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Iran completes pre-pilot phase of central bank digital currency
Iran completes pre-pilot phase of central bank digital currency
Iran has reportedly completed preliminary research for the launch of a potential digital rial, including a pre-pilot development phase, according to the central bank's Monetary and Banking Research Institute. However, this should be taken with a big "grain of salt" because there have already been two, apparently false, reports that pilot launches were imminent, e.g., in January 2022 and February 2023. So I will be "demoting" the Iranian central bank digital currency (CBDC) from "piloted/launched" to "proof-of-concept" in my next retail CBDC update.
#Fintech#CBDC#Iran#DFC
·cointelegraph.com·
Iran completes pre-pilot phase of central bank digital currency
Project Icebreaker: breaking new paths in cross-border retail CBDC payments
Project Icebreaker: breaking new paths in cross-border retail CBDC payments
The Bank for International Settlements (BIS) Innovation Hub and the and the central banks of Israel, Norway and Sweden,  concluded Project Icebreaker, which studied the potential benefits and challenges of using retail central bank digital currencies (CBDCs) for cross-border payments. In the Icebreaker model, a cross-border transaction is broken up into two domestic payments, one in each domestic system, so the CBDC never leaves its own domestic system. Foreign exchange (FX) providers buy one currency in one system and sell the other currency in the other system. Settlement is via a coordinated payment-versus-payment (PvP) arrangement using hash time locked contracts (HTLC), going a long way towards eliminating counterparty risk in the FX transaction. FX providers submit FX rates to the Icebreaker hub, which selects the best rate to be presented to the payer for each payment request. The number of connections between retail CBDC systems are kept to a minimum by the hub-and-spoke approach. The Icebreaker hub only routes payment messages and does not act upon them. The only information it acts upon is the data from FX providers, which are used when identifying and selecting the best FX rates for the payer.
#Fintech#CBDC#CrossBorder#Payments#BIS#DFC
·bis.org·
Project Icebreaker: breaking new paths in cross-border retail CBDC payments
China’s Wechat integrates digital yuan into payment platform
China’s Wechat integrates digital yuan into payment platform
WeChat has reportedly added China's central bank digital currency (CBDC) to some of its payment services, following rival Alipay in offering support for the digital yuan since December 2022. WeChat Pay now allows digital yuan payments on certain apps, such as ordering food from McDonald’s and paying bills. Direct CBDC transactions between WeChat users are expected to follow.
#Fintech#CBDC#China#WeChat#AliPay#DFC
·forkast.news·
China’s Wechat integrates digital yuan into payment platform
Brazil announces pilot for digital currency seeking to leverage financial services
Brazil announces pilot for digital currency seeking to leverage financial services
Banco Central dos Brasil (BCB) announced the start of a (wholesale?) central bank digital currency (CBDC) proof-of-concept (PoC) project aimed at providing payment rails executed on distributed ledger technology (DLT) to support the provision of retail financial services, including the purchase and sale of tokenized government bonds, settled through tokenized bank deposits. The PoC is not aimed at leveraging digital payments, as this is already being done on a large scale with Pix, which was launched at the end of 2021 and has been widely adopted. https://www.bcb.gov.br/detalhenoticia/17848/nota
#Fintech#CryptoAssets#CBDC#Tokenization#Brazil#DFC
·reuters.com·
Brazil announces pilot for digital currency seeking to leverage financial services
Digital euro compensation model
Digital euro compensation model
The European Central Bank (ECB) published a presentation on the digital euro compensation model. The digital euro is seen as a public good and should be free for basic use by private individuals, but there should be economic incentives for payment service providers (PSPs) to distribute the digital euro in order to generate network effects. PSPs will be allowed to charge merchants, as with cash and other payment methods today, and such fees could be determined by market forces. However, legislation might establish an expectation on merchant pricing considering the current levels for comparable retail payment solutions.
