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Monetary Policy with Reserves and CBDC: Optimality, Equivalence, and Politics
Monetary Policy with Reserves and CBDC: Optimality, Equivalence, and Politics
This paper analyzes policy in a two-tiered monetary system. Noncompetitive banks issue deposits while the central bank issues reserves and a retail CBDC. Monies differ with respect to operating costs and liquidity. It maps the framework into a baseline business cycle model with "pseudo wedges" and derives optimal policy rules: Spreads satisfy modified Friedman rules and deposits must be taxed or subsidized. It generalizes the Brunnermeier and Niepelt (2019) result on the macro irrelevance of CBDC but shows that a deposit based payment system requires higher taxes. The model implies annual implicit subsidies to U.S. banks of up to 0.8 percent of GDP during the period 1999-2017.
#Fintech#CryptoAssets#CBDC#DFC
·cepr.org·
Monetary Policy with Reserves and CBDC: Optimality, Equivalence, and Politics
CBDC: Can central banks succeed in the marketplace for digital monies?
CBDC: Can central banks succeed in the marketplace for digital monies?
This paper provides an overview of the existing payment ecosystem and derives a systemic taxonomy of CBDCs that distinguishes between new payment objects and new payment systems. Using this systemic taxonomy, it is able to categorize different CBDC proposals. In order to discuss and evaluate the different CBDC design options, it develops two criteria: allocative efficiency, i.e. whether a market failure can be diagnosed that justifies a government intervention, and attractiveness for users, i.e. whether CBDC proposals constitute attractive alternatives for users compared to existing payment objects and payment systems. The analysis shows that there is no justification for digital cash substitutes from the point of view of allocative efficiency and the user perspective. Instead, the analysis opens the perspective for a retail payment system organized or orchestrated by the central bank without a new, independent payment object.
#Fintech#CryptoAssets#CBDC#DFC
·cepr.org·
CBDC: Can central banks succeed in the marketplace for digital monies?
SAMA and CBUAE Issue Report on Results of Joint Digital Currency Project "Aber"
SAMA and CBUAE Issue Report on Results of Joint Digital Currency Project "Aber"
The Saudi Central Bank (SAMA) and the Central Bank of the United Arab Emirates (CBUAE) published the results of their joint "Aber" wholesale central bank digital currency (wCBDC) pilot project. The wCBDC was issued by SAMA and the CBUAE, and used only by them and participating banks, as a settlement unit for domestic and cross-border commercial bank transactions between Saudi Arabia and the UAE. The final results of the pilot project were consistent with the results of similar pilots conducted by a number of central banks.
#Fintech#CryptoAssets#CBDC#DFC
·sama.gov.sa·
SAMA and CBUAE Issue Report on Results of Joint Digital Currency Project "Aber"
Beijing preps for digital yuan trial expansion for trade
Beijing preps for digital yuan trial expansion for trade
Beijing municipality, which was not one of the five regions that were part of the first round of trials for China’s central bank digital currency (CBDC), is reportedly preparing to create a digital yuan pilot program and explore cross border data flow. One of the first five initial test regions, Xiong’an New Area, reportedly already has plans to use the digital renminbi for cross-border trade. The Ministry of Commerce had previously outlined such an expansion as part of a three-year plan, but the timing was unclear. Also, the digital currency is the responsibility of the central bank rather than the Commerce Ministry.
#Fintech#CryptoAssets#CBDC#DFC
·ledgerinsights.com·
Beijing preps for digital yuan trial expansion for trade
Shaping the future – Challenges in the European payments market
Shaping the future – Challenges in the European payments market
Dr Jens Weidmann, President of the Deutsche Bundesbank: "The Eurosystem has not yet decided whether to introduce a digital euro or not. And even if we were to opt for CBDC, its careful introduction would be an immense logistical and technical endeavour and, therefore, would be bound to take time... Some important issues... still require further analysis. Athorough understanding of the effects and trade-offs of CBDC is imperative for us before we can weigh up the arguments and draw firm conclusions."
#Fintech#CryptoAssets#CBDC#FastPayments#DFC
·bundesbank.de·
Shaping the future – Challenges in the European payments market
Ruble or Rubble? Russian Institutions Have Concerns About Proposed CBDC
Ruble or Rubble? Russian Institutions Have Concerns About Proposed CBDC
The Bank of Russia has started a series of consultations dedicated to the potential launch of the digital ruble, a CBDC pegged to the Russian ruble. The central bank has not yet decided if it wants to actually launch the project, but it is gathering feedback from would-be participants and users of the new payment system.
