When Less is More: Behavioral Effects of CBDC Holding Limits (ECB)

The European Central Bank (ECB) published a working paper that examines how holding limits affect demand for retail central bank digital currency (CBDC). In an incentivized experiment involving 761 participants in France, Germany, Italy, and Spain, the authors distinguish the mechanical effects of limits from behavioral responses. Lower limits reduced overall holdings, whereas higher limits induced some participants to increase balances, apparently because the ceiling acted as a reference point. The experiment also found that a “reverse waterfall” mechanism, which automatically funds CBDC payments from linked bank deposits, increased adoption while reducing average holdings. The findings suggest that combining limits with automatic funding could reconcile usability and financial stability objectives in the ECB’s digital euro design. [ECB]

Composable Clearing: How Blockchain Reconciles Efficiency and Safety in Intermediated Markets (JFMI)

In a Journal of Financial Market Infrastructures (JFMI) article, Nicolas Zhang shows how blockchain could reconcile pricing efficiency with settlement safety in intermediated markets. He argues that pooled pricing mechanisms cannot fully reflect private trading information, while uncleared over-the-counter (OTC) markets offer flexible pricing but are vulnerable to coordination failures. Central counterparties (CCPs) can strengthen settlement safety, but do not, by themselves, resolve the pricing problem. His “composable” framework separates price discovery from prefunded clearing, linking them through an atomic settlement map, to ensure that all transaction legs settle together or none do, with multilateral netting reducing collateral requirements. Zhang emphasizes that blockchain facilitates this architecture rather than changing the underlying economics of clearing. He also challenges the proposition that settlement finality necessarily requires central bank money, arguing that suitably secured tokenized Treasury bills could serve as alternative settlement assets. Applications include Treasury repurchase agreements and less-liquid foreign-exchange markets. [JFMI]

BTW if you want to see a complete database of my DFC-related posts going back years, including many that didn’t make the Daily Digest cut, click here.

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.

Foreign Currency Stablecoins: Initial Considerations on Policies to Manage and Enhance Macro-Financial Stability (IMF)

The IMF published a paper examines how foreign-currency foreign-issued stablecoins, most of which are denominated in U.S. dollars and issued in a small number of jurisdictions, could increasingly affect macro-financial conditions in recipient countries if their use expands beyond crypto-asset trading. Although wider adoption could facilitate cheaper cross-border payments, it introduces significant structural vulnerabilities. Extensive integration may drive de facto capital account liberalization, enable the circumvention of capital controls, and entrench currency substitution, thereby undermining domestic monetary policy transmission. To mitigate these risks, the analysis recommends implementing robust macroeconomic frameworks, stringent regulatory oversight aligned with global standards, and enhanced data collection. Furthermore, it emphasizes that international coordination remains critical to manage balance-of-payments pressures and preserve monetary sovereignty. [IMF]

BTW if you want to see a complete database of my DFC-related posts going back years, including many that didn’t make the Daily Digest cut, click here.

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.

Developments that Bring the Issue of a Digital Krona Back into Focus (Sveriges Riksbank)

Sveriges Riksbank submitted an official communication to the Riksdag Committee on Finance calling for a reassessment of the e-krona retail central bank digital currency (CBDC). A 2023 Swedish Government Payments Inquiry report had concluded that there was no sufficiently strong societal need for an e-krona, which led to a pause in e-krona preparatory work. However, the Riksbank now urges renewed preparation, citing a deteriorating geopolitical environment, the advancement of the digital euro, the emergence of stablecoins, and the need to safeguard the resilience and competitiveness of the Swedish payment system. Because implementing an e-krona requires significant technological development and complex legal updates with lead times exceeding five years, the Riksbank recommends immediately appointing a public inquiry to prepare the necessary legislative framework. This proactive measure ensures regulatory readiness should the Riksdag authorize e-krona issuance. [Sveriges Riksbank]

Japanese Banks Complete Stablecoin PoC (Finextra)

