BSP wholesale CBDC proof-of-concept nearing completion (Fintech Philippines)

The Bangko Sentral ng Pilipinas (BSP) is reportedly progressing quickly towards issuing wholesale central bank digital currency (CBDC), codenamed Project Agila, sooner than anticipated, with the proof-of-concept (POC) phase expected to conclude by the end of 2024. Deputy Governor Mamerto E. Tangonan confirmed that the CBDC could likely be launched in the earlier part of BSP Governor Eli M. Remolona Jr.’s six-year term, which runs from 2023 until 2029. Three uses cases mentioned; interbank settlement on weekends and holidays, securities settlement and cross border payments. With regards to the latter, the BSP is an observer of Project mBridge involving the BIS Innovation Hub and the central banks of China, Hong Kong, Thailand, the United Arab Emirates and Saudi Arabia. [Read more at Fintech Philippines]

Simulating the adoption of a retail CBDC (FNA)

Jahrbücher für Nationalökonomie und Statistik (JNS) published a paper by two Financial Network Analytics (FNA) staff that uses agent-based modelling to simulate retail central bank digital currency (CBDC) adoption, calibrated to Spain’s retail payment ecosystem. Results suggest that the distribution of government subsidies via CBDC creates incentives to reduce the use of cash. Also, reverse waterfall functionality (automatic transfer of funds from bank deposits to CBDC wallets) and a positive remuneration spread to bank deposits are effective in fostering adoption. However, the model did not model banks as adaptive decision makers that would include their ability to counter CBDC remuneration. [Read more at the JNS]

A minimum viable offline CBDC using Groth-Sahai proofs (arXiv)

arXiv posted a paper that proposes a design and a first implementation for an offline-first digital euro. The protocol offers complete privacy during transactions using zero-knowledge proofs. Furthermore, transactions can be executed offline without third parties and retroactive double-spending detection is facilitated. To protect the users’ privacy, but also guard against money laundering, bank and trusted third parties for law enforcement must collaborate to decrypt transactions, revealing the digital pseudonym used in the transaction. The transaction can be decrypted without decrypting prior transactions attached to the digital euro. The protocol has a working initial implementation showcasing its usability and demonstrating functionality. [Read more at arXiv]

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.