#Fintech#CryptoAssets#CBDC#DFC
·coindesk.com·
Ruble or Rubble? Russian Institutions Have Concerns About Proposed CBDC
Timothy Lane on the Future of Digital Currencies
Timothy Lane on the Future of Digital Currencies
Deputy Governor Tim Lane identified two scenarios that could trigger the Bank of Canada to issue central bank digital cuurency (CBDC. One of them was the disappearance of the acceptance of cash, and the second was the emergence of digital currencies that might turn out to be disruptive in some way or might undermine Canada’s monetary sovereignty. And he now says the last nine months have seen developments that look like they’re in the direction of some of those things coming to pass sooner than expected. In the end,part of the question is, if cash to is not modernized to keep up with changing technology, is there a gap in the system?
#Fintech#CryptoAssets#CBDC#DFC
·cigionline.org·
Timothy Lane on the Future of Digital Currencies
Project Helvetia: Settling tokenised assets in central bank money
Project Helvetia: Settling tokenised assets in central bank money
Project Helvetia, an experiment between the Bank for International Settlements Innovation Hub Swiss Centre, the Swiss National Bank (SNB) and the financial market infrastructure operator SIX, successfully shows the feasibility of integrating tokenised assets and central bank money. The project demonstrates the functional feasibility and legal robustness of settling tokenised assets with a wholesale CBDC (PoC1) and with linking a DLT platform to existing payment systems (PoC2) in a near-live setup. However, the experiment should not be interpreted as an indication that the SNB will issue a wholesale CBDC.
#Fintech#CryptoAssets#CBDC#Tokenization#SettlementSystems#DFC
·bis.org·
Project Helvetia: Settling tokenised assets in central bank money
Chinese city of Suzhou to give away $3 million in digital yuan via lottery
Chinese city of Suzhou to give away $3 million in digital yuan via lottery
Suzhou will give away 100,000 red packets of 200 yuan worth of DC/EP to city residents via a lottery, as part of the Peoples Bank of China central bank digital currency (CBDC) pilot. Local citizens can register for the lottery on December 5 and 6 and the results will be announced the day before the annual Double 12 online shopping festival. Lottery winners can spend the free digital yuan from December 11 to 27 at shops that support the DC/EP payment as well as at selected online shops on e-commerce giant JD.com. In addition, the government said selected winners from the lottery will be invited to test out the offline payment feature that's built into a DC/EP wallet. https://mp.weixin.qq.com/s/P7JoXI7G2EcRM1AuyZfP_w
#Fintech#CryptoAssets#CBDC#DFC
·theblockcrypto.com·
Chinese city of Suzhou to give away $3 million in digital yuan via lottery
A New Trend for Fintech - Cross-border Payment
A New Trend for Fintech - Cross-border Payment
The Hong Kong Monetary Authority (HKMA) is working with the People’s Bank of China (PBoC) on a pilot program to use the digital yuan (e-CNY) for cross-border payments. According to the HKMA, as the renminbi is already in use in Hong Kong and the status of e-CNY is the same as cash in circulation, it will bring even greater convenience to Hong Kong and Mainland tourists.
#Fintech#CryptoAssets#CBDC#CrossBorder#DFC
·hkma.gov.hk·
A New Trend for Fintech - Cross-border Payment
Six ways China's newest larger-scale digital yuan lottery is different than before
Six ways China's newest larger-scale digital yuan lottery is different than before
The city of Suzhou will give away 20 million DC/EP central bank digital currency (CBDC) via lottery, which is similar to the first one conducted in Shenzhen. However, for this pilot some of the 100,000 lottery winners (up to 1,000) will be selected to test an offline payment feature based on near-field wireless technologies. These DC/EP wallets will be capable of sending transactions between two smartphones or hardware devices even without an internet connection.
