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Central Banks Warm To Issuing Digital Currencies (#GotBitcoin?)

One in 10 central banks surveyed says it is likely to roll out digital currencies within three years. Central Banks Warm To Issuing Digital Currencies (#GotBitcoin?)

More than one-fifth of the world’s population could have access to digital money issued by central banks to pay for groceries, movie tickets and even homes in the next few years, as these institutions accelerate plans to issue official cryptocurrencies.

 

Central Banks Warm To Issuing Digital Currencies (#GotBitcoin?)

One in 10 central banks surveyed in 2019 said it was likely to offer digital currencies within the next three years, covering about 20% of the world’s population, according to a report from the Bank for International Settlements. The proportion of central banks likely to issue digital money almost doubled when the horizon was stretched to six years, the BIS said.

Federal Reserve Chairman Jerome Powell said in November the U.S. central bank doesn’t currently have plans to launch a digital currency. Doing so would be difficult in the U.S., with Americans remaining more committed to cash than other nations, he said.

The rising popularity of electronic payments, and the boom in private cryptocurrencies like bitcoin, has promoted authorities to pay more attention to digital currencies. The new tools could offer faster settlements of payments and the potential to allow people to bank directly with a central bank. They may even offer monetary-policy benefits, if central banks could set rates on accounts that directly affect households, rather than using financial markets to transmit changes to borrowing costs for consumer and corporate loans.

Major technology companies, meanwhile, are interested in offering digital currencies. But Facebook Inc.’s plans to launch libra have drawn criticism from regulators and have led early partners to reconsider their support.

Central banks face big hurdles in offering dedicated digital currencies and related bank accounts to the general public, the BIS’s general manager, Agustín Carstens, said in December. Still, policy makers in the Caribbean, including the Central Bank of the Bahamas and the Eastern Caribbean Central Bank, are testing digital money, according to the BIS.

Some 66 central banks, representing 90% of the world’s economic output, took part in the survey in 2019, according to Switzerland-based BIS, which is owned by some of the world’s biggest central banks, including the Fed. A year earlier, only one in 20 monetary authorities were considering rolling out digital money in the short term.

In response to the rapid decline in the use of cash in recent years, Sweden’s Riksbank began working on its e-krona pilot program in 2017. Uruguay’s central bank, which piloted a program between late-2017 and mid-2018 that let individual users hold a maximum of 30,000 e-Pesos ($1,000) in a digital wallet, is considering its next steps.

Central banks in general have been hesitant about creating digital currencies, according to Darrell Duffie, a finance professor at Stanford University. Questions remain on how to monitor transactions to prevent fraud and whether such currencies would be linked to interest rates.

“It’s a responsibility I think central banks don’t want,” Mr. Duffie said.

Updated: 6-5-2020

Fed Paper: Central Bank Digital Currencies Could Replace Commercial Banks – But At A Cost

Central bank digital currencies might one day replace commercial banks. But that comes with risks, according to new research from the Federal Reserve of Philadelphia.

The 32-page research paper – titled “Central Bank Digital Currency: Central Banking for All?” – investigated the implications of an account-based central bank digital currency (CBDC), focusing on its potential competition with the traditional maturity transformation role of commercial banks.

“The introduction of digital currencies may justify a fundamental shift in the architecture of a financial system, a central bank ‘open to all,’” the paper, which was published on June 1, reads.

Questions posed by the research arm of the Fed, which were undertaken in collaboration with the Universities of Pennsylvania and Chicago, examined the ramifications of the introduction of a CBDC and how the opening of central bank facilities might affect financial intermediation.

Specifically, the questions were aimed at exploring the role CBDCs play in “giving consumers the possibility of holding a bank account with the central bank directly,” in essence replacing the role currently performed by commercial banks.

Maturity transformation refers to the practice by financial institutions of borrowing money on shorter timeframes than they lend out. This is often done through deposits from savers by converting that finance into long-term borrowings such as mortgages. It is the role of commercial banks to facilitate the needs of lenders and borrowers.

