Kiffmeister’s #Fintech Daily Digest (20260511)

May 11, 2026May 11, 2026 ~ kiffmeister ~ Leave a comment

CBDC From Global Challenges to Implementation in Kazakhstan (NPCK)

The National Payment Corporation of Kazakhstan (NPCK) published a survey of global central bank digital currency (CBDC) implementation experience to frame Kazakhstan’s Digital Tenge rollout, arguing that a phased, programmability-first approach centered on government-to-business use cases can overcome five identified adoption barriers: low public awareness, high bank integration costs, uncertain banking-sector benefits, distributed ledger technology scalability limits, and competition from established payment instruments. For institutional design, the report advocates a two-tier model (central bank issues, commercial banks and fintechs distribute), holding limits and a reverse-waterfall mechanism to contain deposit outflow risk, and non-DLT distributed databases for high-volume retail transactions. The Kazakhstan-specific case emphasizes automated VAT refunds, targeted budget fund marking, and agricultural payment escrow as priority use cases. [NPCK]

Interconnect to Stabilize: Cross-Border Payments in a Fragmenting World (Banca D’Italia)

Banca d’Italia Governor Fabio Panetta argues that cross-border payments remain structurally deficient despite domestic progress, and that the G20 Roadmap’s four targets—speed, cost, transparency, and access—remain unmet in the remittance segment, with average costs at 6.4% against a 3% objective. Bank of Italy researchers who posed as ordinary users and conducted actual stablecoin transfers found no systematic cost advantage once conversion fees into and out of crypto are included, with some corridors reaching 9%. Root causes include legal and time-zone complexity, fragmented messaging standards, a contracted correspondent banking network (down 30% since 2011), and opaque FX conversion costs. Panetta proposes national-level action plans along three lines: strengthening domestic infrastructure (ISO 20022, extended RTGS hours, central bank money as settlement anchor), improving regulatory frameworks (competition, transparency, FATF travel rule), and preserving global payment system openness. Whether geopolitical fragmentation via rival parallel systems, such as BRICS Pay, erodes interoperability is the key unresolved question. [Banca D’Italia]

The Future of Programmable Payments: Why CBDC and Stablecoins Need Each Other (LinkedIn)

The Bank of Israel’s Assaf David-Margalit posted a nice interpretation of the Bank of Canada’s recently published “to tokenize or not to tokenize” working paper. Assaf argues that tokenized central bank digital currencies (CBDCs) and regulated stablecoins should operate as complementary infrastructure layers rather than rivals. The Bank of Canada’s paper’s core insight is that a tokenized CBDC establishes a “technological floor” by offering superior collateral efficiency—eliminating default risk allows the central bank to support transaction volumes with lower collateral requirements, crowding out inefficient stablecoins through market discipline. Assaf distinguishes programmable payments infrastructure (capable of interacting with smart contracts) from programmable money (which would compromise fungibility), asserting that CBDC should provide the settlement layer while private stablecoins innovate at the application layer using CBDC as the reserve asset. [LinkedIn]

After Acacia: The Next Era of Financial System Innovation? (RBA)

[March 25, 2026] Reserve Bank of Australia (RBA) Assistant Governor Brad Jones foreshadowed the conclusions from the Project Acacia. Assisted with regulatory relief from ASIC and AUSTRAC, industry participants in Project Acacia explored 20 use cases involving a range of assets, forms of money and settlement arrangements. It found that tokenisation and related infrastructure changes can materially reduce settlement frictions, counterparty risk and manual processing in wholesale markets, especially in fixed income and term deposits, and support new asset structures and investor segments, However, large‑scale adoption is constrained by lentrenched network effects, legal uncertainty (enforcement of on‑chain records, settlement finality, licensing perimeter, prudential treatment) and the absence of a coordinated public‑private strategy to scale from pilots to commercial deployment. [RBA]

