Month: September 2024

Kiffmeister’s #Fintech Daily Digest (20240914)

~ kiffmeister

FYI I spent last week in Istanbul at the CBDC Conference which was an excellent gathering of central bankers and central bank digital currency (CBDC) platform vendors. I had the pleasure of providing a global view of retail CBDC developments in one of the lead-off sessions of the CBDC Academy (that’s me in the picture below). Although I cover CBDC news quite comprehensively, even I learned a few things there, some off the record, so unfortunately I won’t be able to share them. The Central Bank of the Bahamas is hosting next year’s edition on September 9-11, 2025 on Paradise Island!

Ecosystem models for a CBDC: analysis framework and potential models (BOC)

The Bank of Canada (BOC) published a paper presents a framework for analyzing different economic models of CBDC ecosystems. For an intermediated CBDC to be successful, central banks will need to develop sustainable economic models where intermediaries and end users derive value and central banks achieve their policy goals. The paper analyzes the trade-offs of three of the eight potential CBDC ecosystem models, each with different levels of central bank involvement in activities of the ecosystem and the usage of different policy levers. The policy levers considered in the framework are control over intermediary access to the CBDC network, prices and quality standards. The analysis suggests that a central bank provision of network infrastructure enables direct control over intermediary access requirements, prices and quality standards upstream. Providing a CBDC wallet increases development costs but allows the central bank to set quality standards downstream and to promote competition. Delegating the network service to a regulated entity reduces costs for the central bank but may limit its strategic autonomy to control upstream pricing and intermediary access. [Read more at the BOC]

Eurosystem exploratory work on settlement in central bank money using new technologies (BfF)

In collaboration with the Italian Banking Association Innovation Lab (ABI Lab) and 8 of its banking partners, the Banque de France (BdF) settled, in its DL3S platform and in a tokenized representation of central bank money (CeBM), several automated wholesale payments instructed by ABI Lab’s Leonidas distributed ledger technology (DLT) platform. Leonidas is an emanation of the highly successful Spunta project launched by ABI Lab in 2020, which now manages 200 million transactions yearly. Leonidas aims at calculating and settling liquid balances between participating banks, and experimenting settlement in central bank money. A similar experiment has been completed with JP Morgan S.E. using its ONYX DLT platform. [Read more at the BdF]

Upcoming Speaking Engagements:

  • 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.

Kiffmeister’s #Fintech Daily Digest (20240912)

~ kiffmeister

FYI it’s been a few days since I last posted a Daily Digest (September 8) but that’s simply that there was no news (until now) that cleared my importance bar. So rest assured that we didn’t miss anything of importance!

The CBDCTracker.org database has been updated, now counting a total of 104 jurisdictions and/or currency unions engaged in central bank digital currency (CBDC) research. For more information, please read Atakan Kavuklu’s summary of recent developments [here] and visit the CBDCTracker.org website.

Bank of Russia targets July 2025 for digital ruble launch (CoinDesk)

The Bank of Russia wants the country’s largest banks to support a digital ruble for retail and commercial use by July 2025, after which a full launch will take place. Customers will have to be able to “open and top up digital ruble accounts, make transfers, and accept digital rubles in their infrastructure”. The Bank has sent its proposals to amend the relevant laws to the Russian Ministry of Finance. Smaller banks will be given until July 1, 2026 to follow suit, While other credit institutions have to make sure they comply with the requirement by July 1, 2027. [Read more at the Bank of Russia]

U.K. tables legislation to clarify digital asset property rights (Ledger Insights)

The U.K. Ministry of Justice introduced new legislation aiming to clarify that digital assets can be considered as “property” in the United Kingdom. It follows an extensive review by the U.K. Law Commission, which drafted the legislation and conducted a consultation. [Read the legislation here]

Grayscale launches a new XRP Trust (CoinDesk)

Grayscale launched XRP Trust, a closed-end fund giving investors exposure to XRP that could pave the way for a U.S. spot XRP exchange-traded fund (ETF). Grayscale previously offered an XRP Trust but dissolved it in 2021 following the U.S. Securities and Exchange Commission (SEC) 2020 lawsuit against Ripple Labs that alleged the XRP token is a security under federal securities law. [Read more at CoinDesk]

Upcoming Speaking Engagements:

  • 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.

