All you need to know about the CBDC project by the NY Federal Reserve

https://www.msn.com/en-in/money/news/all-you-need-to-know-about-the-cbdc-project-by-the-ny-federal-reserve/ar-AA14d1EO

CBDCs are the intersection of fiat currencies and the digital asset industry. Backed by central governments and powered by blockchain technology, they are touted as the future of transacting. As such, central banks around the world are racing to develop, test and launch their CBDC projects. For instance, China is currently in the middle of a vast testing phase, where citizens in select locations can use the e-CNY to pay for various services and products, including public transport.

Yesterday, the Federal Reserve Bank of New York also announced a proof-of-concept project to explore the feasibility of digital money operating on a shared distributed ledger. The project will be carried out under the Fed's New York Innovation Centre (NYIC), with the help of several giants from the traditional banking sector, such as HSBC, Citigroup, Wells Fargo, BNY Melon, PNC Bank, T.D. Bank, Truist and Mastercard. The program aims to test the use of digital tokens and improve how central bank money is exchanged and settled between the various institutions.

As per the NY Fed's official press release from Nov 15, this 12-week proof-of-concept project will "test the technical feasibility, legal viability, and business applicability of distributed ledger technology." The program will operate on a Regulated Liability Network (RLN), where banks issue tokens to represent customer deposits. They will use these tokens to simulate transactions on a shared distributed ledger. If all goes well, the project could also be "extended to multi-currency operations and regulated stablecoins" in the future.

On November 4, the centre also released research findings on its wholesale CBDC program. The program's first phase was called Project Cedar, which aimed to determine whether blockchain technology could improve cross-border wholesale payments. Initial findings indicate that blockchain-enabled payment systems could settle transactions in less than ten seconds and that throughput could be further increased in the future.

"Project Cedar Phase I revealed promising applications of blockchain technology in modernizing critical payments infrastructure, and our inaugural experiment provides a strategic launch pad for further research and development regarding the future of money and payments from the US perspective," said the director of the NYIC, Per von Zelowitz, in a statement.

One day before NYIC's research paper was released, the Monetary Authority of Singapore (MAS) also launched its wholesale CBDC project for cross-border transactions. The project has been named Ubin , and it aims to test the use of CBDCs for foreign exchange and explore how distributed ledger technology (DLT) could interact with non-ledger payment systems. As part of the Ubin program, MAS will also participate in the SWIFT's CBDC Sandbox along with 17 other central and commercial banks. The objective of the sandbox is to test cross-border interoperability.

India is also working on its wholesale CBDC program. A couple of weeks ago, the RBI announced that it would roll out the 'e-rupee' on Nov 1 as part of its pilot programme to test and improve the currency's functionality. Nine banks will participate in the pilot, including the State Bank of India, HDFC Bank, ICICI Bank, Kotak Mahindra Bank, Yes Bank, HSBC, Bank of Baroda, Union Bank of India and IDFC First Bank.

Therefore, it's clear that CBDCs are at the top of the agenda for central banks across the world. The introduction of digital money will bring the benefits of blockchain technology to traditional banking infrastructure. However, most of these projects are still in the testing phase, and it could be a while before they are introduced to the masses.

>>17807384

>India is also working on its wholesale CBDC program

India Today

Reserve Bank Of India to launch retail CBDC pilot in December

https://www.msn.com/en-in/money/topstories/reserve-bank-of-india-to-launch-retail-cbdc-pilot-in-december/ar-AA14sf6m

The retail pilot for the digital rupee or the CBDC is scheduled to commence in the next month, following the introduction of the Reserve Bank of India's (RBI) first digital rupee pilot project on 1 November.

However, no information on the successful ending of the wholesale pilot is available at the time of writing.

The retail CBDC can be summarised as one of the digital currencies which has been issued to the general public by a central bank. It is based on DLT, i.e., distributed ledger technology and has anonymity and traceability as its features. Moreover, these retail CBDCs are available round the clock and all year through, along with the feasibility of an interest rate application.

"I think, in that sense also, it's going to be a major transformation of the way business is done and the way transactions are conducted, the RBI is one of the few central banks in the world that has taken this initiative," RBI Governor Shaktikanta Das said on 2 November 2 at the annual banking conference jointly organised by the Federation of Indian Chambers of Commerce and Industry (FICCI), following the first pilot of the digital rupee in the wholesale segment.

Details of the retail CBDC launch

Since it is issued by the central bank, CBDC will exist in a virtual form and will not be decentralised like cryptocurrency, but instead governed by the Reserve Bank of India. The National Payments Corporation of India (NPCI) will have a hold over the CBDC infrastructure, and will continue to monitor it.