Sumitomo Mitsui Banking Corporation (SMBC), Mitsubishi UFJ Financial Group (MUFG), Sumitomo ⁠Mitsui Financial Group (SMBC) and Mizuho Financial Group conducted a proof-of-concept from July 17 to July 23, 2026, in regard to joint stablecoin issuance and advanced cross-border payments. Operating with support from Japan’s Financial Services Agency, the initiative evaluated issuing stablecoins as specified trust receivable rights under the Payment Services Act. The trial assessed regulatory compliance, anti-money laundering controls, and user protection within a multi-bank framework managed by SMBC and MUFG. Additionally, the participants simulated transactions across corporate locations to verify the technical feasibility and system reliability for international settlements. [Finextra]

Russia Will Ban Peer-to-Peer Bitcoin Trading (Bank of Russia)

According to an updated Bank of Russia FAQ, direct peer-to-peer crypto-asset transfers will be prohibited effective July 1, 2027, under Federal Law No. 282-FZ. Such transactions, including transfers through licensed digital depositories, must route exclusively through approved intermediaries. The legislation also prohibits individuals from moving crypto-assets to non-custodial wallets and restricts crypto-asset lending exclusively to brokers, trustees, exchanges, and clearing houses. While domestic crypto-asset payments remain strictly banned, the framework reportedly preserves exemptions for foreign trade settlements—a carve-out reportedly described by Duma officials as a mechanism to circumvent international sanctions. [Bank of Russia]

BTW if you want to see a complete database of my DFC-related posts going back years, including many that didn’t make the Daily Digest cut, click here.

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.

Money and the Architecture of Trust (BIS)

The Bank for International Settlements (BIS) published a paper by Iñaki Aldasoro that argues that money is not primarily a medium of exchange, a commodity or a technology, but a system of interlocking promises sustained by trust based on an institutional architecture featuring a monetary hierarchy anchored by central bank liabilities. The crucial price binding these layers is par, ensuring deposits convert to settlement money without discounts. Furthermore, the system balances the elastic creation of credit against the discipline of funding constraints. Because private monetary innovations ultimately require public validation and backstops during crises, instruments attempting to bypass this framework, such as gold and bitcoin, inherently reject the required social compact. Stablecoins, however, seek validation from authorities at the top of the hierarchy, although their current architectures fundamentally lack the elasticity and institutional backstops necessary to sustain par convertibility under stress. [BIS]

BTW if you want to see a complete database of my DFC-related posts going back years, including many that didn’t make the Daily Digest cut, click here.

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.

Reserve Bank of New Zealand Pauses Retail CBDC Work (RBNZ)

The Reserve Bank of New Zealand (RBNZ) has paused work on “Digital Cash” (retail central bank digital currency (CBDC)) while it focuses on “modernizing New Zealand’s payments system, including real-time payments… New Zealand’s payments system works well today, but there is an opportunity to make it faster, more innovative and better prepared for the future. The announcement said that “modern payments system could support new technologies and payment options like new forms of digital money including Digital Cash issued by the Reserve Bank, alongside the money people already hold in their bank accounts”. This seems to allude to tokenized commercial bank deposits settled in wholesale CBDC, which is a route being explored by a growing number of other central banks. [RBNZ]

BOE’s Breeden in No Rush to Launch “Britcoin” (Bloomberg)

Bank of England (BOE) Deputy Governor Sarah Breeden, speaking at the IMF Annual Meeting in Bangkok, reportedly said that there’s no rush to introduce a retail central bank digital currency (CBDC) because so many other developments in digital payments are underway. “Maybe we don’t need a digital pound quite so quickly, arguing that alternatives such as commercial stablecoins or tokenized deposits developed by banks could fulfill the role just as well.” Breeden also reportedly said that the BOE is upgrading its real time gross settlement system (RTGS) so it can be used to settle tokenized asset transactions, and that U.K. firms should develop successful sterling stablecoins to offer an alternative to the dollar dominance in the market. [Bloomberg]

Are Stablecoins and Bank Deposits Substitutes? (BIS)

The Bank for International Settlements (BIS) published a paper by Ahmed and Aldasoro that investigates whether stablecoins and bank deposits function as economic substitutes. The authors use weekly 2019 to 2025 U.S. data to argue that increases in bank deposit rates cause a deceleration in stablecoin market capitalization growth. They find that these effects are stronger for USDC than for USDT, consistent with the former’s closer ties to U.S. depositors. However, the authors note that their analysis relies on a sample spanning only a single high-rate tightening cycle and uses aggregate data, which obscures the specific depositor types and bank categories driving the substitution. [BIS]

BTW if you want to see a complete database of my DFC-related posts going back years, including many that didn’t make the Daily Digest cut, click here.

