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The Committee on Payments and Market Infrastructures (CPMI) published an article that provides an update on a workstream of the G20 cross-border payments program focused on the harmonization of ISO 20022 for enhancing cross-border payments. Most of the world's payment systems will adopt ISO 20022 by 2025, when SWIFT will discontinue its support of the current MT (message type/text) standard for cross-border payments. Hence the coming years will be crucial for converging on a harmonized use of the messaging standard to fully leverage its potential to make cross-border payments faster, cheaper and more transparent.

The world's largest banks are exposed to about 9.4 billion euros of crypto-assets, a study by the Basel Committee on Banking Supervision (BCBS) found as it considers new rules for the capital that lenders must hold against innovative assets. The exposure, mainly client services involving bitcoin (BTC) and ether (ETH), represents 0.14% of the total exposure to risk from the 19 banks who sent in data, or just 0.01% across all banks. Exposures are distributed unevenly across reporting banks, with two banks making up more than half of overall crypto-asset exposures, and four more banks making up just below 40% of the remaining exposures.

"The viability of CBDC initiatives depends on adoption. CBDCs must meet users' preferences - eg, the need for privacy and usability - and address commercial banks' concerns around disintermediation. At the same time, new functionalities - eg, offline access - could enhance CBDCs' appeal, while interoperability could broaden payment channels, both of which help boost user adoption."

The Monetary Authority of Singapore (MAS) published a report proposing a framework for designing open, interoperable networks for digital assets (i.e. tokenized real-economy and financial assets ). The report also considers how the CPMI-IOSCO principles for financial market infrastructures (PFMIs) can be applied to evolving models of digital asset networks, based on industry pilots launched under Project Guardian, MAS's collaborative initiative with the financial industry to test the feasibility of applications in asset tokenization and decentralized finance (DeFi).  The MAS also announced an expansion of Project Guardian to more asset classes.

The Swiss National Bank (SNB) will reportedly to issue a wholesale central bank digital currency (CBDC) on Switzerland's SIX digital exchange as part of a pilot. "This is not just an experiment, it will be real money equivalent to bank reserves and the objective is to test real transactions with market participants." This sounds very much like the next phase of Project Helvetia, which explored how the SNB could offer settlement in central bank money in a future with more tokenized financial assets based on distributed ledger technology (DLT).

An article by Raphael Auer, Rainer Böhme, Jeremy Clark and Didem Demirag explores the multiple dimensions of retail CBDC privacy considerations. They point to the number of distinct stakeholders, combined with the technical challenges, as possibly responsible for stalling progress toward deploying retail CBDC. One step forward is understanding who the key stakeholders are and what their interests are in payment records. Knowledge of conflicting interests is helpful for developing requirements and narrowing the range of technical solutions. This article contributes to the literature by identifying three stakeholder groups - privacy enthusiasts, law enforcement, and data holders - and exploring their conflicts. A main insight is that nuanced data-access policies are best to resolve the conflicts, which in turn rule out many technical solutions that promise "hard privacy," meaning solutions relying on cryptography and user-guarded secrets without room for human discretion. This observation shifts attention to a softer form of privacy-enhancing technologies, which gives authorized stakeholders the capability to access certain payment records in plaintext under defined circumstances. Such a system depends on compliance and accountability, supported with technically enforced access control, limited retention periods, and audits. This is referred to as "soft privacy".

"In October 2022, the Financial Stability Board (FSB) announced a comprehensive set of proposals for regulating and supervising cryptoasset activities, which are collectively referred to as the "proposed framework for the international regulation of cryptoasset activities". The FSB invited the public to submit feedback on the recommendations and on a set of questions1. The proposed framework is a part of the FSB's ongoing efforts to address the potential financial stability risks posed by cryptoassets2, including so-called "stablecoins.""

The Committee on Payments and Market Infrastructures (CPMI) published a report that provides a framework to help payment system operators and authorities understand and evaluate the benefits, challenges and risks of interlinking arrangements. It also provides an overview of important trends in interlinking arrangements and adoption of application programming interfaces (APIs) by payment systems. Interlinking arrangements allow banks and other payment service providers to transact with each other without requiring them to participate in the same payment system or use intermediaries. Such arrangements can shorten transaction chains, reduce overall costs and increase the transparency and speed of payments.

The Basel Committee on Banking Supervision suggested during its second consultation on the prudential treatment of crypto-asset exposures that banks limit their exposure to so-called Group 2 crypto assets to just 1% of their Tier 1 capital. Group 2 digital assets include major non-stablecoin, non-tokenized cryptocurrencies like Bitcoin and most altcoins. Therefore, banks would only be able to commit 1% of their total equity or net asset value in either long or short positions toward Group 2 digital assets. Moreover, the Basel Committee is considering banks adopting a 1,250% risk premium for Group 2 digital assets. In comparison, stocks typically have a 20% to 150% risk premium attached to their nominal values, depending on the company's credit rating. Under Basel III, a bank's risk-weighted assets must not surpass 10.5% of its Tier 1 capital for prudent leverage.

