Kiffmeister’s #Fintech Daily Digest (11/04/2021)

Central bank digital currencies: motives, economic implications and the research frontier

The Bank for International Settlements (BIS) published a paper that gives a comprehensive guided tour of the literature on central bank digital currency (CBDC) on the microeconomic considerations related to operational architectures, technologies and privacy, and the macroeconomic implications for the financial system, financial stability and monetary policy. A set of questions, particularly on the cross-border dimensions of CBDCs, remains unresolved, and calls for further work to expand the research frontier. [Read more]

The paper’s discussion around the financial stability and monetary policy impacts of introducing retail CBDC particularly comprehensive and informative. Also, there has been a lot of talk about the need for a digital dollar to combat threats to dollar hegemony, but I heartily agree with the paper’s take on CBDC “weaponization”:

mBridge: Building a multi CBDC platform for international payments

The BIS Innovation Hub published a brochure for its mBridge project with a comprehensive list of use cases contributed by 22 commercial banks across four different jurisdictions (China, Hong Kong, Thailand and the United Arab Emirates). The mBridge trial platform has shown that CBDCs can substantially increase the speed of cross-border payments from multiple days to near real-time, while also reducing cost. The project is using an agile and iterative development approach, plus a modular bricks design. [Read more]

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