#Fintech#CryptoAssets#CBDC#DFC
·theblockcrypto.com·
Six ways China's newest larger-scale digital yuan lottery is different than before
Monetizing Privacy
Monetizing Privacy
In a market where consumers choose between payment options, and firms compete with products and prices, we show that payment data drives the formation of a market monopoly. Active intervention can successfully restore and maintain a competitive market, but often at the expense of both efficiency and consumer welfare. The introduction of a low-cost anonymous means of electronic payment, or digital cash, preserves the market structure and improves consumers' welfare by enabling them to monetize their private information. There are, however, challenges to the private provision of digital cash. We discuss the potential role of central banks in providing digital cash.
#Fintech#CryptoAssets#CBDC#Privacy#DFC
·papers.ssrn.com·
Monetizing Privacy
Sweden Explores Moving to Digital Currency
Sweden Explores Moving to Digital Currency
Sweden’s government launched an inquiry that will explore the feasibility of the Riksbank issuing an e-kronor central bank digital currency, and review the meaning of the concept of legal tender. More broadly, the inquiry's assignment includes mapping what the payment market looks like and may look like in the future, based on developments in Sweden and in other countries. In that regard, it will map the division of roles between the state and the business community in the payment market and take a position on the state's future role. The inquiry is expected to be completed by the end of November in 2022. https://www.regeringen.se/pressmeddelanden/2020/12/anna-kinberg-batra-ska-utreda-statens-roll-pa-betalningsmarknaden
#Fintech#CryptoAssets#CBDC#PaymentSystems#DFC
·bloomberg.com·
Sweden Explores Moving to Digital Currency
IMF leader on digital payments for skilled trades workers
IMF leader on digital payments for skilled trades workers
The continuing transition to digital finance is likely to affect sectors across the board. Artisans, or skilled craftsmen and women, are no exception. According to Kristalina Georgieva, managing director for the International Monetary Fund, or IMF, digital money for these skilled workers hinges on a tetrad of factors.
#Fintech#CryptoAssets#CBDC#Payments#DFC
·cointelegraph.com·
IMF leader on digital payments for skilled trades workers
Central Bank Money: Liability, Asset, or Equity of the Nation
Central Bank Money: Liability, Asset, or Equity of the Nation
Based on comparisons across a number of legal characteristics of financial instruments, this paper suggests that an appropriate characterization of "central bank money" (CBM) is as ‘social equity’ that confers rights of participation in the economy’s payment system and thereby its economy. This interpretation is important for macroeconomic policy in light of quantitative easing and potential future issuance of central bank digital currency (CBDC). It suggests that in robust economies with credible monetary institutions, and where demand for CBM is sufficiently and sustainably high, large-scale issuance such as under CBDC is not inflationary, and it does not weaken public sector finances.
#Fintech#CryptoAssets#CBDC#Accounting#DFC
·papers.ssrn.com·
Central Bank Money: Liability, Asset, or Equity of the Nation
Understanding China’s Central Bank Digital Currency
Understanding China’s Central Bank Digital Currency
In this paper, former Peoples Bank of China (PBOC) Governor Zhou Xiaochuan explains what China’s DC/EP is, the respective responsibilities of the central bank and second-tier institutions in the system, and the technological path. Interestingly, he says the idea behind DC/EP is not completely the same with that underlying central bank digital currency (CBDC) because the second-tier institutions actually own the e-CNY and offer guarantee of payment. This arrangement borrowed ideas from the three note-issuing commercial banks in Hong Kong. These banks are required to give the Hong Kong Monetary Authority 1 U.S. dollar for every 7.8 Hong Kong dollars issued, and in exchange receive a 100% reserve certificate. From the balance sheet’s perspective, the banknotes issued by the banks are their liabilities, their assets are reserves, and the liabilities of the central bank are the reserve certificates issued.
#Fintech#CryptoAssets#CBDC#DFC
·cf40.com·
Understanding China’s Central Bank Digital Currency
EMTECH Debuts Tech To Streamline Central Banking
EMTECH Debuts Tech To Streamline Central Banking
EMTECH is rolling out its new Modern Central Bank Sandbox, which will help to streamline regulatory reviews and test central bank digital currencies (CBDCs). The platform will also help central banks that want to collaborate with innovators on new technology, and enabling them to innovate safely with effective oversight and quicker time to market. EMTECH also aims to provide central banks with an infrastructure for digital cash. For example, EMTECH is currently working with the Central Bank of the Bahamas on its Digital Sand Dollar Currency.
