Kiffmeister’s #Fintech Daily Digest (20220626)

More African Central Banks Are Exploring Digital Currencies

The IMF published a blog that provides a summary of African central bank digital currency (CBDC) activity based on data. It points to the need for governments to improve access to digital infrastructure such as a phone or internet connectivity, and the importance of offline access, for a retail CBDC to be effective, particularly if financial inclusion is a primary motivator. It also underscores the need for central banks to develop the expertise and technical capacity to manage data privacy and financial integrity risks, including strengthening national identification systems so know-your-customer requirements are more easily enforced. There is also a risk that users pull too much money out of banks to purchase CBDCs, affecting banks’ ability to lend. [Read more]

The Lightning Network: Turning Bitcoin into Money

The Cleveland Fed published an assessment of the relationship between Lightning Network (LN) adoption and reduced blockchain congestion, suggesting that the LN has improved the efficiency of bitcoin as a means of payment. It found that the improvement cannot be explained by other factors, such as changes in demand or the adoption of Segregated Witness (SegWit) (a change to the bitcoin transaction format activated on August 23, 2017 that improves the efficiency of blockchain storage. The paper found mixed evidence on whether increased LN centralization has improved its efficiency. [Read more]

Upcoming events I’m affiliated with:

The CBDC Think Tank, in partnership with the International Monetary Fund and George Washington University, is hosting a full-day in-person CBDC Masterclass on October 12 in Washington DC. The sessions are designed as instructional deep dives with full presentations and Q&A components.  [Register here]