The Committee on Payments and Market Infrastructures (CPMI) and International Organization of Securities Commissions (IOSCO) published their final "same risk, same regulation" guidance on regulating stablecoin arrangements (SAs). The guidance highlights that the transfer function of an SA is comparable to the transfer function performed by other types of financial market infrastructure (FMI). As a result, an SA that performs this transfer function is considered an FMI for the purpose of applying the Principles for Financial Market Infrastructures (PFMI) and, if determined by relevant authorities to be systemically important, the SA as a whole would be expected to observe all relevant principles in the PFMI.

Bank Indonesia continues to research central bank digital currency (CBDC) and plans to issue a white paper at the end of this year concerning the development of a Digital Rupiah. The central bank's CBDC exploration has six salient objectives: (i) providing a risk-free means of digital payment using central bank money, (ii) mitigating the risk of non-sovereign digital currency, (iii) expanding payment system coverage and efficiency, including cross-border transactions, (iv) expanding and accelerating financial inclusion, (v) providing new monetary policy instruments, and (vi) facilitating the distribution of fiscal subsidies.

"The first US bitcoin (BTC) exchange-traded fund (ETF), "BITO", started trading on 19 October 2021. The fund debuted as one of the most heavily traded ETFs in market history, attracting more than $1 billion in assets in the first few days. Subsequently, the ETF accumulated a significant share of all short-term bitcoin futures contracts, reaching about one third of the underlying futures market just 10 days after its launch (Graph A, first panel). This box explains how the futures-based structure of BITO differs from that of more traditional, non-futures-based equity ETFs and analyses the possible implications for prices and risks."

The Bank for International Settlements published a paper on digital platform economics. It found that digital platforms can dramatically lower costs and thereby aid financial inclusion - but these same features can give rise to digital monopolies and oligopolies. Digital platforms operate in multi-sided markets, and rely crucially on big data. This leads to specific network effects, returns to scale and scope, and policy trade-offs. To reap the benefits of platforms while mitigating risks, policy makers can: (i) apply existing financial, antitrust and privacy regulations, (ii) adapt old and adopt new regulations, combining an activity and entity-based approach, and/or (iii) provide new public infrastructures. The latter include digital identity, retail fast payment systems and CBDCs. These public infrastructures, as well as ex ante competition rules and data portability, are particularly promising. Yet to achieve their policy goals, the paper concludes that central banks and financial regulators need to coordinate with competition and data protection authorities.

This Central Bank of Brazil (BCB) note discusses the development of its central bank digital currency (CBDC). The main objective is to provide entrepreneurs with a safe and reliable environment to innovate through the use of programmability technologies, such as programable money and smart contracts. In the context of a modern payment system, already available to the Brazilian population, a full-fledged CBDC must enable new functionalities, beyond those brought by an instant payment arrangement. Therefore, the innovation tool for which the BCB envisions the greatest potential is the development of a platform for smart payments.

A Bank for International Settlements working paper concludes that financial law traditionally assumes that functions are concentrated in a single entity. Hence, the distribution of functions in distributed ledger technology (DLT) DLT with the need for additional agreements, ongoing coordination across, and governance arrangements among each participant. Further, in a cross-border context, multiple regulators and courts of various countries will be involved. All of these must decide whether for compliance with the law and regulations they look at DLT as a whole ('ledger perspective') or each individual DLT participant ('node perspective'). On that basis the paper analyzes the extent to which the ledger or the node perspective should prevail.

A Bank for International Settlements working paper analyzes regional payment integration projects across the world to identify key lessons for future cross-border payment enhancements on regional and global level, focusing on the role of technology, law and regulation. It finds that ach border adds to the costs of a cross-border payment if crossing the border means entering into a different technological, regulatory and legal environment, with different systems, regulators, and courts. At the global level, mismatches between the inter-institutional framework on the back-end and the contractual relationship with clients on the front-end represent potential costs for the payment services provider and increase legal risk, prompting costly legal, due diligence manual adjustments in payments processes.  The paper concludes that globally coordinated action is needed to develop a comprehensive "single rule book" framework to guide and support regional payment integration.

The Bank for International Settlements published a paper that looked at the speed of cross-border payments on the SWIFT global payment innovation (gpi) platform. It found that speed is generally high with a median processing time of less than two hours, but took more than two days on several of the slowest routes. Longer processing times tend to occur in low and lower-middle income countries, due partly to capital controls and related compliance processes, weak competition as well as limited operating hours of and the use of batch processing by beneficiary banks.

The Central Bank of the United Arab Emirates (CBUAE) conducted its first cross-border digital dirham transfer using the mBridge central bank digital currency (CBDC) platform on January 29, 2024. A 50 million dirhams transfer was sent to China. https://gulfnews.com/business/video-first-cross-border-payment-made-using-uaes-digital-dirham-1.100731629

"mBridge stands out as an attractive choice for developing countries, especially due to its capability to support economic sovereignty, facilitate integration with existing financial infrastructure, and garner geopolitical support from BRICS countries. However, this does not diminish the value and importance of the SWIFT project, which, with its focus on interoperability and a long track record in the global payment system, provides a solid foundation for countries preparing to transition to more advanced and complex technologies."