I am honored to have been given the opportunity to contribute a chapter to the soon-to-be released book, Tokenisation of Money: From Fiat Currencies to Stablecoins, published by Springer! Expertly edited by Prof. Selim Yazıcı, Prof. C. Coşkun Küçüközmen, and Dr. Michael Salmony, it serves as a critical handbook for navigating the profound transformation of the global financial services industry. At a time when there is substantial confusion regarding new digital instruments, this book distinguishes reality from hype across the dimensions of CBDCs, stablecoins, and tokenized deposits. In my contribution, I provide an overview and reality check on global retail central bank digital currency (CBDC) developments. The book will be available via digital platforms by the end of May and you can pre-order the hard cover version here: https://link.springer.com/book/9783032229458!

FYI I produce a monthly digest of digital fiat currency (DFC) developments exclusively for the official sector (e.g., central banks, ministries of finance and international financial institution (e.g., the BIS, IMF, OECD, World Bank)) plus academics and firms that are active in the DFC space (commercial banks, technology providers, consultants, etc.). (DFCs include central bank digital currency (CBDC), stablecoins and tokenized deposits.) It goes out via email on the first business day of every month, and if you’re interested in being on the mailing list, please email me at john@kiffmeister.com.

Kiffmeister’s #Fintech Daily Digest (20260508)

May 8, 2026May 8, 2026 ~ kiffmeister ~ Leave a comment

To Tokenize, or Not to Tokenize: The Design Question for a CBDC (Bank of Canada)

The Bank of Canada published a paper that develops a general equilibrium model to assess whether a central bank digital currency (CBDC) should be tokenized—deployable on programmable ledgers to compete with stablecoins—or non-tokenized and confined to off-chain markets, where traditional and crypto banks coexist. Tokenization matters for equilibrium only when collateral use differs across sectors; the three governing structural parameters are crypto-bank pledgeability, crypto-asset scarcity, and the social valuation of on-chain transactions. For institutional design, tokenized CBDC crowds out stablecoins and improves welfare when crypto banks are unreliable and crypto collateral is scarce, whereas non-tokenized CBDC may dominate when on-chain activity is less socially desirable or bond-collateral reallocation to the crypto sector is itself welfare-improving; both forms reduce bank lending, posing a payment-efficiency-versus-intermediation trade-off. [Bank of Canada]

Patterns and Determinants of Global Cryptocurrency Flows (Bank of Canada)

The Bank of Canada published a paper that uses Chainalysis on-chain data for up to 162 countries (2020–2023) to document cross-border Bitcoin flow patterns, identify their determinants, and extend the analysis to four major stablecoins. Bitcoin flows behave distinctly from traditional capital flows in level and volatility, with net outflows concentrated in emerging market economies and net inflows in advanced economies. Panel analysis identifies seven motives—adverse current and past macro and financial conditions, weak institutions, underdeveloped financial systems, payments and remittances demand, capital control circumvention, and sanctions evasion—of which macro conditions and remittances are most robust; a COVID-19 difference-in-differences exercise corroborates both. The remittances finding suggests cryptocurrency fills gaps in cross-border payment infrastructure, while evidence of capital control and sanctions circumvention supports closer regulatory oversight; the Chainalysis country-attribution methodology, which relies on web traffic as a proxy for user location, remains an unresolved data limitation. [Bank of Canada]

Kiffmeister’s #Fintech Daily Digest (20260505)

May 5, 2026May 5, 2026 ~ kiffmeister ~ Leave a comment

Legal Tender -A Barbarous Relic in the Digital Currency Era (SSRN)

In a paper posted on SSRN, Christian Pfister argues that granting legal tender status to retail central bank digital currency (CBDC) in advanced economies is a conceptually weak and potentially distortionary extension of a historically contingent, often obsolete institution. The paper critiques recent IMF legal analyses for presuming a “digital cash” equivalence and for conflating the unit of account, the issuer, and specific payment instruments when defining legal tender. Pfister shows that modern payment efficiency, financial inclusion, and safety can be achieved through regulation and public infrastructure without legal tender, and that combining legal tender status with regulated aggressive pricing of public rails could crowd out deposits, weaken bank intermediation, and recreate public “walled gardens.” This raises a core design question: whether any residual role for legal tender should attach to the unit of account, central bank liabilities, or particular instruments, and how to do so without impairing monetary transmission, competition, or innovation. [SSRN]

