Group items tagged

"Innovative technologies, such as distributed ledgers, allow securities to be issued or represented in a new form known as digital tokens. Such "tokenisation" of securities will alter post-trade clearing and settlement, and could improve efficiency in some dimensions. But the fundamental trade-offs involving credit risk and liquidity remain in a tokenised world. To succeed, tokens will need to interoperate with account-based systems, at least in the interim."

Experts at the MIT Bitcoin Expo on Saturday argued that blockchain as a technology is not yet a clear choice for central bank digital currencies due to challenges regarding privacy protection, interoperability, and the ability to move value on a consistent basis. At the same time, they believe that the introduction of central bank digital currencies is a necessary improvement upon the existing global financial system because they advance financial inclusion, cut the cost of handling cash and help mitigate risks during crises.

The World Economic Forum launched the Global Consortium for Digital Currency Governance to focus on the development of interoperable, transparent and inclusive policy approaches to regulating the digital currency space and fostering public-private collaboration in both developed and emerging economies.

The best way to realize the full potential of FinTech to support the SDGs is to focus on four pillars: (i) digital identity and simplified account opening and e-KYC systems, (ii) open interoperable electronic payments systems, (iii) using the infrastructure of (i) and (ii) to underpin electronic provision of government services and payments, and (iv) digital financial markets and systems to support broader access to finance and investment.

The World Bank recommends the following key actions to accelerate the efforts to reduce remittance prices to respond to the challenges of widespread unemployment and the plight of migrant communities in host countries; (i) embrace the new emerging remittance models, (ii) support universal financial access in receiving countries and amongst migrant workers in sending countries, (iii) enhance domestic retail payment systems promoting interoperability and fast payment services and enable leveraging these for remittances, (iv) enhance AML/CFT compliance in receiving countries and support development of digital ID solutions, and (v) support development of comprehensive integrated cross-border payment solutions for MSME trade flows, ecommerce and remittances.

The World Economic Forum published a Blockchain Deployment Toolkit for building more resilient supply chains. The 244-page report includes checklists, guided questions, explainers and risk assessments addressing tax concerns and data privacy; forming a consortium, its ecosystem and governance; public vs private chains; cybersecurity; interoperability; and digital identity, among other concerns.

The Bill and Melinda Gates Foundation have formed the Mojaloop Foundation to develop and promote a free, open-source real-time payments platform for nations and central banks. The Mojaloop software includes a directory for identifying account holders, a transfer system for routing payments, and a clearing and settlement layer that transfers funds among users' financial institutions. The routing system relies partly on Interledger technology originally developed by Ripple. Mojaloop-based systems are hosted by each country's authorities, but because they use a shared standard, they could eventually become interoperable across borders.

The Bill and Melinda Gates Foundation have formed the Mojaloop Foundation to develop and promote a free, open-source real-time payments platform for nations and central banks. The Mojaloop software includes a directory for identifying account holders, a transfer system for routing payments, and a clearing and settlement layer that transfers funds among users' financial institutions. The routing system relies partly on Interledger technology originally developed by Ripple. Mojaloop-based systems are hosted by each country's authorities, but because they use a shared standard, they could eventually become interoperable across borders.

The Bank of Thailand (BOT) and the State Bank of Vietnam (SBV) have deployed a retail payment connectivity system that makes use of an interoperable QR Code in order to simplify cross-border payments between the two countries. In the first phase of the project, Thai tourists can use the BOT mobile app to scan VietQR for payment at TPBank's and BIDV's payment sites in Vietnam. Meanwhile, Vietnamese visitors can also use the mobile apps of TPBank and Sacombank to scan ThaiQR for payment in Thailand. https://sbv.gov.vn/webcenter/ShowProperty?nodeId=/UCMServer/SBV442613//idcPrimaryFile&revision=latestreleased

The Central Bank of the Bahamas (CBOB) circulated draft Sand Dollar regulations for for public consultation on February 15. They are intended to enhance the existing legislative framework governing Payment Services Providers (PSPs), specific to their provision of central bank digital currency (CBDC) linked services. The consultation period closes on March 31 and the regulations will be finalized for issuance by May 1, 2021. Also, all wallet providers are expected to achieve full interoperability by March 31.

"As policymakers and regulators develop regulations to oversee DeFi markets, they must balance the need to support financial services innovation with the need to protect consumers, fight crime, and preserve financial stability. Doing so may not be as straightforward as it was for the initial wave of cryptocurrency activities. Regulators may require more policy and legal innovation to address DeFi's trend toward disintermediation and to support a more open, interoperable, and competitive financial infrastructure."

