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CBDCs for the People? Where the Current State of Digital Currency Research Leads

"We will likely see more central banks in emerging markets and developing economies than in advanced economies testing and launching CBDCs, with many of the emerging markets/developing economy CBDCs coming seemingly out of the blue from among the 44 central banks that we have labeled as being in the exploratory stage. That is because the benefits of introducing CBDCs are typically more obvious in an emerging market or developing economy, where the upside seemingly outweighs the risks. For example, increasing financial inclusion and decreasing cross-border payments costs are priorities in emerging markets and developing economies."

#Fintech #CBDC #DFC

·coindesk.com·Dec 9, 2021

CBDCs for the People? Where the Current State of Digital Currency Research Leads

Kazakhstan to test national digital currency

The National Bank of Kazakhstan reportedly may soon launch a pilot of its digital tenge retail CBDC. The prototype platform has been completed and the final report on the results of the proof of concept work is set to be published on December 15, 2021. The final decision on whether to issue the digital tenge will be made in December 2022.

#Fintech #CBDC #Asia #DFC

·inform.kz·Dec 9, 2021

Kazakhstan to test national digital currency

The Postal Banking Loophole

"Before addressing how the Postal Service might be justifying its authority to launch the pilot program, it’s helpful to consider what exactly is taking place. The pilot program only operates in four locations across four cities, and it offers a rather roundabout form of check cashing. Instead of receiving cash directly, customers can exchange a business or payroll check up to $500 for a single‐use gift card after paying a flat fee of $5.95. This design may appear odd, but it was chosen quite carefully. Instead of “cashing checks,” the Postal Service is “selling gift cards.”"

#Fintech #CBDC #GovCoins #PostalBanking #UnitedStates #DFC

·cato.org·Dec 10, 2021

The Postal Banking Loophole

G+D report shows emerging market consumers ready to use CBDC

G+D and the Official Monetary Financial Institutions Forum (OMFIF) surveyed consumers’ attitudes towards central bank digital currency (CBDC) in Germany, Indonesia, Nigeria, and the United States. The survey revealed sharp differences between consumers in developed countries, where consumers already have many established digital payment options, and developing countries, where there are fewer such options. In Nigeria, 91% of respondents say they are likely to use CBDC, with 60% of consumers saying so in Indonesia. However, these figures fall to just 24% in the United States and 14% in Germany. CBDC awareness is also much higher in emerging markets. https://www.gi-de.com/corporate/Payment/Central_Bank_Digital_Currencies/G_D_2021_consumer_study.pdf

#Fintech #CBDC #DFC

·thepaypers.com·Dec 10, 2021

G+D report shows emerging market consumers ready to use CBDC

The present and future of money in the digital age

ECB Executive Board member Fabio Panetta pushed back on the CBDC redundancy argument, pointing to the central role of public money in the economy, as the monetary anchor and by its fungibility with private money. Also, a digital euro would boost competition by making a free and easy to use digital means of payment available to everyone. In addition, the option to use CBDC would allow all European intermediaries, big and small, to offer products with a higher technological content at a competitive cost, making them better able to compete with global operators.

#Fintech #CBDC #Eurozone #DFC

·ecb.europa.eu·Dec 10, 2021

The present and future of money in the digital age

Interoperability between payment systems across borders

The Bank for International Settlements (BIS) published a paper on cross-border payment system interoperability. It illustrates the public and private sector options using four stylized models, ordered in increasing complexity and cost but also greater efficiency – a single access point, bilateral link, hub and spoke or a common platform (see below). The BIS Innovation Hub is putting theory into practice with several innovative projects to foster interoperability across the four stylized models.

