Group items tagged

[March 2023] The Centrale Bank van Curaçao en Sint Maarten is among the central banks analyzing the effects of a digital Caribbean guilder central bank digital currency (CBDC). One of the reasons to consider a digital Caribbean guilder is the potential positive impact on financial inclusion. However, the advantages of a digital Caribbean Guilder are not yet convincing given the current state of technology, the experience in other Caribbean countries, and the level of digital literacy of those concerned. Priority has been given to provide everyone access to regular banking services and to the legislative initiative to support this in Curaçao and Sint Maarten.

The Association of Russian Banks reportedly sent a letter of critical concerns regarding the digital ruble to the Bank of Russia. Although the central bank has said that it will not be compulsory to open a digital ruble account, bankers want that legislated. They also want to know whether they will be compensated for acting as intermediaries. Also, according to digital ruble surveys conducted by local media, few people (15%) know of the plans to introduce the CBDC in 2025, and of those that do only about half know the details. Around half of survey respondents struggled to answer why a digital ruble is needed, and only 13% said they would use the digital ruble.

The Bank of England (BoE) and HM Treasury launched a digital pound central bank digital currency (CBDC) consultation. Both want to ensure the public have access to safe money that is convenient to use as everyday lives become more digital, while supporting private sector innovation, choice and efficiency in digital payments. At this stage, they judge it likely that the digital pound will be needed, but a decision to go ahead  won't be taken until around the middle of the decade, and it wouldn't be launched until the second half of the decade. Alongside the consultation paper, the BoE published a technology working paper on its CBDC technology thinking.

UBS AG issued the first ever digital bond by a banking institution globally that will be listed, traded and settled on a regulated digital exchange (an SFR375 million three-year senior unsecured bond). The digital bond has the same instrument structure, legal status and rating as a traditional UBS AG senior unsecured note but will be dual listed at SIX Swiss Exchange where they will settle on the SIX SIS central securities depository (CSD) traditional rails, and SDX Trading where they will settle via the SIX Digital Exchange (SDX) distributed ledger-based central securities depository (CSD) network through atomic settlement technology. Settlement via SDX CSD is instant and automatic and does not require a central clearing counterparty. Investors will have the ability to automatically settle and clear the UBS digital bond on either SDX CSD directly or on SIX SIS via the operational link.

"Democratic concerns must be a part of the discussion about a national digital currency. Similar worries about privacy, surveillance and national digital currency were also raised in the European Union, the United States and elsewhere. Launching the digital Canadian dollar is a political decision, not a technological one. Ensuring freedom is the same. For the digital Canadian dollar and the Bank of Canada to be trusted, these worries must be addressed and mitigated. If the decision to issue this digital money is made, it needs to be done in a responsible manner"

"This whitepaper - the second of two papers covering digital assets - examines how digital assets may be held by customers through intermediaries and considers how those assets can be protected following an insolvency of the intermediary, with a specific focus on English and US law. While digital assets raise some novel questions, the key finding is that traditional and fundamental protections of clear legal terms and segregation of assets can be adapted to the world of digital assets."

The Monetary Authority of Singapore (MAS) and People's Bank of China (PBOC) have agreed to allow tourists from either country to use the pilot digital yuan central bank digital currency (CBDC). Visitors to China have likely been able to use the digital yuan for some time, so the innovation here is that Chinese visitors will be able to use it in Singapore. This follows increasing integration between the digital yuan and Hong Kong, enabling visitors in both directions to use the CBDC, but given China's control over Hong Kong, that's rather different. https://www.mas.gov.sg/news/media-releases/2023/singapore-and-china-enhance-digital-finance-and-capital-markets-cooperation

"In general, the digital euro - as is the case with digital money in general - is desired as many benefits can be envisioned. There are substantial benefits for having digital cash as long as key principles of privacy and freedom rights are not affected. Given this, the digital euro is generally desired - be it in the form of the ECB's digital euro or in the form of euro-denominated stablecoins. These topics need more investigation, also because the market share of US dollar-denominated stablecoins yields more than 95%. In other words, other currencies besides the US dollar do not play a significant role today with regards to stablecoins."

"Digital currencies provide a potential form of liquidity competing with bank deposits. We introduce digital currency into a macro model with a financial sector in which financial frictions generate endogenous systemic risk and instability. In the model, digital currency is fully integrated into the financial system and depresses bank deposit spreads, particularly during crises, which limits banks' ability to recapitalize following losses. The probability of the banking sector being in crisis states can grow significantly with the introduction of digital currency. While banking-sector stability suffers, household welfare can improve significantly. Financial frictions may limit the potential benefits of digital currencies."

Boerse Stuttgart Digital, the digital asset brand of the Boerse Stuttgart exchange group has received final licensing from the German Federal Financial Supervisory Authority (BaFin) for its blocknox service to operate as a crypto custodian. Boerse Stuttgart Digital has been providing custody services through blocknox under a provisional license since crypto custody regulations were introduced in Germany on January 1, 2020. It had begun offering trading services to German residents in the prior month and introduced a trading app in 2021. Boerse Stuttgart Digital received its final custody licensing ahead of several other contenders, including Binance. https://www.boerse-stuttgart.de/-/media/files/gruppe-boerse-stuttgart/pressemitteilungen/en/2023/230330-mr-boerse-stuttgart-digital-crypto-custody-licence.ashx

The European Banking Federation (EBF), which represents the vast majority of the European banking sector, published a paper on a digital euro ecosystem. It argues that a retail digital euro could be envisaged in the mix of new tools and solutions to meet evolving payment needs, as long as it adds value to consumers, is appropriately designed, in close cooperation with the private sector, and mitigates ex ante the accompanying risks. a retail digital euro could - if properly designed - support the strategic autonomy of Europe and ensure a monetary anchor role of the euro. A wholesale digital euro based on distributed ledger technology (DLT) for the settlement of interbank transfers and related wholesale transactions in central bank reserves, would support the international role of the euro, enhance global cross-border payments and match the needs arising from digital finance.

