Group items tagged

"This World Bank note examines the implications of digital innovation for market structure and attendant policies, including financial and competition regulation. There have been several surveys of regulatory responses. This note takes a step back, to look at what the economic theory of banking and financial intermediation can tell us about how technology may drive industrial organization in the sector, and how that might inform further policy responses. The paper roots the impact of the digital transformation of finance in innovations that have enabled providers to address long-standing challenges of financial intermediation, including asymmetric information, uncertainty, incomplete markets, and fixed and variable costs of production. The paper describes how digital innovation affects these key economic frictions in finance and alters the financial services value chain and industrial organization. The forces driving these changes, and potential outcomes in terms of industry structure, lead to insights for policy makers on how to harness the benefits of fintech, while mitigating some of the risks, particularly around competition and market structure. The focus is on economic and technological forces that apply broadly across financial services. It recognizes that the sector encompasses a wide range of different products and services and is composed of numerous sub-markets that might use different technologies or have different economic structures. These may thus diverge in market structure and competition outcomes."

"The purpose of this World Bank report is to assess whether digitizing the equity or debt financing used for infrastructure projects using blockchain, that is, tokenized infrastructure, provides enough benefits to justify the use of this technology. The information presented here aims to inform the World Bank whether it should explore the possibility of tokenizing one of its infrastructure projects. The conclusions are based on interviews with tokenization start-ups, experts, and the review of current and planned regulatory frameworks in selected jurisdictions and use cases/pilots to date."

The World Bank published a Digital Economy Diagnostic for Eswatini that provides an assessment of the five pillars of Eswatini's digital economy comprising digital infrastructure, digital platforms, digital financial services, digital skills, and digital entrepreneurship. Overall, it concludes that the potential of the digital economy in Eswatini has not yet been fully realized. A coordinated and holistic approach will be needed to build an inclusive digital economy, as each of the foundations play an important role in their own right, but also depend upon and reinforce the others.

"The purpose of this report is to assess whether digitizing the equity or debt financing used for infrastructure projects using blockchain, that is, tokenized infrastructure, provides enough benefits to justify the use of this technology. The information presented here aims to inform the World Bank whether it should explore the possibility of tokenizing one of its infrastructure projects. The conclusions are based on interviews with tokenization start-ups, experts, and the review of current and planned regulatory frameworks in selected jurisdictions and use cases/pilots to date."

The World Bank issued the first digital securities on the new Euroclear R3 Corda-based Financial Market Infrastructure (D-FMI) distributed ledger technology (DLT) platform. The three-year Digitally Native Notes raised EUR 100 million to support the financing of World Bank's sustainable development activities.

The World Bank published a report that provides evidence that demonstrates that internet availability increases jobs and reduces poverty in African countries. To fully realize their potential, digital technologies need to become more affordable and easier to use. Governments should prioritize policies and investments that increase internet coverage, foster productive internet use, and enhance skills, jobs, and earnings.

The World Bank published a report that explores the implications of fintech and the digital transformation of financial services for market outcomes, on the one hand, and regulation and supervision, on the other hand-and how these interact. The report, which provides a high-level perspective for senior policy makers, is accompanied by notes that focus on salient issues for a more technical audience. As the financial sector continues to transform itself, policy trade-offs will evolve, and regulators will need to ensure that market outcomes remain aligned with core policy objectives. Several policy implications emerge. 1. Manage risks, while fostering beneficial innovation and competition. 2. Broaden monitoring horizons and reassess regulatory perimeters. 3. Review regulatory, supervisory, and oversight frameworks. 4. Be mindful of evolving policy trade-offs as fintech adoption deepens. 5. Monitor market structure and conduct to maintain competition. 6. Modernize and open financial infrastructures. 7. Ensure public money remains fit for the digital world. 8. Pursue strong cross-border coordination and sharing of information and best practices.

The World Bank will issue the first CHF digital bond by an international issuer to settle in Swiss Franc wholesale central bank digital currency (CBDC) provided by the Swiss National Bank (SNB). The coupon and redemption payments on the seven-year CHF 200 million bond will be made using tokenized CHF on the SIX Digital Exchange (SDX). The SDX connects to conventional settlement systems such as Euroclear and Clearstream, via SIX SIS, allowing investors to hold the digital bond through their traditional custodians.

World Bank and Commonwealth Bank have enabled secondary market trading recorded on blockchain for bond-i making this the first bond whose issuance and trading are recorded using distributed ledger technologies.

"The World Bank has raised an additional AUD 50m for its Kangaroo bond due August 2020 - the first bond created, allocated, transferred and managed through its life-cycle using distributed ledger technology."