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.

Global Stablecoin Arrangements: Cross-Border Vulnerabilities and Financial Stability Monitoring (FSB)

The Financial Stability Board (FSB) published a summary of its ongoing monitoring work on global stablecoin arrangements. It highlights that the borderless, round-the-clock mobility of stablecoin liabilities fundamentally conflicts with the jurisdictionally anchored nature of their reserve assets and redemption frameworks, escalating run risks and potential spillover into traditional financial markets. Complex, multi-issuer structures further obscure oversight and complicate reserve rebalancing during stress events. Furthermore, the FSB notes severe structural data deficiencies; authorities currently rely on opaque private data compilers, and blockchain pseudonymity impedes accurate geographic or use-case attribution. To mitigate these regulatory blind spots, the FSB advocates for enhanced cross-border cooperation, standardized monitoring metrics, and improved industry data disclosures. [FSB]

BTW if you want to see a complete database of my DFC-related posts going back years, including many that didn’t make the Daily Digest cut, click here.

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.

Stablecoin-on-Creditor Violence (Cleveland Fed)

The U.S. Federal Reserve Bank of Cleveland published a paper by Jeffery Zhang and Peter Zimmerman arguing the Guiding and Establishing National Innovation for U.S. Stablecoins (GENIUS) Act of 2025 rewrites priority and estate-property rules for failed stablecoin issuers. By removing required reserves from the bankruptcy estate and granting holders a shortfall-capped superpriority, the Act lets distressed issuers mint fully backed stablecoins to selectively repay favored creditors, structurally subordinate existing debt, and strip the estate of liquid assets necessary for resolution (“stablecoin-on-creditor violence”). If the issuer is a bank subsidiary, this shifts failure costs onto the deposit insurer and taxpayers. Because federal statutory entitlements shield this mechanism, traditional equitable remedies fail, prompting the authors to recommend countermeasures—including capital requirements, transfer restrictions, and lockups—to mitigate systemic risk. [Cleveland Fed]

Three Myths About Payment Innovation (Kansas City Fed)

[August 29, 2026] Harvard Business School’s Wenxin Du presented a paper at the 2026 U.S. Federal Reserve Bank of Kansas City Jackson Hole Economic Policy Symposium that challenges prevailing payment innovation narratives by prioritizing economic architecture over blockchain rails. First, Du questions the viability of 24/7 atomic gross settlement in wholesale markets, noting it sacrifices critical liquidity-saving benefits of multilateral netting. Second, she argues retail cross-border frictions stem from misaligned banking incentives rather than legacy technology. Finally, she remains highly skeptical that stablecoins resolve inefficiencies, highlighting prohibitive fiat conversion costs and thin foreign exchange liquidity within the “stablecoin sandwich”. Consequently, central banks should prioritize system interoperability and institutional trust over adopting novel distributed ledgers. [Kansas City Fed]

BTW if you want to see a complete database of my DFC-related posts going back years, including many that didn’t make the Daily Digest cut, click here.

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.