#Fintech#CryptoAssets#CBDC#DFC
·pymnts.com·
EMTECH Debuts Tech To Streamline Central Banking
Solutions for a Digital Euro and the future of payments
Solutions for a Digital Euro and the future of payments
Blockchain for Europe published a roadmap for the future of payments in a Distributed Ledger Technology (DLT) oriented European economy. The paper provides an analytical framework dividing the digital payments value chain into three pillars: the contract execution system, the digital payment infrastructure, and the monetary unit. Based on this framework, the authors compare technology platforms, public and private sector payment solutions, including a bridge solution, e-money tokens, and central bank digital currency (CBDC) including "synthetic" CBDC. It concludes that the optimal payment solution for Europe would be a DLT-based euro CBDC but it is unlikely that it will be implemented in the short term, and unclear if it will address all the challenges and needs of the European economy and its consumers.
#Fintech#CryptoAssets#CBDC#DFC
·blockchain4europe.eu·
Solutions for a Digital Euro and the future of payments
An Offline Payment System for Central Bank Digital Currencies
An Offline Payment System for Central Bank Digital Currencies
Visa published a technical paper that outlines an approach for offline point-to-point payments between two devices. The protocol allows digital money to be directly downloaded onto a personal device, such as a smartphone or tablet. The money is stored on a secure hardware embedded in that device and managed by a wallet provider (e.g. a bank). CBDC can be transacted from one device to another device directly without any intermediaries such as banks, payment networks, or payment processors. Examples of the underlying technology that can support point-to-point payments include Bluetooth and Near Field Communication (NFC).
#Fintech#CryptoAssets#CBDC#Offline#DFC
·usa.visa.com·
An Offline Payment System for Central Bank Digital Currencies
Inclusion by Design: Crafting a Central Bank Digital Currency to Reach All Americans
Inclusion by Design: Crafting a Central Bank Digital Currency to Reach All Americans
This Kansas City Fed paper finds that a central bank digital currency (CBDC) could alleviate some of concerns facing unbanked American households. However, whether most unbanked households would view a CBDC any differently than a bank account remains to be seen. If some unbanked households see no distinction between the two, then a CBDC may not be able to reach those who wish to remain outside of the financial system. To overcome this challenge, policymakers may need to further consider whether to differentiate CBDC access from other digital products offered today and provide corresponding financial education.
#Fintech#CryptoAssets#CBDC#FinancialInclusion#DFC
·kansascityfed.org·
Inclusion by Design: Crafting a Central Bank Digital Currency to Reach All Americans
The Oyster Card & CBDCs
The Oyster Card & CBDCs
Can the Oyster Card help us sort out privacy issues with CBDCs? In a chapter of "The End of Money" there is a discussion about anonymity in electronic money, using the data storage of the London Ground Oyster Card as an example. With the Oyster Card, you need to register for an account, and all journey and transaction history is held for only 8 weeks. That's so you can replace your lost card when needed or not get billed for a journey where only an entrance or exit turnstile is working. And it does give the police and transit people the ability to track who was in a station to investigate crime--for a limited time.
#Fintech#CryptoAssets#CBDC#Privacy#DFC
·franklinnoll.com·
The Oyster Card & CBDCs
Bank of Canada Getting Serious About Digital *Cash*
Bank of Canada Getting Serious About Digital *Cash*
The Bank of Canada aims to design a CBDC with cash-like properties in digital form. While not aiming for cash-like anonymity, CBDC should be highly private yet meet the obligation to be compliant with anti-money laundering and other regulations. Regardless of their circumstances, CBDC should be usable by all Canadians, even by those without a bank account or access to a cellular phone, in remote communities not well served by cellular networks, and/or those with sensory, motor and cognitive impairments. And the CBDC should continue to work even during electrical power and network outages.
#Fintech#CryptoAssets#CBDC#DFC
·careers.bankofcanada.ca·
Bank of Canada Getting Serious About Digital *Cash*
Tokens and accounts in the context of digital currencies
Tokens and accounts in the context of digital currencies
This Fed paper reviews how the cryptocurrency community has approached the concepts of tokens and tokenization, and discusses "tokens" in the context of CBDC. By highlighting how the terms "tokens" and "accounts" are used by the cryptocurrency community and the central banking community, this note seeks to inventory the subtly and sometimes obviously different ways these common terms are being used by different people to reference different concepts. Misalignment of this ambiguous terminology could create issues for legal frameworks and oversight regimes for digital currencies and so-called tokenized financial markets.