#Fintech#CBDC#Eurozone#DFC
·ecb.europa.eu·
Digital euro compensation model
ANZ to trial offline CBDC payments via smart cards
ANZ to trial offline CBDC payments via smart cards
Australia's ANZ is partnering with two universities to trial offline central bank digital currency (CBDC) payments via smart cards that can be loaded with funds and used like physical cash. Students will install secure apps on their smartphones to view their CBDC balances and use NFC functionality to load CBDC onto their smart cards. Students will use them to make purchases at on-campus merchants and make instant peer-to-peer payments in offline environments when unconnected to existing banking infrastructures. https://dfcrc.com.au/2023/02/28/offline-payments/
#Fintech#CBDC#Australia#Offline#DFC
·finextra.com·
ANZ to trial offline CBDC payments via smart cards
Privacy Enhancing Technologies: Payments and Financial Services in a Digital Society
Privacy Enhancing Technologies: Payments and Financial Services in a Digital Society
The Bank of Japan (BoJ) published a paper on privacy-enhancing CBDC technologies, comparing methods for privacy-preservation, such as homomorphic encryption and zero-knowledge proofs (ZKPs), and discusses how important other central banks rank privacy within their CBDC projects. As part of its CBDC research, the BoJ will continue to research and study privacy protection related to digital currencies with a wide range of stakeholders.
#Fintech#CBDC#Japan#Privacy#DFC
·boj.or.jp·
Privacy Enhancing Technologies: Payments and Financial Services in a Digital Society
Central Bank of Nigeria consults Convexity on e-Naira adoption
Central Bank of Nigeria consults Convexity on e-Naira adoption
The Central Bank of Nigeria (CBN) has reportedly partnered with Nigerian-based blockchain development firm Convexity to speed up the adoption of eNaira. Barbados-based Bitt is the CBN's current eNaira platform provider, although rumors were flying in February 2023 that the CBN was looking for a new platform provider. From the headlines, one might suppose that Convexity's role here is to replace Bitt's, but a Techpoint article makes it seem like Convexity's role is focused mainly on building use cases for the eNaira. https://techpoint.africa/2023/03/01/even-with-zero-charges-and-speedy-transfers-nigerians-are-not-using-the-enaira-and-heres-why/
#Fintech#CBDC#Africa#DFC
·cryptotvplus.com·
Central Bank of Nigeria consults Convexity on e-Naira adoption
CBDC as an untapped opportunity for the West African Economic and Monetary Union
CBDC as an untapped opportunity for the West African Economic and Monetary Union
IMF staff concluded that a central bank digital currency (CBDC) "could offer an untapped opportunity for promoting the development of the financial sector as well as financial inclusion in the West African Economic and Monetary Union (WAEMU)." However, the staff report warned that a CBDC presents significant challenges, and should not be viewed as a financial inclusion "silver bullet". "In particular, it would be important to assess the extent to which private sector initiatives— particularly those related to e-money—could deliver similar results in terms of inclusion, efficiency, and safety, if adequately regulated.
#Fintech#CBDC#Africa#WAEMU#DFC
·imf.org·
CBDC as an untapped opportunity for the West African Economic and Monetary Union
Connecting digital islands - Swift CBDC sandbox project
Connecting digital islands - Swift CBDC sandbox project
SWIFT announced further progress on its experimental solution for interlinking central bank digital currencies (CBDCs), reporting that 18 central and commercial banks found “clear potential and value” in the API-based CBDC connector after a comprehensive review. SWIFT published the findings of the 12-week period of collaborative sandbox testing, in which almost 5,000 transactions were simulated between two different blockchain networks and with existing fiat-based payment systems. Sandbox participants included the Banque de France, the Deutsche Bundesbank, the Monetary Authority of Singapore, BNP Paribas, HSBC, Intesa Sanpaolo, NatWest, Royal Bank of Canada, SMBC, Société Générale, Standard Chartered and UBS. Over the coming months SWIFT will develop a beta version of the solution for payments that can be tested further by central banks. A second phase of sandbox testing will also be held, in which the SWIFT community can collaborate further with a focus on new use cases.
#Fintech#CBDC#SWIFT#DFC
·swift.com·
Connecting digital islands - Swift CBDC sandbox project
The Values of Money: Will Tyranny or Freedom Be in Your Digital Wallet?
The Values of Money: Will Tyranny or Freedom Be in Your Digital Wallet?
