I’ve updated my tabulation of the 93 central banks that have recently issued, piloted, experimented with and/or researched retail central bank digital currency (CBDC). The updates since the last update are mainly minor, including fixing broken links. [Download the tabulation here]
Circle to ‘stand behind’ USDC, cover $3.3 billion shortfall held in Silicon Valley Bank
USDC stablecoin issuer Circle announced that it will “cover any shortfall” caused as a result of the $3.3 billion in its funds held by the collapsed Silicon Valley Bank (SVB). Circle said it is legally obliged to “stand behind” USDC and will cover any shortfall using corporate resources—and external capital if necessary. USDC is currently collateralized 77% ($32.4 billion) with short-term U.S. Treasury Bills and 23% ($9.7 billion) with commercial bank deposits ($5.4 billion with BNY Mellon, $3.3 billion at SVB, and $1 billion at Consumer Bank). Circle also maintains USDC transaction and settlement accounts with Signature Bank. [Read more at Decrypt]
The day before the California Department of Financial Protection and Innovation shut SVB down and appointed the Federal Deposit Insurance Corporation (FDIC) as receiver (Thursday, March 9, 2023), Circle initiated transfers of the $3.3 billion held at SVB to other banks. Though these transfers remained unsettled when SVB was closed down (Friday, March 10), Circle believes that under FDIC policy, transfers initiated prior to a bank entering receivership should be processed normally. Hence, they are confident that the full $3.1 billion will be returned. Meanwhile, Coinbase says it will re-commence USDC:USD conversions when banks re-open (Monday, March 13). [Read more at Coinbase]
Interestingly, FDIC Chairman Gruenberg gave a speech on March 6 now seems quite prescient:
The current interest rate environment has had dramatic effects on the profitability and risk profile of banks’ funding and investment strategies. First, as a result of the higher interest rates, longer term maturity assets acquired by banks when interest rates were lower are now worth less than their face values. The result is that most banks have some amount of unrealized losses on securities. The total of these unrealized losses, including securities that are available for sale or held to maturity, was about $620 billion at yearend 2022. Unrealized losses on securities have meaningfully reduced the reported equity capital of the banking industry. The good news about this issue is that banks are generally in a strong financial condition, and have not been forced to realize losses by selling depreciated securities. On the other hand, unrealized losses weaken a bank’s future ability to meet unexpected liquidity needs. That is because the securities will generate less cash when sold than was originally anticipated, and because the sale often causes a reduction of regulatory capital.
Upcoming conferences, webinars and speaking engagements:
- I’ll be providing an introduction to global CBDC developments (virtually) to a panel at the March 15 Digital Euro Association (DEA) Digital Money Academy with Ruslan Konurbayev National Bank of Kazakhstan) , and Péter Fáykiss (Maygar Nemzeti Bank). [Register here]
- I’ll be on a “public finance and the digital future” panel at the March 23-25 Willamette College of Law “Our Money, Our Future” (Hybrid) Conference in Salem, Oregon on March 24. [Register here]
- I’ll be moderating the “CBDCs, Stablecoins, Commercial Bank Money Tokens – What is the Future of Money?” panel discussion at the Digital Euro Association (DEA) Digital Euro Conference on March 31 in Frankfurt. [Register with this link and the DECKIFFMEISTER20 code and get a 20% discount]
- I’ll be moderating a panel on “what happens when the lights go out…different schemes for offline functionality” at the in-person Digital Currency Conference (DCC) in Mexico City on May 18. [Register here]
Kiffmeister’s global central bank digital currency monthly monitor
Just a reminder that I produce a monthly digest of central bank digital currency (CBDC) developments exclusively for the official sector. So for any of you out there who work for a central bank, ministry of finance or international financial institution 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 email@example.com.
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