Kiffmeister’s #Fintech Daily Digest (20240908)

~ kiffmeister

Kazakhstan’s digital tenge project enters new phase (LinkedIn)

The National Bank of Kazakhstan (NBK) has entered a new phase of its digital tenge project by introducing the concept of programmable money for government spending. The central bank has been actively engaging with the Ministry of Finance, including the Treasury and Tax Authority, to integrate their systems with the digital tenge platform. This will enable pilots for transparent public procurement, social digital vouchers, and other innovative scenarios. The NBK is finding that the combination of electronic procurement, digital treasury, digital tax administration, and smart payment rails can significantly increase the efficiency and transparency of public finances. [Read more on LinkedIn]

How can CBDCs be designed to drive financial inclusion? (UNDP)

The United Nations Development Programme (UNDP) published an article by Heng Wang on potential central bank digital currency (CBDC) design features that drive financial inclusion. From users’ perspectives, CBDCs need to (i) provide low-cost and safe electronic payment services and to provide benefits like accessibility for vulnerable people, (ii) align with values, experiences, and needs of potential users, and address concerns like privacy, safety, (iii) simplify access to CBDCs (especially for vulnerable groups), easy access to CBDC wallets, user-friendly interfaces, clear terms and conditions, (iv) be tested comprehensively through pilots and sandboxes to refine their design and ensure safety, and (v) the benefits and costs should be visible and understood by users. [Read more at the UNDP]

    Japan’s big 3 banks to use stablecoins, Swift for cross border payments (Ledger Insights)

    Progmat and Datachain, along with Japanese banks MUFG, SMBC and Mizuho, launched Project Pax, that aims to use stablecoins instead of correspondent banks for cross-border payments. However, so that corporate customers can trigger trade payments in the conventional manner via their banks, SWIFT payment messages will be integrated with the distributed ledger technology (DLT) based Progmat tokenized network, so clients don’t touch the stablecoins. For cross-chain transactions between different blockchains, the platform will utilize Datachain’s middleware and its Inter-Blockchain Communication (IBC) protocol. Prototype testing will start shortly, and Pax members plan to collaborate with other financial institutions, looking to go live in 2025. [Read more at Datachain]

    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.

    Kiffmeister’s #Fintech Daily Digest (20240906)

    ~ kiffmeister

    BCB announces projects selected for the second phase of Drex testing (Ledger Insights)

    Banco Central do Brasil (BCB) announced the 13 themes that will be trialed during the second phase of the Drex wholesale central bank digital currency (CBDC) project. The first phase involved testing processes such as issuing, transferring and settling digital treasury bonds with tokenized commercial bank deposits with wholesale CBDC utilized for interbank settlements. During the second phase, various financial services will be developed via smart contracts on the Drex platform created by 16 consortia or companies. The platform is a permissioned Ethereum network using Hyperledger Besu. [Read more at the BCB]

    Lessons from India’s Unified Payments Interface (UPI)(SUERF)

    Société Universitaire Européenne de Recherches Financières (SUERF) published a note that draws lessons from the success of India’s Unified Payments Interface (UPI). It argues that this success majorly owes to ease of development of applications, easy use and zero-transaction fees for end-users. Further success factors have been strict data protection rules, active partnership with the private sector and adept regulation. The note also discusses the organization of the Indian payment market since the launch of UPI, and the changes in digital payment market in India, with a focus on payment volumes and values. It highlights the increasing investments in the payments market and increased adoption over time, and provides insights into the implications of payment systems for financial inclusion in India, and touches upon some challenges UPI faces. [Read more at SUERF]

    Tokenization: another giant leap for securities? (NY Fed)

    The U.S. Federal Reserve Bank of New York (NY Fed) published an article that explains what tokenization is and how it works, and looks at how past innovation in financial markets might offer lessons for the future. Multiple successful experiments show efficiencies in a completely tokenized world—where money and securities are all tokenized and settlement can be automated and synchronized with smart contracts. Change takes time, and there may be a period of years where tokenized money would need to interact with traditional securities, or vice versa. As an example, the article points to the Swiss National Bank (SNB) Project Helvetia which initially tried to link the existing payment system to a tokenized securities system, but found that without tokenized cash operational burdens were added, not reduced. Hence, when Helvetia went live, it did so with wholesale CBDC. [Read more at the NY Fed]

    Focusing on users: lessons for Canada’s CBDC from the digital euro and digital pound (CIGI)

    The Centre for International Governance (CIGI) published Ori Freiman’s paper that explores how Canada can craft a responsible and user-centric approach to its digital loonie project. It emphasizes meaningful public engagement in both technical design and regulatory processes — drawing from the U.K. and European Union (EU) consultative approaches. It also highlights the importance of responsible personal data handling and clear regulatory language, learning from EU expectations and UK legislative concerns. It concludes with recommendations that span across five key areas, critical to the successful integration of the digital loonie within the fabric of society; the developmental approach, engagement strategy, regulation and consumer protection, regulatory novelty and further research. [Read more at CIGI]

