The Reserve Bank of Australia has posted a job advertisement for multiple positions within its new central bank digital currency (CBDC) research team. The cross-disciplinary team is researching "whether there is a case for a CBDC in Australia, and if so, how it might be designed and what benefits and other implications it would have."
China explores using blockchain for digital yuan CBDC issuance
Di Gang, Deputy Director of the PBOC Digital Currency Research Institute, reportedly said the central bank is exploring using distributed ledger technology (DLT) at the e-CNY issuance layer. Until now, the PBOC has been working with a centralized ledger technology approach because of DLT's immaturity, performance, and scalability challenges. However, he acknowledged that perhaps these can be addressed using sidechains, multichain architectures and hardware acceleration.
China’s Central Bank Reports Progress, Challenges On E-CNY Adoption
People’s Bank of China (PBOC) Deputy Governor Fan Yifei provided a progress report on the PBOC's e-CNY central bank digital currency (CBDC) pilot project. So far there have been no technical glitches, but the PBOC is working to support the connection between e-CNY and traditional payment systems and the connection between e-CNY digital wallets and bank accounts. He also mentioned that regulations need to be improved and optimized. For example, setting the boundaries between account- and value-based transactions may need to be refined (account-based transfers are large-scale transfers, while value-based transfers are smaller offline P2P payments). According to Richard Turrin, a Shanghai-based fintech consultant who recently published Cashless: China’s Digital Currency Revolution, "One big issue... would be what limit to put on value-based transfers to make them cash-like especially for rural users.
Central banks of Honduras, Guatemala eye digital currencies
The central banks of Honduras and Guatemala are reportedly studying digital currencies with the aim of eventually introducing them into the economy, including via a central bank digital currency (CBDC).
Roxe Announces A Global CBDC Payment Network Powered By Blockchain
"Roxe’s full stack solution knits together issuance, management, distribution, and interoperation of different CBDCs with banks, central banks, cross-border money transfer companies, and peer-to-peer payment providers in a single network. This is an audacious vision, to rework the global payments system. DeFi and CeFi are losing their distinction. The global payments system needs a rework, integrating CBDCs into it and providing payment rails come as the first step in true digital asset trading towards a global capital market."
Roxe hires ex-IMF economist to lead blockchain-based CBDC project
Global payment network Roxe has recruited Andreas Jobst, an International Monetary Fund (IMF) Senior Economist. As Roxe’s chief currency economist, Jobst will be tasked with helping to scale Roxe’s Bitcoin blochchain-based central bank digital currency (CBDC) project. The CBDC Plus Program appears to be a wholesale CBDC designed for cross-border interoperability among financial institutions.
"Fluency Aureum is the world's first permissioned enterprise platform, made for the purpose of building and interconnecting national CBDC networks. With the smart use of advancements in DLT (Distrubuted Ledger Technology), our platform is designed to provide all tools necessary for easy deployment, configuration and management of custom CBDC networks. Using a lightweight consensus mechanism and sharding approach, our platform is designed to achieve commercialisation viability, by maximising scalability and flexibility of the underlying network, while providing regulatory compliance by creation of separated, yet interconnected, compliance zones for each CBDC."
"Sand Dollar is the digital version of the Bahamian dollar (B$). Like cash, Sand Dollar is issued by the Central Bank of The Bahamas through authorised financial institutions (AFIs)."
Tokenizing Trust and Putting the ‘Stable’ in Stablecoins
"A more practical and efficient method of backing a privately-issued stablecoin, discussed in detail in our “Shaping the Future of Digital Currencies” report, would be to replace (off-chain) central bank reserves with an (on-chain) central bank blockchain-based liability, or CBBL for short."
Private Central Bank Digital$ to Earn, Spend, Send, Transact in $ - USD Mint
Beware, this is likely a scam! "USD Mint is a Public Benefit Central Bank that Directly Issues & Settles USD Globally. USD Mint offers Free Universal Access to USD Accounts and Income as a Public Good."
Whether a stablecoin needs dollar reserves depends on its actual or potential use in the conventional payments system. A stablecoin used only within the crypto ecosystem wouldn’t need 100% dollar reserves. It would only need sufficient dollar liquidity to maintain its peg – and if exchanges are compliant and redemptions restricted, that might not be very much. However, stablecoins could replace conventional rails for international payments, potentially making them faster, cheaper and available 24/7. Stablecoins used for this purpose would need to be fully exchangeable for U.S. dollars or other fiat currencies on demand 24/7, and would therefore either need 100% dollar reserves or access to central bank liquidity. [Hence,] rather than wasting time and energy trying to regulate crypto-only stablecoins as if they are banks or money market funds, regulators should concentrate on ensuring that stablecoins that are, or show signs of becoming, payment media within the conventional financial system have 100% reserves and/or are licensed banks.