#Fintech #Payments #CrossBorder #CBDC #mCBDC #DFC

·bis.org·Dec 10, 2021

Interoperability between payment systems across borders

Central bank digital currency, loan supply, and bank failure risk: a microeconomic approach

"We use a microeconomic banking model to investigate the effects of introducing an economy-wide, account-type CBDC on a bank’s loan supply and its failure risk. Given that a CBDC is expected to lower the cost of liquidity circulation and become a strong substitute for demand deposits, both the loan supply and the bank failure risk increase. These increases are countered by subsequent increases in the rates of return on term deposits and loans, which, in turn, reduce the loan supply and thus bank failure risk. These offsetting forces lead to no significant change in banking, as long as the rate of return on loans is below a certain threshold. However, once the rate is above the threshold, bank failure risk increases, thereby undermining banking stability. The problem is more pronounced when the degree of pass-through of funding costs to the loan rate is high and the profitability of a successful project is low. Our results imply that central banks wishing to introduce an economy-wide, account-type CBDC should first monitor yields on bank loans and consider policy measures that induce banks to maintain adequate liquidity reserve levels."

#Fintech #CBDC #DFC

·jfin-swufe.springeropen.com·Dec 16, 2021

Central bank digital currency, loan supply, and bank failure risk: a microeconomic approach

Designing a Viable Central Bank Digital Currency

CBDC design must consider the creation process of all money across a number of categories which in step one could greatly improve the overall transparency, and manageability of the movement of money, and related values – i.e., seigniorage and demurrage. Our current thoughts on these categories include mortgages, certificates of deposits, corporate debt, student loans, auto loans, credit card debt, checking accounts, and HELOC. CBDC design papers largely omit discussions around the instantiation of fiat currency. It is necessary to examine the current birth process of fiat currencies which are largely brought into existence by the process of the collateralized lending activities by commercial banks (e.g., mortgages), a business model not readily available to competing private currencies.

#Fintech #CBDC #DFC

·hackernoon.com·Dec 16, 2021

Designing a Viable Central Bank Digital Currency

CBDCs - The Folly of Digital Fiat

While most CBDC discussions stress the importance of inclusion of the ‘unbanked’ to the financial system, they regularly fail to address the true reasons why citizens do not maintain bank accounts. The largest group of unbanked is comprised of individuals unable or unwilling to pass stringent anti-money laundering procedures often charitably labelled as ‘know-you-customer’ requirements. Tellingly, that term even appears in quotations within the secretly extended legal requirements for - what must otherwise be considered - an invasion of financial privacy. CBDCs discussions offer little hope for the two billion unbanked citizens, most of which do not even possess government credentials.

#Fintech #CBDC #DFC

·hackernoon.com·Dec 16, 2021

CBDCs - The Folly of Digital Fiat

The Banque de France completed the first tranche of its CBDC experimentation

The Banque de France successfully completed the last experiment of its program for interbank settlements in wholesale central bank digital currency (CBDC), launched in March 2020. This final experiment involved the issuance of a digital bond on a blockchain and subscription with settlement in It successfully tested an end-to-end digital asset transactional lifecycle, through issuance, subscription by several actors, and coupon payment involving a conversion into another currency. All those transactions occurred across different blockchain environments operated by HSBC for the custody of the assets, and by the Banque de France for the securities settlement and the CBDC. The next phase of the Banque's CBDC experiments will be mainly dedicated to cross-border transactions.

#Fintech #CBDC #wCBDC #Settlement #France #DFC

·banque-france.fr·Dec 16, 2021

The Banque de France completed the first tranche of its CBDC experimentation

Cash Is An Offline Thing

"This use of tamper-resistant hardware means that when the mobile network has crashed because of a botched software upgrade, cloud services are down because of a DNS misconfiguration and the electricity is out because of high winds blowing trees down on power lines, you should still be able to send cash from your phone to a neighbour’s phone via Bluetooth or UWB whatever and you should till be able to tap your CBDC contactless smart card on a shopkeeper’s mobile phone to buy some food."

#Fintech #CBDC #Offline #DFC

·forbes.com·Dec 17, 2021

Cash Is An Offline Thing

Revisiting the Monetary Sovereignty Rationale for CBDCs

The Bank of Canada published a paper on the potential role of central bank digital currency (CBDC) in protecting a country's monetary sovereignty. According to the monetary sovereignty argument, private and foreign digital currencies could displace domestic currencies ("currency substitution"), threatening the central bank’s ability to conduct monetary policy and act as a lender of last resort. The paper concludes that CBDC may be a useful defense mechanism for countries with strong monetary systems where currency substitution is driven more by the attractiveness of new digital currencies than by fundamental economic weaknesses in the country. However, for countries that have deeper macroeconomic and financial issues, CBDC issuance is unlikely to prevent currency substitution.

