Kiffmeister’s #Fintech Daily Digest (20220602)

Bank of Thailand Postpones CBDC Pilot

The Bank of Thailand (BoT) has been working on a retail central bank digital currency (CBDC), with an initial six month pilot planned for the second quarter of 2022, but it has been postponed to the fourth quarter of this year, to make sure the central bank gets it right. In terms of rationale, the BoT sees CBDCs offering more potential for the private sector to get involved and innovate, compared to the existing fast payments system. For example, programmability can’t be built on a fast payment system. [Read more]

Adapting central bank balance sheets to a world of digital currencies

The Bank of England’s Andrew Hauser argues that a CBDC could have a big impact on the the size, composition and risk profile of the central bank’s balance sheets; for the monetary policy transmission mechanism, and for monetary control. He argues for the need to understand these impacts, and build them into the design of CBDCs and central bank operational toolkits. [Read more]

Central Bank Digital Currency and Financial Fragility

A recent European Central Bank (ECB) paper analyzes how the introduction of a remunerated CBDC might affect financial stability. It validates the commonly held view that higher CBDC remuneration increases depositor withdrawal incentives and thus bank fragility. Second, it identifies a contrarian force when banks raise deposit rates in response to higher CBDC remuneration to retain deposits that, in turn, reduces fragility. These opposing effects can lead to a U-shaped relation between CBDC remuneration and bank fragility. [Read more]

UnionBank raises ₱11B in PH’s first-ever digital peso bonds

UnionBank of the Philippines has raised ₱11 billion from its maiden digital peso bond offering — the first of its kind in the country. The 1.5-year bonds with a fixed per annum rate of 3.25% were issued through the digital registry/repository of Philippine Depository and Trust Corp. (PDTC) using infrastructure powered by STACS blockchain. The new digital infrastructure was kept interoperable with the Philippine Dealing & Exchange Corp (PDEx) Fixed Income Market’s traditional trading to clearing infrastructure. [Read more]

Upcoming events I’m affiliated with:

The CBDC Think Tank is hosting a CBDC Papers Lecture Series on June 17 and 24 starting at 7am EST and running for 4 hours each day. [View list of papers and register here]