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The Reserve Bank of Australia (RBA) published a paper that explores the merits of introducing a retail central bank digital currency (CBDC) in Australia, focusing on the extent to which consumers would value having access to a digital form of money that is even safer and potentially more private than commercial bank deposits. The results suggest that the average consumer attaches no value to the added safety of a CBDC. This is consistent with bank deposits in Australia already being perceived as a safe form of money, and physical cash issued by the RBA continuing to be available as an alternative option. Privacy settings of a CBDC, which can take various forms, look more consequential for the CBDC value proposition. However, no clear relationship was found between safety or privacy valuations and the degree of consumers' cash use.

"There is an inherent tension between government control (viewed as "safety") and individual liberty (viewed as "privacy"). And, generally, the Founding Fathers believed that liberty should prevail over government rights or this mischievous concept of "safety"."

This Bank of Canada paper asks, as the economy becomes increasingly cashless, can we rely on the private sector to invest in the optimal level of safety in the electronic payment system? It tries to answer this question by modelling private incentives to invest in safety in a deposit-based payment system. Depositors can mitigate the risk in the system through monitoring to reduce the risk of default before it happens (ex ante) or through monitoring for timely detection of defaults after they've occurred (ex post). In addition, they can also set up a separate, safe account as a backup to receive funds from the risky account in a crisis situation. The paper finds that because depositors do not internalize the externalities in the payment system, the private sector can over- or under-adopt the use of safe accounts. However, governments could use taxes or subsidies to correct private incentives and restore the optimal adoption of safe accounts.

This opinion piece suggests that the US Congress create a national "payments passport" by allowing money transmitters with at least 40 state licenses to obtain limited access to the payments system, provided they are subject to Federal Reserve regulatory standards and supervision tailored to payments services. State-based licensing and supervisory authority would remain in place, while the Federal Reserve would be empowered to ensure the safety, soundness, and integrity of its own payments system. This framework could also include tailored parent company oversight to protect safety and soundness and be limited to firms whose activities are predominantly financial in nature. And such payments companies would directly originate, clear, and settle payments, but lack access to broader Fed services. They would not be granted full banking powers, limiting the threat to community banks, while the preservation of state-based consumer protections would ease consumer advocates' concerns.

The United Nations Development Programme (UNDP) published an article by Heng Wang on potential central bank digital currency (CBDC) design features that drive financial inclusion. From users' perspectives, CBDCs need to (i) provide low-cost and safe electronic payment services and to provide benefits like accessibility for vulnerable people, (ii) align with values, experiences, and needs of potential users, and address concerns like privacy, safety, (iii) simplify access to CBDCs (especially for vulnerable groups), easy access to CBDC wallets, user-friendly interfaces, clear terms and conditions, (iv) be tested comprehensively through pilots and sandboxes to refine their design and ensure safety, and (v) the benefits and costs should be visible and understood by users.

Kenya's interior ministry has suspended the local activities of the Worldcoin crypto-asset project while government agencies assess potential risks to public safety. The project launched on July 24, 2023. It requires users to give their iris scans in exchange for a digital ID, and in some countries users also get free crypto-assets as part of plans to create a new identity and financial network. France and Germany have also raised concerns around the legality of the biometric data collection and storage.

NY Fed staff investigated similarities and differences between stablecoins and money market funds (MMFs), comparing investor behavior during the stablecoin runs of 2022 and 2023 to investor behavior during the MMF runs of 2008 and 2020. They found that, similarly to MMF investors, stablecoin investors engage in flight to safety, with net flows from riskier to safer stablecoins during run periods. However, whereas in MMFs, run risk has historically materialized only in prime funds, with stablecoins, runs occurred in different stablecoin types across the 2022 and 2023 episodes. The analysis also shows that, similarly to intrafamily flows in MMFs, stablecoin flows tend to be within blockchains. A discrete "break-the-buck" threshold of $0.99 was identified, below which redemptions accelerate.

The ECB and BoJ published the outcome of Poject Stella, their joint research on DLT-based synchronised cross-border payments system. It concludes that the safety of today's cross-border payments could potentially be improved by using payment methods that synchronise payments and lock funds along the payment chain, but further reflections on legal and compliance issues, the maturity of the technology and a cost-benefit analysis would be required before the possible implementation of such new methods could be considered.