#Fintech #CBDC #DFC

·bankofcanada.ca·Dec 17, 2021

Revisiting the Monetary Sovereignty Rationale for CBDCs

CBDC and Banking: Macroeconomic Benefits of a Cash-Like Design

Another Bank of Canada paper shows that an interest-bearing cash-like CBDC is more effective than a deposit-like CBDC in promoting consumption and welfare. It can also increase bank intermediation, even in the absence of bank market power. The cash-like CBDC's interest rate makes payments more efficient, which increases demand and generates positive spillovers on other types of transactions. As a result, deposit taking and lending, and thus intermediation, increase. The theoretical model used to draw these conclusions introduces new general equilibrium linkages across different types of retail transactions (including cash, deposits and credit) as well as feedback effects from transactions to deposit creation.

#Fintech #CBDC #DFC

·bankofcanada.ca·Dec 17, 2021

CBDC and Banking: Macroeconomic Benefits of a Cash-Like Design

RBI Board meet: Digital currency pilot soon

On December 17, 2021 the Central Board of the Reserve Bank of India (RBI) discussed various aspects related to central bank digital currency (CBDC) and cryptocurrencies. RBI officials reportedly informed the Board that they are working on both wholesale and retail CBDC, and a pilot project will be launched soon. They said that, while a lot of work is already done on wholesale accounts, the retail issue is slightly complicated and the central bank is taking some time on it.

#Fintech #CBDC #Asia #DFC

·indianexpress.com·Dec 19, 2021

RBI Board meet: Digital currency pilot soon

Crunchfish announces Digital Cash Wallets’ architecture

"Crunchfish Digital Cash AB (“Crunchfish”) is announcing a patent-pending architecture of Digital Cash Wallets. In addition to Crunchfish’s original Digital Cash Wallet offline, that is integrated in a mobile app, an architecture spanning from Core Banking Systems to Digital Cash Wallets either online or offline, in mobile apps or on non-mobile devices is presented. This provides the foundation of Crunchfish’s ambition to take a global leadership position within digital payments. The Digital Cash Wallets online and in mobile apps are already ready for shipment."

#Fintech #CBDC #Offline #Crunchfish #DFC

·crunchfish.com·Dec 20, 2021

Crunchfish announces Digital Cash Wallets’ architecture

DvP using CBDC: a "settlement choice model" for securities settlement

A paper from R3 proposes a new securities settlement model that offers the ability to settle both gross and netted trades instantly using central bank digital currency (CBDC) and digital assets on a blockchain infrastructure. Existing delivery versus payment models exist on a continuum from intraday gross settlement–which minimizes settlement risk while requiring a great deal of liquidity–to delayed batch settlement–which offers netting efficiencies but delays final settlement. Market participants acknowledge the benefits of real time gross settlement but continue to rely on the operational and liquidity advantages of delayed batch settlement. The R3 model purports to be a "best of both worlds" model.

#Fintech #Blockchain #CBDC #wCBDC #Settlement #DFC

·r3.com·Dec 22, 2021

DvP using CBDC: a "settlement choice model" for securities settlement

SETL to take part in asset tokenization pilot with SWIFT and other market participants

London-based SETL will be working with SWIFT, Clearstream, Northern Trust and other market participants to explore the issuance, delivery versus payment (DVP), and redemption processes to support a frictionless and seamless tokenized asset market. The experiments will use both established forms of payment and central bank digital currency (CBDC). SETL had previously been part of a Banque de France experiment in which shares of a money market fund were subscribed and then redeemed on the IZNES Platform using wholesale CBDC tokens created by the Banque.

