"EMTECH, an award-winning software company modernizing central banking infrastructure for financial inclusion and resilience, with blockchain-based platforms, and Hedera Hashgraph, provider of the most used, sustainable, enterprise-grade public network for the decentralized economy, announced today a partnership to develop an enterprise-grade, highly performant, highly secure and energy efficient CBDC (Central Bank Digital Currency) infrastructure product."
The Central Bank of Nigeria published a white paper that provides detail on the critical dimensions of its eNaira central bank digital currency (CBDC). It provided more detail on the individual wallet tiers and limits (Table 2 and 3 below) and the two-tier, apparently "hybrid", architecture (Figure 7). The local press is reporting that the launch of the pilot is imminent.
"Can central banks deliver on and guard cash-like privacy and resilience properties of a CBDC? And if so, at what cost? In order to maintain public’s access to central bank money are operational investments or subsidies needed to both CBDC deployment as well as to sustainability of cash infrastructures?"
Challenges to the International Role of the U.S. Dollar
According to a new paper by the Federal Reserve, the US dollar's dominant role in global markets should continue, but that status could be threatened by increased European integration, the continued rapid growth of China, or cryptocurrencies. However, absent any large-scale political or economic changes, it concludes that the dollar will likely remain the world's dominant international currency for the foreseeable future. For example, even with more European fiscal integration, remaining political separation will continue to cause policy uncertainty that would undermine the Euro as a viable competitor. And there are significant roadblocks to more widespread use of the Chinese renminbi, including it not being freely exchangeable, the Chinese capital account being closed, low investor confidence in Chinese institutions and the rule of law. As for cryptocurrencies, the paper's assessment is that it is unlikely that technology alone could alter the landscape enough to completely offset the long-standing fundamental reasons the dollar has been dominant.
Crypto Mystery: Where’s the $69 Billion Backing the Stablecoin Tether?
A Bloomberg article made numerous claims against Tether, including that its chief financial officer Giancarlo Devasini has used the company’s reserves to make investments, that seem to contradict Tether’s public position that the holdings were fully backed at all times. In addition, the article alleges that Tether has invested in Chinese firms and issued crypto-backed loans “worth billions of dollars.” Furthermore, Wall Street traders were canvased to see if any had ever seen any trades made by the company, which supposedly holds $30 billion in commercial paper short-term loans — suggesting the fact that none had seen any should raise eyebrows. Additionally, only one bank was located — in the Bahamas — that was working with the firm. Tether called the article “another tired attempt to undermine” the company, pointing to its recent quarterly report on its holdings to demonstrate that it is 100% backed, although not offering any detail on its asset holdings that would concretely refute the Bloomberg article's contentions.
"Again, I think if you told that story five years ago people would think you were nuts. “No no no,” they would say, “you can’t manufacture safe dollar assets out of Bitcoin, Bitcoin is too volatile, there is no floor, it could go to zero, this is nonsense.” I think there is a good chance that if you tell that story five years from now it will be unremarkable. “Yes right of course the Bank of Tether issues deposits worth one Tether and uses those deposits to fund margin loans to levered Bitcoin investors, that’s just how banking works,” people will say. It is just a function of how confident people are in Bitcoin’s permanence and its function as a store of value. Right now we are in between; the story is plausible but still weird. It’s not the story that Tether wants to tell, and it’s not the main story of Tether. But it's the interesting part."
MoneyGram launches USDC settlement using the Stellar blockchain
"MoneyGram has partnered with the Stellar Development Foundation to enable consumers to send money using Circle’s USD Coin (USDC) stablecoin, and convert directly to and from fiat across its global retail platform. Working alongside Circle, MoneyGram will also enable “near-instant backend settlement,” account funding and local fiat withdrawals using USDC. United Texas Bank will act as the settlement bank to complete the process within the regulatory framework."
US FDIC Said to Be Studying Deposit Insurance for Stablecoins
The Federal Deposit Insurance Corp. (FDIC) is reportedly studying whether certain stablecoins might be eligible for its coverage. The agency is trying to analyze what so-called pass-through FDIC insurance might look like for the reserves that stablecoin issuers hold at banks. Such coverage would insure holders of the tokens against losses up to $250,000 if the bank holding the collateral were to fail. The FDIC is also looking at what regular, direct deposit insurance might look like for banks that want to issue stablecoins.
The National Bank of Georgia (NBG) reportedly plans to launch a retail central bank Digital currency (CBDC) pilot next year, following up on their April 30, 2021 request for fintech companies to cooperate in the digital lari project.
CPMI and IOSCO publish guidance, call for comments on stablecoin arrangements
The Committee on Payments and Market Infrastructures (CPMI) and the International Organization of Securities Commissions (IOSCO) published for public consultation preliminary guidance that confirms and clarifies that systemically-important stablecoin arrangements (SAs) should observe international standards for payment, clearing and settlement systems. The report proposes additional guidance on how certain aspects of the CPMI/IOSCO Principles for Financial Market Infrastructures (PFMIs) apply to the novel features of SAs.