SBI, Union Bank of India, ICICI, HDFC, YES Bank, IDFC, and Kotak Mahindra Bank are among the banks on the regulator's list of those taking part in the pilot, in addition to all the commercial banks in the country. Each participating bank will test the CBDC with between 10,000 and 50,000 customers, and to guarantee a seamless rollout of the retail CBDC pilot, in the new payment system, banks will partner with PayNearby and Bankit payment platforms.

According to an Economic Times report, an anonymous source revealed to Indian journalists:

"The e-rupee will be stored in a wallet, and the denominations will be available as per the customer's request, just like you request cash from an ATM. Banks are launching this only in select cities."

This basically means that users and merchants will be required to download special wallets for the CBDC, but this won't be necessary for very long because there are plans by the RBI to fully incorporate it with operating virtual banking utilities.

No plans of retail CBDC pilot to replace the traditional financial system

The digital rupee is not intended to replace the current payment system; rather, it is meant to be an addition to it. Its operationalization is yet to be anticipated.

"The main use case of India's CBDC pilot will be to settle secondary market transactions in government securities. The Reserve Bank of India stated, "The digital rupee is expected to add more efficiency to the interbank market by lowering transaction costs of settlements."

Indian Finance Minister Nirmala Sitharaman first revealed the vision to introduce the digital rupee in February 2022, which was regarded as a "huge boost" for India's economy. This indicates that India has been rather swift to introduce a CBDC. The Reserve Bank of India then revealed a three-step graded rollout strategy to launch CBDC on 7 October, with no intention in disrupting the operations of the current traditional financial system.

>>17807391

Bank of Japan to Run CBDC Experiments With Country's Megabanks: Report

The Bank of Japan (BoJ) has planned experiments on a digital yen with three megabanks and regional banks in the country, Nikkei reported on Wednesday.

Starting in the spring of 2023, the BoJ will work with private banks and other organizations to identify any problems with deposits and withdrawals, and check that a central bank digital currency (CBDC) can operate during natural disasters and in areas without internet access, according to the report.

Although the report did not name the banks, Japan's “three megabanks” typically refer to Mitsubishi UFJ Financial Group Inc., Sumitomo Mitsui Financial Group Inc. and Mizuho Financial Group Inc.

The BoJ joined a growing list of central banks worldwide exploring CBDCs last year, by developing a test environment for a digital yen and exploring basic functions like issuance, distribution and redemption.

Last year, a BoJ official said that it is the central bank's priority to ensure a CBDC enables competition between private payment providers and be universally accessible by the public.

The experiment will last two years and the central bank will decide on issuing a CBDC in 2026, the report said.

https://finance.yahoo.com/news/bank-japan-run-cbdc-experiments-122207304.html

>>17807404

BIS report finds uneven progress, differing motivations in African CBDC adoption

https://cointelegraph.com/news/bis-report-finds-uneven-progress-differing-motivations-in-african-cbdc-adoption

A survey of the continent’s central banks shows optimism about greater efficiency and inclusion, but several drawbacks remain; Nigeria already has an operational retail CBDC.

Mobile money has been a strong competitor to central bank digital currency (CBDC) in Africa, but many of the continent’s central bankers have greater faith CBDC, according to a Bank for International Settlements (BIS) report published Nov. 24. African central bankers also saw greater utility in CBDC for implementing monetary policy than bankers in other parts of the world, according to the BIS.

Nineteen African central banks responded to the survey that served as a basis for the report, and all of them stated that they were actively interested in CBDC. Only Nigeria has issued a retail CBDC, the eNaira, meant for public use, while Ghana has a retail CBDC project in the pilot stage, and South Africa is currently running a project for a wholesale CBDC, meant for institutional use.

Provision of cash was listed by African central bankers as a major motivation for the introduction of a CBDC for 48% of respondents. A CBDC would save money on the printing, transportation and storage of banknotes and coins, they said. Financial inclusion was mentioned by all respondents. Less than half the adult African population was banked in 2021.

Related: Nigerians’ passion for crypto is stopping short at the eNaira

Sub-Saharan Africa accounts for two-thirds of the world’s money transfers by volume and more than half of all users. The entry of CBDC into this field could improve competition and lower costs, the report notes. A CBDC would “support new digital technologies and their integration with the broader economy.”

Issuing and operating a CBDC is a daunting task:

“Here African central banks highlight aspects very similar to other EMEs [emerging market economies …]: network resilience, the cost, availability and combinability of technologies, and their scalability and functionalities. The operational cost of such a complex system is high.”

That was combined with cybersecurity concerns and the risk of low adoption in the minds of several of the central bankers. Bank disintermediation also ranked among the concerns, although bankers expected CBDCs to help implement monetary policy. Cost of remittances was a big concern for design.

>>17807409

Canada to examine crypto, stablecoins and CBDCs in new budget

https://cointelegraph.com/news/canada-to-examine-crypto-stablecoins-and-cbdcs-in-new-budget

Canada’s government stated its concerns about the risks digital assets and the digitalization of money may pose to its financial system as a reason for launching the consultation.

