Google, Amazon, Walmart seek to join e-rupee pilot (Reuters)

GooglePay, Walmart-backed PhonePe and AmazonPay, plus Indian fintech firms Cred and Mobikwikare, are reportedly seeking to join the Reserve Bank of India (RBI) e-rupee central bank digital currency (CBDC). Initially, the RBI had permitted only banks to offer e-rupee via their mobile applications, but in April 2024 it said payment firms could also offer e-rupee transactions via their platform once approved by the RBI. [Read more at Reuters]

Regulating decentralized systems: evidence from Tornado Cash sanctions (Ledger Insights)

The Federal Reserve Bank of New York (NY Fed) published a study of the impact and effectiveness of regulation in decentralized systems, using sanctions imposed in 2022 by the U.S. Department of Treasury’s Office of Foreign Assets Control (OFAC) on the Tornado Cash (TC) crypto-asset mixer. It documented an immediate and lasting negative impact on TC following the sanction announcement. This conclusion was based on tracking Ethereum block proposers and the builders responsible for selecting transactions for settlement. Many large builders cooperated with the sanctions. A couple of builders who did not comply with the sanctions, acting for philosophical reasons rather than monetary motives, were responsible for most of the ongoing TC transactions. [Read more at the NY Fed]

Ledger Insights makes the point that OFAC’s sanctions on crypto mixers could be viewed as a violation of Article 12 of the Universal Declaration of Human Rights, as are all existing anti-money laundering (AML) procedures promulgated by the Financial Action Task Force (FATF). And despite zero evidence that effectiveness of AML procedures outweigh their negative impact on financial inclusion, national authorities continue to unquestioningly impose them. As examples of the abject failure of AML procedures Ledger Insights points out that studies have estimated that their impact is about 0.2% of illicit flows, and a McKinsey report noted that suspicious transactions flagged by banks are up to 99% false positives.

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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.