Kiffmeister’s #Fintech Daily Digest (20221006)

Central Bank Digital Currency (CBDC): identifying appropriate policy goals and design for Nepal

Nepal Rastra Bank (NRB) published a concept report on central bank digital currency (CBDC) for public consultation. The report recommends that the NRB move forward in with CBDC issuance plans, with design focusing on four policy goals; improving access to payments, enhancing payment system resilience, reducing currency management costs, and promoting financial inclusion. It suggests that a retail, intermediated, semi-centralized infrastructure-based CBDC that is interoperable with other domestic payment systems, is most suitable for Nepal. Also, it should be unremunerated, available 24/7 hours, quantity restrictive, and programmable for broader usage options. The next steps is to set up a cross-functional dedicated team, to carry out the exhaustive and rigorous next steps. [Read more at the NRB]

Archetypes for a retail central bank digital currency

The Bank of Canada published a paper that proposes a common framework to analyze and compare the different possible CBDC designs, independent of vendor, platform and technology. It is based on five archetypes—common patterns that recur in system designs—and discuss their trade-offs from the perspective of privacy, compliance, visibility, scalability, resilience, extensibility, online and offline payments. The five archetypes are centralized, leaderless, macro-partitioned (money service businesses (MSBs) own and operate partitions), micro-partitioned (users maintain the different partitions) and direct (users directly provide their own oversight). The analysis suggests that a design based on a single archetype is unlikely to achieve all policy goals. [Read more at the Bank of Canada]

Europe finalizes landmark crypto rules

The Council of the European Union Permanent Representatives Committee approved the legal text for its  Markets in Crypto Asset Regulation (MiCA), marking a significant step in the journey towards a fully authorized and regulated crypto-asset market in Europe. The European Parliament’s Committee on Economic and Monetary Affairs will now vote to pass the final text on October 10, before a date is decided for the implementation of the regulation. [Read more at the Council of the European Union]

IMF releases the 2022 financial access survey results

The International Monetary Fund released the results of the 13th annual Financial Access Survey which presents the 2021 data and highlights the continued expansion in the use of digital financial services—considerably higher than pre-pandemic levels. The usage of digital financial services has also increased, with the value of mobile money transactions growing from about 40% of GDP to 70% in low-income countries, and the value of mobile and internet banking transactions increasing from 225% of GDP to 324% in middle-income countries between 2019 to 2021. [Read more at the IMF]

Tickets available for CBDC Think Tank masterclass

The CBDC Think Tank, in partnership with the IMF and George Washington University, is hosting a full-day in-person CBDC Masterclass on October 12 in Washington DC for “official sector” staff and academics active in the CBDC / digital currency space only. The sessions are designed as instructional deep dives with full presentations and Q&A components.  Tickets are $99. [Register here]

Also, the CBDC Think Tank, in partnership with Georgetown University and the DC FinTech Week, is hosting a FREE (also in-person) Digital Currency Lecture Series, a set of digital currency lightning talks delivered by subject matter experts, on October 14 in Washington DC. [Request an invite 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 chronicles@kiffmeister.com.

Kiffmeister’s #Fintech Daily Digest (20221005)

The Book of [Blockchain, Crypto and Web3] Jargon

Latham & Watkins LLP has published a very helpful interactive glossary of acronyms, slang, and blockchain, crypto and Web3 industry terminology. [Download at Latham & Watkins LLP]

SWIFT innovation paves way for global use of CBDCs and tokenized assets

SWIFT, working with Capgemini, has shown that central bank digital currencies (CBDCs) and tokenized assets can move seamlessly on existing financial infrastructure. The findings, from two separate experiments, bridged transactions between different distributed ledger technology (DLT) platforms (JPMorgan Quorum and R3 Corda) and real-time gross settlement systems. However, it appears that it still uses intermediaries for cross border payments, and and intermediaries are a significant cause of friction in the payment system. Fourteen banks will be involved in further experiments to scale the system. [Read more at SWIFT]

Privacy in cross-border digital currency: A transatlantic approach

The Atlantic Council published an article illustrating how various technical design choices can affect the privacy and transparency of cross-border CBDCs. Many of the cross-border CBDC pilot studies to date have adopted the technical designs provided by enterprise DLT platforms. However, some of these designs make tradeoffs regarding privacy, efficiency, and/or security. Whether these tradeoffs are acceptable is a matter of policy, and requires coordination between different regulators and central banks. [Read more at the Atlantic Council]