The Canadian federal government is set to launch a consultation on cryptocurrencies, stablecoins and central bank digital currencies (CBDCs) as revealed in its new mini-budget.

The government’s “2022 Fall Economic Statement,” released on Nov. 3 by Deputy Prime Minister Chrystia Freeland, works as a fiscal update in conjunction with its main yearly budget.

The statement included a small section on “Addressing the Digitalization of Money” that outlined the government’s crypto plans.

It said the rise in cryptocurrencies and money digitalization is “transforming financial systems in Canada and around the world” and the country’s financial system regulation “needs to keep pace.”

The statement opined that money digitalization “poses a challenge to democratic institutions around the world,” highlighting cryptocurrencies’ use in sanctions avoidance and illicit activity financing both domestically and abroad.

In the statement, the government said consultations with stakeholders on digital currencies, stablecoins, and CBDCs are being launched on Nov. 3, although exactly which stakeholders will be engaged remains unclear.

The announced consultations are understood to be part of the government’s intention to launch a “financial sector legislative review focused on the digitalization of money and maintaining financial sector stability and security,” which was part of the 2022 budget released on April 7.

This review will also examine the “potential need” of a Canadian CBDC in light of these risks.

Related: Quebec's energy manager to seek government approval to stop powering crypto miners

In January, protests broke out in the nation’s capital of Ottawa regarding the COVID-19 vaccine mandate and restrictions in Canada, with protestors migrating to crypto fundraising platforms after being kicked off competing fiat fundraising platforms.

The province of Ontario declared a state of emergency on Feb. 11 due to the protestor’s road blockades resulting in its government freezing millions in donations to protestors, at the time protestors raised around 21 Bitcoin

tickers down

, worth $902,000.

Prime Minister Justin Trudeau invoked the Emergencies Act on Feb.14 for the first time in Canada’s history giving him the power to freeze protesters’ bank accounts and monitor “large and suspicious transactions,” including crypto.

Two days later, Canada’s federal police force sent letters to several crypto exchanges demanding they stop processing transactions of more than 30 specific crypto wallet addresses linked to the ongoing protests.

>>17807418

Australia's CBDC Pilot to Be Completed in 2023

The pilot, which is exploring "innovative use cases" for a central bank digital currency, kicked off in August.

https://www.coindesk.com/business/2022/09/26/australias-cbdc-pilot-to-be-completed-in-2023/

The Reserve Bank of Australia (RBA) is expecting to complete its central bank digital currency (CBDC) pilot by mid-2023, according to a white paper published on Monday.

The purpose of the pilot is to "explore innovative use cases" that could be supported by the issuance of a CBDC, a media release said. The white paper, which is a document produced by the bank that can later be used to inform future laws, said the project was also looking into regulatory considerations associated with a CBDC.

The paper did not reveal a commitment from the RBA to issue a CBDC but the bank is seeking feedback from industry participants that will "contribute to ongoing research." The experiment is expected to end in the beginning of next year with results to be published in mid-2023, according to the document.

Australia's CBDC research project kicked off in July and the pilot commenced in August. The document was published in the wake of Australian opposition politician Andrew Bragg criticizing the current government, led by Prime Minister Anthony Albanese, on its "inaction" when it came to crypto. The Albanese government has meanwhile announced it will use "token mapping" as a framework for regulation.

The white paper provides additional details on the CBDC project including that Australia's pilot currency would be called eAUD, and all participants in the project will need to be invited and approved.

>>17807425

China to Extend CBDC Trial to Most Populous Province, Guangdong, Three Others: Report

https://finance.yahoo.com/news/china-extend-cbdc-trial-most-112340238.html

China's central bank is to extend the trial of its e-CNY digital currency to four major provinces including Guangdong, the most populous, the South China Morning Post (SCMP) reported Tuesday.

The People's Bank of China (PBOC) will also add Jiangsu, Hebei and Sichuan to the trial, Deputy Governor Fan Yifei said at a financial forum on Monday, according to the SCMP.

No timetable was offered for the expansion. Yifei said it would happen "at a proper time."

Trials of the country's central bank digital currency (CBDC) have been taking place over the past two years. They have generally been city-wide and taken the form of lotteries in which larger numbers of citizens win relatively small denominations of the currency. Merchants are also encouraged to accept payment in e-CNY in order to spur adoption.

As of October last year, around 140 million people had opened e-CNY wallets, and transactions worth 62 billion yuan ($9 billion) carried out.

The central banks and governments of almost every major economy around the world have at least demonstrated intent to explore the development of a CBDC, partly in response to the rise in the use of cryptocurrencies.

China's plans are significantly the most advanced, while South Korea's and Sweden's have also moved into a testing phase in the past year.

