Kiffmeister’s #Fintech Daily Digest (03/27/2021)*

Bank of Japan Establishes CBDC Liaison and Coordination Committee

The Bank of Japan (BoJ) will engage in experiments on general-purpose central bank digital currency (CBDC) from fiscal year 2021. The BoJ will first test the technical feasibility of the core functions and features required for CBDC through proof of concepts (PoC). It has has established a “Liaison and Coordination Committee on Central Bank Digital Currency” through which it will share details of and provide updates on the PoC with the private sector and the government and will seek consultation on future steps to facilitate smooth implementation of the PoC. 

Mobile Money Accounts Grow to 1.2 Billion in 2020

The GSMA has published its annual State of the Industry Report on Mobile Money. It revealed a dramatic acceleration in mobile transactions during the COVID-19 pandemic as lockdown restrictions limited access to cash and financial institutions. The report found that the number of registered accounts grew by 13% globally in 2020 to more than 1.2 billion. The fastest growth was in markets where governments provided significant pandemic relief to their citizens. To minimise the economic toll of COVID-19, many national governments distributed monetary support to individuals and businesses, and the value of government-to-person payments quadrupled during the pandemic. 

Thailand, Vietnam banks deploy joint QR code-based payment service

The Bank of Thailand (BOT) and the State Bank of Vietnam (SBV) have deployed a retail payment connectivity system that makes use of an interoperable QR Code in order to simplify cross-border payments between the two countries. In the first phase of the project, Thai tourists can use the BOT mobile app to scan VietQR for payment at TPBank’s and BIDV’s payment sites in Vietnam. Meanwhile, Vietnamese visitors can also use the mobile apps of TPBank and Sacombank to scan ThaiQR for payment in Thailand.  

US Monetary Policy Implementation Considerations of Global Stablecoins

This US Federal Reserve note explores the potential effects of the widespread adoption of a global stablecoin (GSC) on key aggregate financial sector balance sheets in the United States. To do this, it maps out cash flows of GSC transactions among financial sector entities using a stylized set of ‘t-accounts’. By analyzing these individual transactions, it infers aggregate and compositional effects on U.S. commercial banking sector and Federal Reserve balance sheets. Through this lens, the note also considers how these balance sheet changes could affect monetary policy implementation, the demand for central bank reserves, and the market for US dollar safe assets. 

Digital Currencies and Bank Competition

This article examines how the issuance of a digital currency by a non-bank operator impacts competition between banks in a cashless society. Unlike banks, the digital currency provider is not allowed to engage in maturity transformation. The article analyzes how the fee charged for the digital currency impacts the interest rates on loans and the fees charged by banks to depositors for paying from their bank account and opening an account in a bank. It derives the conditions under which consumers use the digital currency to pay. It also discusses how the distribution mode of the digital currency may impact its use for payments. 

* 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.