World Bank rejects El Salvador request for help on bitcoin implementation

The World Bank reportedly has said it could not assist El Salvador’s bitcoin implementation. “We are committed to helping El Salvador in numerous ways including for currency transparency and regulatory processes,” said a World Bank spokesperson via email to Reuters. “While the government did approach us for assistance on bitcoin, this is not something the World Bank can support given the environmental and transparency shortcomings.” 

AFIN Collaborates with R3 to Drive Central Bank Digital Currency Innovation

The ASEAN Financial Innovation Network (AFIN), a not-for-profit entity jointly formed by the Monetary Authority of Singapore (MAS), the International Finance Corporation (IFC), and the ASEAN Bankers Association, has partnered with R3 to enable banks and FinTechs to build and test central bank digital currency (CBDC) applications. The R3 Sandbox for Digital Currencies is underpinned by Corda, and provides an environment for central banks, commercial banks, exchanges, payment providers, FinTechs and more to collaborate and evaluate CBDC use cases, as well as to learn, transact, and test roll-out strategies. 

SEC Delays VanEck Bitcoin ETF Application—Again

The U.S. Securities and Exchange Commission (SEC) has delayed its decision on VanEck’s VanEck Bitcoin Trust exchange-traded fund (ETF). On June 15, the SEC also postponed its decision on Kryptoin’s ETF filing. The SEC has yet to approve any Bitcoin ETF, with chairpeople frequently citing manipulation and a lack of transparency in the crypto market as key reasons.  

Dinero Electrónico: The rise and fall of Ecuador’s central bank digital currency

Dinero Electrónico was a mobile payment system developed by the Banco Central del Ecuador that allowed citizens to transfer USD balances in real-time from person to person using basic cell phones. The program operated between 2014 and 2018. Key drivers of the program were increasing financial inclusion and reducing the need for the central bank to hold and distribute large quantities of USD notes. This paper discusses reasons why the program was ultimately discontinued, including opposition to the program from private banks, and outline lessons learned. 

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Details about the digital yuan wallet officially disclosed

The People’s Bank of China (PBOC) revealed the holding and transaction limit structures being applied to the wallets currently being used in its eCNY central bank digital currency (CBDC) pilots. There are anonymous wallets that can be registered with only a mobile phone number, with maximum holding limits of 10,000 yuan, single transaction limits of 2,000 yuan, and daily cumulative payment limits of 5,000 yuan. And then there are less anonymous wallets with holding limits of 500,000 yuan, single transaction limits of 50,0000 yuan, and daily cumulative payment limits of 100,000 yuan, requiring that the users link the wallets to a bank account and meet full know-your-customer (KYC) requirements. Also users can open sub-wallets to limit payments, set up conditional payments, and control information sharing.  

El Salvador: Adopting the Bitcoin standard? 

On June 9 the El Salvador parliament passed President Nayib Bukele’s bill to make Bitcoin (BTC) legal tender in the country. The law will allow citizens to pay for goods and services in Bitcoin, and the government will guarantee the convertibility of Bitcoin into dollars at the time of any given transaction. This is made possible by a $150-million trust established by El Salvador’s Bandesal development bank. In essence, the government will buy BTC from locals if they wish to receive dollars instead of BTC.

Frances Coppola opines that adopting BTC potentially gives El Salvador the hard-currency peg and monetary discipline it needs, while breaking its monetary and fiscal policy dependence on the US. It’s not total monetary sovereignty, but it’s an improvement on the present situation. However, some of the details bring into question how much de-dollarizing is really going to happen here. The El Salvador government will be working with digital wallet developer Strike to build the financial infrastructure needed to make its BTC all of this this a reality.

In March 2021 Strike launched a beta pilot of its Strike Global mobile payment app in El Salvador, after which it quickly became the country’s number one downloaded app. The app is aimed at facilitating incoming USD remittance payments which account for more than 20% of El Salvador’s GDP. However, although Strike Global uses BTC as the app’s “plumbing” layer, it actually leaves the the end user with flaky USD-pegged USDT stablecoins.  (“Flaky” because of the many questions surrounding the composition of the reserves that the issuer (Tether) holds against outstanding USDT.) 