Smart Contracts Could Improve Efficiency And Transparency In Financial Transactions

S&P Global has published a smart contract explainer. Using smart contracts in financial transactions can improve efficiency and reduce reliance on third parties like asset servicers and custodians, as well as make transaction resolutions faster–enhancing creditworthiness and the integrity of business dealings. However, smart contracts have had slow and limited adoption in the financial markets owing to key risks including technology issues (such as incorrect coding) and legal and regulatory ambiguities that make accountability difficult. [Read more at S&P Global]

Tickets available for CBDC Think Tank masterclass

The CBDC Think Tank, in partnership with the IMF and George Washington University, is hosting a full-day in-person CBDC Masterclass on October 12 in Washington DC for “official sector” staff and academics active in the CBDC / digital currency space only. The sessions are designed as instructional deep dives with full presentations and Q&A components.  Tickets are $99. [Register here]

Also, the CBDC Think Tank, in partnership with Georgetown University and the DC FinTech Week, is hosting a FREE (also in-person) Digital Currency Lecture Series, a set of digital currency lightning talks delivered by subject matter experts, on October 14 in Washington DC. [Request an invite 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 chronicles@kiffmeister.com.

Kiffmeister’s #Fintech Daily Digest (20221003)

Tether Increases US Treasury Portfolio, Cuts Commercial Paper Holdings to Below $50M

Tether has cut its commercial paper holding to less than $50 million, as of September 30, and increased its holding of U.S. Treasuries to 58.1% of its total portfolio from 43.5% of its total portfolio as of June 30, according to a Tweet by its Chief Technology Officer, Paolo Ardoino. [Read more at CoinDesk]

Bigtech regulation: in search of a new framework

The Bank for International Settlements (BIS) published a paper on two potential Bigtech regulatory models. The first is segregation, which is a structural approach that seeks to minimize risks arising from group interdependencies between financial and non-financial activities by imposing specific ring-fencing rules. The second is inclusion, that creates a new regulatory category for Bigtech groups with significant financial activities. The paper concludes that the inclusion approach provides for a more tailored option to address specific risks associated with Bigtech business models. [Read more at the BIS]

Tickets available for CBDC Think Tank masterclass

The CBDC Think Tank, in partnership with the IMF and George Washington University, is hosting a full-day in-person CBDC Masterclass on October 12 in Washington DC for “official sector” staff and academics active in the CBDC / digital currency space only. The sessions are designed as instructional deep dives with full presentations and Q&A components.  Tickets are $99. [Register here]

Also, the CBDC Think Tank, in partnership with Georgetown University and the DC FinTech Week, is hosting a FREE (also in-person) Digital Currency Lecture Series, a set of digital currency lightning talks delivered by subject matter experts, on October 14 in Washington DC. [Request an invite 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 chronicles@kiffmeister.com.

Kiffmeister’s #Fintech Daily Digest (20221002)

Scotland Release CBDC On XRP Ledger (Fake News)

Over the last few weeks various crypto news sites have been reporting that the Scottish central bank is planning to issue a central bank digital currency (CBDC). This is obviously fake news because Scotland is part of the United Kingdom and the Bank of England is the U.K.’s central bank. But I will hand it to the perpetrators, as there is even a fairly official-looking Scottish Reserve Bank ready to step in if Scotland was to become independent in the event of a “yes” (to leaving the U.K.) vote in the proposed 2023 referendum.

The CBDC story revolves around a Scottish crypto startup called “ALBA” that has created a cross border settlements currency in collaboration with the Scottish Central Bank. However, I found no reference to this project on the Reserve Bank website, and the Alba website seems to be dead (“this store is unavailable”). According to Wikipedia, Alba was the name of the Kingdom of Scotland between the deaths of Donald II in 900 and of Alexander III in 1286, and there is an Alba political party advocating for Scottish political independence from the U.K..

And unsurprisingly, what is getting the crypto news machine excited about a Scottish CBDC, is that Alba (the purported crypto startup) is reportedly creating it on an XRP-based ledger. And of course, any mention of XRP is sure to spread like wildfire because of the very active XRP fanboy/girl community!