This process can backfire though, such as if there is a panic or bank run where all savers attempt to withdraw money at once or if the money markets suddenly dry up due to lenders no longer providing short-term loans to one another.

The paper determined the set of allocations achieved with private financial intermediation (commercial banks) could also be achieved with a CBDC, provided competition is allowed with those commercial banks and depositors do not panic. However, the paper also determined an associated cost involved.

“Our equivalence result has a sinister counterpart. If the competition from commercial banks is impaired (for example, through some fiscal subsidization of central bank deposits), the central bank has to be careful in its choices to avoid creating havoc with maturity transformation,” according to the paper.

In other words, if CBDCs did disrupt the role of commercial banks and allowed the borrowing of more money than is lent out, there’s a concern central banks could harm the money markets.

The paper also showed how the “rigidity of the central bank’s contract with investment banks” deterred panic runs and, as such, if depositors started to exclusively deposit with the central bank it could end up becoming a “deposit monopolist,” attracting deposits away from the commercial banking sector.

“This monopoly power eliminates the forces that induce the central bank from delivering the socially optimal amount of maturity transformation,” the Fed paper says.

Updated: 6-8-2020

Central Bank of Saudi Arabia Transfers Funds To Local Banks Over Blockchain

The Saudi Arabian Monetary Authority has transferred funds to local banks using blockchain technology.

The Saudi Arabian Monetary Authority (SAMA), the country’s central bank, announced that it used blockchain technology to deposit funds to local banks.

An official statement published by SAMA said that the funds were a part of the bank’s initiative to enhance its “capabilities to continue its role in providing credit facilities.” The bank did not specify the exact amount of the fund transfer.

SAMA’s Involvement With Blockchain Technology

The Middle East is seeing widespread adoption of blockchain technology in the finance sector. SAMA has performed enormously in terms of using blockchain for remittances for banks located in Saudi and the United Arab Emirates.

In 2018, SAMA also partnered with the UAE’s central bank to develop a digital currency that can be used for cross-border transactions between the two countries.

Reflecting on their recent transaction and active involvement in the blockchain space, SAMA’s recent announcement stated:

“SAMA is one of the pioneer central banks to experiment [with] blockchain technology for money transfers, this move is one of the key innovative initiatives launched by SAMA in its program to enable and develop Fintech in the Kingdom.”

Blockchain In Finance

Increased involvement of governments and central banks in the blockchain sector is playing an important role in the adoption of the technology in finance.

Today, Cointelegraph reported that a major Turkish bank completed its first international trade finance transaction based on blockchain. Another report cited that almost 40% of fintech firms operating in Hong Kong were utilizing distributed ledger technology.

Updated: 6-8-2020

Chinese Bank Issues Commercial Paper Worth $16.9 Billion on Blockchain

A Chinese commercial bank issued China’s first asset-backed commercial paper worth $16.93 billion on a blockchain.

China Zhe­shang Bank, a national commercial bank, used blockchain technology to issue an asset-backed commercial paper, or ABCP. It was issued as a part of the Na­tional As­so­ci­a­tion of Fi­nan­cial Mar­ket In­sti­tu­tional In­vestors’s (NAFMII) pilot project for ABCPs.

An asset-backed commercial paper is a short-term investment issued by financial institutions to help companies meet short-term goals.

Dubbed “Lianxin 2020 Lian­jie First Phase As­set-backed Com­mer­cial Pa­per,” the period of the Lianxin ABCP is six months and the span of the next issuance is yet to be specified.

An official of the NAFMII noted that the use of blockchain technology would provide enterprises a “direct channel to markets, help­ing to greatly in­crease the ac­ces­si­bil­ity of busi­ness fi­nanc­ing.”

Helping Small And Micro Enterprises

Small, medium, and micro-enterprises usually face difficulties with bond issuance as they do not have any connection with open markets.

The launch of Lianxin ABCP will ensure that SMEs can seek easy financial support. The ABCP “increases the ac­ces­si­bil­ity of fi­nanc­ing for SMEs that have dif­fi­culty with fi­nanc­ing via di­rect debt is­suance,” an official stated.