Strike claims that an El Salvador user can simply go to a BTC ATM or local Bitcoin teller and receive real US dollars, but apparently there are only two BTC ATMs in the country. 

David Gerard hypothesizes that Bukele likely wants to get hold of the dollars coming in as remittances — if Strike doesn’t just keep them all — and adding tethers to the economy in place of dollars would allow him to effectively print money that he couldn’t print otherwise.  

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The Marshall Islands SOV Deconstructed

At first glance, the Marshall Island’s SOV scheme seems like a great way to raise government revenue. However, the International Monetary Fund’s Sonja Davidovic takes a closer look that reveals that, like most things that sound too good to be true, it is. 

El Salvador’s Legislature Votes to Adopt Bitcoin as Legal Tender

A supermajority of El Salvador’s legislature voted in favor of President Nayib Bukele’s proposal for the nation to adopt bitcoin as legal tender. The bill will mandate all businesses to accept bitcoin for goods or services, but the government will act as a backstop for entities that aren’t willing to take on the risk of a volatile crypto-asset. The government will set up a $150 million trust fund at the Development Bank of El Salvador to instantly convert bitcoin to U.S. dollars to assume merchants’ risk. The Development Bank’s trust fund would sell some of the bitcoin it receives for dollars to replenish the fund. 

This could further complicate the Central American country’s quest to seek a more than $1 billion-program with the International Monetary Fund (IMF). In May, Bukele’s party strained relations with Washington when it ousted five Supreme Court judges and the top prosecutor. President Bukele said that there is a meeting with the IMF scheduled for Thursday (June 10). And this could be just the beginning, as some speculate that other Central and Latin American countries may follow El Salvador’s example – eg Argentina, Brazil, Nicaragua, Panama, and Paraguay. 

Central bank digital currency: the quest for minimally invasive technology

A Bank for International Settlements paper discusses the range of proposed central bank digital currency (CBDC) architectures, how they could complement existing payment options, and what they imply for the financial system and the central bank of the future. It sets out the requirements for a “minimally invasive” CBDC design – one that upgrades money to current needs without disrupting the proven two-tier architecture of the monetary system, which involves both the private and public sectors. It finds that technological developments inspired by popular cryptocurrency systems – based on anonymity and lacking a central authority – do not meet the requirements for a retail CBDC. Instead, digital banknotes that run on “intermediated” or “hybrid” CBDC architectures show promise. 

Central Bank Digital Currencies and a Euro for the Future

The European Blockchain Observatory and Forum (EUBOF) published a report identifying and evaluating eight alternative design architectures for the digital euro against the core principles and requirements set by the ECB. It considers how the digital euro will differ based on whether it will account-based or token-based, or whether it’s implemented atop existing eurozone-wide payment rails or atop novel technological architectures, such as blockchain. The paper also explores whether a digital euro should be exclusively coordinated by the central bank or distributed and managed in collaboration with Europe’s commercial banks and other financial institutions. It addresses interoperability and programmability features, regulatory aspects and end-user experience, along with potential financial stability implications. 

Beijing Winter Olympics vendors begin to accept digital yuan

More than 200 vendors at and around the venues for the 2022 games in Shijingshan are now supporting payments made using e-CNY. 

New Cryptocurrency to Cater to ‘Establishment’ With Transparency

Concordium’s vision is to become the leading public and regulatory compliant open de-centralized world computer with Identity built-in at the Protocol level. Concordium offers secure, low-cost services for transactions, IoT data sharing, storage and more. It is a proof-of-stake-based blockchain which solves the shortcomings of classic blockchains and their non-compliant cryptocurrencies — with the introduction of protocol-level identity verification and the use of zero-knowledge proofs to replace anonymity with perfect privacy – and facilitate KYC and AML procedures for Concordium’s Global Transaction Unit (GTU) payment coin.  

Central bankers can sign up here: https://www.eventbrite.com/e/the-central-bank-digital-currency-workshop-tickets-152572742179

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