This paper explains how China’s DC/EP digital currency works and the respective responsibilities of the central bank and second-tier institutions in the system. Interestingly, it says that the DC/EP won’t be a central bank digital currency (CBDC) as it’s a liability of the intermediaries in the “two-tier” system. The second-tier institutions actually have the ownership of the DC/EP and guarantee payment and redemption rights. This arrangement has borrowed ideas from the three note-issuing banks in Hong Kong that are required to give the Hong Kong Monetary Authority one US dollar for every 7.8 Hong Kong dollars issued, and in exchange receive from a 100% reserve certificate. From the balance sheet’s perspective, the banknotes issued by the banks are their liabilities, their assets are reserves, and the liabilities of the central bank are the reserve certificates issued.
The Central Bank of Nigeria (CBN) reportedly issued a Regulatory Framework for Open Banking in Nigeria on February 17. (I couldn’t find it on the CBN website, but numerous law firms are reporting on it.) Prior to the issuance of the Framework, banks operated in a closed ecosystem, with exclusivity of access to customer information, locking out innovators; and forcing customers to rely solely on the digital channel offerings of their respective banks. With the issuance of the Framework, the financial services space in Nigeria will experience the simplification and integration of multiple and complicated financial services.
UK-based challenger bank Revolut has reportedly filed a draft application for a banking licence with the Federal Deposit Insurance Corporation (FDIC) and the California Department of Financial Protection and Innovation. Revolut currently offers financial services in the US through a relationship with FDIC-insured Metropolitan Commercial Bank.
* The views expressed herein are those of the author and should not be attributed to the International Monetary Fund, its Executive Board or its management.