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.

Tokenized Reserves and Next-Generation Capital Markets (IMF)

The IMF published a chapter of its Central Bank Digital Currency (CBDC) Virtual Handbook that examines how markets for tokenized assets are developing and the implications for central bank money (CeBM). Adoption remains piecemeal, relying on non-native models (existing assets tokenized with ambiguous underlying rights) and hybrid structures (tokenized assets settling via conventional cash rails or separate ledgers). Because private settlement assets currently dominate, critical questions arise regarding settlement finality, liquidity fragmentation, and systemic interoperability. While tokenized CeBM is not a binding prerequisite for nascent markets, its necessity will intensify as transaction complexity demands a unified, risk-free anchor. Ultimately, central banks must preserve optionality through phased strategies, balancing legal readiness and institutional capacity against the risk of preempting market-led innovation. [IMF]

Global Stablecoins in 2030: A European Perspective (ESM)

The European Stability Mechanism (ESM) published a paper co-authored by Bindseil, Meuwissen, Mondini and Rohár that examines the implications of global stablecoin adoption for the monetary and financial architecture, with particular emphasis on the euro area. It employs a flow-of-funds framework tracing sectoral and cross-border balance-sheet adjustments as a function of funding sources and reserve asset composition, operationalized through a calibrated three-region model (United States, euro area, rest of the world), embedding alternative stablecoin growth scenarios for USD- and EUR-denominated stablecoins through 2030. While concluding that aggregate systemic impacts remain manageable—primarily involving a shift from inexpensive retail deposits to volatile wholesale funding—the authors acknowledge their model simplifies analysis by ignoring the actual heterogeneity of deposits and securities. [ESM]

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.

Eclipsing the Pyramid: Stablecoins and Settlement (JFMI)

The Journal of Financial Market Infrastructures (JFMI) published a paper by Clément Berthou and Xavier Lavayssière that examines stablecoins and the concept of a “settlement eclipse.” The paper shows how stablecoins circulate value globally without requiring traditional fiat redemption, leveraging quasi-bearer claims, programmable platforms, and crypto intermediaries. As a result, stablecoins produce a settlement eclipse, whereby a subordinate layer of the monetary hierarchy internalizes transfers at sufficient scale, and occults the settlement function of layers above it. Such phenomenon obscures systemic risks, transfers financial access control to private operators, and narrows policy options. Analogous occultation occurs when transfer volumes are internalized by large financial institutions, netted within private payment systems, or managed through nested correspondent banking chains. Ultimately, the authors position stablecoins within an emerging “tokenized monetary pyramid,” questioning whether this parallel structure will secure a direct public anchor or remain structurally subordinate to the traditional fiat system. [JFMI]

Project Ensemble Business Use Case Report (HKMA)

The Hong Kong Monetary Authority (HKMA) published a report that details the experiences gained from the first phase of its Project Ensemble that tested end-to-end use cases for settling digital asset transactions using experimental tokenized deposits settled using e-HKD wholesale central bank digital currency (CBDC). Although pilots across fixed income, liquidity management, green finance, and trade finance demonstrated atomic delivery-versus-payment execution, the anticipated efficiency gains face substantial friction. True straight-through processing remains constrained by legacy manual workflows, off-chain data lags, and an unproven critical mass. Furthermore, structural hurdles like potential bank liquidity strains and absent secondary market conventions threaten commercial scalability. In addition, the report acknowledges that policy shifts and regulatory interventions are required to support the viability of such new ecosystems. [HKMA]

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.

India’s CBDC Moment: From Digital Cash to Programmable Money (S&P)

According to a recent S&P Global report, India’s central bank digital currency (CBDC), the digital rupee, should be judged on programmability and settlement efficiency, not retail wallet adoption. Retail transactions lag significantly behind the ubiquitous Unified Payments Interface (UPI). However, the digital rupee could become a foundational layer of India’s digital public infrastructure by functioning as programmable money for targeted policy outcomes. Furthermore, its most substantial economic promise lies in wholesale markets, where it could facilitate atomic settlement for tokenized assets and reduce cross-border payment friction. And in a potential tokenized global economy, the digital rupee could prevent a shift of cross-border business-to-business trade and remittances toward foreign-currency stablecoins. [S&P]

Digital Pound Lab: Phase 2 Update (BoE)

The Bank of England (BoE) updated its webpage dedicated to Phase 2 of its Digital Pound Lab that concluded in July 2026. BoE-developed use cases demonstrated included one-time aliases for privacy-preserving payments, confirmation of payee, group “kitty” payments using conditional locks, external service interface provider connections enabling third-party app integration, allowances extended to e-commerce, and usage-based streaming micropayments. Eleven private sector participants tested additional use cases that the latest update fleshed out in more detail. These included Crunchfish demonstrating deferred offline payments with a reserve-pay-settle lifecycle and double-spend controls, and TECHT Labs demonstrating conditional business-to-business payments via smart contracts. Interestingly, one of the participants listed in the June 2026 update (Focus on Monesave) was quietly dropped. The BoE explicitly disclaimed policy endorsement of any participant designs, or endorsement of the firms, their products or services. [BoE]

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.

