Offline payments: implications for reliability and resiliency in digital payment systems (FRB)
The U.S. Federal Reserve Board (FRB) published an assessment of the offline digital payment payment services landscape and their potential to mitigate internet outage risks and bolster digital payment resilience. It finds that many services branded as offline payment solutions are more accurately classified as hybrid solutions because they ultimately require internet access for clearing and settlement. Truly offline digital payment systems that exchange digital bearer instruments for instant, in-person settlement are still in early development stages. The note lays out a variety of risks associated with offline payment models, including risks related to double spending, security, user privacy, and merchant liability. It concludes that certain offline payment models are promising, but more research and wider uptake is needed for the technology to drive incremental gains in payment system resilience and reliability. [Read more at the FRB]
HKMA launches Project Ensemble Sandbox to accelerate adoption of tokenization (Ledger Insights)
The Hong Kong Monetary Authority (HKMA) launched the Project Ensemble Sandbox to support institutional experimentation with tokenization. Four main themes were chosen for the initial round of experimentation, fixed income and investment funds, liquidity management, green and sustainable finance, and trade and supply chain finance. Also, an experimental wholesale central bank digital currency (CBDC) will enable interbank settlement between the tokenized deposits of banks. The HKMA will also explore collaborating with the BIS Innovation Hub Hong Kong Centre across one or more themes. [Read more at the HKMA]
Japanese tokenized deposit solution DCJPY launches into production (Ledger Insights)
Japan’s DeCurret DCP officially launched its DCJPY tokenized deposit solution. DCJPY consists of two zones, a Financial Zone where banks mint tokens and integrate with their core banking systems. Multiple Business Zones synchronize transactions with the Financial Zone. The first DCJPY use case involves server hosting company IIJ procuring renewable energy certificates (RECs), tokenizing them and selling them to its clients. Apart from using the tokenized RECs for its clients, IIJ is also considering the secondary distribution of the tokens. [Read more at DeCurret]
Runs, transparency and regulation: on the optimal design of stablecoin frameworks (EBA)
The European Banking Authority (EBA) published a paper that uses a theoretical model to show how transparency incentivises stablecoin issuers to keep a larger share of the reserves in liquid assets, thus reducing the risk of runs and potential bankruptcy ex–ante. In addition, transparency on reserves disincentivises stablecoin holders from irrationally demanding the reimbursement of their funds. The model also suggests that regulatory interventions after a run has become imminent, in the form of a suspension, can still reduce the negative impact of potential bankruptcy on consumers, and that letting assets mature after imposing the suspension can deliver the first–best social welfare outcome. [Read more at the EBA]
The political, psychological, and social correlates of cryptocurrency ownership (PLoS ONE)
PLoS ONE published a paper that polled 2,001 American adults in 2022 to examine the associations between cryptocurrency ownership and individual level political, psychological, and social characteristics. Analyses revealed that 30% of the sample have owned some form of cryptocurrency and that these individuals exhibit a diversity of political allegiances and identities. We also found that crypto ownership was associated with belief in conspiracy theories, “dark” personality characteristics (e.g., the “Dark Tetrad” of narcissism, Machiavellianism, psychopathy, and sadism), and more frequent use of alternative and fringe social media platforms. The variables that most strongly predict cryptocurrency ownership are being male, relying on alternative/fringe social media as one’s primary news source, argumentativeness, and an aversion to authoritarianism. [Read more at PLoS ONE]
Upcoming Speaking Engagements:
- Intertribal Foreign Affairs Council Forum 2024, Yidindji, August 30-31. The conference will bring together indigenous nations to showcase the excellence of their governance practices and generate new ideas for the future. I’ll be on a panel focused on the future of money and indigenous financial inclusion. [Find out more and register here]
- 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.