Government-to-person (G2P) payments have never been more important, as governments worldwide seek for ways to respond to the economic and social consequences of the COVID-19 pandemic.  Eighty-four countries have reported changes to their social protection systems in response to the pandemic; fifty-eight countries of these are scaling up cash transfer schemes.

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 Bank Group and the Cambridge Centre for Alternative Finance published a survey containing responses from regulators in more than 110 jurisdictions around the world on their approaches (and challenges) to the regulation of peer-to-peer lending, equity crowdfunding, and initial coin offerings.

According to the report, 90 percent of regulators "mentioned benchmarking and lessons learned from other jurisdictions as key triggers prompting changes in regulation more frequently than any other trigger." The survey also found that less than a quarter of respondents formally regulate peer-to-peer lending and initial coin offerings, while less than 40 percent of respondents have frameworks in place to regulate equity crowdfunding. Respondents also noted that new innovations and models are stretching regulatory resources. Regulatory resources dedicated to equity crowdfunding and initial coin offerings since 2017 have grown by over one-third and one-sixth for peer-to-peer lending. The survey also questioned the extent to which "light touch" regulatory frameworks are applied across those three areas. Lastly, the study finds that low-income jurisdictions are catching up to high-income jurisdictions, especially in regard to the regulation of peer-to-peer lenders. Here, low-income areas "are almost three times as likely as high-income ones to review their regulatory frameworks for peer-to-peer lending (43% vs. 16%)." However, as the study further shows, low-income jurisdictions are far less likely to have active regulatory innovation initiatives in place (innovation offices, sandboxes, RegTech/SupTech programs).

A World Bank report looked at the role smart contracts could play in improving financial services in poorer nations. It found that smart contracts will not alleviate a variety of common impediments to financial inclusion, including credit risk and income irregularity, distance and inaccessibility, limited awareness and financial literacy, and cultural factors. However, they could assist in determining whether a particular insurance product was suitable as well as increasing trust in the product amongst stakeholders. And on short-term loans, smart contracts could increase efficiency with the different phases of a loan cycle, but those phases are already highly automated, so the new technology would be redundant.

This World Bank note consolidates and summarizes the theoretical and empirical research produced in the past 20 years on the causes, effects, and sequencing of capital markets development. Overall, the empirical studies reviewed confirm the potential benefits of capital markets to economic growth and, under certain conditions, to financial stability. At the same time, the empirical research confirms the existence of a series of preconditions for capital markets to develop. The empirical research on sequencing is more limited.

The World Bank has developed a Fast Payments Policy Toolkit, which consists of a global fast payments tracker as well as other resources pertaining to the topic. The tracker provides updates on jurisdictions around the world (by income level and geographic region) that have implemented fast payments and also provides information on different implementation aspects (such as technical features, technology, access rules) for each such jurisdiction.

The World Bank has assembled a Global Database of Fintech Regulations that constitutes a curated library of enabling laws, regulations, and guidelines from nearly 200 countries in a searchable and easy-to-use format. The data show that while some countries have strong enabling regulations for fintech and digital financial services, others simply lack the necessary regulatory infrastructure. Also, foundational legislation exists in most countries, but there are important gaps, for example in the implementation of basic data-protection regulations.

The World Bank published a guidance note to assist central banks and public authorities as they investigate the use of central bank digital currency (CBDC) as an instrument to strengthen or modernize their national payment systems. It articulates the analysis and decision-making process through five fundamental "W" questions (why, what, when, where and who) that should holistically determine whether to issue CBDC.

The Reserve Bank of Vanuatu launched a new national digital payment platform, VANKLIA, to strengthen its digital economy and promote financial inclusion. The VANKLIA system has two main components: a Real-Time Gross Settlement (RTGS) component which carries out high value and high priority payments and settlement in real time; and an Automated Clearing House (ACH) component which facilitates the clearing of low value, high volume electronic fund transfers for batch payments such as salary payments and instant fund transfers for retail payments.

The Committee on Payments and Market Infrastructures (CPMI), the BIS Innovation Hub (BISIH), the International Monetary Fund (IMF) and the World Bank published a paper on challenges to addressing and approaching the establishment of a multilateral cross-border payments platform. Such a platform could reduce the need for intermediaries and allow payment service providers in different jurisdictions to transact directly with each other. Two paths are examined - the growth approach that involves expanding existing multilateral platforms to additional jurisdictions, currencies and participants, and the greenfield approach that involves building a new, potentially global, infrastructure for cross-border payments.