>>17807427

Russia Targets CBDC Launch Early 2023, Focus on China Settlements

https://fintechs.fi/2022/09/28/russia-targets-cbdc-launch-early-2023-focus-on-settlements-with-china/

Russia has been doubling down on crypto usage to overcome the odds arising out of Western sanctions after the Ukraine situation.

Russia is on course to launch its CBDC early next year and use the new currency in mutual settlements with China that has already tested its digital Yuan, a senior Russian lawmaker said in an interview.

The move aims at reducing the US hegemony over the global financial system, media reports said.

“The topic of digital financial assets, the digital roble and cryptocurrencies is currently intensifying in society, as Western countries are imposing sanctions and creating problems for bank transfers, including in international settlements,” Anatoly Aksakov, head of the finance committee in Russia’s lower house of parliament, said in an interview with Russia’s parliamentary newspaper.

With that objective in mind, Russia is looking at alternatives, he added.

“If we launch this, then other countries will begin to actively use it going forward, and America’s control over the global financial system will effectively end,” the Russian lawmaker said.

The digital ruble has been in the works over the past couple of years. It was primarily aimed at modernizing the country’s financial system and speeding up payments. But given the sanctions, its implementation is being fast-tracked, and Russian banks are reported to be testing it.

Crypto Legislation in Russia

The senior Russian lawmaker also hinted at the possibility of a new crypto regulation to come later this year. With the Bank of Russia adopting a strict non-accommodation approach and batting for a complete ban on cryptocurrencies, the Russian crypto legislation has been in limbo throughout the last year.

Typically, Russia pursued a strict dismissive approach to digital assets, and the CBDC project was planned partly as a response to “the threat of cryptocurrencies like bitcoin gaining influence.”

In the changed circumstances, the central bank is believed to have moderated its stance on the crypto regulation bill. It’s currently reviewing a version that seeks to allow digital asset trading at Moscow Exchange, the country’s largest exchange.

Moderating Stance

Early this month, the Finance Ministry and the central bank agreed to use cryptocurrencies in cross-border payments to facilitate the country’s trade with other nations.

In June, Russian President Vladimir Putin signed a bill into law that made the use of cryptocurrencies as a medium of domestic payments illegal. But he expressed interest in crypto mining, saying the country can use its spare electricity and favorable climate to develop the industry.

>>17807429

Iran's central bank to start a CBDC pilot in push for new type of national currency

https://seekingalpha.com/news/3884878-irans-central-bank-to-start-a-cbdc-pilot-in-push-for-new-type-of-national-currency

As part of its plan to develop a new version of its national currency, the Central Bank of Iran will reportedly start testing a central bank digital currency ("CBDC") on Thursday.

The central bank's goal of designing the digital rial is to "turn banknotes into a programmable entity," according to a release from the newsroom associated with the country's Chamber of Commerce, Industries, Mines and Agriculture.

The digital rial is not designed to compete with cryptocurrencies such as bitcoin (BTC-USD) because CBDCs are centralized, whereas cryptos are decentralized, the report said. Note a CBDC represents a digital form of a fiat currency, such as the U.S. dollar, issued by a central bank like the Federal Reserve.

The CBI's move comes on the heels of Hong Kong's plans to start trailing its CBDC in the fourth quarter.

In 2021, Iran shut down crypto mining to save power to avoid winter blackouts.

https://finance.yahoo.com/news/iran-launches-cbdc-crypto-rial-093357192.html

Iran Launches Its CBDC ‘Crypto-Rial’ To Compete With USDT, USDC

The Central Bank of Iran (CBI) announced the launch of its CBDC after informing the banks and credit institutions about the regulations that will accompany the Crypto-Rial.

One of the biggest purposes of implementing the CBDCs is to improve financial inclusion within the country, which will be minted by the Central Bank alone and will have an unspecified maximum supply.

Although it is expected that the issuance of these CBDCs will be similar to how the fiat works currently, simply replacing a portion of fiat with the digital currency to maintain the total Rial issued by the bank.

The Central Bank also stated that the Crypto-Rial would play a bigger role in establishing the presence of crypto in the country. Using the Crypto-Rial, Iran will be bringing competition to the other stablecoins used globally.

These stablecoins include the likes of Tether (USDT), USD Coin (USDC), Binance USD (BUSD), TerraUSD (UST), etc.

However, the bank has specified that given the difference in the process of CBDCs creation, they certainly won’t be a competition to the other major non-stablecoin cryptocurrencies such as Bitcoin, Ethereum, Cardano, etc.

CBDCs Across the World

As mentioned before, CBDCs are rising quickly, and that too among significant countries. Within the last four months of 2022, countries such as India, Russia, and Jamaica have been announcing their plans concerning said stablecoins.

Canada even announced a joint collaboration with the Massachusetts Institute of Technology.

