Regarding the news I posted earlier this week about the Bank of Canada “reportedly” downshifting its retail central bank digital currency (CBDC) project, we now have confirmation on the Bank’s website: “the Bank is scaling down its work on a retail central bank digital currency and shifting its focus to broader payments system research and policy development… The body of knowledge built over recent years will be invaluable if, at some point in the future, Canadians, through their elected representatives, decide they want or need a digital Canadian dollar… The Bank will continue to monitor global retail CBDC developments and publish some related research, but the focus will be on preparing for the evolution of payments both in Canada and around the world, through policy research and analysis.” [Read more at the Bank of Canada]

CBDC adoption: inclusive strategies for intermediaries and users (IMF)

The IMF published a paper that argues that successful CBDC adoption hinges not only on technical readiness and operational robustness, but also on strategic policy and design choices that target end-user and intermediary involvement from the outset. Central banks cannot take it for granted that CBDC, once launched, will be adopted and scaled up easily. The paper proposes a “REDI” framework that central banks can use to prepare for CBDC adoption comprised of (i) regulatory strategies, (ii) education and communication initiatives, (iii) design and deployment choices, and (iv) incentive mechanisms. The paper [read more here] also makes several concrete recommendations including:

• Early engagement with end-users focusing on identifying their needs and pain points, as well as social and cultural factors that influence their financial behavior.
• Monetary and non-monetary incentives to encourage intermediary participation, including exclusivity agreements, subsidies for setup costs, and allowing for CBDC data monetization or charging for value-added services.
• End-user incentives including sign-up bonuses, airdrops or lotteries upon onboarding, and once onboarded, usage incentives, such as cash-back offers and discounts on CBDC transactions. Incentives targeted specifically to merchants could include subsidies for setup costs, reduced transaction fees, tax exemptions, or volume-based rewards.
• Implementing selected use cases (such as P2P, G2P or B2P payments) may help generate initial momentum (see also SODA’s “test and deploy” implementation framework).

Tokenized deposits to hit Korean supermarkets in December (Korea Times)

Starting in December 2024, selected participants will reportedly be able to use tokenized deposits to make payments at domestic supermarkets and convenience stores. This initiative is part of a comprehensive usability test for a wholesale central bank digital currency (CBDC), conducted by the Bank of Korea (BOK) in collaboration with six major commercial banks. Basically, the BOK will issue CBDC to banks, which will then convert it into deposit tokens for use by consumers at designated retail locations. 100,000 individuals have been selected for the pilot, and participating banks are forming partnerships with retail outlets and developing dedicated digital platforms. [Read more at The Korean Times]

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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.