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The European Central Bank (ECB) announced that the Eurosystem will look into how wholesale financial transactions recorded on distributed ledger technology (DLT) platforms could be settled in central bank money (i.e., wholesale central bank digital currency (CBDC)). The purpose of this initiative is to (i) consolidate and further develop the ongoing work of Eurosystem central banks in this area, and (ii) gain insight into how different solutions could facilitate interaction between TARGET services and DLT platforms.

Crunchfish Digital Cash separates the payment process into three distinct steps - Reserve-Pay-Settle: 1. Reserve funds in a bank account and represent it as an offline balance in a Digital Cash Wallet. 2. Pay by debiting the offline balance in the Digital Cash Wallet. Offline payments are transferred using proximity interaction, e.g. QR or BLE, and are verified in a Digital Cash Verifier (for P2B transactions) or in the Digital Cash Wallet (for P2P transactions). 3. Settle Digital Cash transactions by transferring money from the payer's bank account with the reserved funds to the payee's bank account. The transfer can be initiated by both the payee and the payer, whoever gets connectivity first.

E-money adoption may be extremely rapid, but that it may raise significant risks. Policies to counter these risks yield a synthetic version of central bank digital currency with various advantages relative to the full-service version.

Riksbank's Hanna Armelius: Central banks need to consider issuing digital currencies or leave citizens vulnerable to market power. Cashless societies could leave payment systems vulnerable to "increasing monopoly power … if there's no sort of competition from central bank money."

In February 11, ePayments Systems, one of the biggest digital payments companies regulated by the UK Financial Conduct Authority suspended all activity after the regulator found several weaknesses in its AML controls.

Digital payments allow people to access goods and services while in quarantine or social distancing. SARS epidemic in 2003 expedited China's path in launching digital payments and e-commerce in the country. A robust identification system, widespread, consistent internet access and trustworthy ways to get money into digital formats could be important for digital payments to thrive.

U.K.-based Lithuanian-licensed digital bank Revolut has launched as a fully-licenced bank in Lithuania. Existing customers are able to upgrade from e-money accounts to bank deposit accounts from their Revolut app.

The Bank of Thailand (BoT) has issued a warning against baht-denominated stablecoin Thai Baht Digital (THT), citing a sixty-year-old law, that makes the "creation, issuance, usage or circulation of any material or token for money is a violation of Section 9 of the Currency Act 1958." "Although THT is currently not used as a medium of exchange, it could cause fragmentation to the Thai currency system should THT or other similar stablecoins come to replace, substitute or compete with Baht issued by the BOT," the BoT noted. THT stablecoin is issued on the Terra platform which has produced various other stablecoins including the TerraUSD and TerraKRW. The Terra platform is also behind the chai payment app, an e-commerce wallet that is mainly used in Asia and powered by stablecoins. https://www.bot.or.th/English/PressandSpeeches/Press/2021/Pages/n1564.aspx

Circle published a breakdown of the assets backing its USDC stablecoin in its latest attestation report. According to the report, on May 28 bout 61% of its tokens were backed by cash and money market funds. Yankee certificates of deposit (i.e., issued by non-US banks) comprise a further 13%, short-term U.S. Treasury securities account for 12%, unsecured commercial paper accounts for 9%, and the remaining tokens are backed by unsecured short-term municipal and corporate bonds. By "short-term" is meant a maximum term to maturity of three years, and the overall portfolio weighted average maturity is limited to 1.5 years. There are also credit rating limits based on S&P scales. The overall portfolio must main an average credit rating must of A or better, commercial paper holdings must be rated A1 on the short-term scale, and for bonds issued by corporations and financial institutions must be rated BBB+ or higher on the long-term scale.

On December 10th, 2019, Monerium and Tradeshift Frontiers carried out the world's first cross-border euro transaction on the Ethereum network. Using the Tradeshift platform, Tradeshift ordered goods from Shop Icelandic which in turn ordered the goods from their supplier, Nordic Store. Invoices and purchase orders were issued through Tradeshift smart-contracts and settled using Monerium e-money on-chain.

Ecuador's Sistema de Dinero Electrónico (SDE) had a limited launch in late 2014, and a full public launch in 2015, but the system failed to take off and was shut down in March 2018. This was arguably a central bank digital currency, because it was issued by the Banco Central del Ecuador (BCE). However, the currency was the U.S. dollar, which has been the national currency since March 2000. Ecuadorians could get an account at the BCE with an identity card and a mobile phone, after which they could go to an authorized outlet and deposit cash into the account. Each dollar in SDE was backed by a dollar stored at BCE, so this was more like e-money or a central bank-backed stablecoin.