Bitt Awarded CBDC Contract for Central Bank of Nigeria
The Central Bank of Nigeria (CBN) is partnering with Bitt to roll out its eNaira central bank digital currency (CBDC) later this year. Project Giant, as the Nigerian CBDC pilot is known, has been a long and thorough process for the CBN, that started with the Bank’s decision to digitize the Naira in 2017. Bitt was previously key to the development and launch of the CBDC pilot of the Eastern Caribbean Central Bank (ECCB) in April 2021. https://www.cbn.gov.ng/Out/2021/CCD/CBN%20Press%20Release%20(CBDC)%2030082021.pdf
MAS Announces 15 finalists for the Global CBDC Challenge
The Monetary Authority of Singapore (MAS) announced the 15 finalists for the global competition to develop retail central bank digital currency (CBDC) solutions (Global CBDC Challenge). The finalists will progress to the Acceleration Phase before they pitch their solutions to a panel of judges and an international audience at this year’s Singapore FinTech Festival. The Challenge attracted over 300 submissions from more than 50 countries. Participants were invited to address 12 problem statements relating to (i) CBDC instrument; (ii) CBDC distribution; and (iii) CBDC infrastructure; covering topics such as inclusivity, interoperability and programmability. The proposals from the finalists sought to address multiple problem statements through a variety of technology approaches including hardware wallets, digital identity and asset tokenisation solutions.
The Central Bank of Nigeria (CBN) reportedly has sent a presentation to Nigerian banks about the e-Naira central bank digital currency (CBDC) project. The CBDC, which will not be renumerated, will run on a Hyperledger Fabric DLT platform, and users will access it with the CBN's three-tier Speed Wallet. The first tier, which does not require users to have a bank account, will require users to register their phone number validated as a National Identity Number (NIN) and has a daily send/receive limit of N50,000 (about $120) and a maximum balance of N300,000 ($730). Tier Two wallet users, who must have a bank account and Bank Verification Number (BVN), will be able to send and receive N200,000 ($485) and hold up to N500,000 ($1,200). The third Tier allows daily transactions up to N1,000,000 ($2,430) with holdings limited to N5,000,000 ($12,150).
This paper by the Bank of Canada's Scott Hendry and Yu Zhu confirms the validity of central bank concerns that wide adoption of a private digital currency and decline in the use of central bank money may undermine monetary sovereignty. The analysis is based on a theoretical model in which fiat money and the digital currency differ in the types of transactions that they can serve, with the latter dominating in online transactions. Although the central bank wants to maintain the value of the fiat money by keeping low inflation in case households want to use the fiat money for transactions, a welfare-maximizing central bank would also want to encourage households to use e-money for transactions where e-money has an advantage. This can be achieved by raising inflation of fiat money since it is a substitute for e-money, and the incentive to raise inflation would dominate if the usage of fiat money was sufficently low. However, if the use of the central bank money becomes sufficiently low, this leads to high inflation and low welfare. The paper concludes that, to defend monetary sovereignty, the central bank should maintain or expand the use of central bank money, for example, by offering a central bank digital currency (CBDC) designed to be a perfect substitute for the private e-money.
Banco de Reserva del Perú on Central Bank Digital Currency
Banco de Reserva del Perú has apparently been studying central bank digital currency (CBDC) since 2019. "Central banks must continue with the analysis, both conceptual and technological, in order to be prepared for eventual changes in the conditions they face regarding the conduct of monetary policy in the future. It is essential to continue with the study and analysis of the potential effects of the issuance of a digital currency, as well as learning from the experiences of other countries on the subject."
DCash: motivations, challenges, and lessons from the first monetary union CBDC pilot
"The inauguration of the DCash CBDC pilot, in March 2021, represented the first major step towards the practical achievement of a CSME. To truly understand the scale of this achievement, it is necessary to examine some of the fundamental problems that arise from inefficient payment systems. In doing so, light will be shed on the Herculean efforts required to get to this point and the pivotal justifications for why these efforts were well warranted."
This IMF paper reviews how central banks have been reacting to the challenges posed by fintech to the legal foundations of their governance. It finds that fintech calls for reconsidering the adequacy of the legal formulation of currency issuance and payment systems functions and powers. Fintech may impact the functional autonomy for some key central bank functions. For example, the role claimed by governments in designing CBDC will be an important issue to consider; the legal framework will need to carefully delineate the respective roles and responsibilities between the government and the central bank. The authors suggest that central bank law reform must be sufficiently broad to achieve appropriate levels of “agility” to provide a “future-proof ” legal framework. For instance, legislation (and by extension the legal framework to which the central bank is subject) should to the maximum extent possible be technology-neutral.
Madagascar Central Bank Exploring CBDC Introduction
Banky Foiben’I Madagasikara (BFM) is exploring the introduction of a retail central bank digital currency (CBDC) based on a two-tier "intermediated" distribution model. The design thought process will be focused on domestic use, but keeping open the option of cross-border use later. The BFM has published a request for information and quotation (RFI/RFQ) for potential technical solutions, The deadline for submissions is September 6, 2021, with a heads up notification requested by August 25.