In a new report published by the American Enterprise Institute, we expand on privacy principles published by the digital dollar. Our report includes two clear prescriptions: First, a U.S. freedom coin must not weaken the personal financial privacy available with today’s paper cash. Second, a U.S. CBDC must not become a new, easier avenue for government agencies to surveil citizens, levy fines and enact punishments as can be expected from autocratic governments using surveillance coins.
#Fintech#CBDC#Privacy#DFC
·aei.org·
The Values of Money: Will Tyranny or Freedom Be in Your Digital Wallet?
India and UAE to Collaborate on Developing Digital Currencies
India and UAE to Collaborate on Developing Digital Currencies
The Reserve Bank of India (India) and the Central Bank of the United Arab Emirates (CBUAE) signed a memorandum of understanding (MoU) to explore the interoperability between the central bank digital currencies (CBDCs) of the two central banks. The banks will jointly conduct proof-of-concept (PoC) and pilot(s) of bilateral CBDC bridges to facilitate cross-border CBDC transactions of remittances and trade. The MoU also provides for technical collaboration and knowledge sharing on matters related to Fintech and financial products and services. https://www.rbi.org.in/Scripts/BS_PressReleaseDisplay.aspx?prid=55372
#Fintech#CBDC#India#UAE#CrossBorder#Payments#DFC
·coindesk.com·
India and UAE to Collaborate on Developing Digital Currencies
A practical guide to offline payment security
A practical guide to offline payment security
Lipis Advisors in partnership with Crunchfish published a paper that outlines the key security aspects relating to offline digital currency payments. Unlike other offline payment platforms that operate in various devices' secure elements, Crunchfish advocates a software-based approach that operates in smartphone trusted execution environments (TEEs). The need for hardware-based digital cash (e.g., on cards, wearables and feature phones) is acknowledged, but as peripheral bearers that need to be able to exchange digital cash with the smartphone as the main bearer, even in full offline-mode.
#Fintech#CBDC#Offline#Crunchfish#DFC
·crunchfish.com·
A practical guide to offline payment security
Wholesale CBDC – the safe way to debt capital market efficiency
Wholesale CBDC – the safe way to debt capital market efficiency
The European Stability Mechanism (ESM) published a paper that analyzes the usefulness of digital currencies for wholesale financial transactions in Europe. It identifies the risks impede broad adoption of distributed ledger technology (DLT), despite potential widespread debt capital market efficiency gains from DLT-based smart contracts. A wholesale central bank digital currency (CBDC) on a private permissioned blockchain could overcome these risks and impediments and lead to significant efficiency gains in the financial system.
#Fintech#CBDC#Tokenization#wCBDC#DFC
·esm.europa.eu·
Wholesale CBDC – the safe way to debt capital market efficiency
Monetary Policy Implications Central Bank Digital Currencies: Perspectives on Jurisdictions with Conventional and Islamic Banking Systems
Monetary Policy Implications Central Bank Digital Currencies: Perspectives on Jurisdictions with Conventional and Islamic Banking Systems
The IMF published a paper on the potential impacts of central bank digital currency (CBDC) on monetary policy, through their effects on money velocity, bank deposit disintermediation, volatility of bank reserves, currency substitution, and capital flows. Countries most vulnerable are those with banking systems dominated by small retail and demand deposits, low digital payments usage, and weak macro fundamentals. Caps on CBDC holdings and zero remuneration can moderate disintermediation risks, but they are not sufficient. Jurisdictions with Islamic banking systems could be more vulnerable to deposit disintermediation because of the predominance of unremunerated deposits and retail deposits in banks. The underdeveloped nature of Islamic financial markets and Sharia’h compliant liquidity management tools could also limit the central banks’ scope to respond to liquidity shocks.