It will also integrate supply chain finance with small, medium, and micro-enterprises to support them with their production.

China, Banks, And Blockchain

The central bank of China along with other major banks is spearheading blockchain innovation in traditional finance. On May 13, the People’s Bank of China’s deputy governor Fan Yifei urged that China needed to accelerate its blockchain adoption strategy. Only a day after that, Cointelegraph reported that the PBoC proposed a blockchain-based trade finance platform for the Guangdong-Hong Kong-Macao Greater Bay Area.

Earlier, in April, the Industrial and Commercial Bank of China released a white paper proposing the applications of blockchain technology in finance.

Updated: 10-11-2020

Central Banks Detail CBDC Expectations In Massive Joint Document

The report is a major step towards pushing central bank digital currencies forward.

With Central Bank Digital Currencies a point of focus across the globe, a number of countries’ banking authorities have jointly produced a document discussing the currency type at length.

The Bank for International Settlements told Cointelgraph in a statement that a group of seven central banks and the BIS had collaborated on the report, “identifying the foundational principles necessary for any publicly available CBDCs to help central banks meet their public policy objectives.” The BIS is a global institution helping out national central banks.

CBDCs have been a hot topic in 2020, with a number of countries expressing interest in the asset type. China has pushed forward with plans for its CBDC, the digital yuan, although China’s central bank did not contribute to the report. China is in the midst of testing its digital asset, and has completed approximately $162 million USD worth of digital yuan transactions.

The Bank of England, the U.S. Federal Reserve and the Bank of Japan sit among the governing bodies involved in crafting the document, titled: Central bank digital currencies: foundational principles and core features. However the statement from the BIS made it clear that the involved parties had not included opinions in the report regarding the launch of such a currency, nor did they specify any firm plans for producing such an asset.

The Report Clarified:

“This report is not about if or when to issue a CBDC. Central banks will make that decision for their jurisdictions (in consultation with governments and stakeholders). None of the central banks contributing to this report have reached a decision on whether or not to issue a CBDC.”

The report listed a trio of necessary fundamental principles upon which a future CDBC, and its related ecosystem, should be founded, if such an asset arises.

“A central bank should not compromise monetary or financial stability by issuing a CBDC; (ii) a CBDC would need to coexist with and complement existing forms of money; and (iii) a CBDC should promote innovation and efficiency.”

The document clarified that vital components of sound CBDCs include convertibility, convenience, security, speed, scalability, legal soundness and several other categories.

Brazil’s central bank has also expressed interest in a CBDC in recent months, although the report also did not list Brazil’s central bank as a contributor. In contrast, the Bank of Japan does grace the list of reported contributors. Japan boasts a team tasked with studying CBDCs.

Updated: 10-12-2020

Central Banks Haven’t Made A Convincing Case For Digital Currencies

It remains unclear what benefits e-money would bring to offset risks to bank funding and financial stability.

Central bankers should avoid getting too drawn into the bitcoin buzz.

On Friday, seven central banks—including the Federal Reserve—and the Bank for International Settlements published a report outlining common principles for issuing digital currencies to the public. Officials and corporations such as Facebook, inspired by cryptocurrencies, have spent years looking into the potential for technology to revolutionize money creation.

In a survey earlier this year, the BIS concluded that 20% of central banks are likely to launch a digital currency within six years. The risks posed by Covid-19 around the exchange of physical cash could heat up the race. China is furthest along and has launched a pilot program. Sweden’s Riksbank is also conducting its own test.

What remains unclear, though, is why this pitfall-ridden shift is necessary.

The most common justification, including in the latest report, is the decline in cash payments, which started well before Covid-19. The Riksbank’s haste to develop an e-krona has been fueled by Sweden becoming an almost cashless society.

But this doesn’t add up: If the shift to digital payments required digital currencies, why is it already happening via cards and mobile applications?

In papers published this year, Riksbank economists also claimed that, in a crisis, a digital currency might give households peace of mind that they could transfer their money into state-issued assets, and therefore be less afraid of leaving it in their bank.