    AI and Central Banks—Speeding Ahead within Legal Guardrails (IMF)

    International Monetary Fund (IMF) staff published a short note that highlights the legal challenges concerning central banks’ governance, transparency, and accountability in central banks’ AI exploration, first covered in a 2021 IMF Fintech Note. AI can significantly strengthen central banks’ agility to predict and mitigate crises and improve monetary policy implementation, as well as the regulation and supervision of financial institutions. However, the use of AI tools could pose risks and challenges to central banks’ governance, data privacy, intellectual property, cybersecurity, and legal liability. An effective AI journey for central banks requires completion of ‘AI legal checkpoints’: is there an effective oversight function? Is there adequate expertise? Are central banks’ decisions relating to AI transparently disclosed? Do central banks remain accountable for their actions? Central banks should carefully assess if their legal frameworks are adequate to ensure they are well equipped for their AI journey. [Read more at the Oxford Business Law Blog]

    I don’t consider AI a “Fintech” issue but I have recently started to track the topic, mainly from a central banking policy perspective. I’ve been collecting them here: https://www.diigo.com/user/kiffmeister?query=%23AI.

    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.

    Kiffmeister’s #Fintech Daily Digest (20240905)

    ~ kiffmeister

    I’ve updated my tabulation of retail central bank digital currency (CBDC) explorers. Since the last update, two have been added (Aruba and Malawi) bringing the total to 104 jurisdictions. [Check out the tabulation here]

    ECB reviews progress on digital euro rulebook (ECB)

    The European Central Bank (ECB) published its third report outlining the progress of the digital euro scheme Rulebook Development Group in developing a draft digital euro rulebook, consisting of a single set of rules, practices and standards for the harmonization of digital euro payments across the euro area. [Read more at the ECB]

    Citi survey finds fewer institutions want CBDC for digital asset settlement (Ledger Insights)

    Of almost 500 institutions surveyed by Citi, only 15% expressed a need CBDC for digital asset settlement versus 52% of respondents to a similar survey in 2023. Instead, there’s a greater emphasis on alternative digital payment methods including nonbank stablecoins, tokenized deposits and tokenized money market funds. [Read more at Citi]

    Thai SEC updates rules for digital asset payments (Fintech Thailand)

    Thailand’s Securities and Exchange Commission (SEC) will ease restrictions on using digital assets for payments, and digital asset businesses under SEC supervision will be able to participate in the Bank of Thailand’s Programmable Payment Sandbox. The updated regulations broaden the scope of services digital asset businesses can provide without being considered a means of payment and include new types of operators like digital asset custodial wallet providers. [Read more at the Thai SEC]

    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.

    Jurisdictions Where Retail CBDC Is Being Explored

    ~ kiffmeister

    104 central banks have recently launched, piloted, experimented with and/or researched retail central bank digital currency (CBDC) not including two that started issuing retail CBDC and then shut the platforms down (Ecuador and Finland). There have been two additions since the end-July update; Aruba and Malawi. Keep in mind that I don’t count all of the individual national central banks that are part of currency unions (e.g., the European or Eastern Caribbean Currency Unions). If I did the tally that way, my count would be around the oft-quoted 130+ central banks. Also, the table was compiled from publicly available sources, including the media and central bank websites, and not verified through official channels. If I’m missing anything, or you find mistakes in the tabulation, please let me know in the comments! (See the notes below the table for more information on how it was compiled.)

    RCBDC Explorer Tabulation (20240904)Download

    Notes: The difference between a “pilot” and “proof of concept” (POC) is that a pilot involves actual users, whereas a POC does not, even though some POCs may involve central bank staff. Also, because the tabulation is based only on publicly-available information, it is likely that there is some POC activity in the “research” category, but no announcements have been made. Finally, entries that are crossed through indicate that the projects have been shut down. Also, the ones that are crossed out, are where the central bank has considered issuing CBDC but then decided to cancel the research or put it on hold (“watchful waiting”).

