Kiffmeister’s #Fintech Daily Digest (20230127)

To demand or not to demand: on quantifying the future appetite for CBDC

The IMF published a paper by Marco Gross and Elisa Letizia that proposes a structural, stock-flow consistent model of banks, the central bank, and the private sector economic environment. It can be used to examine the impact of introducing a central bank digital currency (CBDC), to estimate its uptake, alongside its impact on bank balance sheets and profitability, monetary policy effectiveness, central bank seigniorage, and various other metrics. A “deposit-like” CBDC remunerated at the policy rate results in an estimated upper bound of CBDC uptake share of 25% of total “money” (cash, bank deposits and CBDC) in the United States and up to 20% in the Eurozone. However, uptakes of unremunerated “cash-like” CBDCs would be well below 5%. The less deposit-like (and the more cash-like) and the lower the remuneration rate, the smaller the CBDC uptake (see figure below). The model codes have been made publicly available, for transparency and to allow applying the model to other countries. [Read more at the IMF]

The U.S. Federal Reserve Board denies Custodia Bank’s Federal Reserve System application

The Federal Reserve Board has denied Custodia Bank’s application to become a member of the Federal Reserve System, saying that it is inconsistent with the required factors under the law. Custodia is a Wyoming-chartered special purpose depository institution, which does not have federal deposit insurance. According to the denial, Custodia is proposing to engage in “novel and untested crypto activities that include issuing a crypto asset on open, public and/or decentralized networks that… present significant safety and soundness risks… The Board has previously made clear that such crypto activities are highly likely to be inconsistent with safe and sound banking practices, and it found that Custodia’s risk management framework was insufficient to address [these] concerns [and] its ability to mitigate money laundering and terrorism financing risks. [Read more at the Federal Reserve Board]

Enabling offline payments in an online world

Crunchfish and Lipis Advisors published a guide to offline payments design, providing insights to how offline payments relate and can interoperate with online payment system. It provides a way of categorizing offline payment solutions by three design choices which provides the payment ecosystem with a better understanding of the nuances of offline payments:

  • Online Payment Rail: (i) distributed ledger technology (DLT) based or (ii) centralized account-based. (The paper incorrectly labels DLT-based as token-based (see the 2020 New York Fed article on this misnomer)).
  • Offline Security Protocol: (i) native (layer-1) or (ii) non-native (layer-2) digital currency security protocol, described in relation to the underlying online payment rail.
  • Offline Trusted Environment: (i) hardware-based or (ii) software-based.

On a layer-1 solution the offline payment solution uses the same native security protocols as the underlying payment service. On a non-native layer-2 security protocol, digital currency is signed out by debiting a locally held offline balance. A non-native layer-2 solution can be integrated with any type of payment rail and general ledger as the offline security protocol can be interoperable with any underlying payment system. [Read more at Crunchfish]

Kiffmeister’s global central bank digital currency monthly monitor

Just a reminder that I produce a monthly digest of central bank digital currency (CBDC) developments exclusively for the official sector. So for any of you out there who work for a central bank, ministry of finance or international financial institution who would like to receive it by email on the first business day of every month, please DM me on LinkedIn or email me at

The Sovereign Official Digital Association (SODA) is a technology-agnostic firm offering advisory services at the intersection of central banking, digital finance and the web3 industry, aiming to make public digital money a reality. SODA believes institutions in the existing financial ecosystem should have access to the tools and resources they need to move from discussion to action. SODA offers ‘real life’ use cases to help test digital money and drive adoption as central banks and other public institutions explore the future of a more financially inclusive world powered by interoperable blockchain-based networks. SODA would love you to join us on this journey – please get in touch (

Satoshi Capital Advisors is a New York-based, global advisory firm that works with central banks, governments, and the private sector to architect, implement, and operate varying initiatives. Satoshi Capital Advisors’ central bank work revolves around CBDC architecture and implementation, providing advisory services from research phase through to growth phase. Utilizing a product-market fit and technology agnostic approach to CBDC architecture and implementation enables Satoshi Capital Advisors to build tailored solutions, bespoke to local financial system nuances. Satoshi Capital Advisors welcomes requests from central bank officials for virtual and in-person CBDC workshops. [Click here for more information]

WhisperCash offers the first fully offline digital currency platform that has the same properties as physical cash. It can perform secure consecutive offline payments without compromising on security, privacy or accessibility. WhisperCash allows direct person to person offline payments without any server infrastructure or internet connectivity. It comes in various form factors including the self-contained credit card-sized “Pro” that sports an eInk screen and capacitive keyboard, and lasts for two weeks between recharges assuming a few transactions per day. [Click here for more information]