Just today, FXEmpire also reported on Brazil’s plans to begin the CBDC pilot program in the latter half of this year.

Although, with over 40 countries still researching CBDCs, 16 more developing, and another 15 countries working on the pilot program, it won’t be long before CBDCs become the new chase, just as Metaverse has.

>>17807436

Brazil To Begin CBDC Pilot in Second Half of 2022

https://finance.yahoo.com/news/brazil-begin-cbdc-pilot-second-082324509.html

Key Insights:

Brazil’s central bank chief says the CBDC pilot would begin in the second half of 2022.

The CBDC will be guaranteed by the Brazilian real, and banks can issue stablecoins upon deposits.

Brazil chose nine projects in March, including Aave, Visa, and Microsoft, to develop CBDC.

The Central Bank of Brazil chief said Monday that it would begin the CBDC pilot later this year.

The President of Banco Central do Brasil (BCB), Roberto Campos Neto, announced the move during an event presented by TradersClub (TC) and Arko Advice.

Neto said that Brazil would start piloting its central bank digital currency (CBDC) in the second half of 2022.

CBDC Pilot Roll Out Coming Soon

The central bank gave a hint in November 2021 that it would roll out the CBDC pilot this year. However, earlier reports say that the asset will not be ready for use until 2024.

According to Neto, the sovereign national digital currency would be pegged to the country’s official currency— the Brazilian real (BRL). He also confirmed that the CBDC dubbed “Digital Real” would have a fixed supply, similar to Bitcoin.

“This is a way of creating the digitalization of the currency without creating a rupture in the banks’ balance sheets. This project should have some kind of pilot in the second half of the year.”

Neto stressed that the bank has been exploring and studying the process of CBDC for a long time. He believes that crypto is more prominent as a form of “investment rather than payment” but could change with broader adoption and acceptance.

It is unknown whether the pilot project would make the CBDC available to the public or would restrict the asset to the central bank itself.

Brazil Picks up Pace in the Crypto Marathon

The central bank joined hands with nine partner projects to complete its CBDC goals. Announced in March, the selected partners include Aave, a DeFi lending platform, Visa of Brazil, ConsenSys, and Microsoft.

Brazil has been catching up pace in the crypto space by introducing various “pro-crypto” measures. CBDC development isn’t Brazil’s only crypto-related pursuit. The city of Rio has been at the forefront of the crypto adoption movement.

Rio de Janeiro announced that it would allow its citizens to pay their real-estate taxes in cryptocurrencies. Additionally, the city plans to expand its crypto-friendly measures to stimulate arts, culture, and tourism.

Rio Secretary of Finance and Planning Pedro Paulo stated last month,

“Going further, we will use these crypto assets to stimulate the arts, culture, and tourism, through NFTs, and create a sound and responsible governance policy to evaluate the realization of crypto investments.”

The city announced early this year that it would buy Bitcoin as a store of value for city reserves. The seaside city said it intends to invest 1% of the Treasury in Bitcoin, and the mayor of Rio, Eduardo Paes, has promised to launch its coin dubbed “Crypto Rio.”

>>17807440

Israel trials CBDC blockchain solution that enables privacy

https://www.ledgerinsights.com/israel-cbdc-blockchain-privacy/

Yesterday the Bank of Israel shared details about its first set of technical trials for a central bank digital currency (CBDC). One test used smart contracts, raising the issue of who should be allowed to write smart contracts and how to police them. A second digital shekel test focused on a novel way of enabling limited quantities of private payments. Both experiments used a two-tier model intermediated by payment providers and blockchain, with different technologies for each.

The central bank emphasized that it hasn’t decided to issue a digital shekel and the technologies used in its experiments do not indicate any preferences.

The holy grail for CBDC: privacy

Physical cash provides not just privacy for payments, but anonymity. Central banks are reluctant to enable the same degree of anonymity for fear of money laundering and tax evasion. Yet many central banks worldwide are also aware that as cash usage declines, digital currencies threaten people’s right to privacy.

The Bank of Israel trialed a hybrid solution from VMware Blockchain where wallets had some ordinary digital shekels as well as a monthly allocation of 1000 private digital shekels where the transactions are not recorded openly on the blockchain. The VMware solution combines zero knowledge proofs (ZKPs) and eCash, a privacy concept developed by early digital currency inventor David Chaum that originally didn’t use blockchain.

eCash works by using a cryptographic concept called blind signatures, which is the most technical we’ll get. The key point is that the consumer’s coins can’t be linked to each other. When a retailer receives the CBDC they will verify the coin’s validity, but they don’t get to see the consumer’s identity.

The solution used by the Bank of Israel is based on VMware paper on Untraceable Transactions published in April that claims to be a scalable and performant solution.

The central bank noted that the technical solution raises policy questions such as how much money should the privacy budget include and how that might differ between businesses and consumers? And whether this creates an economic incentive to misuse private wallets.

