Gluwa, a platform for real-world assets, announced on March 7 its partnership with the Central Bank of Nigeria. The partnership arrangement aims to improve the functionality of the Nigerian central bank’s digital currency and promote financial innovation through blockchain technology. Improving the CBDC’s Utility Gluwa, a real-world assets platform, has entered into a partnership arrangement […]
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The Central Bank of the Philippines will develop a central bank digital currency (CBDC) in the next two years, according to Governor Eli Remolona Jr. The still unnamed CBDC will focus on the wholesale market and won’t use blockchain tech, instead relying on the Philippine Payment and Settlement System, owned and operated by the central […]
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The Bank for International Settlements (BIS) has revealed its strategic priorities for 2024, with a particular emphasis on Central Bank Digital Currencies (CBDCs) and tokenization.
The 2024 roadmap points to a continuation of the watchdog’s engagement with digital financial technologies. The BIS has taken a heavily pro-CBDC stance and has published a comprehensive framework for countries looking to create their own localized digital currencies.
One of the most ambitious undertakings in the BIS’s 2024 agenda is Project Promissa, which aims to revolutionize financial instruments by digitizing promissory notes using blockchain technology.
Promissory notes are still paper-based despite their integral role in the financial system. According to the regulator, their digitization could greatly enhance efficiency and transparency in financial transactions.
Project Promissa is a collaborative venture between BIS, the Swiss National Bank, and the World Bank. The proof-of-concept phase for the project is scheduled for completion by early 2025.
Complementing the tokenization efforts is Project Aurum, a joint initiative with the Hong Kong Monetary Authority (HKMA), which completed its initial pilot testing phase in 2022.
Project Aurum will focus on privacy in retail payments using CBDCs. Following its initial phase in 2022, the project aims to delve deeper into privacy issues related to CBDCs.
Project Aurum’s exploration of CBDC privacy is crucial, considering the growing global interest in digital currencies and the need for secure, private transactions. The project aligns with the broader strategy of the watchdog, highlighting the increasing importance of CBDCs in reshaping the financial sector.
The BIS’s 2024 agenda includes four other projects: Project Leap, Project Symbiosis, Project Hertha, and Project NGFS Data Directory 2.0. These projects cover cybersecurity, green finance, and financial crime. This diversified approach indicates BIS’s broad engagement with various aspects of financial technology.
Historically, BIS has maintained a prudent approach towards digital currencies, with a particular focus on the implications of stablecoins. In late 2023, Agustín Carstens, general manager of BIS, highlighted the importance of central banks in digital currency innovation, with a focus on CBDCs.
Bank of Korea Governor Chang-yong Rhee warned that the rise of stablecoins could pose a significant threat to the traditional roles of central bank money and impact the effectiveness of monetary policies, local media reported.
Rhee made the statement at a conference on digital money in Seoul on Dec. 15. He added that central banks must step up their efforts to issue both a retail and a wholesale form of central bank digital currency to mitigate this looming threat.
In his keynote speech, Rhee highlighted two main issues central banks must confront.
The first major concern is the rise of stablecoins and the existential threat they pose to central bank money, while the second is the lack of a proper regulatory framework for non-depository or non-financial institutions participating in the digital financial system.
Rhee emphasized that, despite their nomenclature, stablecoins often lack intrinsic stability and could diminish the role of central bank-issued money. This, in turn, could impair the effectiveness of traditional monetary policies.
Further complicating matters is the potential involvement of global networks like Visa or Mastercard, especially for countries like South Korea. This could lead to complexities in managing capital flows and maintaining monetary policy independence, Rhee added.
To address these challenges, Gov. Rhee suggested that central banks consider introducing central bank digital currencies (CBDCs), both in retail and wholesale formats.
He highlighted South Korea’s own efforts in this domain, including a pilot project for a retail CBDC system that leverages distributed ledger technology (DLT). The programmability of such currencies, allowing for complex, conditional transactions through smart contracts, was particularly noted as a significant advantage.
Moreover, the BOK, in collaboration with financial regulators and the Bank for International Settlements, is embarking on a second CBDC pilot project to explore wholesale CBDCs.
The project focuses on integrating a wholesale CBDC with tokenized bank deposits. It aims to explore the issuance of tokenized e-money by banks and non-bank financial institutions fully backed by wholesale CBDCs.
The views of the Bank of Korea align with the sentiments of other major global central banks and financial institutions. For instance, the U.S. Federal Reserve has highlighted the volatility risks associated with stablecoins, especially those collateralized by other cryptocurrencies.
The Fed’s analysis points out the potential for market runs and the amplification of financial instability due to these digital assets. Similarly, the BIS has raised concerns about using stablecoins in cross-border payments.
According to a report by the BIS Committee on Payments and Market Infrastructures, stablecoins could challenge monetary sovereignty and financial stability, and impact seigniorage income. The report also suggests that the benefits of stablecoins could only be realized under stringent design and regulatory frameworks.
