CBDCs and financial stability: balance sheet analysis and policy choices (IMF)
The IMF published a paper that analyzes the financial stability implications of retail central bank digital currency (CBDC). It starts with a systematic analysis of balance sheet changes that arise from the new liability for the central bank and the banking system, and examine how they depend on preconditions, central bank choices, and banking system responses. Based on this, it discusses the range of implications for financial stability that may arise in steady state, in the context of adoption, and in crisis times. Threats to financial intermediation in steady state arise mainly in situations where the central bank balance sheet expands, and triggers adjustment mechanisms that lead to more costly or less stable funding of the banking system, while in crisis times run risk may increase. The analysis of policy choices to control these effects considers macroprudential policy, and an expansion of central bank lending to commercial banks, but finds that a main contribution needs to come from a design of the CBDC that encourages its use as a means of payment rather than a store of value. [Read more at the IMF]
First EU DLT Pilot Regime system gets green light: CSD Prague (Ledger Insights)
The Central Securities Depository Prague (CDCP) has become the first institution to get official authorization to launch under the European Securities and Market Authority (ESMA) DLT Pilot Regime. The DLT Pilot Regime provides the legal framework for trading and settlement of transactions in crypto-assets that qualify as financial instruments under European regulation, while facilitating the set-up of new types of market infrastructures. Starting November 18, 2024, CDCP will be able to offer issuers of book-entry securities registration of issues in the newly created distributed ledger technology (DLT) based registry. [Read more at CDCP]
Ripple escalates dispute with SEC, files notice of cross-appeal (Cointelegraph)
In an October 10, 2024 filing in the U.S. District Court for the Southern District of New York, Ripple disclosed plans to take a cross-appeal to the Court of Appeals for the Second Circuit, in its ongoing legal battle with the U.S. Securities and Exchange Commission (SEC). On October 2 the SEC filed an appeal to an August 7 order for Ripple to pay a $125 million civil penalty for violating federal securities laws. The Court of Appeals will review both appeals to determine if any legal or procedural errors were made in the August 7 decision. [Read more at Cointelegraph]
Upcoming Speaking Engagements:
- Digital Euro Conference 2025, Frankfurt, March 27, 2025. The DEC25 conference will explore the future of money with a focus on CBDCs, stablecoins, tokenized deposits, and the intersection of AI and digital ID. When you register, get 20% off the regular ticket price by using the Kiffmeister20 code! [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.
