IMF presents blueprint for cross-border payments
The IMF published a paper proposing a new class of platforms to bring interoperability, efficiency, and safety to cross-border payments, and domestic financial markets. It involves a single ledger for settlement and a safe settlement asset, possibly in the form of central bank digital currency (CBDC), as well as programming standards and information management capabilities leveraging encryption. Governments would keep the right to limit user transactions in foreign currency and impose financial integrity checks. It rejected the use of distributed ledger technology (DLT) because it has “important limitations” in terms of validator costs, security, efficiency and privacy. [Read more at the IMF]
The digital dollar’s bipartisan problem
This Politico article is a good summary of the opposition to a potential U.S. retail CBDC by libertarian and anti-establishment types, citing concerns over privacy and government control. It has now seeped into US political discourse, with Tennessee Senator Bill Hagerty, claiming that a digital dollar “would give the federal government unprecedented insight into your life,” Florida Governor Ron DeSantis signing a bill restricting the use of retail CBDCs in Florida, and Joe Biden presidential primary challenger Robert F. Kennedy Jr. condemning of them. Most of these objections are distorting facts, like assuming that digital dollar will be festooned with user surveillance and spending control mechanisms, all of which can be banned in the necessary enabling legislation. The ignorance behind these condemnations was highlighted by DeSantis and Kennedy claiming that the Fed’s soon-to-be-launched FedNow fast payments platform was a retail CBDC. [Read more at Politico]
Anyways, the article also has juicy quote from me that you can check out for yourselves. I don’t know where the quote came from. It’s probably from something I said on LinkedIn or Twitter in the heat of battle with the many ignorant boobs and conspiracy theorists that pounce on CBDC-related posts that are not frothing-at-the-mouth anti-CBDC. At first I thought they could be swayed a little bit if government legislation were to forbid the issuance of CBDC that violates user rights to privacy and self control. But no such luck, because they erect the strawman of a dystopian future in which CBDC is forced on us with no exit (e.g., transfers out of CBDC to bank accounts or cash is forbidden). In any case, I stand by the sentiment expressed in the politico article, aimed at CBDC misinformation purveyors like DeSantis and Kennedy, although I would have reframed it more politely if Politico had checked with me before publishing it.
BoE’s CBDC consultation amounts to a national scandal?
According to an article London’s City AM raised concerns over the accessibility of the central bank digital currency (CBDC) consultation document being conducted by the Bank of England (BoE) and HM Treasury that closes on June 30, 2023. “Questions arise about the document’s clarity and the intentions behind this intervention in people’s lives. To gain insights, [City AM] sought the expertise of a health researcher specializing in health literacy, mainly working with individuals facing mental health challenges and dementia. Their evaluation of the consultation process revealed significant concerns regarding the accessibility of the documentation provided to the general public.” Part of the evaluation involved an assessment by Hemingway, an app that assesses text accessibility, which rated the readability of the document at a Grade 10 level. In other words, “comprehending the document would require a reading ability of an average 15 to 16-year-old, while the average UK reading age is only 9.” Scary stuff! [Read more at City AM]
According to BoE deputy governor for financial stability Jon Cunliffe (via Izabella Kaminska’s Blind Spot blog), the CBDC consultation had received about 50,000 public responses so far, and that while he hadn’t read them yet, the main theme that was emerging was a public concern about privacy. (The BoE’s real-time gross settlement (RTGS) renewal program only received 34 public responses.) However, he said that the system couldn’t be entirely anonymous because “complete anonymity has with it the potential for social harms, tax evasions, crime, terrorist financing” but that the Bank would not see any individual identifiable customer data. As to the banks, they “would store all that information in the way that banks store it now and that would be available to for example law enforcement under certain circumstances.”
Applying the extended attitude formation theory to a digital euro
Electronic Markets published a paper that explores how to best create a digital euro that will be used by its intended users through an interview-based analysis of attitudes towards established payment solutions and the transfer of these attitudes. Several participants indicated that they currently see no reason for using a digital euro as an additional payment solution given the current benefits of established payment solutions. However, existing payment solutions are also found to possess perceived limitations and concerns by respondents. The paper concludes that a digital euro would need to be privacy-sensitive, offering wide acceptance for national and international online and offline payments in different contexts. [Read more at Electronic Markets]
*For those interested in intra-day updates, check out my searchable Diigo Fintech developments database, which is also a good place to go to query for past developments: https://www.diigo.com/user/kiffmeister/ART.
Upcoming conferences, webinars and speaking engagements:
- I’ll be participating in Currency Research’s in-person Central Bank Payments Conference and Global Payments Summit in Cape Town from June 26 to 30. [Register here and here respectively]
- I’ll be lecturing at the Digital Euro Association (DEA) Digital Money Academy on July 27, 2023. [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 chronicles@kiffmeister.com.
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 (chris@sodapublicmoney.org).
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