling French treasury bonds on a blockchain. The experiment, using technology from IBM and commissioned by the Banque de France included Agence France Trésor, BNP Paribas CIB, Crédit Agricole CIB, HSBC, Societe Generale. The trial is part of a wider Banque de France initiative commissioned in March 2020, to test the integration of a central bank digital currency for the exchange and settlement of tokenised financial assets between financial intermediaries.
Tether’s bitcoin-backed lending clashes with dollar promise
"The CEO of crypto lending platform Celsius Network has said that Tether lends out new USDT stablecoins in return for cryptocurrencies — a claim that calls further into question Tether’s founding promise that it uses only real dollars to issue its tokens. Celsius borrows USDT from Tether in return for well-known cryptocurrencies. New USDT is issued for such loans and later destroyed when the loan is closed so it does not permanently increase USDT in circulation. This flies in the face of the Tether operating model described in its whitepaper - issuance of USDT is supposed to be on a one-for-one basis against dollars. However a primer published in May 2021 says only that that 'newly issued [USDT] must be backed by collateral' and that 'redeemed [USDT] tokens are not released back into circulation unless new collateral has been provided'."
The e-cedi, which the Bank of Ghana is set to pilot, reportedly seeks to facilitate transactions without the need for power or connectivity." This is a core functionality of the Filia central bank digital currency (CBDC) platform of the Bank of Ghana's technical partner G+D.
Digital yuan's anonymity is misunderstood, says China's digital currency leader
Mu Changchun, the Director General of the People's Bank of China (PBOC), clarified how the managed anonymity of China’s digital yuan works. Wallets come in multiple tiers, with small transaction value tiers supporting anonymity by requiring only a phone number as identity, but larger-value tiers requiring conventional proof of identity. Under China's Personal Information Protection Law, the telecom companies cannot release identity information to any third parties, including the central bank. However, if it’s suspected that some anonymous transactions are illicit, law enforcement agencies can present a legal warrant to the phone company to get the user’s identity. Also, all wallets have a sub wallet function in which each merchant can have a separate wallet to avoid linking a person across merchants.
CFTC Fines Tether and Bitfinex $42.5M for ‘Untrue or Misleading’ Claims
The US Commodity Futures Trading Commission (CFTC) fined Bitfinex and Tether more than $42 million on allegations that over a 26-month period between 2016 and 2018, the reserve funds backing its USDT stablecoin were comingled with the company’s corporate funds and held in non-cash products, relying on unregulated entities and certain third-parties to hold funds comprising the reserves. In a statement published shortly after the CFTC release, Tether confirmed that indeed the reserves were not all in cash and all in a bank account titled in Tether’s name, at all times, contrary to what the firm had claimed during the period in question.
G7 Public Policy Principles for Retail Central Bank Digital Currencies
The G7 published a set of public policy principles for retail central bank digital currency (CBDC) alongside a G7 Finance Ministers and Central Bank Governors’ Statement on CBDCs and digital payments.
FSB publishes targets for enhancing cross-border payments and progress under its Roadmap
The Financial Stability Board (FSB) published a progress report on the first year of the G20 Roadmap for Enhancing Cross-Border Payments, bringing together in one place the work under the wide-ranging, but interconnected, set of initiatives. Most of the milestones set for 2021 have been successfully completed or are close to finalization. The breadth of the work underway and the recognition of the importance of conducting sufficient external outreach has led some of the timelines to be extended. But the end-goals of the overall Roadmap remain firmly on track. The next stage of work in 2022 includes the development of specific proposals for material improvements of underlying systems and arrangements, as well as the development of new systems.
"This article digs into general-purpose CBDC design features and challenging technological decisions that digital architects, policy-makers and bankers are currently working on. Arguably, the paper could be many pages longer, but we wanted to offer more of a stock-take review so that you, the reader, could see the larger design picture more easily. We expect that the inventory of features and issues will continue to change over time as evaluations and testing proceeds. "
G7 Set to Release the Guidelines for the Creation of CBDCs
The Group of Seven (G7) industrialized nations are reportedly discussing a draft document that sets out standards for the creation and issuance of central bank digital currency (CBDC). Among issues considered “essential” for any CBDC, the document cited appropriate national regulatory and oversight frameworks for the new payment system, as well as “rigorous” standards of privacy and accountability for the protection of users’ data and transparency on how information will be secured and used. The paper also pointed to concerns over a significant use of any CBDC by residents of a foreign country, which could lead to currency substitution and loss of monetary sovereignty in both the issuing and foreign country.
OFS and AUGENTIC GmbH reveal the design of the offline "Smart Banknote CBDC" prototype
"A smart banknote is a physical banknote that interacts with a CBDC solution and acts as a transitional device between traditional and CBDC based payment systems. A smart banknote can be used like a classic banknote; however, the owner can redeem his cold wallet (physical banknote) and transfer the note’s value to a digital wallet by scanning the QR code with the private key. Our smart banknote includes a public and a private key represented by QR codes of which the private one is sealed. When the cover of the private key is removed, the QR code scanned, the value of the banknote can be transferred to a digital wallet. Conceptually after this procedure, the smart banknote cannot be transferred anymore."