Paxos is rebranding its stablecoin from PAX to USDP
Paxos is rebranding its stablecoin from Paxos Standard (PAX) to Pax Dollar (USDP) so it is more easily identifiable as a US dollar-backed token. The updated USDP smart contract will go live on August 31, 2021. PAX has always maintained reserves that are 100% cash or cash equivalents, which for Paxos means short-term Treasury bills.
Circle Stablecoin to Be Held 'Entirely' in Cash, US Treasuries
The Centre Consortium announced that USD Coin (USDC) stablecoins will only be backed by cash and U.S. Treasury Bills. Centre oversees which entities are allowed to issue the stablecoin and use its API. In July, its parent company Circle, which issues the USDC, revealed that USDC was only 61% backed by cash (including money market funds) and cash equivalents (high-quality short-term fixed income securities). The July attestation report showed that reserves included Yankee Certificate of Deposit (13%), commercial paper (9%), corporate bonds (5%) and municipal bonds and U.S. Agencies (0.2%).
"The key lesson from disasters past, present and future is not that we should keep cash but that what we should have in place is a means to person-to-person (or actually, device-to-device) payments in the absence of mobile networks, electricity and clearing systems. I don't want to labour the point about the unsuitability of blockchain-based payments for general purpose cash replacement, but this seems to me to reinforce a critical design characteristic for central bank digital currencies: they must be able to work offline."
Thailand Publishes CBDC Study Results, Pilot Test To Start In 2022
The Bank of Thailand today published the results of its retail central bank digital currency (CBDC) study and public survey, which the central bank says will guide the development of the country’s CBDC pilot test. The guidelines for a retail CBDC include: (1) the CBDC should be cash-like and non-interest bearing, and (2) intermediaries such as financial institutions would distribute the CBDC to the general public. A “Foundation Track” pilot will begin in Q2 2022 and will involve using the currency to conduct cash-like activities at a limited scale, e.g. as payment or receipt for goods and services, as well as for conversion. An "Innovation Track" will explore use cases for the CBDC with participation from the private sector and technology developers. https://www.bot.or.th/English/PressandSpeeches/Press/2021/Pages/n6064.aspx
Facebook's digital wallet, Novi, could abandon the Diem stablecoin in favor of fiat money if regulators do not change their tune, says David Marcus, head of Facebook Financial and Novi. The current iteration of the project involves the issue of a single stablecoin pegged to the US dollar, versus the original plan to issue a series of stablecoins backed by individual traditional currencies, as well as a token based on the currency-pegged stablecoins. Marcus claims that US authorities' "hostility" to Facebook's move into payments, is "profoundly un-American" and that the firm deserve a "fair shot" while also pointing out that it is already well embedded in the sector.
Ukraine’s Digital Ministry Plans to Pay Employees With Digital Hryvnia in Pilot Project
Ukraine's Ministry of Digital Transformation is reportedly planning to pay its employees with Ukraine’s e-hryvnia central bank digital currency (CBDC) as part of future pilot testing. Another e-hryvnia pilot idea being considered is to use it in the payment of social benefits and government subsidies, and to employ smart contracts that can potentially limit the use and misuse of such government grants.
Bank of Jamaica will need court order to track CBDC transactions
The Bank of Jamaica (BOJ) reportedly said that, although wallet providers can monitor personal information and transactions of its central bank digital currency (CBDC) users, this information cannot shared with the BOJ and any other authority without a court order. The BoJ will only capture general data for economic analysis. A total of $230 million CBDC has been minted as part of a pilot exercise which ends in December 2021. If the pilot is successful, full roll-out is expected in 2022.
Research about central bank digital currency (CBDC) has been silent about consumers’ willingness to use CBDC and what triggers usage. This De Nederlandsche Bank paper reports on the results of a survey among a representative group of Dutch citizens to fill this gap. It found that about half of the Dutch population would be willing to open a current account for digital euros at the central bank. The not-for-profit nature of central banks was the most often mentioned rationale. The second was improved resilience of the electronic retail payment system, and third was its relative safety versus cash.
Ghana to Pilot CBDC With German Banknote Printer Giesecke+Devrient
The Bank of Ghana plans to test a general purpose central bank digital currency (CBDC) in partnership with German banknote printer Giesecke+Devrient (G+D). G+D is providing the technology and will adapt their Filia CBDC solution adapted to Ghana’s requirements, which will be tested in a pilot with banks, payment service providers, merchants, consumers and other relevant stakeholders. Filia enables secure, consecutive offline payments in case no network connection is available.
Coinbase removes ‘backed by US dollars’ claim for USDC stablecoin
The Coinbase website now states that USD Coin is “backed by fully reserved assets,” contrary to the now-removed claim of “backed by U.S. dollars in a bank account.” More specifically, “each USDC is backed by one dollar or asset with equivalent fair value, which is held in accounts with US regulated financial institutions.”
