Group items tagged

The Eurosystem has a mandate to promote the smooth functioning of the payment system from a holistic perspective. From the perspective of retail payments, the smooth functioning of the payment system means ensuring that, in their tangible interaction with the euro, people and businesses are able to make safe and efficient payments and thus their trust in the currency is maintained. To this end, the Eurosystem is responsible for issuing public money, currently in the form of cash, which may possibly be complemented by a digital version, i.e. a digital euro. In addition, the Eurosystem can act: (i) as a catalyst for change, promoting efficiency in the field of retail payments; (ii) as overseer, setting retail payment standards and rules and ensuring compliance; and (iii) as an operator, having the possibility to set up public infrastructures. The trends at work in the retail payments landscape have the potential to bring benefits to consumers and businesses alike. However, they also carry risk and will require the Eurosystem to take action in its different capacities. This article looks at the changing retail payments ecosystem, before turning to the Eurosystem's multi-faceted policy response and providing perspectives on the way ahead.

De Nederlandsche Bank (DNB) published a paper that studies the transition from a steady-state without central bank digital currency (CBDC) to one in which the home country issues a CBDC using a two-country dynamic stochastic general equilibrium (DSGE) model with financial frictions. In the new steady state, the availability of CBDC, which is liquid and storage-cost-free, improves welfare. During the transition, however, demand for CBDC and money overshoot, thus crowding out bank deposits and leading to initial declines in investment, consumption, and output. However, these negative effects can be reduced with binding caps, with an optimal level of around 40% of the CBDC demand in the steady state. A two-tiered remuneration scheme is also effective in smoothing the transition if the penalty interest rate is extremely high (e.g., a negative 300% interest rate on holdings above 50% steady-state demand).

Giesecke+Devrient (G+D) has unveiled its Filia Unplugged offline payment solution that can be integrated into existing digital payment platforms, including tokenized deposit systems, instant payment systems, or mobile money services. It enables use cases such as peer-to-peer payments (P2P) or payment-to-business (P2B) payments. The solution stores monetary tokens on a hardware wallet (e.g. the SIM card of a smartphone) and requires only two wallets to operate, which can then be used without an online connection, for example via near field communication (NFC).

The Laboratório de Inovações Financeiras e Tecnológicas (LIFT), a joint initiative of BCB and Federação Nacional de Associações dos Servidores do Banco Central (Fenasbac), will resume activities following a hiatus in 2023. Since its inception in 2018, the laboratory has been at the forefront of innovation within the Brazilian national financial system, focusing on developing technological prototypes. The 2023/2024 edition will feature seven projects to enhance the financial innovation ecosystem. The 2023/2024 edition will include seven projects, including technological solutions for anti-money laundering and compliance, B2B interoperability solutions between incompatible blockchain networks, and scores for Pix payments to identify fake accounts.

The Banca d'Italia published a paper that evaluates two solutions for synchronizing the asset-leg and the cash-leg of a DvP (delivery versus payment) transaction on distributed ledger technology (DLT) rails. Both use the Target Instant Payment Settlement (TIPS) platform to provide the settlement services of the cash leg. The experiments showed that the proposed implementations can effectively contribute to safer and more efficient settlement of DvP trades, enabling interoperability with a wide array of DLT platforms, and different degrees of integration effort compared to other already established approaches. The implemented solutions preserve the atomic nature of a DvP transaction, building a "bridge" between the DLT asset management platform and the central bank payment system. In accomplishing this task, this architecture offers the potential to standardize communications with DLTs and, crucially, avoid the need to issue central bank money as cash tokens on DLTs - a key point of other approaches - thus preserving the central bank's control over the cash-leg of the DvP.

"Big banks have also been using their muscle to delay the delivery of Payments Canada's new real-time payment system. Meanwhile, they've been upgrading their own real-time payment product-Interac e-transfer-so that it will be better than Payments Canada's when it finally launches."

Vow is a free floating, ERC777 compliant token issued on the Ethereum blockchain. It can be traded peer-to-peer or on supporting crypto exchanges. The initial supply of Vow is 1,142,857,142 and these are issued by Vow Limited. The Vow Token is most accurately described as an enabler for minting a second type of token called vcurrencies. The purpose of Vow is to provide nodes on the network (e.g. businesses) the ability to issue fixed value tokenized currencies called vcurrencies.

SUERF published an article by Christian Pfister that the notion of legal tender is a "barbarous relic" that is unfit in a digital environment where there is a wide choice of payment instruments. Furthermore, making the digital euro legal tender could even undo some the expected benefits of its launch and entail risks. That is not to say that making a retail central bank digital currency (CBDC) legal tender may be more justified in a context where the wide majority of payments are made in cash and the public authorities wish to encourage the modernization of payments, i.e. in some developing and emerging economies.

China's State Council Information Office, prompted by the Peoples's Bank of China (PBOC), is reportedly looking at whether to launch an anti-trust probe into Alipay and WeChat Pay, The State Council's antitrust committee has been gathering information on them for more than a month. But authorities have been keen to whittle back their dominance. Also, in an effort to encourage smaller players to enter the market, the PBOC said last year that it planned to standardize the interoperability of QR code payments.