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Ripple is currently working with over 20 central banks from around the world, helping them to develop digital versions of their national currency.
Blockchain-based payment solutions provider Ripple has reaffirmed its support for central bank digital currencies (CBDC). In a 23-page white paper released on December 14, the firm explains the basics of CBDCs, their potential benefits, risks, and barriers to mainstream adoption. It also stresses the need for governments and private sector players to collaborate in addressing challenges.
Citing a report by global management consulting firm McKinsey, Ripple presents CBDCs as an aid to ensuring financial inclusion, reducing fraud and money laundering, stimulating payment innovation, and reinforcing monetary policy control.
The document also highlights the role of central bank digital currencies in tokenization, stating:
“CBDCs are needed to support the most significant positive impacts of asset tokenization, an increasingly targeted mechanism for transforming tangible assets into digital tokens stored on the blockchain. With tokenization, anyone can view the process of asset transfer through ownership,” the paper reads in part, adding that “tokenization improves privacy and agility as assets move peer-to-peer without the need for centralized intermediaries within decentralized networks.”
The whitepaper goes on to mention some barriers to widespread CBDC adoption including lack of end-user adoption, little-to-no consumer education, fears about privacy and security protections, digital identity verification, lack of interoperability among CBDCs and offline access to transactions. The firm reasons that these issues are not “unsolvable,” adding that they must be solved at scale and often through collaborative efforts among countries and jurisdictions.
Ripple is currently working with over 20 central banks from around the world, helping them to develop digital versions of their national currency. These include The Royal Monetary Authority (RMA) of Bhutan, Colombia’s Banco de la República, and the Central Bank of Montenegro.
Columbia’s Minister of Information and Communication Technologies Mauricio Lizcano comments:
“Potential efficiencies can be evaluated through the results obtained in the development of a solution with blockchain technology. In turn, this manages to improve and complement the processes in the entities in a safe and efficient way. In addition, it will provide a technological solution. This solution will allow simulations of different use cases in the high-value payment system.”
The paper concludes by re-emphasizing the need for cross-government collaboration. It notes although central banks are moving at different paces in CBDC development, they are “extraordinarily interdependent”. It adds that the global adoption of sovereign-backed digital assets will need agreement on common standards and protocols that will enable interoperability.
It is estimated that $5 trillion worth of CBDCs from around the globe will circulate through major economies over the next 10 years – further incentive for governments and private sector participants to work together towards addressing challenges.
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The Federal Reserve Board continues to research a central bank digital currency (CBDC), or at least adjacent technologies, Vice Chair Michael Barr said on Oct. 27. He also touched on stablecoins at the Economics of Payments XII Conference, where his English colleague Sir Jon Cunliffe made his last speech as deputy governor of the Bank of England (BOE).
The Fed’s research is currently focused on “end-to-end system architecture,” such as ledgers and tokenization and custody models for an intermediated CBDC, Barr said in Washington. Barr repeated the Fed mantra of no digital dollar without a congressional mandate, but added that “learning from both domestic and international experimentation can aid decisionmakers in understanding how we can best support responsible innovation.”
Barr’s remarks are not controversial on the surface, but they bring to mind Representative Tom Emmer’s call for an end to the Fed’s “sketchy” CBDC research made in the House of Representatives in September.
Related: Stablecoin market escaping US regulatory oversight: Chainalysis
Cunliffe, whose 10-year term in office ends on Oct. 31, spoke at the conference a day earlier. He, too, emphasized that no decision has been made in his country on a CBDC. But he said a consultation paper published in February “concluded that current trends and technological advances in payments […] made it likely that a Digital Pound would be needed by the end of the decade.”
The Deputy Governor of the BOE Sir Jon Cunliffe hiding his excitement of the coming CBDC
Can you read between the lines Anon? pic.twitter.com/RPq0Bv8J9P
— RŌNIN (@ronin21btc) December 30, 2022
The consultation paper received 50,000 responses, Cunliffe said. Privacy, programmability and the decline of cash were the top concerns among commenters. Further:
“I would observe, if only a little tongue in cheek, that criticisms of the Digital Pound have ranged from concerns that it would […] disintermediate the banking system and threaten financial stability, to, at the same time, concerns that there would be no use for it and it would be a ‘solution looking for a problem.’”