#Fintech#CBDC#MonetaryPolicy#DFC
·imf.org·
Monetary Policy Implications Central Bank Digital Currencies: Perspectives on Jurisdictions with Conventional and Islamic Banking Systems
CBUAE Central Bank Digital Currency strategy launched
CBUAE Central Bank Digital Currency strategy launched
The Central Bank of the United Arab Emierates (CBUAE) has engaged with G42 Cloud and R3 as the infrastructure and technology providers respectively for its central bank digital currency (CBDC) implementation. The first phase, which is expected to complete over the next 12 to 15 months, comprises (1) the soft launch of mBridge to facilitate real-value cross-border CBDC transactions for international trade settlement, (2) proof-of-concept (PoC) work for bilateral CBDC bridges with India, and (3) PoC work for domestic CBDC issuance covering wholesale and retail usage.
#Fintech#CBDC#UAE#R3#DFC
·wam.ae·
CBUAE Central Bank Digital Currency strategy launched
The “Too Much Finance” literature
The “Too Much Finance” literature
"A large and growing body of academic research supports the finance curse analysis: academics sometimes call it the “Too Much Finance” (TMF) literature. The core proposition is that as a country’s financial sector grows it helps the local economy, but only up to an optimal point, after which it turns bad. Most advanced countries, and some developing countries, passed that point long ago."
#Fintech#CBDC#FinancialStability#FinancialInclusion#DFC
·financecurse.net·
The “Too Much Finance” literature
Successful testing paves way for CBDC use cross-border
Successful testing paves way for CBDC use cross-border
SWIFT published the results of their experimental central bank digital currency (CBDC) interlinking solution in a sandbox environment with 18 central and commercial banks. It was successfully tested across almost 5,000 transactions between two different blockchain networks and a traditional fiat currency. SWIFT concluded that their solution can meet the needs of CBDC interoperability, ensuring CBDCs can be successfully used in cross-border payments.
#Fintech#CBDC#SWIFT#Interoperability#CrossBorder#DFC
·swift.com·
Successful testing paves way for CBDC use cross-border
Project Polaris - Invitation to a deep-dive event for offline CBDC solutions
Project Polaris - Invitation to a deep-dive event for offline CBDC solutions
"Many central banks considering potential implementation of CBDC deem offline functionality as an important requirement, citing reasons such as resilience, crisis, financial inclusion, cash resemblance, privacy, accessibility as well as others. The requirement for and degree to which offline functionality will be provided or utilised will likely vary significantly by country, region, demographics, scenarios as will the solutions that best meet diverse needs. The Nordic Centre is now inviting solution providers to participate in a technical deep dive. The findings of the deep dive may help guide central banks in understanding the applicability, suitability and readiness of the variety of solutions available, the risks and trade-offs and the maturity of the solutions."
#Fintech#CBDC#Offline#BIS#DFC
·bis.org·
Project Polaris - Invitation to a deep-dive event for offline CBDC solutions
The Bank of Japan’s Framework for Participation in the CBDC Forum
The Bank of Japan’s Framework for Participation in the CBDC Forum
Norbert Gehrke has written up a summary of the terms of engagement for participating in the Bank of Japan's (BoJ) central bank digital currency (CBDC) prototyping work. (The BoJ calls it a "pilot" but there are no end users taking part, so it sounds more like "prototyping" to me.) "The BoJ will select participants and contractors for developing the experimental system, proceeding with discussions and explorations with the participants and the development of the system."
#Fintech#CBDC#Japan#DFC
·medium.com·
The Bank of Japan’s Framework for Participation in the CBDC Forum
Opening of the BIS Innovation Hub Eurosystem Centre
Opening of the BIS Innovation Hub Eurosystem Centre
The Bank for International Settlements (BIS) Innovation Hub Eurosystem Centre, a joint effort by the BIS and all Eurosystem central banks, opened on March 28, 2023. The Centre will have offices in Frankfurt and in Paris, hosted and supported by the Deutsche Bundesbank and the Banque de France. The European Central Bank will coordinate the interactions of the Eurosystem with the Centre. The Centre's project focus areas will be decentralized finance (DeFi), wholesale central bank digital currency (CBDC), cyber security and green finance. Projects include Atlas, which will create an open-source data platform to provide information on DeFi and crypto-asset market capitalization, economic activity and international flows of crypto-assets, and Mariana, which will explore automated market-makers (AMM) for the cross-border exchange of Swiss franc, euro and Singapore dollar wholesale CBDCs.