The Russian Ministry of Finance Paying Wages in Digital Rubles (Russian MOF)

Russia’s Ministry of Finance (MOF) reports that, on October 1, 2026, several employees opted to receive salary payments in digital rubles through wallets on the Bank of Russia platform. It follows pilot federal-budget transactions in 2025, covering salaries, stipends and selected government-contract payments, with aggregate volume of nearly 16 million rubles. Since January 2026, federal institutions have been permitted to make and receive budget-related payments in digital rubles without a restricted expenditure list. The initiative therefore marks a shift from controlled pilot use toward routine Treasury and payroll integration, contingent on bank and merchant infrastructure that opened up on September 1, 2026. [Russian MOF]

Will US Firms Adopt Stablecoins? Survey Says They’re Not Enthusiastic (Cleveland Fed)

In a U.S. Federal Reserve Bank of Cleveland Economic Commentary, Dirtzu, Panzitta and Zimmerman surveyed 148 firms in the Fourth District (Ohio, western Pennsylvania, eastern Kentucky, and northern West Virginia) regarding plans to use stablecoins. Despite the 2025 Guiding and Establishing National Innovation for U.S. Stablecoins (GENIUS) Act easing supply constraints, they find negligible latent corporate demand. Only one firm currently uses stablecoins, while seven plan future adoption. Primary deterrents include satisfaction with existing payment rails, knowledge gaps, and absent counterparty demand. While analysis of Securities and Exchange Commission (SEC) nonfinancial corporate balance sheet filings seemingly corroborates this disinterest, the authors dismiss stablecoin holdings below a 2% total asset threshold as trivial, which risks obscuring early-stage corporate experimentation. [Cleveland Fed]

UK Banks Complete First Live Customer Transactions Using tokenized Sterling Deposits (UK Finance)

[September 24, 2026] Seven U.K. banks collaborated to complete the first live customer transactions using tokenized sterling deposits on a shared platform developed by Quant, delivered through the Great British Tokenised Deposit (GBTD) initiative convened by UK Finance. The participating banks (Barclays, HSBC UK, Lloyds, Monzo, Nationwide, NatWest and Santander) tested conditional payments in two remortgage completions and a consumer marketplace exchange, in which customer balances were locked and automatically released when specified completion or delivery conditions were met. The pilots seek to preserve the legal and prudential characteristics of bank deposits while adding programmable, interoperable settlement functionality. Planned work includes tokenized bank-issued debt instruments and digital-asset settlement using delivery-versus-payment-versus-reserves. The announcement demonstrates operational feasibility, rather than resolving questions of scale, governance, interoperability, legal finality, or supervisory treatment. [UK Finance]

International Stablecoin Flows, Capital Controls and Currency Crises (IMF)

The IMF published a working paper by Marco Reuter that analyzes $21.4 trillion in international stablecoin flows across 188 countries from 2018 to 2025. These US dollar-pegged assets are concentrated in emerging markets and developing economies, which hold 75% of the total. Flows are predominantly cross-border, retail-sized transfers with a median size of $300. Furthermore, when countries restrict capital outflows, stablecoin activity rises persistently by roughly 30% over six months. Similarly, currency crises trigger a persistent 75% increase in holdings within a year. However, country-level geography is inferred via machine learning trained on domain-name linguistics and web traffic—proxies vulnerable to virtual private network (VPN) distortions, unrepresentative sampling, and the untestable assumption of equal average transaction sizes across countries. [IMF]

Tokenization of Real World Assets: Towards Embedded Crypto Finance (DC Fintech Week)

A paper by Zetzsche, Buckley and Arner that focuses on tokenization of non-financial real-world assets (TRWAs) develops a tokenization taxonomy to better understand what TRWAs entail. The authors contend that TRWAs could transform mainstream custody and securitization through continuous 24/7 settlement and central bank digital currency (CBDC) interoperability, forecasting a gradual shift toward “embedded crypto finance.” To govern this transition, they propose adapting existing securitization rules, such as expanding substituted compliance for prospectuses. This approach relies heavily on legacy frameworks to manage the unique operational and cyber risks of distributed ledger technologies, leaving open the question of whether unprecedented on-chain vulnerabilities might ultimately fall through the regulatory cracks. [DC Fintech Week]

The Compatibility of Permissionless Networks and Financial Integrity (DC Fintech Week)

A paper by Rettig, Malekan and Mosier posits that regulated financial institutions can build and use permissionless networks in compliance with financial integrity obligations. While some see the pseudonymous, decentralized nature of these networks as insurmountable compliance barriers, the authors contend that compliance can be achieved by implementing risk-based controls strictly at the application layer, rather than attempting to police the underlying neutral network protocol. Ultimately, they frame embracing open protocols not merely as a manageable risk, but as a strategic imperative, to unlock superior operational resilience and market efficiency compared to permissioned alternatives. Whether regulatory authorities will embrace this neat bifurcation of network carriage and application liability in practice remains to be seen. [DC Fintech Week]

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.