Cunliffe envisioned that “private companies would be able to integrate and programme the Digital Pound, as the settlement asset, into the services they would offer to wallet holders.” The BOE will respond in “the coming months,” he added.
Cunliffe promised that the BOE would soon issue a discussion paper on stablecoin regulation. Barr also mentioned stablecoins, saying regulation was necessary. An asset of that type “borrows the trust of the central bank,” he said.
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Argentine presidential candidate Sergio Massa has pledged to launch a central bank digital currency (CBDC) if elected to “solve” Argentina’s long-lasting inflation crisis.
“I am clear that inflation is a huge problem in Argentina,” the country’s second-leading candidate said in an Oct. 2 presidential debate before outlining how he plans to solve the country’s devastating inflation:
“We are going to launch the digital currency in Argentina. […] We are going to do it globally for all of Argentina accompanied by a laundering law that allows those who have money abroad to bring it and use it freely without new taxes in parallel.”
Massa, who currently serves as the Minister of Economy, shut down the idea that Argentina should move to the United States dollar:
“Dollarization is what generates the temptation of the dollar. Be patriots [and] defend our currency, do not promote the use of it [the U.S. dollar],” he said.
Argentina’s general election will take place on Oct. 22.
Two of three major voting polls suggest Massa is ever so slightly trailing Javier Milei, a pro-Bitcoin (BTC) and anti-central bank candidate who won Argentina’s primary election in August.
Data from American think tank AS/COA suggests that Massa will likely receive the most support in the Buenos Aires province — home to 16.6 million of the country’s 46 million residents — while Milei has majority backing in the more rural parts of the country.
Milei has previously signaled wanting to adopt the United States dollar as Argentina’s currency. As an economist and libertarian, Milei has long been a skeptic of central banking. Part of his campaign promise is to abolish Argentina’s central bank.
Milei previously referred to Bitcoin as a reaction against “central bank scammers” and said that the Argentine peso allows politicians to scam Argentines with inflation.
Related: Argentines turn to Bitcoin amid inflation worries: Report
Argentina’s third-leading presidential candidate, Patricia Bullrich, would reportedly pursue a currency regime where the Argentine peso and U.S. dollar co-exist as legal tender if she wins the election.
The Argentine peso has fallen over 99% against the U.S. dollar since December 2003.
Most data suggests Argentina’s inflation is the third highest globally, only trailing Venezuela and Lebanon.
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Mastercard is partnering with Ripple, Consensys, and other blockchain companies on a central bank digital currency program.
On Aug. 17, the payments giant announced its CBDC Partner Program, including other inaugural partners like tokenized assets company Fluency, digital assets platform Fireblock, Consult Hyperion, and Idemia.
Mastercard wants the private sector involved in CBDC development
All the partners in the program have a history of working on CBDC or payment services infrastructure. According to Mastercard, the program will enable collaboration between the key players in the space.
Although the company did not specify its plans, it wants inputs in the development and future of CBDCs from its partners. Mastercard has shown an interest in digital fiat currencies since 2020 when it launched a sandbox for central banks to test their CBDC systems.
The company also issued prepaid cards for the CBDC in the Bahamas.
With this program, the company wants to join hands with other leading companies developing CBDCs. According to the blog post, the program will clarify the benefits and limitations of CBDCs and how they can be safely implemented.
Speaking on the partnership, Mastercard’s head of digital assets and partnerships, Raj Dhamodharan, expressed the company’s commitment to ensuring that the digital assets are as easy to use as other forms of money. He said this would be possible through interoperability.
Executives from the partners also touched on various issues ranging from the need for privacy as the most critical issue for users to the varying needs of countries demanding CBDCs.
However, Mastercard noted that CBDC is yet to gain wide acceptance due to several issues. But it expects that its partner program’s work will help central banks develop national digital currencies that resolve these issues properly.
“By assembling the strengths, deep expertise, and different capabilities of these partners, we can drive innovation in the central banking community and along the CBDC value chain as the space continues to evolve,” Dhamodharan said.
The post Mastercard forges blockchain alliances to power future of CBDCs appeared first on CryptoSlate.
South Korean banks are favoring Certificate of Deposit (CD) tokens as potential alternatives to “volatile” stablecoins, as reported by the South Korean news organization Pulse on July 24.
According to Pulse, industry sources revealed that Hana Bank plans to research CD tokens as part of the bank’s preparations for a potential Central Bank Digital Currency (CBDC) project led by the Bank of Korea.