Tickets available for CBDC Think Tank masterclass

The CBDC Think Tank, in partnership with the IMF and George Washington University, is hosting a full-day in-person CBDC Masterclass on October 12 in Washington DC for “official sector” staff and academics active in the CBDC / digital currency space only. The sessions are designed as instructional deep dives with full presentations and Q&A components.  Tickets are $99. [Register here]

Also, the CBDC Think Tank, in partnership with Georgetown University and the DC FinTech Week, is hosting a FREE (also in-person) Digital Currency Lecture Series, a set of digital currency lightning talks delivered by subject matter experts, on October 14 in Washington DC. [Request an invite 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 chronicles@kiffmeister.com.

Kiffmeister’s #Fintech Daily Digest (20221001)

I have updated my tabulation of central bank digital currency (CBDC) explorers with information gleaned from the IMF’s excellent survey-based “Towards CBDCs in Asia and the Pacific: Results of a Regional Survey” Fintech Note. As I reported yesterday, it confirmed that Fiji, Vanuatu, Solomon Islands and Tonga are conducting CBDC feasibility studies with Soramitsu, a Japan-based private-sector technology platform provider. In addition, the note confirmed that Sri Lanka is researching CBDC, and uncovered Mongolia as another CBDC explorer. [Click here to see the updated table]

Iran’s Central Bank Unveils RamzRial

More details are being reported on the central bank digital currency (CBDC) pilot reportedly launched by Iran’s central bank. It’s reportedly a partnership with two local banks (Bank Melli and Mellat Bank) that have have given 1 billion tomans ($311,000) to a limited number of people, and two shops have been designated for the use of the currency. [Read more at Iranwire]

AML by design: Designing a central bank digital currency to stifle money laundering

This article explores how technical CBDC design choices can be used to make a CBDC inherently resistant to money laundering. These design choices not only further anti-money laundering (AML), but they can also help to better balance AML priorities with other goals including financial inclusion, privacy and compliance costs. Moreover, CBDCs provide an opportunity to measure the effectiveness of different design choices in real time. These measurements can facilitate the iterative redesign of CBDCs to identify optimal approaches to meeting regulatory objectives. [Read more at the MIT Science Policy Review]

Tickets available for CBDC Think Tank masterclass

The CBDC Think Tank, in partnership with the IMF and George Washington University, is hosting a full-day in-person CBDC Masterclass on October 12 in Washington DC for “official sector” staff and academics active in the CBDC / digital currency space only. The sessions are designed as instructional deep dives with full presentations and Q&A components.  Tickets are $99. [Register here]

Also, the CBDC Think Tank, in partnership with Georgetown University and the DC FinTech Week, is hosting a FREE (also in-person) Digital Currency Lecture Series, a set of digital currency lightning talks delivered by subject matter experts, on October 14 in Washington DC. [Request an invite 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 chronicles@kiffmeister.com.

Jurisdictions Where Retail CBDC Is Being Explored

There now 91 central banks that have recently issued, piloted, experimented with and/or researched retail central bank digital currency (#CBDC) not including two that started issuing retail CBDC and then shut the platforms down (Ecuador and Finland). If I’m missing anything, or you find mistakes in the tabulation, please let me know in the comments!

Kiffmeister’s #Fintech Daily Digest (20220930)

Towards CBDCs in Asia and the Pacific: Results of a Regional Survey

The IMF published a Fintech Note that, drawing on survey responses from 34 Asian economies and country case studies, takes stock of recent developments related to central bank digital currencies (CBDCs) and crypto-assets in Asia. The survey finds that there is significant heterogeneity in terms of stage of development, but the emergence of private crypto assets has created an impetus to consider CBDCs. While most countries are engaged in research and development, with some at advanced stages of testing and pilots, very few countries are likely to issue CBDCs in the near-to-medium term, reflecting the still considerable uncertainties. Still, country experiences so far provide some key insights for others in their journey in this area. [Download at the IMF]

Importantly for my CBDC tracking, the IMF report confirmed that Laos, Fiji, Vanuatu, Solomon Islands and Tonga are conducting CBDS feasibility studies with Soramitsu, a Japan-based private-sector technology platform provider. Here are the specifics:

