Myanmar Central Bank to Introduce Digital Currency (Myanmar Now)
The Central Bank of Myanmar (CBM) reportedly plans to introduce a central bank digital currency to reduce the use of banknotes. The CBM has formed a committee of 13 members, including a deputy governor, to study and analyse the best methods, technologies, and regulatory frameworks to use in ensuring the successful introduction of the CBDC into the economy, as well as assess its potential impacts on payments systems and monetary policy. The committee will also be responsible for overseeing and maintaining the infrastructural foundations, funding, and regulation of the digital currency after it is introduced. [Read more at Myanmar Now]
Pakistan Planning CBDC Pilot (Ledger Insights)
The State Bank of Pakistan is reportedly planning a central bank digital currency (CBDC) pilot. Governor Jameel Ahmad said that the central bank is building up appropriate capacity and hoped to roll out a pilot soon. However, this should be taken with a grain of salt, since the central bank has twice before made false starts to CBDC work, most recently in 2023. [Read more at Ledger Insights]
RBA and DFCRC Project Acacia Update (RBA)
The Reserve Bank of Australia (RBA) and the Digital Finance Cooperative Research Centre (DFCRC) provided an update on Project Acacia. It will explore how different forms of digital money and associated infrastructure could support the development of wholesale tokenized asset markets in Australia. 19 pilot use cases, and 5 proof-of-concept use cases, have been conditionally selected for this next stage of the project to take place over six months. The use cases involve a range of asset classes, including fixed income, private markets, trade receivables and carbon credits. Proposed settlement assets for the use cases include stablecoins, bank deposit tokens, and pilot wholesale central bank digital currency (CBDC), as well as new ways of using banks’ existing exchange settlement accounts at the RBA. Issuance of pilot wholesale CBDC for testing use cases will occur on a range of private and public-permissioned distributed ledger technology (DLT) platforms. The Australian Securities and Investments Commission (ASIC) will provide regulatory relief to participants to support and streamline the pilot. [Read more at the RBA]
Stablecoins are Trending, But What Frictions and Risks are Getting Overlooked? (Atlantic Council)
The Atlantic Council published an article by Ashley Lannquist that discusses the growing popularity of stablecoins, while highlighting the risks and frictions. The article points out regulatory gaps, potential financial instability, and the lack of transparency in reserve backing, which could lead to liquidity crises if many users redeem stablecoins simultaneously. It also examines geopolitical concerns, such as the use of stablecoins to evade sanctions, and operational risks like cybersecurity threats. Also, despite their utility in cross-border payments and decentralized finance (DeFi), stablecoins’ value for everyday payments remains to be seen. [Read more at the Atlantic Council]
Latest Stablecoin Depeg Spotlights Need for Better Attestation (Ledger Insights)
Falcon USD (USDf), a crypto-backed, overcollateralized stablecoin issued by Falcon Finance, a subsidiary of DWF Labs experienced a depegging event, with its price dropping as low as $0.98 and briefly to $0.9432 before recovering to around $0.995. This incident has raised concerns about the transparency and quality of the collateral backing USDf, as well as the potential risk of a broader stablecoin crisis reminiscent of the Terra (LUNA) collapse. Critics and risk consultants have pointed to a lack of clarity regarding the composition and liquidity of USDf’s reserves, and have questioned its inclusion as collateral on DeFi lending platforms. In response to the depegging and growing scrutiny, DWF Labs’ CEO has pledged to provide a more detailed breakdown of the assets backing USDf. [Read more at Ledger Insights]
Why Banks Need Regulatory Clarity on Permissionless Blockchains (Fireblocks)
Fireblocks published an article about the regulatory barriers that prevent banks from effectively utilizing permissionless blockchains, despite their potential benefits. For example, Basel III’s emphasis on knowing all node operators results in a maximum 1250% risk weight for tokenized assets on public blockchains, making them approximately 12 times more expensive to hold than traditional assets. The article contends that these regulatory mismatches discourage banks from adopting infrastructure that could provide trust through decentralization, continuous innovation, and programmable finance capabilities. To address these challenges, the author advocates for more nuanced regulatory approaches that distinguish between different types of risks, focus on how banks actually use blockchain networks rather than the networks’ permission models, and recognize that governance and compliance controls can be embedded at the token or application layer rather than requiring control over the entire network infrastructure. [Read more at Fireblocks]
Upcoming Speaking Engagements:
The CB+DC Conference (Nassau, Bahamas, September 9-11) is a premier gathering centered on CBDCs, tokenized assets, and stablecoins. It provides a forum for central bankers, commercial bankers, technology innovators, policymakers, and academics to explore the latest advancements in digital currency, engage with experts and peers, and discuss the future of digital currency. [Register here but before you do, email me at john@kiffmeister.com for a 15% discount]
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.