#Fintech#CBDC#CryptoAssets#BIS#DFC
·bis.org·
Opening of the BIS Innovation Hub Eurosystem Centre
Russia delays digital ruble launch testing due to lawmaking process
Russia delays digital ruble launch testing due to lawmaking process
The next phase of the Bank of Russia’s central bank digital currency (CBDC) testing, slated to start on April 1, 2023, has been delayed because relevant legislation has only passed through the first reading in the State Duma — the Federal Assembly’s lower house. However, the legislation may be enacted by early May. Meanwhile, the number of private banks participating in the pilot has also changed from 15 to 13. Some of the banks’ employees would become the test participants for CBDC retail payments, as well as one of the largest insurance companies in the country, Ingosstrakh. Hence, although the April 1 launch was being billed as a "pilot" is appears to be either further proof-of-concept or prototyping work, since none of the general public isn't involved in the testing. https://tass.ru/ekonomika/17382789
#Fintech#CBDC#Russia#DFC
·cointelegraph.com·
Russia delays digital ruble launch testing due to lawmaking process
Public money as a store of value, heterogeneous beliefs, and banks: implications of CBDC
Public money as a store of value, heterogeneous beliefs, and banks: implications of CBDC
The bulk of euro-denominated cash is held for store of value purposes, with such holdings sharply increasing in times of high economic uncertainty. We develop a Diamond and Dybvig model with public money as a store of value and heterogeneous beliefs about bank stability that accounts for this evidence. Consumers who are sufficiently pessimistic prefer to hold cash. In our model, the introduction of a central bank digital currency (CBDC) as a store of value that is superior to cash leads to bank disintermediation as some depositors opt for switching to CBDC based on their beliefs. While CBDC partially replaces deposits, long-term lending decreases less than proportionally as remaining depositors are, on aver-age, more optimistic about bank stability and banks re-balance their portfolio accordingly. The appropriate calibration of CBDC design features such as remuneration and quantity limits can mitigate these effects. We study the individual and social welfare implications of introducing CBDC as a store of value.
#Fintech#CBDC#ECB#DFC
·ecb.europa.eu·
Public money as a store of value, heterogeneous beliefs, and banks: implications of CBDC
What Consumer Surveys Say about the Design of a U.S. CBDC for Retail Payments
What Consumer Surveys Say about the Design of a U.S. CBDC for Retail Payments
To understand how a CBDC could provide a good user experience, the Kansas City Fed's Franklin Noll analyzed recent surveys in the United States and in other countries that have asked consumers about their wants and needs for a potential CBDC. Overall, a majority of polled consumers prefer a CBDC to be dependable, secure, and convenient—a reliable and secure digital payment method that is simple, fast, and makes their lives easier. U.S. respondents indicated that they were generally comfortable with government access to their transactional and financial data if it was clear what information the government could access and under what circumstances. European consumers responded similarly, indicating that they do not have particular concerns about an issuer of a payment instrument knowing their transaction details and that a “medium level of financial privacy” is acceptable. At this level of privacy, non-detailed transaction data is stored by the bank and only shared with the government as legally required.
#Fintech#CBDC#Privacy#DFC
·kansascityfed.org·
What Consumer Surveys Say about the Design of a U.S. CBDC for Retail Payments
Sweden does not yet need CBDC, inquiry finds
Sweden does not yet need CBDC, inquiry finds
Sweden does not yet need a central bank digital currency (CBDC) according to a government-appointed investigation. After more than two years’ work, the Payments Investigation presented over 900 pages of analysis to the government. The inquiry, led by Anna Kinberg Batra, concluded the case for a Swedish CBDC or e-krona is not yet strong enough. It recommended Sveriges Riksbank continue to study CBDC and return to Sweden’s parliament in 2024 with new proposals, if warranted. https://betalningsutredningen.se/wp-content/uploads/2023/03/prm-betalningsutredningen-final-31-mars-2023.pdf
#Fintech#CBDC#Sweden#DigitalID#DFC
·centralbanking.com·
Sweden does not yet need CBDC, inquiry finds