Fintech Daily Digest

The Bank of England (BOE) published a summary of its work during 2024 on a digital pound, including how it relates to the evolving payments landscape. It also published an initial design note as part of its work on a blueprint for the central bank digital currency (CBDC). The blueprint is one of four workstreams in the digital pound design phase (see below). Its purpose is to provide a comprehensive proposition for a digital pound, including technology, operational, ecosystem, commercial, regulatory and financial considerations, and the roles that both the Bank and the private sector could play in delivering it. The Bank also will launch a Digital Pound Lab to enable hands-on experimentation to test API functionality, innovative use cases and potential business models for payment interface providers (PIPs) and external service interface providers (ESIPs). https://www.bankofengland.co.uk/report/2025/blueprint-framework-design-note

The BIS Innovation Hub (BISIH) posted its 2025-26 work programme. The BISIH started 16 new projects in 2024, and the project portfolio consisted of 26 active projects at the start of 2025. The work programme for 2025 includes further developing ongoing projects such as Project Agora in which partners from seven central banks and over 40 private sector financial institutions are exploring how tokenization can enhance wholesale cross-border payments. The first two new projects in 2025 will explore AI-based tools supporting supervision and green finance. https://www.bis.org/about/bisih/about.htm

Travis Hill, Vice Chair of the Federal Deposit Insurance Corporation (FDIC) acknowledged there had been some crypto debanking. It was part of his wide ranging analysis of potential future policy directions including changes to be made with respect to digital assets, distributed ledger technology (DLT) and blockchain. "Access to a bank account is essential for individuals and businesses to participate in many aspects of the modern economy. A longstanding goal of the FDIC's has been to decrease the number of people who are unbanked. Efforts to debank law-abiding customers are unacceptable, regulators must work to end it, and there is no place at the FDIC for anyone who has pushed - explicitly or implicitly - banks to stop serving law-abiding customers." https://www.fdic.gov/news/speeches/2025/charting-new-course-preliminary-thoughts-fdic-policy-issues

"More consumers and businesses than ever before benefited from real-time payments on the RTP® network in 2024, the largest instant payments system in the United States operated by The Clearing House. In 2024, payment value on the network jumped 94% from the previous year, logging in at $246 billion, while volume surged 38% to 343 million transactions. Additionally, the network heads into 2025 having experienced a record 98 million transactions valued at $80 billion in Q4 2024, representing 12% volume growth and a 16% increase in value from Q3. "

Sberbank is calling for a delay of the digital ruble launch scheduled for July 1, 2025 because its central bank digital currency (CBDC) platform is still being developed. However, many of the smaller Russian banks that have been participating in the pilot since late 2023, report being ready to go on schedule, but Sberbank only joined in December 2024 leaving it just over six months to prepare. A representative of Sberbank, said that the introduction of the digital ruble requires significant financial investments, including tens of billions of rubles for the development and integration of new functionality. https://www.pravda.ru/news/economics/2159660-cifrovoi-rubl/

The evolution of money has gone through three major transitions and one key historical event: the first transition from commodity money and precious metal to fiduciary money and fiat money issued by the government in the 18th and 19th century; the second transition from the commercial bank note to the central bank's monopoly on currency issuance in the 19th and 20th centuries; the third transition that money has developed to be a monetary policy tool since the 17th century; the event that Bank of England took the place of the traders and business owners at that time to issue banknotes and set up branches to provide payment services to the general public so as to solve the financial crisis at the early 19th century. The four parts of history are very inspiring for our understanding of the digital form of money, for example, central bank digital currencies (CBDCs).

The National Bank of Kazakhstan (NBK) is now focusing on stablecoins backed by Digital Tenge - a concept that mirrors the idea of a synthetic central bank digital currency (CBDC) CBDC. This approach essentially represents e-money fully reserved with liquidity in a Digital Tenge wallet, offering a secure and reliable foundation for digital transactions. Furthermore, the NBK will aim to extend the opportunity of stablecoin issuance to a broader range of players, including non-bank entities, fostering inclusivity and innovation across the ecosystem.