On that point, we’d observe that bank accounts are already misused, with stories of students being paid so criminals can pass transactions through their accounts. Some level of misuse will need to be tolerated in the name of privacy.

Who writes the smart contracts?

The other experiment involved a delivery versus payment transaction relating to the sale of a car. For that test, the central bank used the Ethereum-based enterprise blockchain Quorum. The transfer of the car’s ownership and payment happened simultaneously.

Smart contracts ensure this atomicity; if one leg of the transaction fails, so does the other. One concern is that a trustworthy entity needs to develop the smart contract. Otherwise, there’s a possibility that there will be counterparty risk, whether inadvertently or with criminal intent.

That is a concern to the Bank of Israel, as is the potential for someone to write buggy smart contract code that could overload the system. Hence the potential to only allow payment providers to write the smart contracts, which would need auditing.

From the central bank’s perspective, both these cases are in line with the Bank of Israel’s potential motivations and requirements – to enable innovation and safeguard privacy.

Last week the Hong Kong Monetary Authority (HKMA) announced it’s collaborating on CBDC research with the Bank of Israel, focusing on Israel’s deep expertise in cybersecurity. In May, the central bank published feedback from its CBDC public consultation.

>>17807441

Saudi Arabia exploring blockchain and CBDC to reduce cash usage

https://coingeek.com/saudi-arabia-exploring-blockchain-and-cbdc-to-reduce-cash-usage/

The Kingdom of Saudi Arabia is exploring blockchain technology and a central bank digital currency (CBDC) as a means to digitize payments, a central bank official has revealed. The official, however, made it clear that the country has no intention of completely phasing out cash payments.

In an interview with the local newspaper Al Eqtisadiah, the official pointed out that the Saudi Arabia Monetary Authority, which is the country’s central bank, has been deeply involved in CBDC research over the past few years. Aside from its local CBDC initiatives, it has partnered with other countries and international organizations for research.

He told the paper, “International organizations in which the Saudi Central Bank is a member of their working groups are still working on the available design aspects, the principles and standards used, and the potential impacts on countries’ economies and their current payment systems.”

And even as Saudi Arabia works towards digitizing payments, it has no intention of completely phasing out cash use, the official clarified. Despite a push towards digital payments in the Kingdom, 60% of its residents rely on cash for payments at least once a week, with one in four using it daily, a report by Fintech Saudi shows. The young population is, however, less reliant on cash, with only 18% of the respondents aged 16-22 are relying on it for payments, compared to 60% for those aged 60 and above.

SAMA has set an ambitious target of having 70% of all payments being conducted through digital means by 2030. According to the official, this target will be achieved even earlier, setting the target at 2025.

Such a move would greatly benefit the Saudi economy, he said. It would facilitate faster and safer payments, reduce the cost of cash handling and enhance transparency in payments, the official added.

SAMA launched Project Aber back in 2019 to explore the feasibility of a digital riyal. It has since then expanded this research to partner with the UAE on a cross-border CBDC.

>>17807448

Hong Kong, BIS explore CBDC-backed stablecoins in retail prototype

https://finance.yahoo.com/news/hong-kong-bis-explore-cbdc-095016052.html

The Bank for International Settlements (BIS) Innovation Hub Hong Kong Centre has completed its central bank digital currency (CBDC) study, Project Aurum, which examined the feasibility of intermediated CBDCs and CBDC-backed stablecoins.

Fast facts

The BIS said in a report released on Friday that the Aurum prototype provides a solid basis for furthering the exploration and testing of Hong Kong’s retail CBDC, the e-HKD.

“Bringing CBDC-backed stablecoins to life has never been done before and we therefore felt that doing so may supplement the growing body of research on private sector stablecoins,” the BIS wrote in the report.

The BIS study was conducted in collaboration with the Hong Kong Monetary Authority (HKMA) and the Hong Kong Applied Science and Technology Research Institute, and a prototype was completed in July, the BIS said.

In the prototype, the BIS said that a CBDC-backed stablecoin can only be issued by issuing banks, and the banks can then use it to pay other banks or end users.

The HKMA said in September that it had carried out two rounds of market consultation on technical design and key policy.

Also in September, Eddie Yue, Chief Executive of the HKMA, shared plans for a series of e-HKD trials in the fourth quarter this year with banks and technology firms.

>>17807456

Mexico Plans to Issue a CBDC by 2024, Government Confirms

https://www.coindesk.com/policy/2021/12/30/mexico-plans-to-issue-a-cbdc-by-2024-government-confirms/

The Mexican government tweeted that it considers these new technologies and payment infrastructure of “utmost importance” to advance financial inclusion.

The Central Bank of Mexico (Banxico) plans to launch a central bank digital currency (CBDC) by 2024, the Mexican government confirmed in a tweet on Wednesday evening.