Taiwan’s central bank has completed a feasibility study of wholesale central bank digital currency (CBDC) and is continuing to consider its introduction. The central bank is seeking feedback from businesses and academics and will continue to work on platform design, Deputy Governor Mei-lie Chu said on Dec. 7.
In a lengthy speech at an event for bankers, Chu outlined what she called Banking 4.0, or “services embedded in customers’ daily lives,” including the integration of artificial intelligence and advanced mobile and digital technology into banking. She devoted about half of her presentation to CBDC.
Chu referred to Bank for International Settlements research and said she saw the advantages of CBDCs and tokenization of real-world assets. Furthermore:
“A central bank currency with clearing finality can serve as the operational basis for tokenization.”
Chu mentioned unified ledger technology in particular. A unified ledger, as the name implies, uses a single ledger in a “partitioned data environment” to achieve interoperability among systems.
Related: Financial Supervisory Commission of Taiwan awards first securitized token license
According to the website CBDC Tracker, Taiwan began CBDC research in 2020. It is further along in its development of a retail CBDC and has already tested it in a pilot project with consumers and five commercial banks.
Today’s #Fintech Digest includes the Palau Ministry of Finance on its stablecoin proof-of-concept, Taiwan’s central bank on its wholesale #CBDC feasibility study, and the Basel Committee giving a thumbs down to permissionless blockchain-based crypto. pic.twitter.com/8qTY4QJqCH
— John Kiff (@Kiffmeister) December 8, 2023
Bank disintermediation and interoperability with other payment systems were outstanding issues in Taiwan’s CBDC research, Chu said. The central bank is taking a “prudent” approach to further development of a CBDC with no timeline for a decision, Chu added.
In addition, Taiwan’s Fubon Bank has participated with Ripple and the Hong Kong Monetary Authority in a reverse mortgage pilot project using Hong Kong’s e-HKD CBDC. It has also integrated China’s digital yuan, also known as the e-CNY, into its platform.
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The Central Bank of Solomon Islands has launched a proof-of-concept for a central bank digital currency (CBDC) called Bokolo Cash, with Japanese blockchain companySoramitsu providing support.
Bokolo Cash will be worth one Solomon Islands dollar. Project participants can use it in retail settings in the island nation’s capital, Honiara, and for person-to-person transfers.
Wholesale transfers between commercial banks and simulated cross-border payments and remittances will also be tested. Users will undergo “two-tier” Know Your Customer verification, according to Soramitsu.
Related: Small Islands, big problems: Can Bitcoin fix this? Cointelegraph Cape Verde video
Bokolo Cash will operate locally on a tailor-made blockchain based on Hyperledger’s Iroha. It will have connectivity to Soramitsu’s public Sora blockchain as well, where users will be able to make transfers with QR codes and the self-custody Fearless Wallet, which was developed by Soramitsu.
The project was initiated on Nov. 1 but only announced on Nov. 29. Solomon Islands Prime Minister Manasseh Sogavare said:
“By embracing digital currency, we position our nation at the forefront of the global technological landscape. The CBDC Pilot Project signifies our commitment to embracing the future, capitalizing on the efficiency, transparency, and security that digital currency offers.”
The Solomons are a group of over 900 islands west of Papua New Guinea with a population of about 700,000. It joins other island nations — such as Palau, the Marshall Islands and Mauritius — in experimenting with CBDC. In addition, Tonga considered introducing Bitcoin (BTC) as legal tender but has yet to do so, while Vanuatu is the host nation of BTC-friendly Satoshi Island. The Eastern Caribbean countries already have an official CBDC called DCash.
Soramitsu is a major regional CBDC provider. Its technology powers the Cambodian bakong and Lao DLak, and it has launched a project to use the bakong and stablecoins in a regional cross-border payment system.
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A pilot program for a live Singapore dollar-based central bank digital currency (CBDC) was unveiled by Singapore’s central bank, which aims to have the CBDC used by local banks for settlements.
“I am pleased to announce that MAS will pilot the ‘live’ issuance of wholesale CBDCs to instantaneously settle payments across commercial banks,” MAS managing director Ravi Menon said on Nov. 16 at the Singapore Fintech Festival.
The MAS had previously only simulated the issuance of a CBDC in test environments. Menon said the central bank would soon partner with Singaporean banks to test using a CBDC as a settlement asset for domestic payments.
As part of the test program, Menon explained that banks will issue tokenized liabilities that represent claims on their balance sheets. Retail customers could use those tokenized liabilities to transact with merchants, which would be settled via an automatic transfer of a wholesale CBDC.
“Clearing and settlement thus occur in a single step, on the same infrastructure, unlike the current system in which clearing and settlement take place on different systems, and settlement occurs with a lag,” he said.
A wholesale CBDC is primarily used by central and commercial banks and other large financial institutions to settle payments.