Is Project Hangang’s Digital Currency a Retail CBDC? (BOK)

The Bank of Korea (BOK) affirmed that Project Hangang’s digital currency is not a retail central bank digital currency (CBDC). Starting in 2023, the BOK shifted its digital currency research direction from retail CBDC to a focus on commercial bank deposit tokens settled with wholesale CBDC, because the BOK found that there is no significant need to introduce a retail CBDC , and even if one were to be introduced, it is highly likely that it would not be widely adopted. Meanwhile, preparations for the second phase of the Han River Project are in full swing, with the BOK and participating banks being busy with final preparations for the pilot relaunch before the end of 2026. [BOK]

Central Bank Digital Currency: Challenges and Lessons for Morocco (BOM)

Bank Al-Maghrib (BAM) published a working paper that evaluates the macro-financial feasibility of a retail central bank digital currency (CBDC) for Morocco. While digital payment adoption is expanding, persistent domestic cash reliance highlights entrenched structural constraints alongside untapped infrastructural efficiencies that a CBDC could help unlock. To mitigate systemic disintermediation and preserve monetary policy transmission, the authors advocate a hybrid, two-tier architecture: the central bank issues an unremunerated e-dirham, while private intermediaries manage client distribution and financial integrity compliance. Ultimately, the paper frames potential CBDC implementation as a long-term prospect requiring a gradual, prudent, and collaborative approach. [BOM]

Call for Evidence on CCP Use of Tokenized Forms of Collateral (ESMA)

The European Securities and Markets Authority (ESMA) is seeking views on whether, and under what conditions, tokenized forms of collateral could be used safely and effectively by European Union (EU) financial market infrastructure central counterparties (CCPs). This inquiry probes whether existing regulatory frameworks sufficiently mitigate the complex legal, operational, and liquidity risks introduced by distributed ledger technologies. Specifically, ESMA questions if tokenization, whether via “digital twins” or natively issued assets, compromises settlement finality, asset segregation, or default management processes. The paper critically examines systemic vulnerabilities, including interoperability friction, cyber risks, and market concentration. ESMA will consider all comments received by January 15, 2027. [ESMA]

BTW if you want to see a complete database of my DFC-related posts going back years, including many that didn’t make the Daily Digest cut, click here.

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.

Meeting the Challenge of Correspondent Banking Relationship Withdrawals in Fully Dollarized Microstates (SSRN)

This is a revised version of a paper I posted here a little over a month ago. It examines a structural vulnerability inherent in the domestic financial architecture of officially dollarized microstates: their dependence on correspondent banking relationships (CBRs). By surrendering the monetary autonomy of an issuing central bank in exchange for the stability of a foreign currency, these microstates make their domestic financial systems dependent on CBRs that global banks are increasingly unwilling to maintain. The existing International Monetary Fund and World Bank literature treats CBR withdrawal primarily as a cross-border payments problem, with prescriptions addressed to that dimension, leaving this distinct domestic vulnerability unaddressed. Focusing on the Federated States of Micronesia, Palau, Timor-Leste, and the Republic of the Marshall Islands, the paper examines emerging digital financial infrastructure and instruments as potential complements to the standard prescriptions, assessing their capacity to sustain domestic monetary circulation independently of conventional CBRs and the extent to which they may allow microstates to recapture economic benefits somewhat analogous to the seigniorage forgone via dollarization. [SSRN]

The revised paper benefited greatly from comments from Christian Pfister, Patrick McConnell, Kristina Fedorenko and Russell Krueger, plus the support of Mark Lurie, Jordan Goldman and Jeremy Coffey of M1X Global. However, comments are still more than welcome!

Scaling Tokenization: New Efficiencies, New Vulnerabilities (IMF)

The IMF published a Global Financial System Report (GFSR) that discusses the potential benefits of tokenization and the constraints to its development and assesses its implications for financial stability. While distributed ledgers promise reduced intermediation frictions, the ecosystem remains nascent, constrained by lacking legal certainty, regulatory clarity, interoperability, and safe settlement assets. Systemic risks are currently contained, but scaling could amplify vulnerabilities like liquidity runs and procyclical leverage, while introducing novel operational fragilities. Indeed, empirical evidence from tokenized equities reveals elevated volatility and structural illiquidity despite continuous trading. Authorities must implement a technology-neutral framework that removes barriers while mandating robust safeguards for an always-on architecture. [IMF]

BTW if you want to see a complete database of my DFC-related posts going back years, including many that didn’t make the Daily Digest cut, click here.

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.