The Central Bank of the UAE (CBUAE) is reportedly operationalizing its domestic digital dirham central bank digital currency (CBDC). It is encouraging all UAE commercial banks and payments processors to participate in a pilot integration with the CBUAE digital dirham issuing node and has decreed digital dirham adoption by all UAE licensed financial institutions (LSIs) by 2026. In the immediate term, those LSIs are being encouraged to develop digital dirham use cases in the CBUAE sandbox.

Starting in 2025 banks across North America, Europe, and Asia will embark on live trials of digital assets and currency transactions over the SWIFT network. These trials aim to address the rise of disconnected digital platforms, or 'digital islands', that could hinder more widespread adoption and ease of use for new forms of value. The live trials will leverage SWIFT's existing global network to interlink various digital and traditional currency platforms, providing a single system for banks to transact across borders with digital and fiat currencies.

The Bank of Israel (BOI) concluded its Digital Shekel Challenge with presentations by the 14 entities selected to develop innovative use cases for the digital shekel. The use cases presented demonstrated the potential of the digital shekel to help create advanced payment solutions and lead innovation in Israel's payment system. First place was awarded to Siara for a platform for returning debtors to an economic growth path, second went to Paypal for a smart payroll payments system, third to IDEMIA for an offline payments solution, and the "People's Choice" to QEDIT for a platform that enhances trust for digital transactions using advanced cryptography. https://www.boi.org.il/en/communication-and-publications/press-releases/the-bank-of-israel-held-a-concluding-conference-for-the-digital-shekel-challenge-today-and-announced-the-winners-of-the-challenge/

The Bank of Israel (BOI) has chosen 14 teams from the private and public sectors, and academia to study potential use cases for a digital shekel. The use cases that were selected by the BOI deal with a variety of functions: connectivity between the digital shekel, other payment systems, and cash; use of the advanced functionalities offered by the digital shekel, such as subwallets, conditional payments, and split payments; and the implementation of various technologies while using the digital shekel as a means of payment. Participant proposals will be tested in a digital sandbox in August 2024, with products developed to be showcased at a concluding conference at the end of October 2024.

The Bank of England (BoE) published a joint report with MIT Digital Currency Initiative (DCI) on how privacy enhancing technologies (PETs) could be used to enhance the privacy of a potential digital pound. The paper focused on pseudonymization, zero-knowledge proofs, and secure multiparty computing. It found that these technologies present opportunities for a central bank digital currency (CBDC) to be at least as private as current forms of digital money and potentially even more private as they mature. While PETs, on their own, do not guarantee privacy, the approaches explored in this paper seek to safeguard consumers' private information, enable compliance with existing regulations, and strengthen trust and confidence in a digital pound, should one be launched in the future.

The Bank of England (BOE) published a summary of its work during 2024 on a digital pound, including how it relates to the evolving payments landscape. It also published an initial design note as part of its work on a blueprint for the central bank digital currency (CBDC). The blueprint is one of four workstreams in the digital pound design phase (see below). Its purpose is to provide a comprehensive proposition for a digital pound, including technology, operational, ecosystem, commercial, regulatory and financial considerations, and the roles that both the Bank and the private sector could play in delivering it. The Bank also will launch a Digital Pound Lab to enable hands-on experimentation to test API functionality, innovative use cases and potential business models for payment interface providers (PIPs) and external service interface providers (ESIPs). https://www.bankofengland.co.uk/report/2025/blueprint-framework-design-note

Fuse published a guide to digital commerce payment preferences by region, unpacking the key trends shaping payment behaviors in key regions around the world: APAC, Europe, Latin America, MEA, and North America. Globally, digital commerce's share of total sales was 20.3% in 2024 and expected to surpass 21% in 2025. Digital wallets make up half of all digital commerce payments (by value) around the world. Credit and debit card usage, separate from their usage in digital wallets, account for 22% and 12%, respectively, but there is a lot of regional variance.

This article examines how the issuance of a digital currency by a non-bank operator impacts competition between banks in a cashless society. Unlike banks, the digital currency provider is not allowed to engage in maturity transformation. I analyze how the fee charged for the digital currency impacts the interest rates on loans and the fees charged by banks to depositors for paying from their bank account and opening an account in a bank. I derive the conditions under which consumers use the digital currency to pay. I also discuss how the distribution mode of the digital currency may impact its use for payments.

The European Commission (EC) proposed a framework for a European Digital Identity which will be available to all citizens, residents, and businesses in the European Union. The proposed European Digital Identity wallets will enable holders to prove their identity and share electronic documents with the click of a button on their smartphone. They will be able to access online services with their national digital identification, which will be recognized throughout Europe. Very large platforms will be required to accept the use of European Digital Identity wallets upon request of the user, for example to prove their age. Use of the European Digital Identity wallet will always be at the choice of the user.