Kiffmeister’s #Fintech Daily Digest (04/19/2021)

The New Money Review published a nice summary of a podcast that we recorded last week on central bank digital currencies and the benefits and risks of new digital economy. 

Bank of England and UK Treasury Launch CBDC Taskforce

The Bank of England and the U.K. Treasury announced the creation of a Central Bank Digital Currency (CBDC) Taskforce that will (i) coordinate exploration of CBDC objectives, use cases, opportunities and risks, (ii) guide evaluation of the design features, and (iii) support a rigorous, coherent and comprehensive assessment of the overall use case. Also, the Bank of England established a CBDC Unit, and created a CBDC Engagement Forum to engage senior stakeholders and gather strategic input on all non-technology aspects of CBDC, and a CBDC Technology Forum to gather input on all technology aspects of CBDC. 

China may test its digital currency with foreign visitors at the 2022 Beijing Winter Olympics

The People’s Bank of China (PBOC) will reportedly try to make it possible for foreign athletes and visitors to use its e-CNY CBDC during the Beijing Winter Olympics in 2022. Deputy governor Li Bo also reportedly said the aim of the e-CNY is not to replace the U.S. dollar’s dominance on the international stage, although in the long term the PBOC hopes to have a cross border solution as well. 

Bank of England publishes policy for omnibus accounts in RTGS

The Bank of England unveiled a new type of omnibus account as part of its real-time gross settlement (RTGS) service. Under the new model, an operator of a payment system can hold funds in the omnibus account to fund their participants’ balances with central bank money. An omnibus account co-mingles funds from different entities for the purposes of wholesale settlement. The new type of account is not limited to wholesale transactions such as buying gilts, but can be used to settle transactions on behalf of customers, such as a small business paying a supplier. 

Bank of England omnibus account ideal for Fnality blockchain settlement tokens

Fnality sees the new Bank of England omnibus accounts as supportive of the opportunity to use tokenized cash assets on next generation payment systems, enabling on-chain wholesale exchange of value. Fnality uses an Ethereum-based permissioned blockchain developed by Clearmatics, that will run on chain payment systems in multiple currencies with a regulated subsidiary in each jurisdiction. When a bank wants to use Fnality tokens to make a payment, it transfers money from its central bank account to the Fnality omnibus account, which then tokenizes it. The bank then uses the tokens to make a payment, and the recipient bank can then opt to convert the received tokens back to central bank money and have it transferred to its own central bank account. Or it could use the tokens for further payments.