Papua New Guinea progresses digital currency explorations (Global Government Fintech)

The Bank of Papua New Guinea (BPNG) presented the results of its digital kina central bank digital currency (CBDC) proof-of-concept (POC) experimentation. The POC simulated the core functions of a digital currency system and staff from the BPNG, Japan International Cooperation Agency and the Japanese Embassy tested digital payments, and transaction security, under controlled conditions. Further studies will broaden the scope to engage more financial institutions, and explore cross-border payments with neighboring countries. [Read more at the BPNG]

FDIC releases documents related to supervision of crypto-related activities (FDIC)

The U.S. Federal Deposit Insurance Corporation (FDIC) released 175 documents related to its supervision of banks that engaged in, or sought to engage in, crypto-related activities. They show that such requests from banks were almost universally met with resistance, ranging from repeated requests for further information, to multi-month periods of silence as institutions waited for responses, to directives from supervisors to pause, suspend, or refrain from expanding all crypto- or blockchain-related activity. Looking forward, the FDIC is actively reevaluating its supervisory approach to crypto-related activities, including replacing Financial Institution Letter (FIL) 16-2022 required prior approval before banks can offer crypto-related services, and providing a pathway for institutions to engage in crypto- and blockchain-related activities while still adhering to safety and soundness principles. [Read more at the FDIC]

Telcoin granted approval to open Nebraska’s first digital asset bank (Telcoin)

Telcoin Bank has become Nebraska’s first Digital Asset Depository Institution to be conditionally approved by the U.S. state’s Department of Banking and Finance. If approved, Telcoin Bank claims that it will be the first regulated crypto bank in the United States. Telcoin also claims that because the Nebraska charter creates an actual bank charter, it will gain access to the Fed payment system (i.e., a master account). How this banking charter is different from the Special Purpose Depository Institution charter granted by Wyoming’s Division of Banking to Custodia Bank and two others, is not clear to me. The Wyoming banks have all been denied access to a Fed master account. The regulation of banking in the United States is quite arcane. [Read more at Telcoin]

Reducing transaction costs through tokenization (Electronic Markets)

The Electronic Markets journal published a paper that follows the design science research (DSR) paradigm to design and develop a tokenized bond prototype using the Ethereum blockchain protocol. The results highlight the capability of blockchain-based bond markets to reduce transactions costs in the three dimensions of asset specificity, uncertainty, and transaction frequency. However, this research doesn’t give a definitive answer on whether private or public networks should be utilized. For example, transaction throughput within the Ethereum protocol differs significantly compared to centralized systems, so possible congestion needs to be considered. [Read more at Electronic Markets]

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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.