ECB argues digital euro won’t disintermediate banks
The Centre for Economic Policy Research’s VoxEU published an article by Ulrich Bindseil and two other senior European Central Bank (ECB) executives, argued that that commercial bank deposits are unlikely to impacted much by the launch of a digital euro due to its design. This combines a holding limit with the reverse waterfall, which allows instant top-up of a central bank digital currency (CBDC) wallet from the users’ bank accounts. Also, merchants and other businesses cannot hold digital euro balances. According to the article, stablecoins and other innovative private sector financial products are bigger threats to bank business models. [Read more at VoxEU]
Digital Turkish lira first phase evaluation report
The Türkiye Cumhuriyet Merkez Bankası (CBRT) published an English version of the report on the first phase of its digital Turkish lira testing (originally published in Turkish in December 2023). The project started in 2020 with a proof-of-concept (POC) that tested the applicability of various distributed ledger technologies (DLTs) to the digital currency. The study was successfully completed and followed by the establishment of the Digital Turkish Lira Collaboration Platform with the participation of technology stakeholders. The first phase of the project focused on retail payments and involved the preparation of the technical work environment, the design and development of the CBDC system, the integration of a prototype digital identity system, the creation of a digital wallet application, and the simulation and testing of different scenarios for the issuance, distribution, online payment/transfer and redemption of the digital currency. The first phase also included “pilot” tests in selected locations to measure the system performance and user experience. The tests were successfully completed in the first half of 2023 and the first phase was finalized. The findings of the first phase will inform the next phases, which will involve more extensive pilot tests and the expansion of the collaboration platform with new participants. [Read more at the CBRT]
I highlighted the “pilot” in “pilot tests” because the report is unclear whether the pilots are really pilots. According to the IMF “5P” CBDC product development framework, and the way that CBDCTracker.org and I define pilot, a pilot involves real CBDC and end users, with central bank staff not counting as real end users. Some central banks throw the term “pilot” around very loosely, for example, calling proofs-of-concepts “pilots” to sound more impressive. I hope someone at the CBRT can throw more light on this question!
FYI here are some of my upcoming speaking engagements:
– Digital Euro Conference 2024 (Frankfurt on February 29)[Register here and get a 20% discount with the Kiffmeister20 code]
*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
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