Category Archives: CBDC

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Bank of Korea to Research CBDC as Part of 2020 Monetary Policy

BOK to organize taskforce for CBDC research

  • The Central Bank of Korea is planning to appoint a taskforce dedicated to CBDC research
  • The Monetary Policy for 2020 covers research for DLT, crypto assets and CBDC

As reported by local news outlet Korea Times, the Bank of Korea (BOK) is planning to set up a taskforce exclusively for CBDC research, following the crypto boom which has garnered the attention of several central banks from around the world. BOK also plans to recruit additional CBDC experts as Hong Kyung-Sik, head of the central bank’s payment and settlement systems department, said that the bank is considering the issuance of digital currency, although not anytime soon.

As of now, the BOK underscored its priority to strengthen efforts for the CBDC research. The bank said:

“We will actively engage in discussions with the Bank for International Settlements (BIS) and other international organizations, keeping an eye on CBDC development at other central banks.”

South Korea is actively trying to extend support for adequate research into emerging technologies. As part of the Monetary Policy for 2020, BOK said that it will keep up the research work on emerging technologies and innovations, such as distributed ledger technology, crypto assets and CBDC, to tighten the security of settlement systems.

Several countries are showing a keen interest in CBDC, of late. The People’s Bank of China (PBoC) will soon get on board with the testing and promotion of the digital currency in the cities of Shenzhen and Suzhou, sometime in 2020. France will also begin testing of CBDC in early 2020.

 

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The Bahamas Launching Sand Dollar

  • The Bahamas is finally launching their Central Bank Digital Currency, and it is called the Sand Dollar

The Central Bank of the Bahamas has announced that their blockchain-based Central Bank Digital Currency (CBDC) is officially launching as of today, 27 December, and it will be called the Sand Dollar. This new CBDC will begin in a pilot phase in Exuma, with the pilot expected to last through the first half of 2020.

The Sand Dollar will be pegged 1:1 to the Bahamian Dollar (BSD), and the BSD itself is pegged 1:1 with the USD. Therefore, the Sand Dollar is a blockchain-based stablecoin that is interchangeable with the BSD and the USD.

The Bahamian government says they are launching the Sand Dollar to improve financial inclusion and access and to make domestic payments more efficient and non-discriminatory.

As the pilot phase of the Sand Dollar progresses, the Bahamian government plans on promoting a new regulatory framework for digital currency and to strengthen consumer protection. Once regulations are ready the Sand Dollar will become available across the Bahamas for banks, individuals, and corporations.

 

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Ghana May Launch National Digital Currency in Near Future

  • Ghana central bank will lead a pilot of a national blockchain-based digital currency likened to a stablecoin
  • Ghana recorded 1.4 billion Mobile Money transactions in 2018, with e-payments booming in the country

The Governor of the Bank of Ghana, Ernest Addison, has announced that the Central Bank and key stakeholders are piloting a digital currency in a sandbox environment, and may release a national digital currency called the e-cedi in the near future. This puts Ghana among a growing list of countries that have announced their interest in launching a Central Bank Digital Currency (CBDC), including China, United States, Marshall Islands, Turkey, and Iran, among others.

Addison commented: “The digital age provides enormous potential for the financial sector to re-orient itself to satisfy the new consumer and business demands for financial services”.

As with other CBDCs, Ghana’s digital currency would likely use blockchain technology and be similar to a stablecoin, with citizens being able to exchange e-cedi for regular fiat cedi. The benefit of blockchain technology is that it provides cryptographic security, everything can be tracked from a single distributed ledger which increases trust in the system, and transactions are instant. Also, a permissioned blockchain can be used by the government to stay in control of the flow of digital currency.

Ghana has already seen growth in the electronic payments sector, with a nationwide service called Mobile Money seeing a volume increase from 982 million transactions in 2017 to 1.4 billion transactions in 2018.

 

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US Federal Reserve Experimenting with Blockchain-Based Dollar

The United States Federal Reserve, which is the Central Bank of the USA and one of the most powerful organizations in the world, has revealed that they are experimenting with a blockchain-based digital dollar, also known as a central bank digital currency (CBDC).

