BIS blueprint for the future monetary and financial system
The Bank for International Settlements (BIS) proposed a new type of financial infrastructure that would combine central bank digital currency (CBDC) with tokenized bank deposits and other tokenized claims, on a programmable platform on a unified ledger. The BIS claims that “eventual benefits would go beyond faster speeds and lower costs, to enable entirely new types of transaction, limited only by the ingenuity of public and private innovators… Examples include new methods for securities settlements that combine all the individual steps into one seamless transaction, tokenized deposits with built-in regulatory checks that simultaneously settle in wholesale CBDC, smart contract-enabled credit that reduces the cost of trade finance for smaller companies, improving global supply chains, enhanced sharing of data on potential borrowers, and using privacy-protecting technology, to expand access to credit for disadvantaged segments of the population.” [Read more at the BIS]
EU legislation for digital euro was reportedly put on hold
European Union (EU) legislation needed for the European Central Bank (ECB) to issue a digital euro, due to be published June 28, had reportedly been put on hold. The purported move follows the leaking of the draft bill and a statement by finance ministers that appeared to question the motivation for the plan last week. The timeline for the draft bill, intended to be published ahead of a firm ECB decision on whether to issue the retail CBDC, has shifted out several times. However, it was later reported that the legislation was back on the June 28 agenda. [Read more at CoinDesk and download the leaked draft here]
Central bank digital currency adoption: A two-sided model
The IMF published a paper that studies CBDC adoption using a theoretical model, finding that there is a feedback loop where more households will adopt CBDC if more firms accept CBDC and vice versa. Households are more likely to adopt CBDC if the cost to own a CBDC wallet is low, it provides an attractive savings vehicle, reduces the cost of remittances, improves the efficiency of government payments, and offers a valuable means of payment. Merchants are more likely to accept CBDC if fees are low, if there are tax exemptions or subsidies for transactions made in CBDC, and if households who prefer to make payments with CBDC make up a large share of revenue. Temporary subsidies and using CBDC for government payments can spur initial take-up to kick start the higher usage feedback loop. [Read more at the IMF]
*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).
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]