#Fintech#CryptoAssets#CBDC#DFC
·federalreserve.gov·
Tokens and accounts in the context of digital currencies
CBDC in EU
CBDC in EU
A central bank digital currency (CBDC) is in principle a very good idea. It offers the possibility of very low-cost transactions to households and businesses, especially in securities and international transactions. More excitingly, CBDC offers us a foundation for an efficient and nimble financial system that is completely insulated from recurrent crises. But CBDC poses a puzzle, as it undercuts many of governments’ and central banks other questionable objectives. Central banks want to prop up conventional banks, who benefit from taking deposits. And governments are unlikely to want to allow the anonymity that is the great attribute of physical cash.
#Fintech#CryptoAssets#CBDC#DFC
·johnhcochrane.blogspot.com·
CBDC in EU
China’s latest digital currency test doubles down on previous trial
China’s latest digital currency test doubles down on previous trial
China’s latest central bank digital currency (CBDC) pilot doubles down on the previous pilot, nudging merchants and consumers to embrace e-yuan. First the new system is easy to set up and use. Merchants simply download and app to their smartphones and connect the app to their bank accounts. Then they display a QR code that customers scan to make paymants. Or, merchants can use point-of-sale machines that are updated to be compatible with the e-yuan. Either way, payments via e-yuan go directly into the merchant’s bank account without any fees nor commission, while WeChat Pay or Alipay charge a fee when withdrawing from the accounts. Also, payments can be made even without an internet connection. In addition, users are compelled to use the new currency because spending in e-yuan is connected with their social credit system scores.
#Fintech#CryptoAssets#CBDC#DFC
·scmp.com·
China’s latest digital currency test doubles down on previous trial
Turkey to Pilot Digital Currency Next Year
Turkey to Pilot Digital Currency Next Year
Central Bank of the Republic of Turkey Governor Naci Ağbal reportedly told members of parliament on Friday that the country plans to pilot a central bank digital currency (CBDC) in the second half of 2021. In 2019 the Bank announced that it was starting up a CBDC research and development program, and it reportedly established the Directorate-General Financial Innovation in November 2020 to carry it out. Ağbal said that the conceptual phase of this project has been completed.
#Fintech#CryptoAssets#CBDC#DFC
·decrypt.co·
Turkey to Pilot Digital Currency Next Year
Why Exactly Does the World Need a Smart Banknote?
Why Exactly Does the World Need a Smart Banknote?
A smart banknote could bridge the gap between a traditional banknote and a purely electronic currency. In some sense a smart banknote is like a digital currency cold wallet that would show the value it contains when offline. A smart banknote provides all the advantages of cash and all the advantages of digital currency in one device. The still many people who do not have the bank accounts and depend on cash for their daily transactions could periodically use a smart banknote’s electronic capabilities perhaps at a retailer or public kiosk. There are places and times when there is no internet access, or even electricity, rendering electronic money and payment methods useless. Designed to work totally offline, a smart banknote would fill the gap. https://www.franklinnoll.com/smart-notes
#Fintech#CryptoAssets#CBDC#DFC
·beincrypto.com·
Why Exactly Does the World Need a Smart Banknote?
Cash Like Features Of Central Bank Digital Currencies Can Enhance Financial Inclusion, Privacy, And Disaster Readiness
Cash Like Features Of Central Bank Digital Currencies Can Enhance Financial Inclusion, Privacy, And Disaster Readiness
Vipin Bharathan does a deep dive into a recent paper published by Visa that describes a P2P offline payments solution that addresses occasional offline needs. The offline balance on the protected device is created during an online session, and consistency with the accounting system is achieved upon reconnection to the network. The solution depends on an offline payment system protocol that prevents double-spending using digital signatures generated in the trusted execution environments (TEEs) available on most modern smart mobile devices (but perhaps not featurephones?). https://arxiv.org/abs/2012.08003
#Fintech#CryptoAssets#CBDC#DFC
·forbes.com·
Cash Like Features Of Central Bank Digital Currencies Can Enhance Financial Inclusion, Privacy, And Disaster Readiness