Eclipsing the Pyramid: Stablecoins and Settlement (JFMI)
The Journal of Financial Market Infrastructures (JFMI) published a paper by Clément Berthou and Xavier Lavayssière that examines stablecoins and the concept of a “settlement eclipse.” The paper shows how stablecoins circulate value globally without requiring traditional fiat redemption, leveraging quasi-bearer claims, programmable platforms, and crypto intermediaries. As a result, stablecoins produce a settlement eclipse, whereby a subordinate layer of the monetary hierarchy internalizes transfers at sufficient scale, and occults the settlement function of layers above it. Such phenomenon obscures systemic risks, transfers financial access control to private operators, and narrows policy options. Analogous occultation occurs when transfer volumes are internalized by large financial institutions, netted within private payment systems, or managed through nested correspondent banking chains. Ultimately, the authors position stablecoins within an emerging “tokenized monetary pyramid,” questioning whether this parallel structure will secure a direct public anchor or remain structurally subordinate to the traditional fiat system. [JFMI]
Project Ensemble Business Use Case Report (HKMA)
The Hong Kong Monetary Authority (HKMA) published a report that details the experiences gained from the first phase of its Project Ensemble that tested end-to-end use cases for settling digital asset transactions using experimental tokenized deposits settled using e-HKD wholesale central bank digital currency (CBDC). Although pilots across fixed income, liquidity management, green finance, and trade finance demonstrated atomic delivery-versus-payment execution, the anticipated efficiency gains face substantial friction. True straight-through processing remains constrained by legacy manual workflows, off-chain data lags, and an unproven critical mass. Furthermore, structural hurdles like potential bank liquidity strains and absent secondary market conventions threaten commercial scalability. In addition, the report acknowledges that policy shifts and regulatory interventions are required to support the viability of such new ecosystems. [HKMA]
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.