Federal Reserve Chairman Jerome Powell indicates that while the organization is not currently developing a CBDC, it is conducting small-scale experiments with blockchain technology to gain hands-on experience, to better understand the opportunities and limitations of a CBDC in the United States. Also, the legal concerns surrounding a potential digital dollar are being explored, including monetary and payment policies, financial stability, supervision and operational issues, and vulnerability to hacking.

One of the main legal questions is the degree of anonymity that users would be allowed to have, while simultaneously maintaining anti-money laundering (AML) standards.

The news of the Federal Reserve experimenting with blockchain technology is simultaneous with China’s persistent announcements that a digital Yuan (CNY) is coming soon. Some lawmakers in the United States are fearful that they will miss out on an opportunity to revolutionize the world financial system, and that the USD could lose its global reserve currency status if China launches their CBDC and the Federal Reserve does nothing.

 

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https://cointelegraph.com/news/tunisia-to-launch-e-dinar-national-currency-using-blockchain

Tunisia Announces Launch of Central Bank Digital Currency

https://cointelegraph.com/news/tunisia-to-launch-e-dinar-national-currency-using-blockchain

The Central bank of Tunisia has announced the launch of its digital currency in partnership with Russian Startup Universa Blockchain. The digitized Tunisian Dinar will be called E-Dinar.

A percentage of every transaction will be received by Universa which it justifies by saying that the cost of issuing the digital currency will be ‘100 times cheaper’ than issue of liquid money. Moreover they will not have access to any encryption keys or permission to see records.

According to Universa CEO Alexander Borodich, the fee is worth it because:

“Electronic banknotes cannot be faked – each such banknote, like the paper version, is protected by cryptography, it, like the paper counterpart, has its own digital watermarks. And the production of such a banknote is 100 times cheaper than wasting ink, paper, electricity for the printing press.”

It is important to note here that this digital currency is not a cryptocurrency. It is going to be issued by the Central bank whereas a cryptocurrency has to be mined by an individual. The details of every transaction will be available to the central bank. This means that Tunisia’s digital currency, like cryptocurrencies, is traceable and protected but unlike cryptocurrencies, it is state-owned.

Although Tunisia is the first country to issue digital currencies, as reported by BitcoinNews previously, countries such as Canada and Singapore have also hinted their efforts towards digitizing their respective currencies.

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Bank of Japan: We’d Have to Drop Cash for State Crypto

Bank of Japan: We'd Have to Drop Cash for State Crypto

Reuters reports that the Bank of Japan (BoJ) has distinctly struck out the use of so-called central bank digital currencies (CBDC) in the Far East country, since choosing to adopt a state-owned crypto would come at the expense of cash, including the Japanese yen.

Central bank official and deputy governor Masayoshi Amamiya had told Reuters that there was little to believe that CBDCs would help make negative interest rate policies, such as in Japan, more effective.

According to Amamiya, should Japan’s central bank issue a digital yen at current negative interest rates, this effectively means that all businesses and individuals holding the crypto would be charged the rate, providing them no incentive to hold it and probably hold cash instead. He said:

“To overcome the nominal zero lower bound, central banks would need to eliminate cash. Eliminating cash would make settlement infrastructure inconvenient for the public, so no central bank would do this.”

He also said that the uncertainties around conventional commercial banking means there was no space for CBDCs now:

“If central bank digital currencies replace private deposits, that could erode commercial banks’ credit channels and have a negative impact on the economy.”

About a year ago in April, the same official already ruled out any plans for issuing CBDCs directly for consumers, since it would be an undermining of the country’s two-tiered system, jeopardizing financial stability.

He said that central banks like BoJ generally only allow private banks and other entities secondary access or restricted access to consumers. A CBDC would change this system, but cannot prove to be financially stable, he argued.

Commenting on Libra, the crypto project of social media giant Facebook, Amamiya said: “As for Libra, we must bear in mind that the potential global user-base could be enormous.”

 

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IMF Foresees Central Bank Crypto Coming

CBDC, IMF Foresees Central Bank Crypto Coming

The International Monetary Fund (IMF) has predicted that central bank digital currencies (CBDC), or state-backed crypto, would soon be a reality, with central banks already issuing them in the near future.