Circle's newest attestation report shows that it has sold most of its corporate bonds, long-dated commercial paper, Yankee certificates of deposit, and Treasury notes, that back its USDC stablecoin.
Circle, a key supporter of the USDC stablecoin, received an “investigative subpoena” from the U.S. Securities and Exchange (SEC) Enforcement Division in July 2021. The subpoena arrived one month after Circle began onboarding corporate USDC holders into its first high-interest yield product, Circle Yield. The subpoena requests “documents and information regarding certain of our holdings, customer programs, and operations," but Circle did not elaborate on what the SEC’s investigation was focused on.
All your questions about the Trillion Dollar Platinum Coin, Answered
"There are many proposals coming out of congress for how to respond to the Coronavirus-induced depression and deliver economic relief to households. Only one however, involves sending and/or delivering a debit card to every single resident of the United States and funding this expenditure by minting a trillion dollar platinum coin. This is Representative Rashida Tlaib’s proposal, co-authored by my colleague at the Modern Money Network, Rohan Grey. Rohan actually wrote his entire job market paper on the Platinum Coin, which I encourage you to read if you’re really interested in the technicalities, but I wanted to cover some basic details"
Fine, go ahead and mint the damn trillion-dollar coin. And then hang it on the wall or put it on display as a symbol of monetary – and legal – incompetence. Proposed by Democrat members of Congress as a solution to the U.S. debt ceiling impasse, the idea behind the coin is deceptively simple: There’s a loophole in the U.S. law allowing the Treasury Department to keep spending even after the limit on how much public debt can be incurred – the debt ceiling – has been reached. The ploy is to use a rule that authorizes Treasury to issue a platinum coin “in accordance with such specifications, designs, varieties, quantities, denominations, and inscriptions as the Secretary, in the Secretary’s discretion, may prescribe from time to time.” Pushback from Rohan Grey: https://twitter.com/rohangrey/status/1445131064872030211 and response from Marcelo Prates: https://twitter.com/MarceloMPrates/status/1445139106732953613
"Should the U.S. Postal Service get into the banking business? U.S. Senators Kirsten Gillibrand (D-N.Y.) and Bernie Sanders believe it should, and have introduced the Postal Banking Act. The idea is that with 8.4 million unbanked American households, banks are doing a bad job of serving low-income people. If the U.S. Postal Service (USPS) began offering banking services, it may be able to reach these people."
"The United States Postal Service (USPS) has taken the most dramatic step in a half-century to re-establish a postal banking system in America. In four pilot cities, customers can now cash payroll or business checks of up to $500 at post office locations, and have the money put onto a single-use gift card. It’s the most far-reaching executive action that the Biden administration has taken since Inauguration Day."
HKMA Technical Whitepaper on Retail Central Bank Digital Currency
The Hong Kong Monetary Authority (HKMA) released a technical whitepaper on retail e-HKD central bank digital currency (CBDC). Building on the model for retail CBDC that the HKMA is jointly investigating with the Hong Kong Centre of the BIS Innovation Hub, the Whitepaper explores potential technical design options for issuing and distributing retail CBDCs. It aims to explore technology solutions that address the problems of cross-ledger synchronisation, over-issuance prevention, privacy-preserving transaction traceability, and different two-tier distributions models.
Laos to Study Digital Currency With Help From Japanese Fintech, Report Reveals
The Bank of the Lao People’s Democratic Republic is reportedly launching a CBDC study. The monetary authority has employed the Japanese fintech firm Soramitsu which was involved in a similar project in neighboring Cambodia (Project Bakong). (Laos recently signed a memorandum of understanding with the Japan International Cooperation Agency.)
On October 1, the Central Bank Of Venezuela slashed six zeroes from the currency, effectively making 1,000,000 Bolivares just 1 Bolivar now, to make payments and currency handling easier. The measure was announced in August, where the central bank announced it was changing the name of the currency to the “Digital Bolivar,” which sparked speculation about a possible issuance of a central bank digital currency (CBDC) in the country. But the bank did not present any reports in this regard and instead announced the issuance of new bills to complement the redenomination plan.
The People’s Ledger: How to Democratize Money and Finance the Economy
The Biden administration is nominating law professor Saule Omarova to head the Office of the Comptroller of the Currency (OCC). Omarova recently wrote a paper that outlines a series of structural reforms that would radically redefine the role of a central bank as the ultimate public platform for generating, modulating, and allocating financial resources in the economy. Beginning with the liability side of the central bank balance sheet (the "People's Ledger") she advocates the issuance of retail central bank digital currency (CBDC) and concurrent migration of all transaction deposit accounts from private banks to the central bank. On the asset side, she advocates a comprehensive qualitative restructuring of the central bank’s investment portfolio, which would maximize its capacity to channel credit to productive uses in the nation’s economy. She shows how the proposed reforms would make the financial system less complex, more stable, and more efficient.