"Today, a new epoch of system integration is underway. However, efforts to make blockchain technology enterprise-friendly split the community into two camps: public networks versus private networks. The dichotomy was wrong-headed from the start, making it easy to believe that public blockchain networks shouldn't be used in confidential business operations and that private networks were safe and secure. The first belief is wrong, and the second is dangerous."

Most credit card issuers prohibit crypto purchases by defining them as a "cash advance" or "cash equivalent" possibly as a matter of safety, but also to prevent consumers from gaming the cards' reward systems.

Central banks' frameworks for managing foreign exchange reserves have traditionally balanced a triad of objectives: liquidity, safety and return. Pursuing these objectives involves explicit trade-offs. Recently central banks have shown interest in incorporating environmental sustainability objectives into their reserve management frameworks. Rather than a triad, central banks may analyse (and weigh) a tetrad of reserve management objectives in allocating part of their foreign exchange reserves to green bonds.

"The U.S. Fed needs new tools to meet its mandates of price stability and maximum employment, and to preserve the safety and soundness of the financial system in a rapidly digitizing world. A Fed-backed digital currency can solve both problems."

The new Libra white paper is intended to be a stand-alone update regarding the plans of the Association. Additionally, supporting technical papers also published in June 2019 have been edited or retired. Key changes from the June 2019 white paper include single-currency stablecoins in addition to the multi-currency coin, forgoing the future transition to a permissionless system, enhancing payment safety with a robust compliance framework, and building strong protections into the Reserve design.

"Central bank digital currencies (CBDCs) promise to provide cash-like safety and convenience for peer-to-peer payments. To do so, they must be resilient and accessible. They should also safeguard the user's privacy, while allowing for effective law enforcement. Different technical designs satisfy these attributes to varying degrees, depending on whether they feature intermediaries, a conventional or distributed infrastructure, account- or token-based access, and retail interlinkages across borders. We set out the underlying trade-offs and the related hierarchy of design choices."

Boeing has added more than $1 billion in excess airplane parts to GoDirect Trade, a blockchain platform designed to prove the origin of the parts and ensure they comply with safety standards.

Embarking on an instant payment project after these three major economies have already done so may be an advantage for the Fed. While interconnectivity, fraud prevention and directory services might be something the Fed wants to solve at the initial launch - given its three objectives related to ubiquity, safety and efficiency - each approach faces a trade-off against time to market. The potential impact of Facebook's libra may push timing higher up the pecking order. The Fed faces important choices ahead.

A payments revolution has prompted a proliferation of shadow digital money. This money is unsound. It is not insured by the government, nor is it backed by safe assets. Federal regulation is needed to guarantee safety and soundness, to restore full monetary control to the Federal Reserve, and to prevent a race to the bottom between competing state and federal regulatory regimes. Congress should pass new legislation preempting state money service businesses (MSBs), offering federal MSB charters, and authorizing the OCC to establish a special regulatory regime for MSBs that restrict issuers to investing in cash and cash equivalents at banks or the Federal Reserve. With these changes, innovation in payments is just that - innovation in payments-and not also unauthorized and unsound money issuance.

Could now be a good time to announce a CBDC? The asset/saving-less can be encouraged to sign up to the system with the promise of a $2000/£2000/€2000 stimulus and an ongoing stipend of x amount for however long the crisis lasts (an effective negative rate). Those seeking safety for savings, meanwhile, can be promised the protection of par value, with capital invested strategically redeployed in the system in the shape of zero-rate loans for temporarily struggling businesses?

The worry is that in dispensing with collateral as a line of defense (or using less of it), the new breed of less-than-fully collateralized stablecoins may not be able to weather a major black swan event, say like a market crash, an outbreak of war or a new pandemic. It's possible that less-than-fully collateralized stablecoins will prove to be an enduring advance in financial technology. If so, they'll imbue DeFi with true stability while simultaneously disconnecting it from the incumbent financial system. Or they could be highly risky assets that offer only the illusion of safety. We'll know which it is when the next big market disruption hits.

The Bangko Sentral ng Pilipinas (BSP) established the Payments and Currency Management Sector (PCMS) to manage the interplay of physical currency and digital money. PCMS is tasked to maintain the safety and integrity of the local currency and to ensure a well-functioning payments and cash ecosystem that supports sustained and inclusive economic growth, in alignment with the BSP's Digital Payments Transformation Roadmap. The new sector, which consolidates existing currency and payment management units, is responsible for producing banknotes, coins, and securities documents; refining gold; and printing of cards for the national ID.