Woori Bank has also expressed interest in CD tokens, as evidenced by a recent report issued by its research body.
South Korean crypto regulation
This development comes when South Korea’s financial regulators are strategizing the final aspects of new rules for the country’s cryptocurrency industry.
As previously reported by Cryptoslate, the impending legislation will focus on regulating crypto-asset issuance, tackling conflicts of interest, and establishing a robust framework to supervise stablecoins.
Following the passage of the Virtual Asset User Protection Act earlier this year, which introduced protective measures for investors, The Financial Services Commission (FSC) is contemplating broadening the Act’s scope to include crypto asset management firms after the recent suspension of withdrawals by two investment platforms, Delio and Haru Investments, due to their interconnectedness.
CD Tokens
According to Pulse, CD tokens, which turn bank deposits into tokens using blockchain technology, could replace payments currently settled with funds directly from bank accounts. This interest in CD tokens was notably piqued following the collapse of Silicon Valley Bank (SVB) in March of this year.
In contrast to stablecoins, CD tokens are based on existing banking systems and offer more reliability, with transactions settled using CBDCs issued by central banks.
Pulse also highlighted one of the critical features of CD tokens, the requirement for identity verification, due to being issued based on bank deposits. For legacy financial institutions, this may offer an advantage over stablecoins, which can become untraceable once issued, presenting potential regulatory oversight and fraud prevention issues.
Stablecoins in APAC
This South Korean banking sector development aligns with broader global digital currency adoption and stability trends. For instance, Circle, the provider of the USDC stablecoin, recently articulated its interest in targeting the 74% of Asia Pacific (APAC) trade invoicing conducted in US dollars.
Circle views the digital dollar, specifically USDC, as having the potential to significantly impact the APAC financial landscape, given the dollar’s dominance in the region’s financial transactions over the past two decades.
Circle’s CEO, Jeremy Allaire, highlighted the potential of USDC in the APAC region, stating that it’s clear,
“USDC takes the strength of the dollar and gives it the powers of the internet, enabling it to move as quickly and easily as a text message.”
Circle aims to revolutionize cross-border payments, reduce remittance costs dramatically, and facilitate traceable humanitarian aid.
As the FSC prepares for a second phase of regulatory assessment, the emergence of CD tokens and Circle’s expansion plan could ignite a battle between CDs and stablecoins for digital asset market share.
Banks’ trepidation toward decentralized digital assets and preference for traceable tokens underpins the global expectation that CBDCs are coming and will allow governments or central banks even greater access to citizens’ financial history.
The United States Federal Reserve clarified that its new service for instant payments between organizations — the FedNow Service — has no relation with central bank digital currencies (CBDCs).
The Fed certified the FedNow Service as “ready” after it onboarded 41 financial institutions, 15 service providers and the U.S. Department of the Treasury to test the system before its launch by the end of July 2023. However, the central bank had to clarify that the promise of instant fiat payments and real-time gross settlement (RTGS) is not powered by a CBDC.
#FedFAQ: Is the FedNow Service replacing cash? Is it a central bank digital currency?
Learn more about the #FedNow Service: pic.twitter.com/7CUaYZYyM9
— Federal Reserve (@federalreserve) July 19, 2023
In a tweet, the Fed stated that FedNow Service is similar to other payment services, such as Fedwire and FedACH, which work within the boundaries of the fiat ecosystem. It said:
“The FedNow Service is not related to a digital currency. The FedNow Service is a payment service the Federal Reserve is making available for banks and credit unions to transfer funds for their customers.”
The Federal Reserve further confirmed that it has not yet decided on issuing the highly anticipated CBDC and “would only proceed with the issuance of a CBDC with an authorizing law.”
The table above highlights the initial list of participants. However, the Federal Reserve plans to onboard all 10,000 U.S. financial institutions in time to come.
Related: Major US banks get passing grade in ‘severe recession’ stress test
On May 11, the Fed announced the integration of Metal Blockchain into the FedNow Service.
Metal Blockchain is a crypto network developed by Metallicus based on a fork of Avalanche’s code. According to its documents, the network features a subnet called X-Chain that allows developers to enact rules for transferring assets. For example, a token can be issued with the rule that it “can only be sent to US citizens” or “can’t be traded until tomorrow.”
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