The American Civil Liberties Union (ACLU) published a paper that looks at some of the central bank digital currency (CBDC) design options that are being discussed and which would be good for privacy and accessibility. It argues, for a “digital bearer instrument in which money is stored on a device with no party keeping track of balances on a ledger [with] offline and peer-to-peer transactions enabled to the greatest extent feasible.” Also, it’s important that the CBDC be fully fungible and subject to the rules that apply to physical cash, and not the rules that apply to bank accounts. In addition, the software and hardware infrastructure behind a CBDC should be transparent and subject to external, independent audits (e.g., open source). [Read more at the ACLU and Rohan Grey’s summary here]
Notably, the ACLU position shares all of the key design recommendations of the CBDC Manifesto, which I urge everyone in the CBDC policy space to read and sign. [Read the Manifesto here]
Norges Bank, as part of the fourth phase of its CBDC, is assessing the legislative amendments that are expected to be required to introduce CBDC. Other parts of the fourth phase experimental testing of technical solutions in combination with further analysis of the need for and consequences if a CBDC is introduced. [Read more at the Norges Bank]
The IMF published a paper on the role of limited trust among counterparties in dysfunctional cross-border payment systems. Interoperability between different forms of money can thus be conceptualized as the network of trusted links necessary for transactions. Traditionally, across borders, trust links involve exclusive bilateral credit relationships among correspondent banks. However, the fixed costs required to build these links foster an expensive and concentrated system. This paper interprets different payment arrangements in terms of the implied trust structures. It discusses how the tokenization of money alters trust links and allows for a potentially more efficient market structure to exchange money. The paper ends with a suggested global marketplace to trade tokenized money directly across borders. [Read more at the IMF]
The European Central Bank (ECB) is inviting experts in payments schemes to contribute to the scheme compatibility workstream for the digital euro scheme Rulebook. The main objective of the workstream is to develop a proposal for the Rulebook design in order to facilitate the compatibility of the digital euro with existing scheme solutions. Applicants should be market participants and Eurosystem representatives, nominated by their respective payment stakeholder associations. They are expected to be senior experts in scheme management, preferably with managerial responsibilities in a European payment or payment-related scheme. Participation will not be remunerated, and all intellectual property rights, copyright and rights to development and disposal related to the deliverables of the workstream reside exclusively with the ECB. [Read more at the ECB]
Coordinated global crypto policies: G20 key financial stability priority
Last month’s first G20 Finance Ministers and Central Bank Governors (FMCBG) meeting under India’s presidency discussed key financial stability and regulatory priorities. India urged member nations to understand the macro-financial implications of crypto-assets and recommended formulating a coordinated global policy. In that regard, the Indian Presidency has proposed a joint technical paper by the IMF and the Financial Stability Board (FSB) which would synthesize the macroeconomic and regulatory perspectives of crypto-assets. Interest was also expressed in building a common taxonomy and a systematic classification of the crypto-asset universe. [Read more at the Press Information Bureau of the Indian Government]
- I’ll be providing a (probably virtual) update on global central bank digital currency (CBDC) developments at the Digital Euro Association Digital Euro Conference on March 31 in Frankfurt. [Register here]
- I’ll be moderating a panel on “what happens when the lights go out…different schemes for offline functionality” at the in-person Digital Currency Conference (DCC) in Mexico City on May 18. [Register here]
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 email@example.com.
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