The opposite seems much more likely: If a digital currency offered the advantages of both cash—anonymity and security—and a current account—the ability to transfer large sums with ease—nobody would choose to hold money in a bank deposit. Even outside of crises, this could leave banks without retail depositors, their most stable source of funding.

Indeed, many early supporters of digital currencies, such as the Bank of England’s Michael Kumhof, are also known for wanting to reduce the role of those forms of “money” not issued by governments. This would include deposits, which are issued by banks and used as money.

Reform proposals have so far been rejected by the public in places like Switzerland, but could be achieved in a roundabout manner if digital money issued by central banks ends up competing with bank deposits.

For banks, the funding gap would likely be filled by central banks and wholesale money markets. Far from increasing financial stability, as reformers claim, this would make banks more vulnerable. Lending to the real economy could be affected.

Friday’s report did highlight these risks, and established as a principle the need to “ensure the coexistence and complementarity of public and private forms of money.” Some central banks have floated proposals to cap e-currency holdings, so that bank deposits remain in use.

Yet there are few tangible benefits to weigh up against these risks. Policy makers have an abstract desire to broaden access to public money, but it is unclear why the “unbanked” would find e-money easier to use than a prepaid debit card.

The only real justification for digital currencies is privacy. But central banks don’t want too much privacy, either, given officials’ desire to increase know-your-customer and anti-money-laundering checks. The report said that “full anonymity is not plausible.”

Improving the payments systems that act as the lifeblood of the global economy is a worthy goal. The hype surrounding bitcoin and Facebook’s Libra, however, might be shifting the focus away from real-world problems that need fixing and onto untested solutions looking for a problem to fix.

Updated: 10-18-2020

In Thailand, A Free-Money Program Is Also A Data Experiment

The government is funneling assistance to the poor via cash cards—a convenient way to monitor spending despite privacy concerns.

Like many countries, Thailand is giving citizens cash transfers to help them ride out the coronavirus pandemic. But the military-backed government that rules the country is getting something potentially valuable in return: a huge volume of data on how millions of Thais spend their money.

Since 2017 Thailand has funneled assistance to its poorest citizens via so-called cash cards that are automatically loaded with a small amount of money each month. The cards are a more sophisticated version of the Electronic Benefit Transfer cards used to distribute food aid in the U.S., but linked to a much broader range of activities.

While the government says the information is needed to formulate better policies, privacy advocates are concerned—not least because the number of Thais who use the cards, about 14 million, is set to climb as more people thrown out of work by the Covid-19 pandemic sign up for assistance.

“Any time you’re talking about the government’s collection and use of personal data, particularly a large volume of it, the risks are always higher,” says David Hoffman, a cybersecurity expert at Duke University who also chairs the National Security Agency’s advisory panel on privacy. “The dystopian possibility,” he says, is “that you get a tremendous view into individual citizens that then could be used for a variety of government law enforcement purposes, particularly around the area of silencing social dissent.”

That’s far from a theoretical problem in Thailand. The country has been rocked in recent months by unprecedented protests against Prime Minister Prayut Chan-ocha, a former general who led a 2014 coup d’etat, as well as against the monarchy, which has traditionally been treated as off-limits for criticism.

Some activists calling for greater freedoms have been arrested, and a sweeping cybersecurity law passed in 2019 gives law enforcement agencies the power to collect information or seize equipment to prevent cybersecurity threats. In August, Human Rights Watch warned that Prayut had “adopted a more hostile stance toward pro-democracy activists.”

The card system could become a powerful tool for the government to build loyalty and curb dissent. More than $5.6 billion has been spent through the program, which links transaction data to information about personal finances, education, and biometrics using an open-source analytics software called KNIME.

A range of services are offered through the card and an associated app, including an allowance for travel on public transit and access to job training and health care.

Officials say that strict privacy measures are in place and that data from the cards is being used only to serve their stated purpose: helping the millions of Thais who are poor enough to qualify for one.

