The Fed published an article that compiles research exploring the potential impact of central bank digital currency (CBDC) on commercial banking and monetary policy. The review provides a theoretical underpinning for understanding how CBDC could influence consumer adoption and financial stability. It concludes that the models and assumptions in the literature so far provide streamlined frameworks to answer questions about the effects of CBDC at the micro- and macro-levels, while abstracting from many of the complex design issues of interest to policymakers. Avenues for future work include further exploring how the intrinsic features of CBDC as a means of payment and store of value affect the set of feasible allocations in the economy and, in turn, affect its value to heterogeneous households.
Correspondent banking continues to represent an important link in the payment chain with a total average daily turnover of €686 billion, according to the Eleventh European Central Bank survey on correspondent banking in euro, 2019. It shows a decrease in the average size of transactions processed compared to the previous 2016 survey. The decrease in the average transaction size is reflected in a 37% increase in the average daily volume and a 22% decrease in the average daily value of transactions. The most frequently cited reasons for the decline in turnover as well as in the number of banks that are using correspondent banking services are increasing regulatory requirements related to anti-money laundering and combating the financing of terrorism (AML/CFT), including know your customer (KYC) procedures.
New Jersey has moved closer to the implementation of a state-level regulatory framework for firms involved in cryptocurrency services. The new Senate bill has been sponsored by Nellie Pou, a Democratic Party senator serving New Jersey’s 35th Legislative District. Named as the ‘Digital Asset and Blockchain Technology Act’, the new bill requires licensing of all the businesses involved in digital asset services. Unlicensed operations of businesses in New Jersey would be liable to pay a $500 per day penalty until an application for a license is filed.