Related: Paxos to issue USD stablecoin in Singapore, wins initial approval
On Nov. 15, the MAS introduced five additional industry pilots to its financial infrastructure test program — dubbed Project Guardian — to assess various use cases around asset tokenization.
The new partnerships saw the project expand from 12 to 17 members, now including major financial institutions such as BNY Mellon, HSBC and Citigroup.
On May 1, the MAS and the New York Federal Reserve published the results of a six-year-long trial program of a CBDC’s utility in cross-border payment, dubbed Project Ubin. The results showed that CBDCs were potentially useful in making cross-border payments more efficient and cost-effective.
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The ECB lawmakers favored Cipollone’s candidacy to steer forward the agenda of a digital Euro to reinforce the public money infrastructure amid the mainstream adoption of digital assets.
The European Union is preparing to roll out its Central Bank Digital Currency (CBDC) in a few years to keep its economic outlook competitive amid changing puzzles of geopolitics. Blockchain technology has been identified as a key to a successful digital Euro to enable retail CBDCs along the way. In the latest move, former Italian central banker, Piero Cipollone, largely convinced the EU lawmakers why he is the best candidate to steer forward a digital euro to the next level. Moreover, the lawmakers passed a non-binding vote of 30-3 to approve Cipollone’s bid to replace Fabio Panetta as the Supremo of Central Bank Digital Currency (CBDC) at the European Central Bank (ECB).
During the EU parliamentary hearing on Monday, Cipollone highlighted that he will stick to the existing guidelines set by the ECD on a digital euro. Furthermore, the ECB has been conducting several initiatives geared toward developing an interoperable, secure, and versatile digital Euro to compete with other currencies like China which has already filed out its digital Yuan to millions of users.
“A digital euro would reinforce the ability to pay with public money throughout Europe with a technology and infrastructure that is based in Europe,” Cippollone told members of the European Parliament’s Economic and Monetary Affairs Committee.
Cippollone further highlighted that the digital Euro will support offline functionality, accessibility, and excellent solutions geared towards protecting user privacy. Moreover, a lot of respondents sampled by the ECB indicated that security and interoperability are of great importance to ensure mainstream adoption.
According to François Villeroy de Galhau, the current governor of the Bank of France, the need for the European market to adopt a digital Euro has exploded in the recent past as investors seek alternative methods to settle transactions. Blockchain technology has already proved that the settlement of transactions can be cheap, secure, and fast without errors. Moreover, the Bitcoin network has been adopted for over a decade and has grown to a trillion-dollar industry with high prospects of overthrowing Gold and traditional banking systems.
“The Eurosystem has started exploring new technologies for the settlement of central bank money, including the issuance of a first type of tokenized CBDC,” Villeroy de Galhau noted during an event in Paris. “The eligibility criteria and the call of interest will be published in the coming weeks and experiments will be rolled out over the course of next year, including trials with real transactions.”
The plans for a wholesale CBDC are expected to be laid out in the coming weeks in a bid to free over $100 billion per year in automating back-office processes.
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The National Bank of Georgia (NBG) has announced that it will advance its research on a digital lari central bank digital currency (CBDC) in a limited-access live pilot environment. Nine companies, including Ripple Labs, will take part in the project, and one of them will be selected to move forward to the next stage of testing.
In a paper released in February, the NBG stated that it was considering a two-tier design for its CBDC, with wallets provided by a third party. It would be programmable and support asset tokenization.
In an interview in June, NBG’s head of fintech, Varlam Ebanoidze, said that use cases for a digital lari, or GEL, include the provision of agricultural insurance and automation of real estate transactions. He added:
“We are thinking about integration into the European Union and we want to be interoperable with the digital euro, but have monetary freedom.”
The NBG announced that it was considering issuing a CBDC in May 2021, without providing a timeline for it. The NBG announced in January that it was soliciting expressions of interest from fintech firms to participate in a limited live pilot.
Related: Georgian central bank prepares legislation to regulate the crypto market
The NBG announced on Sept. 8 that it would participate as an observer in the Bank of International Settlements’ (BIS) Project mBridge — which involves China, Hong Kong, Thailand and the United Arab Emirates — joining about 10 other observer countries. It said it would also “leverage knowledge and expertise” from the BIS’s Project Aurum.
GEORGIA #CBDC ➡️ DIGITAL LARI PROJECT @Ripple
NBG (NATIONAL BANK OF GEORGIA) has shortlisted 9 companies that have demonstrated sufficient technology potential, maturity, capacity, relevant experience, and desire to join our on-field exploration:
Ripple Labs, Inc.
… pic.twitter.com/JGs6GwOJhe— XRP DROPZ (@DROPZXRP) September 29, 2023
In addition to Ripple, the pilot’s participants include Augentic, Bitt, Broxus Holdings, Currency Network, DCM, eCurrency Mint, FARI Solutions and Sovereign Wallet. Ripple is known to be involved in CBDC projects around the world, active in countries such as Colombia, Montenegro, Hong Kong, Bhutan and Palau.
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