    Kiffmeister’s #Fintech Daily Digest (20240904)

    ~ kiffmeister

    Retail digital Aruba florin for inclusive resilience (CBA)

    The Central Bank van Aruba (CBA) published a paper that reviews the best implementation options for a retail digital florin. It concludes that an inclusively-resilient retail digital florin must at least exhibit a three-tiered know-your-customer (KYC) approach (to balance privacy and KYC efforts), have offline features, one-to-one conversion between commercial bank deposits and CBDC, be unremunerated, and based on permissioned distributed ledger technology (DLT). Cross-border payments have been tabled for future consideration. This paper represents the first of a five-step five-year evaluation and implementation process. The paper also revealed that in 2019, the CBA conducted a feasibility study on a local wholesale CBDC, but concluded that its risks may fall outside the CBA’s risk appetite. The 2019 paper does not seem to be available online. [Read more at the CBA]

    Siemens issues €300m digital bond settled in central bank money (Ledger Insights)

    “Siemens has issued its second digital bond, a €300 million one year bond using the SWIAT permissioned blockchain. Settlement took just minutes and used Germany’s Trigger solution, which triggers a central bank money payment on the TARGET 2 system. Last year Siemens issued a €60 million ‘crypto security’ bond on the Polygon blockchain which still required two-day settlement. The issuance formed part of the European Central Bank’s (ECB) wholesale DLT settlement trials.” [Read more at Siemens]

    SWIAT (Secure Worldwide Interbank Asset Transfer), established by DekaBank in February 2022, is a software developer for blockchain-based digital financial services platform for regulated financial market players to flexibly issue, trade and settle any type of asset – traditional or digital – on the blockchain. It was determined from the start that the platform would be open to partners to be built as a market consortium, and eventually expanded into an international network. It’s competitors include the Regulated Liability Network (RLN) and Partior. [Read more at SWIAT]

    Bank of England approach to innovation in money and payments (JD Supra)

    On July 30, 2024, the Bank of England (BOE) published a paper on its proposed approach to innovation in money and payments. It includes developing additional functionalities for the real-time gross settlement (RTGS) system such as extending settlement hours and a synchronization interface that would allow RTGS to connect to external ledgers, including those based on programmable platforms, and settle assets in central bank money. The bank is also planning a programme of experiments for a wholesale central bank digital currency (CBDC). Broadly these would cover, DvP securities transactions, PvP foreign exchange transactions and interoperability with other global ledger initiatives. The use of tokenized money and programmable payments is also up for discussion. [Read more at the BOE]

    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.

    Kiffmeister’s #Fintech Daily Digest (20240903)

    ~ kiffmeister

    Ripple to add smart contracts to XRP Ledger (Cointelegraph)

    Ripple will add smart contracts to the XRP Ledger (XRPL) developer ecosystem and XRPL mainnet, although it’s still in its research phase and the firm did not provide a definite time frame for deployment. It also invited programmers familiar with Ethereum virtual machine (EVM) languages to explore possibilities on its sidechain. Ripple also said the sidechain was created for developers using Ethereum-based smart contracts. This gives a familiar environment for deploying DApps, allowing them to use Solidity, a programming language used to build smart contracts on Ethereum. [Read more at Ripple]

    CBDCs, payment firms, and geopolitics (NBER)

    The U.S. National Bureau of Economic Research (NBER) published a paper that analyzes the effect of a major central bank digital currency (CBDC) – the digital euro – on the payment industry, finding “remarkably” heterogeneous effects. Stock prices of U.S. payment firms decrease, while stock prices of European payment firms increase in response to positive announcements on the digital euro. Bank stocks do not react. The results are consistent with the notion that the development of the digital euro is driven by a desire for strategic autonomy in payments, pointing to a novel geopolitical dimension of CBDCs. [Read more at the NBER]

    Russia’s largest bank to start offering customers CBDC in 2025 (Crypto.news)

    Russia‘s Sberbank plans to start operations with the country’s digital ruble for its customers in early 2025. Sberbank is among Russian banks expected to join the project in the second round of testing CBDC, along with about 20 other financial institutions. [Read more at the Moscow Times]

    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.

    Kiffmeister’s #Fintech Daily Digest (20240902)

    ~ kiffmeister

    Bank of Russia expands CBDC pilot (Central Banking)

    The Bank of Russia is expanding its central bank digital currency (CBDC) pilot programme. The new phase, which started on September 1, 2024, will involve up to 9,000 people and 1,200 companies, versus the 600 people and 22 firms that took part in the previous stage. The latest phase will enable dynamic QR code payments and business-to-business transfers. Digital ruble transactions will be available to the customers of the same 12 banks that have been participating in the pilot testing since its start in August 2023, and more banks will be added. [Read more at the Bank of Russia]

    Qatar Financial Centre issues digital assets framework (QFC)

    The Qatar Financial Centre (QFC) published the new QFC Digital Assets Framework 2024 which is in line with the Qatar Central Bank’s Third Financial Sector Strategy. It establishes the legal and regulatory foundation for digital assets, including the process of tokenization, legal recognition of property rights in tokens and their underlying assets, custody arrangements, transfer, and exchange. The framework also provides for the legal recognition of smart contracts. [Read more at the QFC]

    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.