Banco Central do Brasil guidelines for the potential development of the digital real Banco Central do Brasil published its guidelines for the potential issuance of reatil central bank digital currency (CBDC). The project will focus on an unrenumerated digital real that will operate on a two-tier business model, with an eye towards cross-border interoperability and integration.

The European Blockchain Observatory and Forum (EUBOF) published a report identifying and evaluating eight alternative design architectures for the digital euro against the core principles and requirements set by the ECB. It considers how the digital euro will differ based on whether it will account-based or token-based, or whether it's implemented atop existing eurozone-wide payment rails or atop novel technological architectures, such as blockchain. The paper also explores whether a digital euro should be exclusively coordinated by the central bank or distributed and managed in collaboration with Europe's commercial banks and other financial institutions. It addresses interoperability and programmability features, regulatory aspects and end-user experience, along with potential financial stability implications.

This Bank for International Settlements (BIS) paper explores initial thinking on the cross-border use of central bank digital currency (CBDC) based on a survey of 50 central banks in the first quarter of 2021. While most central banks have yet to take a firm decision on issuing a CBDC, the survey responses show a tentative inclination towards allowing use of a future CBDC by tourists and other non-residents domestically. They have a cautious approach to allowing use of a CBDC beyond their own jurisdiction. Concerns about the economic and monetary implications of cross-border CBDC use and about private sector global stablecoins are taken seriously. At the wholesale level, 28% of surveyed central banks are considering options to make CBDCs interoperable by forming multi-CBDC arrangements. This involves arrangements that enhance compatibility, interlink or even integrate multiple CBDCs into a single payments system. Finally, almost 14% of respondents are considering an active role for the central bank in FX conversion.

The Monetary Authority of Singapore (MAS) published a report on the foundational digital infrastructure necessary for an inclusive digital economy and seamless cross-border transactions around the world, in collaboration with Mastercard and the central banks of Brunei Darussalam, Cambodia, Ghana, and Kenya. The report highlighted four key pillars; digital identity, authorisation and consent, payments interoperability and data exchange standards.

This paper from Digital Asset Holdings co-written by Stanford University's Darrell Duffie provides a high level overview of some central bank digital currency (CBDC) principles and key factors supporting them that should be considered when choosing and implementing a suppporting technology. The challenge of creating and implementing CBDC is large and complex, requiring addressing current challenges, while facilitating future innovation and support yet-to-be known requirements and opportunities. The ability to start small, facilitate wide adoption, evidence controls, and maintain flexibility to maximize growth are essential. The paper particularly emphasizes the key requirements of privacy protection and interoperability.

EMTECH-spearheaded Project New Dawn (PND) is a technical implementation of a retail central bank digital currency (CBDC) that runs on an Ethereum-based platform. PND is also working with the Hedera Hashgraph Network, to develop further understanding how to use interoperability to provide trust in the private sector part of the two-tiered CBDC network. https://futuremtech.com/central-bank-digital-cash/

This BIS paper explores how interoperating multi-central bank digital currency (mCBDC) arrangements could reduce cross-border payment inefficiencies. This could be especially relevant for emerging market economies poorly served by the existing correspondent banking arrangements. Yet competing priorities and history show that these benefits will be difficult to achieve unless central banks incorporate cross-border considerations in their CBDC development from the start and coordinate internationally to avoid the mistakes of the past.

Paxos Trust Company has completed a same-day settlement of US-listed equity trades in partnership with Instinet and Credit Suisse on its Paxos Settlement Service permissioned blockchain solution. Paxos said the project demonstrated its ability to enable same-day settlement for trades conducted throughout the day. In the current system, settlement can only occur the same day if trades are completed before 11 AM ET and therefore is rarely utilized. The platform is said to be interoperable with the legacy clearing system and can facilitate settlement on any time cycle.

Bank of America joined Credit Suisse and Nomura's Instinet on Paxos Trust's blockchain-based stock-settlement network that settles trades in minutes rather than days. Paxos Settlement Service is a private, permissioned blockchain solution designed to allow two parties to bilaterally settle securities trades directly with each other. The platform is interoperable with the legacy clearing system and can facilitate settlement on any time cycle. Bank of America has been conducting internal transactions for the past few months and, if approved as a clearing agency, will offer the service to clients next.