The report does seem to ignore that Venezuela at least has already released a CBDC, although of course, its legitimacy is highly in doubt, but it does recognize that several central banks in various countries throughout the world are already implementing some form of CBDC. It makes mention of the pilot program in Uruguay, and others like the Bahamas, China, Eastern Caribbean Currency Union, Sweden, and Ukraine, whom it says are “on the verge” of kicking off system trials.

The full paper described how the IMF, together with the World Bank, launched a fintech survey, seeking responses from member countries’ financial institutions and then basing off their conclusions in part from the responses received from 96 participating countries. This number does put it into a fairly broad global perspective.

The report as well talks about the research conducted by several central banks keen to learn more about CBDC’s potential impact on financial stability, as well as on the structure of the banking sector. The potential for non-bank financial institutions to enter and monetary policy transmission was also covered.

The findings show different motivations for a CBDC, with interest coming equally from developed economies as well as emerging ones. While developed countries seek to provide an alternative to cash as payment methods, especially as societies begin to go cashless, those trialing them in developing economies hope to reduce the costs of banking and tackling the issue of so-called unbanked populations.

A curious similarity is that none seek an anonymous CBDC as they all want these cryptos to be traceable by the state.

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Thai, HK Central Banks Sign Fintech Deal for CBDC

Thai, HK Central Banks Sign Fintech Deal for CBDC

The central banks of Thailand and Hong Kong have signed an agreement for cooperation in the field of financial technology (fintech), including on a joint research project to develop a central bank digital currency (CBDC).

In the article by Regulation Asia, the Hong Kong Monetary Authority (HKMA) and the Bank of Thailand (BoT) are to collaborate on the referral of innovative businesses information and experience sharing, and joint innovation projects.

HKMA’s Project LionRock was done in collaboration with the three Hong Kong banks issuing bank notes; the Hong Kong Interbank Clearing Limited; and the R3 consortium, an enterprise-focused startup, to develop a better understanding of the feasibility, implications, benefits and challenges of implementing a CBDC on a distributed ledger technology platform.

For Thailand, the central bank had started on Project Inthanon along with R3 and eight other banks to develop and test a proof-of-concept for CBDC use in domestic wholesale funds transfer.

Referring to its Project LionRock and BoT’s Project Inthanon, HKMA stated:

“One potential collaboration under consideration by the two authorities is a joint research project on a CBDC, to which the two authorities may apply the knowledge and experience they gained from their respective CBDC research studies.”

BoT’s governor Veerathai Santiprabhob said:

“I believe there is huge potential to enhance quality of financial services by leveraging on technological advancement, and it is our responsibilities as regulators to create an ecosystem that is conducive to innovations.”

 

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JPMorgan Introduces Its Own Digital Coin With Institutions in Mind

JPMorgan Introduces Its Own Digital Coin with Institutions in Mind

Major US-based multinational investment bank JPMorgan announced yesterday that it has launched a digital coin that will be backed by the US dollar.

A major breakthrough for cryptocurrencies which had for a long time been blighted in some circles as being untrustworthy, or so would some think. As a matter of fact, JPMorgan was among those in 2017 who ridiculed cryptocurrency and specifically called Bitcoin a fraud. Although its perspective on the subject of blockchain industry as well as properly controlled and regulated cryptocurrencies was that it held promise. Now, it stands as the first major US bank creating a digital coin and one among others in the traditional banking industry to create a real-world application of blockchain technology.

Consequently, this development has aroused some controversial sentiments within the crypto community. According to MarketWatch, Jerry Brito – executive director at Coin Center told the news outlet that the JPM coin isn’t a cryptocurrency but an in-house-built payment system. The bank did clarify on the differences between its digital coin and cryptocurrencies, however, it is a popular sentiment that any product built on the blockchain is assumed to come with the tag ‘cryptocurrency’.

As explained on the bank’s website, it appears that the JPM coin isn’t a legal tender, but a digital coin backed by the US dollar – not a stablecoin either – stored in designated accounts of JPMorgan Chase. The bank said that when one client sends money to another over the blockchain, JPM Coins are transferred and instantaneously redeemed for the equivalent amount of US dollars, reducing the typical settlement time.

The JPM coin will only be used between its institutional clients as the core purpose of the coin is to save time for inter-bank/institution settlements, leveraging the robustness of the blockchain as opposed to legacy systems of money transfers. Accordingly, the coin will not be available to individuals, however, the bank says that the rippling effect in the efficiency of money transfer will confer certain benefits to individuals.