#Fintech #Blockchain #CBDC #wCBDC #SWIFT #Settlement #DFC

·setl.io·Dec 23, 2021

SETL to take part in asset tokenization pilot with SWIFT and other market participants

Thai central bank to delay retail digital currency testing

Thailand's central bank is delaying pilot testing its retail central bank digital currency (CBDC) until late 2022. It was previously planned for the second quarter of 2022.

#Fintech #CBDC #DFC

·bot.or.th·Dec 25, 2021

Thai central bank to delay retail digital currency testing

Mexico Reportedly Rolling Out CBDCs in 2024

The President of Mexico tweeted that El Banco de México will issue a central bank digital currency (#CBDC) by 2024, citing financial inclusion as one of the motives. However, there is no mention of it on the central bank website, although new incoming Governor Victoria Rodriguez Ceja reportedly told a Senate Commission that El Banco de México was analyzing CBDC.

#Fintech #CBDC #DFC

·twitter.com·Dec 30, 2021

Mexico Reportedly Rolling Out CBDCs in 2024

BOJ’s CBDC Pilot Project a Success

The Bank of Jamaica (BOJ), working with eCurrency Mint Inc., successfully completed its central bank digital currency (CBDC) proof of concept (PoC) and pilot work, and will begin a public rollout in Q1 2022. After a prototype was tested in the BOJ's Fintech Regulatory Sandbox, in May 2021 the National Commercial Bank (NCB) was brought onboard for further testing. On August 9-10 the BOJ minted $230 million of CBDC of which $1 million was distributed to BOJ staff for further internal testing.

On October 29, the BOJ distributed $5 million of CBDC to the NCB for an NCB-sponsored “Market on the Lawn” pilot event, for which 4 small merchants and 53 consumers were onboarded to conduct transactions between each other. The NCB will continue onboarding customers, plus two additional wallet providers will soon be able to order CBDC from the BOJ and distribute to their customers. Interoperability will be tested between customers of various participating wallet providers.

#Fintech #CBDC #Caribbean #DFC

·boj.org.jm·Jan 1, 2022

BOJ’s CBDC Pilot Project a Success

eNaira Shows That CBDCs Are Maturing

"eNaira has faded into the background in the cryptosphere. However, due to the reasons discussed below, it is one of the most significant developments of 2021, with ramifications well into 2022 and beyond."

#Fintech #CBDC #Africa #DFC

·forbes.com·Jan 3, 2022

eNaira Shows That CBDCs Are Maturing

Off And On

What all of this means is that payments should stay on when the grid goes off that life can go on. Not necessarily for buying houses or leasing planes, but at least for buying groceries and riding the bus. And this is achievable using the technology that we have at our disposal today: the cost-effective and proven technology of TEEs.

#Fintech #CBDC #Offline #DFC

·dgwbirch.substack.com·Jan 3, 2022

Off And On

IDEMIA and ConsenSys to offer a new secure offline CBDC payment solution

"IDEMIA and ConsenSys have joined forces to offer a truly inclusive Central Bank Digital Currency (CBDC) solution that can work with any consumer device: smartphones of course, but also feature phones, biometric payment cards, sim cards, wearables and even connected machines, making CBDC available to everyone."

#Fintech #CBDC #Offline #ConsenSys #DFC

·idemia.com·Jan 3, 2022

IDEMIA and ConsenSys to offer a new secure offline CBDC payment solution

Boston Fed seeks project manager for CBDC development

The Boston Fed is looking for a Project Management Director to lead its Project Hamilton work on a hypothetical general purpose central bank digital currency (CBDC) with the Massachusetts Institute of Technology Digital Currency Initiative. This research will assist the Fed in more deeply understanding technology tradeoffs among design options, and will result in the open source publication of software to support CBDC research. The new position will presumably report to Jim Cunha, Executive Vice President of Secure Payments and FinTech, who has worked at the Boston Fed since 1984.

#Fintech #CBDC #UnitedStates #DFC

·rb.wd5.myworkdayjobs.com·Jan 3, 2022

Boston Fed seeks project manager for CBDC development

China central bank launches digital yuan wallet apps for Android, iOS

The People's Bank of China reportedly has released pilot versions of its digital yuan wallet app on Chinese Android and Apple mobile phone app stores in Shanghai. A notice in the "e-CNY (Pilot Version)" app said it is in a research and development pilot phase and is only available to selected users through supported institutions that provide e-CNY services, including major domestic banks.