“We now have a large enough database to come up with more targeted policies,” says Lavaron Sangsnit, a Finance Ministry official who oversaw the card system until September. “It’s not a one-size fits all approach anymore. All of our efforts will now have a razor sharp focus.”

No-strings-attached cash transfers have become more popular among development economists in recent years, guided by the principle that recipients are better able to decide what they need than bureaucrats. One of the best known is Brazil’s Bolsa Familia, which provides money to families who ensure their children attend school and get necessary vaccinations.

Other countries, meanwhile, have turned to sophisticated digital systems to deliver existing welfare benefits. In India, a biometric identification platform called Aadhaar has enrolled more than one billion people. While an undoubted technological success, Aadhaar has been dogged by problems with security, including data leaks and thefts.

There have also been allegations by privacy activists that it could be used for improper surveillance, which government authorities have disputed.

Heavily dependent on exports and tourism, Thailand’s economy is expected to contract by as much as 8.5% this year, putting some 8 million jobs at risk. That could drive more people’s annual income below 100,000 baht ($3,200), the threshold for receiving a cash card. To cushion the impact of the pandemic on the poor, the government has increased monthly payments by 500 baht for the final quarter of the year.

Members of the ruling Palang Pracharath Party have not been shy about trying to leverage the program for political advantage. During last year’s general election, some voters said they were told at rallies that they needed to elect government-aligned candidates to keep their card benefits, prompting an opposition lawmaker to file a complaint with the elections regulator. (The agency rejected the allegations.)

Since the cards and associated welfare policies are being implemented “at the discretion of the government,” it’s fair to question “whether this could be used for politics,” says Thon Pitidol, an economics professor at Thailand’s Thammasat University who studied the program’s implementation.

Many poor Thais are just happy to have the extra cash—no matter what it might mean for politics or privacy. Liamtong Namwicha, a farmer who lives in the northeastern Sisaket province, says he’s found the card “useful” since getting one more than two years ago.

Liamtong, who is currently receiving 800 baht a month, has been using it to buy groceries and household necessities from a store in his village, and says he didn’t know data on his habits was being transmitted to policymakers—but that he isn’t worried about it. “I only use the card to buy instant noodles, vegetable oil, and detergent,” he says. “These are necessary things, so I don’t mind if they know.”

Updated: 10-19-2020

Better To Get It Right Than To Be First With CBDC, Says US Fed Chair

The U.S. already has a “safe and active dynamic domestic payment system,” Powell argued.

The United States will not be issuing a digital dollar until the Federal Reserve resolves all questions around a potential central bank digital currency, or CBDC, according to the Fed’s chairman, Jerome Powell.

Powell claimed that he is not worried about other countries having a first-mover advantage when it comes to issuing CBDCs.

Speaking at a Monday panel on cross-border payments hosted by the International Monetary Fund, Powell said:

“We have not made a decision to issue a CBDC, and we think there’s a great deal of work yet to be done. […] In fact, I actually do think that CBDC is one of those issues where it’s more important for the United States to get it right than it is to be first.”

Powell elaborated that “getting it right” means that the U.S. is not only looking at the potential benefits of a CBDC but also the potential risks — particularly given the fact that the U.S. dollar is the world’s reserve currency.

The official noted that countries around the globe will have their own motivations for issuing a CBDC. He contended that the main focus for the U.S. would be determining “whether and how a CBDC could improve an already safe and active dynamic domestic payment system.” Powell continued:

“Unlike some jurisdictions, here in the United States we continue to see strong demand for cash. Moreover, we have robust and mature financial and banking sectors, and we have a highly banked population, so that many, although not all, already have access to the electronic payment system.”

The Fed chair emphasized that the bank will not make a decision on issuing the digital dollar until it resolves CBDC-associated risks involving cyber attacks, financial stability, privacy and security. He stated:

“In addition to assessing the benefits, there are also some quite difficult policy and operational questions. […] Just to mention a few, I would mention the need to protect a CBDC from cyber attacks and fraud; the question of how a CBDC would affect monetary policy and financial stability; and also, how could CBDC prevent illicit activity while also preserving user privacy and security.”

