Before jumping into today’s Fintech news I’d like to bring your attention to the weekly CBDC Chronicles report from the Digital Euro Association’s (DEA’s) Conrad Kraft. He reliably picks and deep dives into the most important central bank digital currency (CBDC) related news [Read this week’s edition here]
A tokenized future for the Australian financial system?
Reserve Bank of Australia (RBA) Assistant Governor Brad Jones provided an update on the RBA’s central bank digital currency (CBDC) proof-of-concept work. First, the project highlighted a range of areas where CBDC could add value in wholesale payments, including by facilitating atomic settlement in tokenized asset markets. Second, it highlighted opportunities for a wholesale CBDC to act as a complement to new forms of privately issued digital money, such as tokenized bank deposits and asset-backed stablecoins. Third, further applied research is needed to better understand operational design issues for new forms of ledgers. [Read more at the RBA]
Australia proposes new licensing regime for crypto exchanges
Australia’s Treasury announced plans to introduce a comprehensive licensing regime for crypto exchanges designed to enhance consumer protection, bring clarity to the digital asset sector, and pave the way for the nation to align with global regulatory standards. Under the proposed framework, crypto exchanges operating in Australia will have to obtain an Australian Financial Services license (AFSL) from the Australian Securities and Investments Commission (ASIC). This regulatory measure will be applicable to exchanges that hold more than AUD 1,500 of any single client’s assets or have total assets exceeding AUD 5 million. [Read more at the Australian Government Treasury]
Retail CBDC and the social costs of liquidity provision
The Centre for Economic Policy Research (CEPR) published an article by Dirk Niepelt that makes a case that a CBDC-based financial system can be a less costly than current two-tier regime that features non-banks that transact with bank deposits, and banks that settle payments with central bank reserves. The slightly lower direct costs of fractional reserve banking are more than offset by its “social” costs such as the fiscal resources and regulation needed to address the former’s inherent frictions and instability. Furthermore, the paper argues that the interest rate on the digital currency should differ from zero and from the rate of interest on reserves. [Read more at the CEPR]
*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.
Kiffmeister’s 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 (only) if you work at a central bank, ministry of finance or international financial institution (e.g., the BIS, IMF, OECD, World Bank) and 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]