Banks’ Crypto Asset Holdings May Be Just 0.01% of Total Risk Exposure, Basel Study Finds

The world’s largest banks are exposed to about 9.4 billion euros of crypto-assets, a study by the Basel Committee on Banking Supervision (BCBS) found. The exposure, mainly client services involving bitcoin (BTC) and ether (ETH), represents 0.14% of the total exposure to risk from the 19 banks who sent in data. Exposures are distributed unevenly across reporting banks, with two banks making up 53% of overall crypto-asset exposures, and four more making up 39% of the remaining exposures. [Read more at the BIS]

The “CBDC Design Trilemma

The Digital Euro Association [DEA] published a blog on a CBDC design trilemma. The “Blockchain Trilemma”, is a term used to describe the challenge of increasing performance, security, and decentralization at the same time. Current enterprise blockchains are not truly decentralised. They may be structurally decentralised, but are operationally centralised. By reversing this, having structurally centralised, but operationally decentralised architecture, a CBDC can achieve a high-performance blockchain. However, any blockchain-based CBDC should not only solve the blockchain trilemma, but also the CBDC design trilemma, which notes that identity, privacy, and programmability cannot be easily enhanced at the same time. A CBDC cannot ignore privacy for the sake of achieving legal compliance and implementing programmable money. From an expertise point of view, the answer to this trilemma is the use of a decentralized identity system such as self-sovereign identity (SSID) to find the perfect equilibrium for the CBDC design trilemma. Self-sovereign identity is very popular for its advanced privacy protection. By having an SSID-based blockchain system, a CBDC can incorporate both privacy and transparency into the blockchain-based CBDC system. Additionally, a use of zero-knowledge encryption to protect the transaction privacy of blockchain data is highly recommended for any CBDC implementation. [Read more at the DEA]

Tickets available for CBDC Think Tank masterclass

The CBDC Think Tank, in partnership with the IMF and George Washington University, is hosting a full-day in-person CBDC Masterclass on October 12 in Washington DC for “official sector” staff and academics active in the CBDC / digital currency space only. The sessions are designed as instructional deep dives with full presentations and Q&A components.  Tickets are $99. [Register here]

Also, the CBDC Think Tank, in partnership with Georgetown University and the DC FinTech Week, is hosting a FREE (also in-person) Digital Currency Lecture Series, a set of digital currency lightning talks delivered by subject matter experts, on October 14 in Washington DC. [Request an invite 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 chronicles@kiffmeister.com.

Kiffmeister’s #Fintech Daily Digest (20220929)

ECB provides update on its digital euro work

The European Central Bank (ECB) provided a status report on its central bank digital currency (CBDC) work. It confirmed that a digital euro would incorporate individual user holding limits to slow the possible conversion of bank deposits into digital euro  (disintermediation risk). A digital euro would also bear interest calibrated to make digital holdings above a certain threshold unattractive compared to other highly liquid low-risk assets.  Offline payments will only be allowed for low value, low risk, close proximity transactions. [Read the report here] In addition, ECB board member Fabio Panetta set out a plan for a digital euro scheme involving a set of rules, practices and standards with plans to start working on a rulebook. [Read the plan here]

Digital Currency: Yuan comes with an expiry date: Spend or it will vanish

China is reportedly exploring putting expiration dates on its e-CNY retail CBDC, which could force holders to use it up by a certain date. This idea has most recently been explored in a Celo working paper that advocated using expiration dates to increase the “velocity” of money, based on an an unconventional monetary policy instrument known as a Gesell money. [Read more at the Economic Times]

Bank of England: FMI Sandbox will start with DLT securities post trade

The Bank of England announced that the U.K.’s Financial Market Infrastructure (FMI) Sandbox would initially focus on distributed ledger technology (DLT) based securities settlement systems. The Sandbox is a joint initiative between HM Treasury, the Bank of England and the Financial Conduct Authority. [Read more at the Bank of England]

ERC-20R and ERC-721R: Reversible Transactions on Ethereum

This paper proposes reversible versions of ERC-20 and ERC-721, whereby a transaction is eligible for reversal for a short period of time after it has been posted on chain. After the dispute period has elapsed, the transaction can no longer be reversed. Within the short dispute period, a sender can request to reverse a transaction by convincing a decentralized set of judges to first freeze the disputed assets, and then later convincing them to reverse the transaction. The paper provides a prototype implementation. [Read more at arxiv.org]