Crypto Boom Poses New Challenges to Financial Stability
A chapter from the IMF's forthcoming Global Financial Stability Report concludes that tougher regulation is needed to prevent the rapid growth in crypto-assets leading to financial instability, defrauding of consumers and the funding of terrorism. The chapter drew particular attention to the widespread and rapid adoption of crypto-assets in emerging markets and developing economies (EMDEs), which could "pose significant challenges by reinforcing dollarization forces in the economy — or in this case cryptoization — where residents start using crypto-assets instead of the local currency, reducing the ability of central banks to effectively implement monetary policy... [In such cases] authorities should prioritize strengthening macroeconomic policies and consider the benefits of issuing central bank digital currency and improving payment systems. In some EMDEs, cryptoization can be driven by weak central bank credibility, vulnerable banking systems, inefficiencies in payment systems and limited access to financial services... [Also,] globally, policymakers should prioritize making cross-border payments faster, cheaper, more transparent and inclusive through the G20 Cross Border Payments Roadmap."
George Selgin: There are a many reasons why I also favor a division of labor in which the Fed sticks to being a wholesale dealer in payments media, leaving the retail side of the business to banks and other private-sector payment services providers.
"According to David Andolfatto a Canadian retail CBDC is, in principle, an attractive proposition. But given the system currently in place and the prospects for its near-term evolution, a retail CBDC on its own is, in my opinion, not an essential initiative at this point in time. For consumers, a retail CBDC would mostly replicate what they already have available. As such, the initiative is not likely to attract business away from private-sector PSPs or serve to discipline private-sector pricing protocols and rewards programs. For a CBDC to be successful in this regard, legislation (or moral suasion) designed to alter private-sector marketing behaviour is likely required. But if such legislation were forthcoming, the rationale for a retail CBDC is even further diminished. On the other hand, a wholesale CBDC (together with legislation governing pricing protocols) seems like the most straightforward way to promote competition and fairness in the Canadian payments system. While I see no reason why a CBDC could not work in principle, I also do not see why it is essential in practice. It probably makes more sense to let the Bank of Canada focus on its core competencies — monetary policy, regulation and wholesale payments — and let a regulated private sector manage retail payments."
Court okays eNaira rollout as CBN postpones launch
The Central Bank of Nigeria (CBN) reportedly deferred the launch of the eNaira central bank digital currency (CBDC) in deferrence to other key activities lined up to commemorate the country’s 61st Independence Anniversary. The launch was scheduled for October 1, and Nigerians have already been able to download the eNaira app from either the Google Play or Apple App stores for some days now. Also, a trademark infringement lawsuit by Nigerian company Enaira Payment Solutions, that had threatened to restrain the launch, had been cleared away the day before.
Visa outlines interoperability concept for CBDC payments
Visa published a paper on its "universal payments channel" (UPC) that will facilitate transactions between various stablecoins and central bank digital currencies (CBDCs). Specifically, it proposes a hub-and-spoke payment route that can be used to support digital token transfers of funds across different networks through payment channels. The UPC protocol facilitates payments through a "UPC hub" that acts as a gateway to receive payment requests from registered sending parties and routes them to registered recipient parties.
New Zealand central bank consults on retail central bank digital currency
The Reserve Bank of New Zealand published a discussion papers seeking public feedback to assess retail central bank digital currency (CBDC) use cases. The central bank emphasized that a potential New Zealand CBDC would be digital money issued by the bank alongside cash. The central bank notes that while the amount of cash in circulation has been growing in New Zealand, it is still used “proportionately less for transactions by most people."
Cabs In Chinese City Xi'an Pilot Digital RMB As Fare
"The Xi’an taxi industry and the Bank of Xi’an have reportedly launched an eCNY pilot program to accept eCNY as fare, becoming the first city in China to accept digital renminbi as a taxi fare. Ten cabs selected as pilot vehicles have QR codes posted, and passengers can scan the QR codes to pay the fare with digital yuan."
Nigeria's eNaira central bank digital currency (CBDC) which was scheduled to launch on October 1, may not go as planned due to an infringement by the central bank's infringement of the trademark of a Nigerian company ENAIRA PAYMENT SOLUTIONS LIMITED (RC 508500), which was incorporated in 2004. The company’s attorney, Olakunle Agbebi & Co. has reportedly approached the Federal High Court in Suit No. FHC/AB/CS/113/2021 between ENaira Payment Solutions Limted v. Central Bank of Nigeria. The action includes an order to restrain the central bank from proceeding with the proposed launch.
Bank of England Announces Membership of CBDC Engagement and Technology Forums
The Bank of England and HM Treasury have today announced the membership of the central bank digital currency (CBDC) Engagement and Technology Forums. The creation of these groups was announced in April 2021, alongside the CBDC Taskforce which coordinates the exploration of a potential UK CBDC. The Engagement Forum consists of senior stakeholders from industry, civil society and academia to gather strategic input on policy considerations and functional requirements pertaining to CBDC. The Forum will have an important role in helping the Bank and HM Treasury understand the practical challenges of designing, implementing and operating a CBDC.
The Celo Foundation launched Provo, a sandbox for public and official sector experimentation on Celo that’s designed to allow central banks to explore and experiment with central bank digital currency (CBDC) and other digital assets. Provo will enable financial and regulatory authorities to test CBDC designs and implementation mechanisms in permissioned and/or permissionless, risk-free environments on the Celo platform.
