I’ve updated my tabulation of DLT-based wholesale central bank digital currency (#CBDC) projects. There has been one project added since the end of January (the HKMA’s Project Ensemble). [Check it out here]
Custodia Bank loses lawsuit challenging Fed master account application rejection
A federal judge has rejected Wyoming-based Custodia Bank’s argument that it is entitled to a Federal Reserve master account and membership with the Fed. Judge Scott Skavdahl, of District of Wyoming, denied Custodia’s motion for judgement on, writing that federal laws do not require the nation’s central bank to give every eligible depository institution access to its master account system, nor did the provided evidence suggest that the Federal Reserve Board of Governors influence a regional branch of the Fed to deny its application for an account. Custodia is now “reviewing the Court’s decision and all of [its] options, including appeal”. [Read more at CoinDesk]
E-money and monetary policy transmission
The IMF published a paper that uses a two-way fixed effect estimator using 2001-2019 panel data, on both monthly (covering 21 countries) and annual (covering 47 countries) frequencies, to estimate the causal effects of e-money development on monetary policy transmission. It finds that e-money development has accompanied stronger monetary policy transmission (measured by the responsiveness of interest rates to the policy rate), growth in bank deposits and credit, and efficiency gains in financial intermediation (measured by the lending-to-deposit rate spread). Evidence is more pronounced in countries where e-money development takes off in a context of limited financial inclusion. [Read more at the IMF]
Mobile internet, collateral, and banking
The IMF published a paper that combines administrative data on credit, internet penetration and a land reform in Rwanda, to shows that the complementarity between technology and law can overcome financial frictions. Leveraging quasi-experimental variation in 3G availability from lightning strikes and incidental coverage, it shows that mobile connectivity steers borrowers from microfinance to commercial banks and improves loan terms. These effects are partly due to the role of 3G internet in facilitating the acquisition of land titles from the reform, used as a collateral for bank loans and mortgages. The paper quantifies that the collateral’s availability mediates 35% of the overall effect of mobile internet on credit and 80% for collateralized loans. [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.
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]