Tickets available for CBDC Think Tank masterclass

The CBDC Think Tank, in partnership with the IMF and George Washington University, is hosting a full-day in-person CBDC Masterclass on October 12 in Washington DC for “official sector” staff and academics active in the CBDC / digital currency space only. The sessions are designed as instructional deep dives with full presentations and Q&A components.  Tickets are $99. [Register here]

Also, the CBDC Think Tank, in partnership with Georgetown University and the DC FinTech Week, is hosting a FREE (also in-person) Digital Currency Lecture Series, a set of digital currency lightning talks delivered by subject matter experts, on October 14 in Washington DC. [Request an invite 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 chronicles@kiffmeister.com.

Kiffmeister’s #Fintech Daily Digest (20220928)

Project Icebreaker: Central banks of Israel, Norway and Sweden team up with the BIS to explore retail CBDC for international payments

The Bank for International Settlements (BIS) and the central banks of Israel, Norway and Sweden are launching Project Icebreaker, a joint exploration of how central bank digital currencies (CBDCs) can be used for international retail and remittance payments. using a hub-and-spoke model. The project will run through the end of the year, with a final report expected in the first quarter of 2023. [Read more at the BIS]

CBDC pilots and research, lessons for the digital euro

The Digital Euro Association published a very nice summary of the current state of play in the CBDC space. It’s part of a series of articles, this first one providing a general overview of global CBDC projects, motivations, with a particular focus on the Bahamas, China, Eastern Caribbean Union, Nigeria and Russia. Subsequent articles in this series will provide a deeper understanding of CBDC research and development in countries with different challenges and policy objectives. The articles will highlight that there is no one-size-fits-all approach to CBDC, but that CBDC solutions must be based on the needs and challenges of each country. [Read more at the DEA]

ESMA not planning blockchain securities rule changes before DLT pilot regime starts

The European Securities and Markets Authority (ESMA) says there is no need for new regulatory technical standards before the start of the European Union’s distributed ledger technology (DLT) pilot regime in March 2023. The regime aims to reduce the regulatory burden to enable blockchain-based securities trading and settlement to be trialed at scale and provide legal certainty. Tokenized stocks, bonds and investment funds fall within the DLT Pilot regime and have monetary limits. [Read more at Ledger Insights]

FCA green lights Revolut, making no UK crypto firms operating under temporary status

The UK Financial Conduct Authority (FCA) has added crypto-friendly payments app Revolut to its list of companies authorized to offer crypto products and services in the country. Revolut was among a small number of entities granted an extension to the FCA’s temporary cryptocurrency licensing program in March 2022. It was the last company on this list as other applicants withdrew their requests, were refused registration, or had their licenses granted before the end of June. [Read more at CoinTelegraph]

France’s CBDC Projects to Manage DeFi Liquidity, Settle Tokenized Assets

The Banque de France announced two new wholesale CBDC projects. The first will look at improving CBDC market liquidity management in decentralized finance (DeFi), such as via automated market makers. The second will focus on issuing and distributing tokenized bonds on a blockchain. [Read more at the Banque de France]

Tickets available for CBDC Think Tank masterclass

The CBDC Think Tank, in partnership with the IMF and George Washington University, is hosting a full-day in-person CBDC Masterclass on October 12 in Washington DC for “official sector” staff and academics active in the CBDC / digital currency space only. The sessions are designed as instructional deep dives with full presentations and Q&A components.  Tickets are $99. [Register here]

Also, the CBDC Think Tank, in partnership with Georgetown University and the DC FinTech Week, is hosting a FREE (also in-person) Digital Currency Lecture Series, a set of digital currency lightning talks delivered by subject matter experts, on October 14 in Washington DC. [Request an invite 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 chronicles@kiffmeister.com.