Digital Money and the Architecture of Trust (Banca d’Italia)

Chiara Scotti, Deputy Governor of Banca d’Italia, argues that debates on central bank digital currencies (CBDCs), stablecoins and tokenized deposits must shift from instruments to system architecture, with trust and “singleness of money” anchored in central bank money and regulatory design. She proposes a seven‑dimensional framework (efficiency, trust/convertibility, stability, market functioning, intermediation, transmission, regulation) focused on bearer versus non‑bearer design, settlement inside or outside the central bank core, and reserve structures. This framing highlights unresolved questions about how tokenized private monies reshape monetary policy transmission, safe‑asset demand and bank funding, and whether European tokenization should extend existing infrastructures such as the Single Euro Payments Area rather than rely on new private rails. [Banca d’Italia]

Progressing Fund Tokenisation (UK FCA)

The UK Financial Conduct Authority (UK FCA)sets out final rules and guidance to accelerate tokenisation of authorised funds and introduce an optional “direct to fund” dealing model using issues-and-cancellations accounts instead of manager box dealing. The statement clarifies that on-chain ledgers can be primary books and records, public distributed ledgers and smart contracts are permitted subject to outcome‑based controls, and tokenised units may sit across multiple blockchains within a class. It tightens ring‑fencing around umbrella cash by constraining omnibus issue-and-cancellation accounts under protected cell legislation, while dropping a proposed mandatory client‑money fallback and instead imposing enhanced reconciliation and unattributed‑cash rules. The package signals openness to stablecoins and tokenised gilts for settlement and operations under an interim waiver‑based regime, while deferring full alignment with the new crypto-asset framework and future composable “tokenised portfolio management” models. [UK FCA]

The BCEAO Invites Submissions for Research on Financial Inclusion (BCEAO)

The Central Bank of West African States (BCEAO) is inviting submissions for the 2026 Abdoulaye FADIGA Prize, which rewards high‑quality economic research on West African Economic and Monetary Union (WAEMU) economies. It explicitly invites research on financial inclusion and digital innovation, including work on how cryptocurrencies, mobile money, central bank digital currencies, and fintech can expand access to financial services in WAEMU, while rigorously assessing associated risks, regulatory and supervisory implications, and their interaction with payment systems, financial stability, and monetary policy transmission in the Union. [BCEAO]

Kiffmeister’s #Fintech Daily Digest (20260504)

May 4, 2026May 4, 2026 ~ kiffmeister ~ Leave a comment

I am honored to announce that I have contributed a chapter to the soon-to-be released book, Tokenisation of Money: From Fiat Currencies to Stablecoins, published by Springer! Expertly edited by Prof. Selim Yazıcı, Prof. C. Coşkun Küçüközmen, and Dr. Michael Salmony, it serves as a critical handbook for navigating the profound transformation of the global financial services industry. At a time when there is substantial confusion regarding new digital instruments, this book distinguishes reality from hype across the dimensions of CBDCs, stablecoins, and tokenized deposits. In my contribution, I provide an overview and reality check on global retail central bank digital currency (CBDC) developments. The book will be available via digital platforms by the end of May and you can pre-order the hard cover version here: https://link.springer.com/book/9783032229458!

