Kiffmeister’s #Fintech Daily Digest (20220721)

IMF wants M-Pesa shielded in CBK digital shilling plan

The IMF published feedback on the Central Bank of Kenya (CBK) central bank digital currency (CBDC) discussion paper published in February 2022. The IMF recommended that the paper emphasize that CBDC will “do no harm” to existing private-sector digital payment solutions. A poorly designed CBDC risks taking away customers of banks and other digital finance providers, increasing the cost of financing for banks, and depriving banks of valuable information they obtain through establishing customer relations. [Read more at the IMF]

Lenders Are Thwarting Digital Currency’s Adoption in Nigeria

Nigerian lenders are impeding the use of the nation’s CBDC because they are concerned about losing revenue from traditional banking services, according to central bank Governor Godwin Emefiele. Only about 700,000 customers have created an e-naira wallet since its introduction in October last year, and e-naira transactions have also failed to pick up. Currently, the e-naira wallet is available to only bank customers, but the central bank is close to concluding tests with MTN Group’s Nigeria unit to provide a channel to enable Nigerians without bank accounts to open e-naira wallets. [Read more at Bloomberg]

Indonesia plans wholesale digital currency

Bank Indonesia Governor Perry Warjiyo reportedly said that the central bank will release the conceptual design of digital rupiah by the end of 2022. The central bank will distribute the CBDC to large banks and payment service companies to sell to smaller banks for various retail transactions. It is also considering ways to ensure it would be exchangeable across borders. [Read more at Bloomberg]

RBI working on phased implementation of digital currency

Reserve Bank of India (RBI) Executive Director Ajay Kumar reportedly said that the central bank is working on a phased implementation of both retail and wholesale CBDC. He also said that the necessary amendment to the relevant section of the RBI Act 1934 had been made enabling the RBI to conduct pilot and subsequent issuance of CBDC. [Read more at The Print]

The Macroeconomic Impact of Cryptocurrency and Stablecoins

The World Economic Forum (WEF) has published a white paper that seeks to forecast the potential macroeconomic effects of crypto-assets and stablecoins based on qualitative assessments from global macroeconomists and credible literature in this space. The majority of economists interviewed predict that allowing crypto-assets to play a regulated role in the economy will bring the highest macroeconomic net benefit to society, contingent on the responsible design and enforcement of regulation. The WEF’s Digital Currency Governance Consortium will deliver more detail regarding regulatory best practices at a later date. [Read more at WeForum.org]

The end of the crypto-diversification myth

An article published by VoxEU proposes a mechanism to explain why the correlation between cryptocurrency and equities went from low and negative to consistently high and positive since the onset of the Covid-19 crisis in 2020.  With investor-level holdings from a bank offering both trading accounts and cryptocurrency wallets, it shows that retail investors’ net trading volumes of stocks and cryptocurrencies are highly positively correlated. Theoretically, this micro-level pattern translates into a cross-asset class correlation. Evidence suggests that the pattern emerged in March 2020, and that stocks preferred by crypto-traders exhibit a stronger correlation with Bitcoin. [Read more at VoxEU]

Cash remains king in Germany

Recently, Deutsche Bundesbank published a study on the payment behavior and habits in Germany (for 2021). The study is very, very detailed and provides data for all kinds of questions around payments. The main takeaway is that cash is still king in Germany. [Read more via Jonas Gross’s summary on LinkedIn]

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]