Italian banks publish Leonidas wholesale CBDC project report
The Italian Banking Association (ABI) published the results of its Project Leonidas (Liquidation Effective ONchaIn Dlt Asset on Check) distributed ledger technology (DLT) based wholesale central bank digital currency (CBDC) proof of concept (POC) work. The project, which concluded at the end of 2023, was carried out under the Banca d’Italia Milano Hub innovation center. It investigated the benefits of using DLT-based wholesale CBDC for interbank transactions, so that the capacity, efficiency and robustness requirements of central bank systems are met. Ledger Insights has a nice summary of the three alternative models that were tested. [Read more at the ABI]
Central bank digital currency, real effect and welfare
The Bank of Korea (BOK) published a paper on the macroeconomic impact of introducing retail central bank digital currency (CBDC). What sets this paper apart from the many other papers that focus on the same question is that it pays more attention to the precise bank-issued instruments that the CBDC competes with – non-interest-bearing demand deposits and interest-bearing savings and term deposits. CBDC directly competes with physical cash and debit, but only indirectly with demand deposits. According to the paper’s theoretical model, CBDC introduction can lead to significant negative impact on demand deposit holdings, but this is accompanied by offsetting increases in holdings of interest-bearing deposits. This implies that the efficacy of CBDC on output and welfare, if any, is quantitatively only marginal, relative to the findings in the previous studies with only one type of deposit. [Read more at the BOK]
HQLAᵡ DLT platform passes €1bn securities lending transactions
BNY Mellon, Goldman Sachs and HSBC have successfully passed the €1 billion notional milestone in outstanding agency securities lending transactions using the HQLAX distributed ledger technology (DLT) platform. HQLAX creates digital collateral records (DCRs) to effect the simultaneous ownership exchange of loan identifiers (ISINS) and triparty collateral on a delivery vs delivery (DvD) basis. This eliminates intraday exposure and associated credit risk identified in most current collateral settlement practices. [Read more at HQLAX]
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.
