Bipartisan US Housing Bill Bans Retail CBDC until 2030 (Senate Banking Committee)
The U.S. Senate Banking Committee and House Financial Services Committee released the latest text of the 21st Century ROAD to Housing Act, with backing from the leading Republicans and Democrats on both committees, which includes a ban on central bank digital currency (CBDC) until December 31, 2030. The Act defines a CBDC as a U.S. dollar‑denominated direct Federal Reserve liability widely available to the general public. The text explicitly carves out wholesale CBDC and tokenized reserves (“any dollar-denominated currency that is open, permissionless, and private, and fully preserves the privacy protections of U.S. coins and physical currency. The Senate and the House are expected to formally pass the bill within weeks, and the President is expected to sign the bill once passed. [Senate Banking Committee]
HKEX and HKMA Launch Wholesale CBDC Pilot Project to Facilitate After-Hours Derivatives Trading (HKMA)
Hong Kong Exchanges and Clearing Limited (HKEX) and the Hong Kong Monetary Authority (HKMA) will run a joint pilot using e‑HKD wholesale central bank digital currency (CBDC) operating on a 24/7 basis to fund advance margin for derivatives after‑hours trading while keeping existing operational workflows unchanged. The aim is to improve flexibility and efficiency versus the current cut‑off, under which clearing participants must submit advance margin deposit requests to Hong Kong Futures Exchange Clearing Corporation (HKCC) by 15:00 for them to count toward the after‑hours session. Participants in HKCC can optionally conduct real‑value trial transactions, with broader adoption contingent on regulatory approval and market readiness. [HKMA]
The Trade-Offs Between Different Designs of Tokenized Systems (BoC)
The Bank of Canada (BoC) posted a blog that argues that tokenized systems’ core features—programmability and openness—are not unique to decentralized architectures and can be implemented on centralized platforms as well. It defines design space along two dimensions: validation (centralized, decentralized permissioned, decentralized permissionless) and access (public versus private), and emphasizes that trust models, not “blockchain” per se, determine who controls the ledger and visibility of state. The authors frame the key trade-off as performance versus transparency: centralized systems maximize throughput but minimize transparency; decentralized permissionless systems do the opposite; decentralized permissioned systems sit in between. [BoC]
Digital Assets and Derivatives: Where Next? (ISDA)
The International Swaps and Derivatives Association (ISDA) published a paper that argues digital assets can be integrated into derivatives markets at institutional scale if settlement, collateral and prudential frameworks are engineered to fit existing regulatory regimes rather than rebuilt from scratch. The paper documents how distributed ledger settlement, continuous margining and portfolio compression can reduce exposure persistence and x‑value adjustment (XVA) type capital charges by roughly 40–45% for a stylized crypto derivatives portfolio, even with unchanged market risk. It emphasizes that balance-sheet efficiency is constrained less by token design than by legal finality, collateral enforceability, exposure recognition under Basel crypto standards and the availability of cash‑leg settlement assets such as tokenized deposits or wholesale central bank digital currencies. Key unresolved issues include conflicts of law for on‑chain property rights, heterogeneous margin model treatment of crypto exposures, limited margin period of risk grade liquidation channels for digital collateral and the need for common standards like the Common Domain Model to avoid infrastructure fragmentation. [ISDA]
Data Externalities, Market Power, and the Optimal CBDC Design (BoC)
The Bank of Canada (BoC) published a paper by Cheng, Davoodalhosseini, Chiu, and Jiang that shows that central bank digital currency (CBDC) economics is complicated by private payment service provider (PSP) transaction data harvesting and sale. A well-designed CBDC should collect some transaction data itself — for fraud detection and financial crime monitoring — but not sell it. Counterintuitively, a U.S.-calibrated model finds that introducing a CBDC would increase rather than reduce PSP data collection, because PSP market power currently dominates – i.e., public competition pushes PSPs to expand their customer base, raising aggregate data output. The reverse holds if PSP competition intensifies, in which case a CBDC designed to curb data monetization would shrink PSPs’ market share and reduce aggregate data production. [BoC]
Stablecoin Remuneration on Centralized Crypto-Asset Exchanges (BIS)
The BIS published a paper by Huang, Tarashev and Wang that argues that the way that crypto exchanges remunerate customer stablecoin holdings drives very different macrofinancial effects. Exchanges either pass through income from low‑risk reserve assets (“reserve-based” remuneration) or use revenues from lending, margin finance and trading (“activity-based”). In the reserve‑based case (e.g., Coinbase), stablecoin remuneration closely tracks policy rates, while in the activity‑based case (e.g., Binance) yields are highly volatile and tied to crypto market conditions and funding demand. Econometric decompositions show crypto‑activity shocks dominate benchmark‑rate shocks in explaining activity‑based yields, especially during 2024 rallies. If stablecoins scale, either of these remuneration models could alter bank and money‑market funding, introduce boom‑bust dynamics and run risks, and reshape monetary policy transmission, with regulatory capital and liquidity requirements a key open mitigant. [BIS]
BTW if you want to see a complete database of my DFC-related posts going back years, including many that didn’t make the Daily Digest cut, click here.
FYI I produce a monthly digest of digital fiat currency (DFC) developments exclusively for the official sector (e.g., central banks, ministries of finance and international financial institution (e.g., the BIS, IMF, OECD, World Bank)) plus academics and firms that are active in the DFC space (commercial banks, technology providers, consultants, etc.). (DFCs include central bank digital currency (CBDC), stablecoins and tokenized deposits.) It goes out via email on the first business day of every month, and if you’re interested in being on the mailing list, please email me at john@kiffmeister.com.