This paper delves into the proposals for regulating the digital euro, establishing a connection between its legal standing and physical euro cash, and requiring payment services providers to offer digital euro services regardless of their location. It raises questions about the fundamental implications of treating the digital euro as legal tender. However, labelling the digital euro as a legal tender raises uncertainties about its core nature and purpose. The analysis challenges the notion that the digital euro is merely a digital version of physical cash, emphasising the evolving roles of central bank digital currencies and their legal and policy ramifications. With the digitalisation of the economy in mind, it examines how the involvement of payment services providers in distributing the digital euro could impact individual and economic rights. It underscores the importance of balancing security measures, privacy, and data protection while fostering competition. The paper aims to provide policymakers with insights into the design and regulation of the digital euro, underlining the necessity of clarifying its legal standing and reconsidering its classification as legal tender.

This work offers a legal analysis of stablecoins. The pivotal legal framework for stablecoins under Europe's Markets in Crypto-Assets Regulation (MiCA). Despite its presence in MiCA, stablecoins lack a specific legal definition therein. The Regulation's classification is based on whether crypto assets aim to stabilise their value relative to other assets. This paper focuses on the in-depth examination of the two subcategories of the Regulation that fall under the umbrella of stable crypto assets: asset-referenced tokens and electronic money tokens. It delves into their unique characteristics, including their vocation for stability and, in turn, the intriguing differences between the two subcategories.

This work describes the main features of those stalbecoins. Current rules seek to provide legal certainty for issuers of stablecoins in the UE (by imposing a common set of provisions applicable to all of them regarding their authorisation, governance requirements, etc.), give appropriate protection for holders of those crypto assets (by regulating their rights against issuers, the rules applicable to crypto-asset white papers or the marketing communications), or address potential financial stability and monetary policy risks that could arise from their use as a means of exchange (by monitoring or restricting the issuance).

Gelephu Mindfulness City (GMC), Bhutan's new Special Administration Region, will recognise digital assets such as Bitcoin (BTC), Ether (ETH) and BNB as part of its strategic reserves, making the Special Administrative Region (SAR) one of the first jurisdictions to officially hold digital assets as part of its strategic reserves. The inclusion of digital assets in the GMC's strategic reserves will enhance the SAR's economic resilience, and is an evolution of the jurisdiction's involvement in bitcoin mining.

The OECD published a paper that analyzes possible reasons for the absence of a market for tokenized assets and puts forward policy considerations for financial supervisors and policy makers, to which Josiah Hernandez and I contributed material on the wholesale central bank digital currency (CBDC) aspects. Possible impediments tokenization growth identified include "chicken and egg" problems (e.g., the lack of liquidity and absence of an ecosystem for tokenized assets, and the need for distributed ledger technology (DLT) payment rails (including wholesale CBDC) to exist for the payment leg of settlement), market functioning challenges of instant and "atomic" settlement, the lack of custodians to onboard investors and assets, and legal issues (e.g., the legal status of smart contracts, token ownership not necessarily according ownership to the underlying assets). It concludes that "with the proper foundations in place, new possibilities of potential efficiencies and productivity gains in tokenized assets markets can be brought about in a manner that need not negatively impact financial stability, law enforcement, local and global policy regimes".

The Hong Kong Monetary Authority (HKMA) unveiled a "Supervisory Incubator for Distributed Ledger Technology", with tokenized deposits as a major focus. At the individual bank level, the Incubator will offer a one-stop supervisory platform that enables banks to reaffirm the adequacy of their risk management controls prior to the full launch of a DLT-based initiative. By leveraging this platform, banks will have access to a dedicated team from the HKMA for obtaining supervisory feedback and may opt to conduct live trials to validate and refine specific aspects of their risk management implementation under a hands-on and iterative approach, as needed. https://www.hkma.gov.hk/eng/news-and-media/press-releases/2025/01/20250108-3/

The Bank of Canada published a paper that explores the use of privacy-enhancing technologies (PETs) in the design of central bank digital currency (CBDC) systems, potentially paving the way for solutions that better safeguard end-user privacy and meet rigorous data protection standards. PETs can offer robust protection for data throughout their lifecycle, whether stored, in transit or during processing, and ensure privacy is maintained even when data are extensively shared or analyzed. However, they can introduce performance overheads and add complexity to systems, and their effectiveness and applicability are currently limited due to their early stage of development. This paper provides a comprehensive overview of how PETs can transform privacy design in financial systems and the implications of their broader adoption.