According to the tweet, which was written in Spanish, Banxico “will have a digital currency of its own in circulation” by 2024 as it considers of “utmost importance these new technologies and state-of-the-art payment infrastructure as options of great value to advance financial inclusion in the country.”

Banxico plans to have its CBDC in place “by the end of 2024, at the latest,” Banxico’s deputy governor, Jonathan Heath, said in a recent video conference organized by S&P, Mexican publication El CEO reported on Tuesday.

“We’re going to have the use of paper money as the preponderant payment domestically for a long time, so we don’t want to be absent from these technological advances,” Heath added.

Mexico joins Brazil and Peru as Latin American countries working on the development of CBDCs.

On Dec. 2, Banxico’s governor, Victoria Rodriguez Ceja, said that the monetary authority was analyzing the launch of a CBDC.

“Authorities at the international level, given the interest that these virtual assets and their evolutions have awakened, have recognized the need and the potential to extend the functionalities of legal tender through the potential implementation of digital currencies issued by the Central Bank,” she said, according to a report by Independent en Español.

In June, Arturo Herrera, Mexico’s finance minister, said cryptocurrencies aren’t legal tender assets nor currencies within the country’s current regulatory framework. One month later, Mexico’s Financial Intelligence Unit (UIF) accused 12 crypto exchanges of not complying with its reporting requirements.

>>17807462

UK launches CBDC pilot

https://news.fintechnexus.com/uk-launches-cbdc-pilot/

An industry consortium in the UK is launching a CBDC retail pilot featuring a live stablecoin asset.

“We are looking carefully at how a UK central bank digital currency (CBDC) might work. But we have not yet decided to introduce one,” the Bank of England explains.

Their website mentions names such as ‘digital sterling’ or ‘Britcoin’ and emphasizes the difference between CBCDs and cryptocurrencies.

Together with HM Treasury (HMT), they set up a Central Bank Digital Currency Taskforce to oversee their work. They are also working closely with other public authorities.

Jim Mignano, a former technology consultant and current assistant policy researcher at RAND specializing in the intersection of cyber, finance, and international relations, takes a positive approach to the initiative “The project acknowledges that multiple, coexisting new digital payment systems are becoming increasingly plausible. It also appears to recognize that experimentation and consultation will be vital to illuminating and overcoming technical, commercial, and regulatory barriers to implementation. I will be watching for lessons from the project about striking the appropriate balance of publicly and privately administered systems, interoperability between systems, and harmonizing standards across jurisdictions. It could also offer valuable lessons for making finance more inclusive, primarily through fostering an industry that embraces contributions from diverse walks of life at all levels of responsibility. The UK has long been a leader in financial innovation, and Project New Era is poised to continue this trend into the era of new digital payments.”

The landscape

In March 2020, the Bank of England published a discussion paper on CBDC and outlined one possible approach to design a central bank digital currency. In July 2021, they published their responses and produced a webinar based on feedback from the payments industry, academics, and other interested parties.

In June 2021, they set out their thinking on the possible opportunities and risks it could bring to the discussion paper on new forms of digital money.

In November 2021, with HMT, they set out the next steps for a UK CBDC. These next steps include consultation in 2022 to help them assess the case for a UK CBDC. Furthermore, it will examine whether more work needs to be done to develop an operational and technological model.

How will it work?

The Bank of England already produces digital currencies for banks and other financial institutions to use (reserves), but this proposal would create a digital currency for all citizens.

However, Molly Elmore, an analyst focused on the future of money, digital assets, blockchain & geopolitics, points out, “there are very few advantages for citizens if nations move towards retail CBDCs. Currently, most people use digital cash to pay for goods and services using credit cards, debit cards, and Venmo. Citizens currently have choices, so if you are unhappy with your bank or credit card provider, you can switch to another competitor offering a similar service. If there is a CBDC, consumer choice is gone. Countries only have ONE central bank with control over the monetary policy. Unless you are in a position to move to another country, you cannot simply switch central banks.”

Massimo Buonomo, an international AI, metaverse, and blockchain expert and former advisor to UN Economics Commission For Europe, added his thoughts.

“CBDCs are not in place except in a few countries. Even there, they are not used extensively but just in pilot cases. Those centralized systems are good for Know Your Client (KYC) and Anti-money laundering (AML) purposes. In other words, the money supply continues in the hands of centralized institutions. I would say that both decentralized cryptocurrencies cannot be compared fully to international payment systems because they obey different rules and have different aims. Of course, KYC/AML issues should be considered when discussing bitcoin and stablecoins. Also, volatility is less an issue for stablecoins than for bitcoins. However, stablecoins have to be seriously audited to see whether they have serious assets that back the stablecoins in circulation.”