The bank may not stop at the digital coin alone, it said in its news release that with respect to its other businesses like custody or clearing and settlement, “it’s still too early to assess the ultimate impact of blockchain,” and it intends to further explore areas of applicability as it works with clients around the world. Perhaps, it may join the list of financial institutions proposing to offer custody solutions in an attempt to cater to institutional investors willing to join the crypto derivative market once the system is well regulated.

Blockchain-related trends in the banking industry have been growing of late with expanding use cases specific to interfacing with the technology to facilitate money transfers between financial institutions. As reported in December last year, Signature Bank’s Signet may have been the first regulator-approved blockchain-based payment system developed by a bank. It was designed to eliminate third parties and process payments faster between the bank’s clients.

Saudi Arabia and the UAE have been discussing plans on developing a blockchain-based cross-border payment system for inter-bank relations.

Moreover, the subject of a state-backed central bank digital currency (CBDC) has been frequently discussed in many banking circles. However, the views on such development have been rather polarized. Perhaps, this step made by JPMorgan will further facilitate the adoption of different blockchain use cases for other banks as they race for inclusion into the emerging market.

 

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FSA Reports Drop in Crypto Inquiries, Is Japan Losing Interest?

FSA Reports Drop in Crypto Inquiries, Is Japan Losing Interest?

In a report from the Financial Services Agency (FSA) last week, the number of inquiries about cryptocurrencies received by the Japanese financial regulator during the period of Q4 of 2018 had declined. Could Japan citizens be losing interest in crypto?

According to the report published on 8 February, in Q3, the FSA had received as many as 1231 inquiries related to cryptocurrencies from citizens, but this figure had dropped to 788, a 36% drop in Q4. Overall, the year 2018 saw a drop from 3,559 during Q1 to 788 in Q4 of the same year – an approximate 78% drop. Further signs may indicate a further decline may be on the horizon.

The year 2018 arguably was an active year in crypto for Japan, with the year end swamping the regulator with exchange applications after the FSA had granted the Japan Virtual Currency Exchange Association (JVCEA) the power to oversee self-regulation within the industry.

Strides had included a regulatory framework for ICOs, systems designed to monitor tax reporting and evasion, the appointment of a pro-crypto minister who would oversee all things crypto and blockchain which provided a positive outlook for crypto enthusiasts in the region. There were talks about a Japan instituted Bitcoin exchange-traded funds – although this was later dismissed by the FSA as rumors.

Although, unlike some other nations, Japan has had a more differing opinion about state-issued central bank digital currencies (CBDC), saying that they are unlikely to improve the existing monetary systems and therefore, the Bank of Japan itself had no plan to issue digital currencies.

Regardless, Japan is considered to be one of the progressively active countries in terms of crypto regulatory initiatives on the Asian continent. However, one baffling question that remains unanswered is why the inquiries about crypto-related issued had declined over the course of 2018. Are Japanese crypto holders and enthusiasts getting tired of crypto, or are they better off without the oversight of the regulator?

At the start of the year 2018, inquiries were higher even with Bitcoin price declining from its all-time high of December 2017, compared to when the price almost seemed to bottom out at the end of the year. Although, Bitcoin trade volume data from peer-to-peer trading platform LocalBitcoins.com as revealed by Coin Dance had peaked in one of the weeks in October 2018, reaching its highest point for the year and then slowly declined.

Perhaps the drop in inquiries may have had something to do with the security challenges plaguing the Asian crypto market which accounted for a sizeable share in the USD 1.7 billion worth of cryptos reportedly stolen in 2018. This included exchange hacks, exit scams, Ponzi schemes, and identity thefts.

One thing is certain, the government of Japan is striving for a more harmonized environment for both crypto ventures and investors, and most certainly not at the detriment of the financial system and its policies. It has also provided a regulatory sandbox for a more controlled environment for fintech products.

A beneficiary of the sandbox project is a recently approved trial for a yen-backed stablecoin settlement to be undertaken by Digital Garage. With the bottleneck-like regulatory framework designed to protect investors interest, even US-based crypto exchange Coinbase applauds the regulator’s effort for setting up such a system in place.

 

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