According to Christian Catalini, network effects in the stablecoin market are likely to be much weaker than most anticipate, and it's far from a winner-take-all environment. In fact, stablecoins may function as loss leaders and, without essential complementary assets, could even become a losing venture. And relying solely on reserve interest isn't a sustainable way to monetise a stablecoin, and issuers will need to start competing with their own customers. While industry insiders often cite liquidity as the primary reason only a few stablecoins will dominate, the truth is far more complex.

Distributed ledger technology (DLT) investment fund platform IZNES shared details about experiments during the recent Eurosystem wholesale DLT settlement trials that ended in November. It conducted two sets of experiments that used the Banque de France's wholesale central bank digital currency (CBDC). Read more about them here: https://iznes.io/en/2024/12/23/dlt-settlement-in-central-bank-money-by-iznes-with-eurosystem/

Banca d'Italia published a paper that proposes a methodological framework for estimating the maximum amount of digital euro (D€) that is consistent with a smooth monetary policy implementation (MPI) in the euro area (EA). To this end, it considers that monetary policy is implemented smoothly following the introduction of the D€ when i) the remaining aggregate liquidity in the EA is sufficient to anchor short-term rates to the deposit facility rate and ii) EA national banking sectors can largely meet D€ demand with excess reserves and additional central bank credit. It estimates that, for a smooth MPI, the maximum amount of D€ should not exceed EUR 1.7 trillion under an approach that takes into account the heterogeneity across EA countries and banks and prevents any EA national banking sector from facing a too severe liquidity distress following the introduction of the D€. The analysis suggests the importance of refinancing operations with a broad collateral framework in the Eurosystem operational framework, due to their key role in allowing the central bank to elastically withstand additional reserve demand stemming from the introduction of the D€.

Ripple has partnered with Chainlink, a decentralized oracle network, to improve the adoption and utility of its Ripple USD (RLUSD) stablecoin in decentralized finance (DeFi) applications. The collaboration will provide price feeds for RLUSD on Ethereum and the XRP Ledger, which aim to support cost-effective transactions and DeFi use cases for the enterprise-grade stablecoin. https://ripple.com/ripple-press/ripple-adopts-the-chainlink-standard-to-further-rippleusd-utility-and-access-in-defi/

The Bank for International Settlements (BIS) Committee on Payments and Market Infrastructures (CPMI) announced further steps to promote the adoption of its harmonized ISO 20022 data requirements for more efficient processing of cross-border payments. A panel of global ISO 20022 market practice groups will be established in early 2025 to support the regular maintenance of the data requirements. Second, the CPMI is encouraging industry to develop global ISO 20022 market practice guidelines for fast payments based on the harmonized data requirements. Third, the CPMI will continue to engage with payment system operators and payment service providers to encourage them to implement the harmonized data requirements by end-2027.

The U.S. Federal Deposit Insurance Corporation (FDIC) published minimally redacted letters sent to banks requesting information about their crypto activities and in most cases asking them to pause activities pending feedback. The FDIC was forced by a June 2024 court order filed by Coinbase (through its contractor History Associates), to release the letters after initially turning down the exchange's Freedom of Information Act (FOIA) request. According to Coinbase Chief Legal Officer Paul Grewal, "they show a coordinated effort to stop a wide variety of crypto activity". https://www.fdic.gov/foia/history-associates-inc-v-fdic-fdics-redacted-pause-letters-january-3-2025 https://www.ledgerinsights.com/fdic-publishes-crypto-pause-letters-including-usdf-consortium/