Kiffmeister’s #Fintech Daily Digest (20220927)

First Project mCBDC Bridge Pilot Complete

Project mBridge is a prototype real-time cross-border payments platform based distributed ledger technology (DLT) and multiple central bank digital currencies (CBDCs) developed by the Bank for International Settlements Innovation Hub and four central banks. The first pilot is now complete, with over $12 million in value issued onto the platform facilitating over 160 cross-border payments and FX transactions totaling more than $22 million in value between 20 participating commercial banks over the course of a month. A detailed report will be released in October. [Read more on LinkedIn]

Central Bank Digital Currency: Financial Inclusion vs. Disintermediation

The Dallas Fed published a working paper that analyzes the impact of introducing a central bank digital currency (CBDC) on financial inclusion, and its potential adverse effect on bank funding. The paper highlights the role of two design parameters: the fixed cost of CBDC usage and the interest rate it pays, and derive principles for maximum inclusion and for mitigating the inclusion-intermediation trade-off. Agents’ choice of money instrument is endogenously driven by income heterogeneity. Pre-CBDC, wealthier agents adopt deposits, while poorer agents adopt cash and remain unbanked. CBDCs with low fixed costs (and low interest rates) are adopted by cash holders and directly increase inclusion. CBDCs with high fixed costs (and high interest rates) are adopted by deposit holders and increase inclusion by raising deposit rates. The former allows for more favorable inclusion-intermediation trade-offs. [Read more at the Dallas Fed]

 

Regulating the crypto ecosystem: The case of unbacked crypto assets

The International Monetary Fund (IMF) published a Fintech Note that recommends that global bodies work to develop common crypto-asset taxonomies that can inform global and cross-sectoral standards while improving data insights. Standards should be risk-based, with greater requirements on entities and activities that generate more risk. Crypto asset service providers that deliver core functions and generate key risks should be licensed, registered, or authorized. [Read more at the IMF]

Regulating the crypto ecosystem: The case of stablecoins

The IMF published a Fintech Note that provides key elements that should feature in any stablecoin regulatory arrangement. Global regulation for stablecoins should be comprehensive, consistent, risk-based, flexible, and focus on their structural features and use. Requirements on stablecoins should cover the entire ecosystem and all its key functions, and there should be additional oversight for systemic stablecoin arrangements. In markets where risks are growing quickly, authorities should take immediate action by using all the tools at their disposal. For effective implementation, domestic and international collaboration are key. [Read more at the IMF]

Distributed ledger technology (DLT) options for CBDC

The Swiss National Bank’s Thomas Moser was one of the authors of a paper on the options for designing CBDCs using distributed ledger technology (DLT). It analyzes the various structures for implementation offered by DLT – public, permissioned and private – and the implications that each has for the central bank and the existing financial system. While a CBDC built on an open, permissionless system would provide the full functionality offered by DLT, it is also far more disruptive to the existing financial system and consequently requires more new infrastructure on the part of the central bank. Within the current DLT landscape, public-private partnerships offer the most practical and efficient means of building a DLT-based CBDC. A selection of existing DLT providers able to support a CBDC is also discussed. [Read more at SSRN]

The impact of fintech lending on credit access for U.S. small businesses

The Bank for International Settlements (BIS) published a working paper that explores the characteristics of pre-pandemic (2016-2019) small business lending (SBL) in the United States, using proprietary loan-level data from two fintech SBL platforms (Funding Circle and LendingClub). The results show that fintech SBL platforms lent more in zip codes with higher unemployment rates and higher business bankruptcy filings. Moreover, fintech platforms’ internal credit scores were able to predict future loan performance more accurately than the traditional approach to credit scoring, particularly in areas with high unemployment. Overall, fintech lenders have a potential to create a more inclusive financial system, allowing small businesses that were less likely to receive credit through traditional lenders to access credit and to do so at lower cost. [Read more at the BIS]

Tickets available for CBDC Think Tank masterclass

The CBDC Think Tank, in partnership with the IMF and George Washington University, is hosting a full-day in-person CBDC Masterclass on October 12 in Washington DC for “official sector” staff and academics active in the CBDC / digital currency space only. The sessions are designed as instructional deep dives with full presentations and Q&A components.  Tickets are $99. [Register here]

Also, the CBDC Think Tank, in partnership with Georgetown University and the DC FinTech Week, is hosting a FREE (also in-person) Digital Currency Lecture Series, a set of digital currency lightning talks delivered by subject matter experts, on October 14 in Washington DC. [Request an invite 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 chronicles@kiffmeister.com.