The Bahamas Sand Dollar central bank digital currency (CBDC) became available to all residents of The Bahamas on October 20. This makes The Bahamas the first country in the world to officially roll out a CBDC. Residents of The Bahamas can use the blockchain-based digital currency at any merchant with a central bank approved e-Wallet on their mobile device and transaction fees are negligible. The central bank has authorized six financial institutions for the project: Omni Financial, Kanoo, SunCash, Cash N Go, Mobile Assist, and Money Maxx. https://twitter.com/CentralbankBS1/status/1318658064074084352

Absent stricter banking regulation, the central bank is subject to the same competitive forces as everyone else in the market: it needs to compete. Public money on its own is not a sufficient differentiator, particularly in 'normal' times (i.e. no acute financial crisis) where most people wouldn't really know the difference, anyway. Instead, users first and foremost value convenience, speed, and ease of use - features which public sector services are not necessarily most renowned for. In the very competitive payments market, it is thus plausible that CBDC lacks a sufficiently compelling value proposition for warranting users to switch from well-established private solutions. The resulting low-impact scenario will have, as the name suggests, little implications for the structure of our monetary and financial systems.

"The ECB's Governing Council has taken significant steps to support the full deployment of instant payments across the euro area, in line with objectives shared with the European Commission. Pan-European instant payments can be ensured by the end of 2021. All Payment Service Providers (PSPs) which have adhered to the SCT Inst scheme and are reachable in TARGET2 should also become reachable in a TIPS central bank money liquidity account, either as a participant or as reachable party (i.e. through the account of another PSP which is a participant). At the same time, all Automated Clearing Houses (ACHs) offering instant payment services should migrate their technical accounts from TARGET2 to TIPS. The Eurosystem will discuss with ACHs and PSPs whether a migration window is needed for this purpose. The ultimate goal is to enable European citizens to make electronic payments in euro from and to any country in real time, both in physical shops and online."

In Q2, 28% of transfers with TransferWise arrived instantly - i.e., money left one bank and arrived in the recipient's bank account, in a different country, and a different currency in less than 20 seconds.

According to Aleksi Grym, a digital euro might not fall under e-money laws - could also fall under bank deposits, or it might require an entirely new legal category. Also, 5AMLD is just one directive, but payments are regulated by many directives, regulations, and national legislation, different in each country. Legislation is not uniform across the EU. Also. a key point is that even if something (anonymity in this case) would be really beneficial to have, it doesn't necessarily mean it should be the central bank who provides it.

Central Bank of the Republic of Turkey will launch a pilot of a new retail payment system on December 18, 2020. The Instant and Continuous Transfer of Funds (FAST) system will allow fund holders to transfer money between their accounts at different banks within seconds on a 24/7 basis. The Easy Addressing System, which facilitates payments by using information like phone or ID numbers and e-mail addresses, will also be made available to all fund holders. https://www.tcmb.gov.tr/wps/wcm/connect/EN/TCMB+EN/Main+Menu/Announcements/Press+Releases/2020/ANO2020-67

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.

The Capgemini World Payments Report 2021 found that, thanks to COVID-19 and the growing digital appetite of customers, demand for digital payment options is greater than ever before, along with the expectations for fast transaction settlements, instant payments, e-money, failsafe security, and wow-factor customer experience. The report found that nearly 45% of consumers frequently use mobile wallets to make payments (>20 transactions a year) up from 23% in the 2020 poll. Furthering this trend, global B2B non-cash transactions will increase to reach nearly 200 billion transactions by 2025, from 121.5 billion in 2020.

Tony Richards, Head of Payments Policy at the Reserve Bank of Australia (RBA) revealed that RBA staff are still not convinced that a strong policy case has emerged in Australia for a retail CBDC. Australia's existing electronic payments system already provides households and businesses with a wide range of safe, convenient and low-cost payment services. Also, much (if not all) of the innovation and new functionality that could potentially be enabled by a CBDC could in principle also be enabled by innovation based around commercial bank deposit accounts, e-money or stablecoins. But given the possibility that the balance could shift towards a case for issuance of retail CBDCs, the RBA has been stepping up its CBDC research.