Kiffmeister’s #Fintech Daily Digest (20260503)

May 3, 2026May 3, 2026 ~ kiffmeister ~ Leave a comment

Two recently published papers — a FEDS Note from Federal Reserve Board economists and an advisory piece from Crowe LLP — address the competitive implications of stablecoins for banks, reaching broadly compatible conclusions through different analytical lenses. Both papers agree that banks’ position as the bridge between fiat and digital rails is an enduring advantage. The principal tension between them lies in timing: the Fed note draws reassurance from historical precedent, while Crowe implicitly questions whether prior adaptation timelines — measured in years or decades — remain available given stablecoins’ distribution characteristics and programmatic scalability.

Banks in the Age of Stablecoins: Lessons from Their Historical Responses to Financial Innovations (FRB)

Federal Reserve Board (FRB) economists argue, in a May 2026 FEDS Note, that banks historically respond to disintermediation threats through regulatory advocacy, product innovation, and strategic partnership rather than passive retreat, and apply that framework to stablecoins. Drawing on the money market fund (MMF) episode of the 1970s–80s and the PayPal/Venmo experience, the authors show that banks eventually recaptured market share despite initial disadvantage. However, stablecoins present a compounded challenge, combining MMFs’ regulatory-arbitrage dynamic with payment platforms’ technological differentiation, while introducing faster potential run dynamics via 24/7 blockchain settlement. Whether aggregate deposit levels contract materially depends on how stablecoin issuers structure their reserves. [FRB]

The Impact of Stablecoins: Considerations for BaaS Banks (Crowe LLP)

Crowe LLP consultants argue that stablecoins pose a structural challenge to banking-as-a-service (BaaS) banks that extends beyond payments into deposit composition, treasury workflows, and customer relationships. With wallet-based infrastructure stablecoins consolidate functions previously distributed across multiple intermediaries. For BaaS banks, the disintermediation risk is less about individual payment flows than about becoming peripheral to the liquidity and settlement environments where fintech partnerships operate. The piece offers a tiered decision framework — monitor, prepare, or act — calibrated to fee-income exposure and partner behavior. However, whether stablecoin adoption remains confined to discrete use cases or becomes foundational infrastructure remains an unresolved question. [Crowe LLP]

Kiffmeister’s #Fintech Daily Digest (20260502)

May 2, 2026May 2, 2026 ~ kiffmeister ~ Leave a comment

BOE Considers Keeping Digital Pound On Ice as Rivals Race Ahead (Bloomberg)

The Bank of England (BOE) and HM Treasury (HMT) are reportedly considering slowing down the digital pound project to defer making an immediate firm decision to approve or scrap it. Officials have been encouraged by private-sector innovation—especially tokenized deposits—that could deliver many CBDC benefits (faster, cheaper payments) within the existing regulated banking system, reducing the urgency to build a central-bank solution. The project has faced skepticism from the public, Parliament, and even BOE Governor Andrew Bailey, who remains unconvinced of the need for a retail CBDC. A decision to build would entail upfront costs in the hundreds of millions of pounds (albeit later offset by CBDC income), voluntary participation by banks, and risk of political backlash over privacy concerns. [Bloomberg]

Meta Rolls Out Stablecoin Payments (Coindesk)

Meta rolled out digital currency payouts for select creators in Colombia and the Philippines. The payouts use the USDC stablecoin on either the Solana or Polygon blockchain networks, processed via Stripe’s Link wallet and accompanied by tax reporting from both Meta and Stripe. The initiative marks Meta’s return to stablecoins after it attempted to introduce the Libra token, later renamed Diem, only to shut down the project amid regulatory scrutiny in 2022. [Meta]

Central Bank Digital Currency and Monetary Architecture (Dirk Niepelt)

In a literature review that has been accepted for publication by the Journal of Economic Literature, Dirk Niepelt argues that the macroeconomic consequences of retail central bank digital currency (CBDC) depend primarily on the policy choices accompanying its introduction. Organizing the survey around a neutrality result, the paper demonstrates that bank disintermediation does not independently constitute a source of non-neutrality, provided the central bank recycles CBDC proceeds to banks on deposit-equivalent terms. Most existing research conflates policy-contingent with fundamental sources of non-neutrality, obscuring the extent of policymaker control. Because CBDC represents a structural shift in monetary architecture rather than a technical payment upgrade, it raises political economy questions that exceed the conventional mandate of central banks. [Niepelt.ch]