#Fintech #CBDC #China #DFC

·reuters.com·Jan 4, 2022

China central bank launches digital yuan wallet apps for Android, iOS

Central Bank Digital Currency: functional scope, pricing and controls

This European Central Bank (ECB) paper discusses success factors for CBDC and how to avoid the risk of crowding out. After examining ways to prevent excessive use as a store of value, the study emphasises the importance of the functional scope of CBDC for the payment functions of money. The paper also recalls the risks that use could be too low if functional scope, convenience or reachability are unattractive for users. Finding an adequate functional scope – neither too broad to crowd out private sector solutions, nor too narrow to be of limited use – is challenging in an industry with network effects, like payments. The role of the incentives offered to private sector service providers involved in distributing, using and processing CBDC (banks, wallet providers, merchants, payment processors, acquirers, etc.) is discussed, including fees and compensation.

#Fintech #CBDC #Eurozone #DFC

·ecb.europa.eu·Jan 4, 2022

Central Bank Digital Currency: functional scope, pricing and controls

BIS appoints Raphael Auer as Head of the Innovation Hub Eurosystem Centre

"The Bank for International Settlements (BIS) today announced that Raphael Auer will join the BIS Innovation Hub (BISIH) team as the head of the upcoming Eurosystem Centre, expected to open in the first half of 2022. Mr Auer is currently a principal economist in the BIS' Monetary and Economic Department, working with the unit dedicated to Innovation and the Digital Economy."

#Fintech #CryptoAssets #CBDC #BIS #DFC

·bis.org·Jan 6, 2022

BIS appoints Raphael Auer as Head of the Innovation Hub Eurosystem Centre

WeChat Enables E-Yuan Payments

WeChat will reportedly join AliPay in supporting the People's Bank of China e-CNY pilot. Payments can be made through WeChat Pay by scanning a QR code once an account on Tencent’s digital bank WeBank is opened. WeChat has added a “digital yuan” option on its WeChat Pay page and a “payment with e-yuan” option on the “receipt and payment” page. Teaming up with WeChat means there are potentially more than 1 billion users who could use the digital currency.

#Fintech #CBDC #China #DFC

·yicaiglobal.com·Jan 6, 2022

WeChat Enables E-Yuan Payments

Global CBDC Challenge 2021 Report

The Monetary Authority of Singapore published a summary of the results of the Global Central Bank Digital Currency (CBDC) Challenge conducted in partnership with the International Monetary Fund, World Bank, Asian Development Bank, United Nations , and the Organization for Economic Co-operation and Development. The Challenge was aimed at identifying and developing retail CBDC solutions that increase payment efficiencies, improve financial inclusion and support the broader digitalization drive in the economy. The report goes through the Challenges various phases and includes highlights of the solutions presented by the 15 finalists during the Singapore Fintech Festival 2021 in November 2021 at which the three winning entries were selected.

#Fintech #CBDC #DFC

·mas.gov.sg·Jan 10, 2022

Global CBDC Challenge 2021 Report

Framework for Facilitating Small Value Digital Payments in Offline Mode

The Reserve Bank of India (RBI) has introduced a framework to enable small value digital payments in offline mode using cards, wallets, mobile devices, etc. in proximity (face to face) mode. This followed pilot testing undertaken by some entities between September 2020 and July 2021. The upper limit of an offline payment transaction shall be ₹200. The total limit for offline transactions on a payment instrument shall be ₹2,000 at any point in time. Replenishment of used limit shall be allowed only in online mode with an Additional Factor of Authentication (AFA). The issuer shall send transaction alerts to users as soon as transaction details are received, implying that an online connection is required at some point, so it's not a purely offline payment system.

#Fintech #Payments #CBDC #Offline #India #DFC

·rbi.org.in·Jan 11, 2022

Framework for Facilitating Small Value Digital Payments in Offline Mode