Banco Central de Venezuela is rolling out a central bank digital currency (CBDC) in October and will launch an SMS-based exchange system to facilitate its use.
The Biden administration is reportedly pushing back against a last-minute effort by a bipartisan group of senators to limit a proposal in the infrastructure bill to increase federal regulation of crypto-assets. The original version of the bill sought to help pay for itself by boosting information reporting requirements and broadening the definition of a “broker” for tax purposes to include any parties that might interact with crypto, including miners, node operators, software developers or similar parties. Then Senators Ron Wyden (D-OR), Cynthia Lummis (R-MT), and Pat Toomey (R-PA) introduced an amendment that would exempt miners and validators, which was followed by the latest amendment from Senators Rob Portman (R-Ohio) and Mark R. Warner (D-Va.) that exempted only proof of work miners. The debate will now likely stretch into the weekend.
According to this paper co-written by the Diem Association’s Christian Catalini, fiat-backed stablecoins must rely on reserves of high-quality, liquid assets and be subject to a framework that protects coin holders from credit risk, market risk, operational risk, as well as the insolvency or bankruptcy of the issuer. Although decentralized stablecoin designs eliminate the need to trust an intermediary, they are either exposed to death spirals, or highly capital inefficient, as they must be highly over-collateralized to account for the lack of an intermediary. While these trade-offs might be acceptable for narrow use cases within the cryptocurrency space, without a breakthrough in decentralized stablecoin design, they are likely to limit the usefulness of these coins for mainstream adoption.
According to this article by European Central Bank (ECB) staff, some advanced economy CBDC would not only have domestic macroeconomic and financial implications for the issuing economy; it would also have implications for the rest of the world. The authors’ simulations suggest that if such a CBDC is available to non-residents, additional volatility in capital flows, exchange rates and interest rates resulting from its presence can be mitigated through holdings limits on transactions by foreigners or through flexibility in the CBDC’s remuneration rate. Of the two policy tools, the authors’ simulations show the latter is the most powerful – price flexibility dominates quantitative restrictions. That a CBDC increases asymmetries in the international monetary system by reducing monetary policy autonomy in foreign economies, but not domestically, suggests in addition that introducing a CBDC sooner, rather than later, could give rise to a significant first-mover advantage.
The Government of Canada’s Advisory Committee on Open Banking recommends moving forward quickly to implement a hybrid, made-in-Canada system of open banking; founded on collaboration, with distinct but appropriate roles for government and industry. This should be done in a phased manner, with an initial phase including the design and implementation of the initial low risk open banking system and a second phase involving the evolution and ongoing administration of the system. Financial inclusion should be considered in the design and be complemented by financial education policies, programs, and resources.
The National bank of Cambodia’s (NBC’s) Chea Serey, who leads the central bank’s Project Bakong blockchain-based retail interbank payment system, said Bakong’s electronic wallet reached 200,000 users in June, doubling from three months earlier. Project Bakong, launched in October 2020, allows Cambodians to pay at stores or send money through a mobile app in riel or U.S. dollars. Serey said that the mission of Bakong is to “increase the usage of the local currency,” with the long-term goal to “solely use our local currency.” NBC is also exploring cross-border transactions through Bakong. Currently it is working on this with Malaysia’s Maybank as well as Thailand’s central bank.
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