On the Resilience of Payment Methods (NBER)

The U.S. National Bureau of Economic Research (NBER) published a paper that argues, using multi-source U.S. and cross-country evidence, that cash functions as critical fallback liquidity when electricity outages disable digital payment infrastructure during natural disasters. Event studies across store-level transaction data, card aggregates, and household scanner records show that hurricanes generate persistent outages, shifting spending composition sharply toward cash, while pre-disaster expenditure spikes are credit-financed stockpiling. The finding that payment-system fragility is a first-order attribute of any instrument has direct implications for regulators overseeing cashless transitions, mandatory acceptance rules, and the design of offline-capable central bank digital currencies. [NBER]

Kiffmeister’s #Fintech Daily Digest (20260501)

May 1, 2026May 1, 2026 ~ kiffmeister ~ Leave a comment

DeFi Lending: Returns, Leverage, and Liquidation Risk (BOC)

The Bank of Canada (BOC) published a paper that analyzes decentralized finance lending using Aave V3, arguing that protocol-based credit markets are operationally viable but structurally fragile. Using transaction-level data (2023–2025), the paper finds zero non-performing loans due to overcollateralization and automated liquidation, but documents concentrated revenues, significant recursive leverage (over 20% of borrowing), and clustered liquidation waves that shift losses to borrowers. The results matter for policy and market design because they highlight a trade-off between lender protection and capital efficiency, and suggest endogenous procyclicality without clear spillovers to the broader financial system. The key unresolved issue is whether governance, collateral design, or external safeguards can reduce liquidation-driven fragility without undermining decentralization. [BOC]

Qivalis Stablecoin Consortium Set to Add At Least 19 European Banks (Blockstories)

Blockstories reports that at least 19 additional European banks have committed to join the Qivalis euro-stablecoin consortium, potentially bringing total membership to over 30. The expansion spans 12 countries and includes both large institutions (e.g., Groupe BPCE, ABN AMRO, Nordea) and smaller banks, with further entrants pending approval. The consortium aims to build shared, MiCA-compliant infrastructure for a euro-denominated stablecoin targeted for H2 2026, rather than fragmented bank-specific tokens. The approach reflects resource constraints and strategic caution among banks toward crypto-native issuers, but leaves open questions on governance, adoption, and competitive positioning versus standalone or non-bank stablecoin models. [Blockstories]

Protected: Kiffmeister’s Digital Currency Monitor, April 2026

April 30, 2026April 30, 2026 ~ kiffmeister

Kiffmeister’s #Fintech Daily Digest (20260430)

April 30, 2026May 1, 2026 ~ kiffmeister ~ Leave a comment

Crypto-Asset Service Providers as Financial Intermediaries: Risks and Policy Approaches (BIS)

The Bank for International Settlements (BIS) published a paper that argues that large crypto-asset service providers have evolved into multifunction crypto-asset intermediaries performing bank-like risk transformation and should face commensurate prudential regulation. The paper documents expansion from custody and trading into lending, derivatives, and “earn” programs that transform client assets into credit, liquidity, and maturity risks. Such activities replicate core intermediation functions without capital, liquidity, or supervisory safeguards, raising financial-stability and regulatory-perimeter concerns as links to traditional finance deepen. The authors advocate a combined entity- and activity-based approach, while noting unresolved issues around data gaps, cross-border supervision, and incomplete coverage of key activities. [BIS]

The Stablecoin Stumbling Block (FT)