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Motivations behind CBDCs

But what the payments system looks like and the motivations behind their production as digitalization continues can be a concerning question for central banks and citizens worldwide.

To this point, Elmore points out the potential political consequences of CBDCs. “Citizens aren’t likely to want an unelected group of central bankers deciding what we can buy or what we even owe in taxes. In most countries, including the US and the UK, the central bank officials are not elected, so you can’t vote out corrupt or ineffective central bank leaders.”

To illustrate the potential impact of CBDCs, she uses China as an example. “China has been using retail CBDCs to subdue and control their citizens. A social credit score system is connected, so if a citizen speaks against the state, their bank account can automatically be fined. It’s not likely that Chinese citizens find such a system beneficial. However, they weren’t given a choice. If you have a choice and live in a country where the voting population can voice their interests, say no to retail CBDCs.”

According to the European Union, Institute for Security Studies, the Chinese government is already using blockchain to gather evidence against dissidents online.

In their report ‘China’s Blockchain and Cryptocurrency Ambitions, ‘ the authors examine how blockchain-based platforms have been used to gather evidence on online media defaming Chinese revolutionary martyrs. Blockchain could also ensure that data in the social credit system is always accessible and cannot be changed by unauthorized actors. This is not that far-fetched as, in December 2019, a seminar was organized in Beijing with the title ‘blockchain technology helps China’s new social credit system.’

Thus to Elmore’s concerns, there is some precedent.

She continues, “If retail CBDCs solved a painful and expensive problem in society, it would be worth discussing to see if the pros outweigh the cons. But for citizens, they don’t. Wholesale CBDCs are a very separate issue, where funds are sent between banks using the blockchain. They fill a vital role and will improve the costs and efficiency of sending money around the globe. But retail CBDCs, even though they might sound similar, are pretty different.

China’s motivation can still be multifaceted, as the Carnegie Endowment for International Peace points out.

That China has only a two percent share in the world’s foreign exchange reserves, and therefore CBDCs may be their way of making a dent in the U.S.-dominated global financial system.

In the report ‘China’s Digital Yuan: An Alternative to the Dollar-Dominated Financial System,’ the authors suggest that the digital yuan could prove to be China’s most influential and noteworthy attack on the US, which may also be a factor behind establishing a CBDC.

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“To challenge the dollar’s hegemony and internationalize its currency, China will have to move away from the dollar and the payment rails dominated by the dollar. The best way to simultaneously do both would be by introducing greenfield payment rails like CBDC. But to do so, China will have to work out agreements and mechanisms for exchanging its digital yuan with the rest of the world. As CBDCs are a relatively new technology with no international standards and design, China could become the standard setter.”

UK motivations

The Bank of England states that the motivation behind their consideration of CBDCs are because the way people choose to pay for things is changing. People are using cash less and have new ways of paying for items due to the fintech revolution and open banking.

According to UK Finance, during 2020, the number of contactless payments made in the UK increased by 12%to 9.6 billion. Over a quarter (27%) of all UK payments were contactless payments. 83% of people in the UK now use contactless, with no age group or region falling below 75% usage. There are over 135 million contactless cards in circulation, covering 88%of debit cards and 81%of credit cards.

These changes mean new opportunities and risks for which the Bank of England needs to plan.

However, the Bank of England notes, “we know some people like to use cash. So, if we did create a CBDC for the UK, we’d keep issuing cash too. That way you could choose how you’d like to pay for something.

What’s next?

The Bank of England is speaking to businesses and communities to determine what impact a CBDC would have on them.

They also work with international partners and organizations such as the Bank for International Settlements. And they are working with finance ministries and central banks in other countries, specifically in the G7.

They also have the Engagement and Technology Forum to move this forward.

The CBDC Engagement Forum looks at all aspects of a central bank’s digital currency apart from the technology it might use.

The forum helps them understand the practical challenges of designing, implementing and operating a CBDC, which include:

How a currency will be used (‘use cases’)

Functional needs of users

The role of the public and private sectors

Financial and digital inclusion

Data and privacy implications

It consists of representatives from financial institutions, civil society organizations, and merchants. They this forum jointly with HM Treasury.

CBDC Technology Forum examines the technology that a central bank might use to create a digital currency. The forum enables them to involve people with a wide range of expertise and perspectives. This helps them understand the technological challenges of designing, implementing, and operating a CBDC.

The forum’s members come from various financial institutions, universities, fintechs, infrastructure providers, and technology firms.

Applications for both forums have closed.

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(European Central Bank) Publications on Central bank digital currencies (CBDC)

https://www.ecb.europa.eu/home/search/html/central_bank_digital_currencies_cbdc.en.html

7 November 2022

SPEECH

Christine Lagarde: Digital euro: a common European project

Video address by Christine Lagarde, President of the ECB, to the “High level conference: Towards a legislative framework enabling a digital euro for citizens and businesses”