Rwanda central bank launches CBDC public consultation
The National Bank of Rwanda (NBR) launched a public consultation on the potential issuance of central bank digital currency (CBDC). A detailed feasibility study, launched in 2023, formed the basis of its approach, that identified four “sweet spots” for a Rwandan CBDC: (i) increase resilience against possible network outages, power failures and natural disasters, (ii) improve innovation and competition, (iii) contribute to achieving the cashless economy national initiative over time, and (iv)develop faster, cheaper, more transparent, and more inclusive crossborder remittances. The consultative paper recommends a cautious iterative approach with multiple proofs of concepts and pilots. [Read more at the NBR]
Digital rupee to get boost from offline feature
Speaking at the Bank for International Settlements (BIS) Innovation Summit, Reserve Bank of India (RBI) Governor Shaktikanta Das said offline accessibility, which is in the works, will make the digital rupee an attractive choice for retail users. Das said that the digital rupee should have the same benefits as cash – anonymity and finality of settlement. While there is currently a preference for the Universal Payments Interface (UPI) among retail users, Das was hopeful that offline and programmable CBDC will change this going forward. [Read more at the Times of India]
Citi, JP Morgan in SIFMA coordinated US DLT settlement trials
The U.S. Securities Industry and Financial Markets Association (SIFMA) will manage a distributed ledger technology (DLT) proof of concept (PoC) involving tokenized deposits, wholesale central bank money, U.S. Treasuries and other tokenized assets on a shared ledger. The goal is to test settlement on a common regulated venue under existing laws by simulating USD delivery versus payment transactions. This will build on a 2023 initiative involving several of the same institutions for the similarly named Regulated Liability Network (RLN). [Read more at SIFMA]
CBDC and the operational framework of monetary policy
The Bank of Spain (BDS) published a paper in February 2024 (that I missed) that analyzes the impact of introducing a CBDC on the operational framework of monetary policy and the macroeconomy as a whole. It is based on a theoretical model that is calibrated to replicate the main monetary and financial aggregates in the euro area. It predicts that CBDC adoption implies a roughly equivalent reduction in banks’ deposit funding, but this has a rather small effect on bank lending to the real economy. This result reflects the parallel impact of a CBDC on a central bank’s operational framework. For relatively moderate CBDC adoption levels, the reduction in deposits is absorbed by an almost one-to-one fall in reserves at the central bank, implying a transition from a ‘floor’ system – with ample reserves – to a ‘corridor’ system. For larger CBDC adoption, the loss of bank deposits is compensated by increased recourse to central bank credit, as the corridor system gives way to a ‘ceiling’ system with scarce reserves. [Read more at the BDS]
Upcoming Speaking Engagements:
- CBDC Conference, Istanbul, September 10-12. The conference will offer representatives of central banks, commercial banks, technology providers, policy makers and academics the perfect platform to learn about the latest CBDC developments, exchange ideas with experts and peers. [Find out more and register here][Central bank delegates may be eligible for free registration (email registration@cbdc-conference.com to find out more)]
- Digital Currency Conference, London, September 23-24. The conference will bring together policymakers, regulators, and technology and innovation experts to network and discuss all aspects of digital currencies. And enter the KiffmeisterDCC code at registration to get a 20% discount! [Find out more and register here]
And 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 john@kiffmeister.com.