The Financial Times published a paper in which Daniel Heller argues that existing stablecoin designs are structurally unfit to serve as wholesale settlement assets at scale. He notes that post-crisis standards for financial market infrastructures require settlement in central bank money or assets with equivalent credit quality and intraday liquidity, a bar current stablecoin reserve and redemption models fail to meet. This matters because large-value payments and securities settlement depend on systemically robust “money,” and today’s stablecoins embed maturity, liquidity, and operational risks misaligned with that role. Heller sees potential in tokenized central bank money or purpose-built, narrow-balance-sheet wholesale stablecoins, but leaves open whether central banks will grant reserve access and how global oversight would be structured. [FT]

I’m reposting this paper by Christian Pfister because of its relevance to yesterday’s post regarding the European Central Bank’s (ECB’s) stated digital euro motivations:

For a Political Economy of Central Bank Digital Currency (REP)

In this 2024 Revue d’Economie Politique (REP) article, Christian Pfister applies a positive (political economy) rather than normative framework to retail central bank digital currency (rCBDC). He maps stakeholder incentives across governments, central banks, regulators, incumbent banks, and fintech firms, then tests whether stated policy rationales align with those incentives. He concludes that publicly foregrounded motives, like financial inclusion, payment system safety, monetary sovereignty, and privacy, are analytically weak or already reached in developed economies. The dominant but largely unstated drivers are fiscal, such as seigniorage maximization through balance-sheet expansion, permanent rollover of sovereign debt held as rCBDC backing, and reduced tax evasion. Setting rCBDC remuneration at zero, officially framed as “do no harm” to bank intermediation, simultaneously serves those seigniorage objectives while suppressing a monetary policy transmission channel that the academic literature broadly endorses. For institutional design, combining legal tender status with fee exemptions advantages rCBDC in ways that raise competitive-neutrality concerns and risk crowding out private innovation. In non-democratic settings, programmable money creates structural conditions for mass surveillance. [REP]

And some backfilling (this one formalizes what most of us have known for about a year…)

Eastern Caribbean Central Bank (ECCB) Suspends DCash 2.0 Project (ECCB)

[February 13, 2026] The Monetary Council of the Eastern Caribbean Central Bank (ECCB) approved the suspension of the DCash 2.0 central bank digital currency (CBDC) project to prioritize the development of the fast payment system (FPS) and participation in the The Caribbean Community (CARICOM) Payments and Settlement System (CAPSS) pilot. [ECCB]

Kiffmeister’s #Fintech Daily Digest (20260429)

April 29, 2026April 29, 2026 ~ kiffmeister ~ Leave a comment

Selling the Digital Euro to Legislators (PIIE)

On April 22, 2026, the Peterson Institute for International Economics (PIIE) hosted a virtual event at which Nicolas Véron interviewed the European Central Bank’s (ECB’s) Piero Cipollone on the digital euro project. As Izabella Kaminska noted on X, at one point Veron opined that the ECB’s concerns about the big US payment companies (e.g., MasterCard and VISA) pulling out of Europe is somewhat far-fetched, to which Cipollone admitted that the rhetoric is largely in play just to motivate legislators to push ahead with the digital euro. “The geopolitical risk, this is resonating much more with politicians and that’s where we saw some acceleration from the political side to put this project into focus… I must confess that before, this was a slow-moving project, at least at the legislative level. Then what happened in the last three/four years, it provided a sort of acceleration, mostly on the political side”. [PIIE]

Digitalization and Innovation – Opportunities and Risks for Financial Health (BIS)

A Bank for International Settlements (BIS) Financial Stability Institute brief argues that digital financial innovation is enhancing access to payments, credit, savings and insurance, and can help people to manage their financial obligations and have greater confidence in their financial future. However, these benefits are emerging alongside new vulnerabilities: a global surge in scams and fraud, greater overindebtedness among some digital borrowers and the use of ill-suited investment products. This mixed record challenges the presumption that inclusion automatically produces well-being, requiring supervisors to adopt outcome-focused oversight and disaggregated measurement beyond access metrics alone. Whether digital public infrastructure can systematically translate inclusion gains into durable financial health improvements at scale remains empirically unresolved. [BIS]