Powell’s remarks come amid a number of global jurisdictions actively exploring and piloting CBDCs. Countries such as Russia and Japan are among the latest countries to jump on the CBDC bandwagon, while jurisdictions such as China and Sweden began testing their forthcoming digital currencies in 2020.

Despite the technology’s growing popularity across the globe, citizens in the U.S. are also skeptical about the idea of the digital dollar. According to a recent survey, more than 50% of Americans are opposed to the U.S. Fed issuing such an asset. In late September, the Federal Reserve Bank of Cleveland revealed details of the Fed’s ongoing research into a potential digital dollar.


95% Of Winners In China’s CBDC Lottery Spent Digital Yuan Prizes

Some winners purchased additional digital yuan during the pilot.

The vast majority of China’s $1.5 million digital yuan lottery winners have received and spent their “red envelopes” of digital yuan.

As of Sunday, a total of 47,573 out of 50,000 lottery winners in China have received their prizes, Shenzhen authorities officially announced.

According to the announcement, the winners conducted a total of 62,788 transactions accounting for 8.8 million yuan ($1.3 million). This amount represents about 88% of the total 10 million yuan ($1.5 million) that was to be distributed in the giveaway pilot in Shenzhen.

Some winners have not only spent their “red envelopes” but also topped up their wallets, having purchased an additional 901,000 yuan ($134,000).

Shenzhen launched a pilot program to promote the digital yuan with a public giveaway on Oct. 9. Lottery organizers said they would take back the unused amount of the digital yuan packets if winners did not spend it by Sunday

As previously reported, a total of 2 million people applied to participate in Shenzhen’s digital yuan giveaway program as of Oct. 12.

China’s central bank digital currency — the digital yuan — began testing in April. Pilots were subsequently expanded to nine cities, including Shenzhen and Guangzhou as well as Hong Kong and Macau.

Leaders of Global CBDC Projects Talk Shop In Panel Today

Central bank digital currency interest continues gaining global traction.

As part of DC Fintech Week, a digital conference on the governmental side of the financial technology sector, several international leaders gathered for an Oct. 19 panel called: Central Banks, CBDCs and Cryptoeconomics. 

“I don’t see technological barriers in this area, but I do see technological challenges,” Cecilia Skingsley, First Deputy Governor of Riksbank, the central bank of Sweden, said on the panel.

“The challenge is not so much technology in itself, but it’s more about — we have to choose what sort of policy objectives do we want to focus on, what is the problem we want to solve,” she explained. “Depending on what that is, and the purposes we want to serve, then you choose the technology after that.”

The panel saw discussion between four separate authorities on various aspects of CBDCs, including the global race toward toward such a currency, as well barriers. In addition to Skingsley, the panel hosted BIS executive committee member Benoit Coeure, Bank of England deputy governor Jon Cunliffe, and former U.S. CFTC chairman J. Christopher Giancarlo.

As far as the Bank of England is concerned, Cunliffe explained cash as a cumbersome part of the economy. “Physical cash is no longer convenient,” he said. “It’s becoming increasingly inconvenient for people to use in their everyday lives, and the COIVD crisis has accelerated that,” he added. “On the other hand, it’s becoming increasingly less acceptable to merchants for some of the same reasons, even merchants that are able to take physical cash.”

Giancarlo specifically pointed out the competitive atmosphere around launching a CBDC, noting that winning the race is not the most important point — sentiment U.S. Federal Reserve chairman Jerome Powell also recently expressed.

“If there’s a winner, I don’t think the winner is necessarily who’s first and the loser is necessarily who’s last,” Giancarlo said during the panel. “What matters is, which central bank successfully incorporates its societal values in a successful development of CBDC,” he explained. “On the other hand, one can’t be too late to the game here,” he added.

Mentioning a report from the BIS from January 2020, Coeure reminded the audience that a large number of the world’s central banks consider CBDCs a worthwhile research effort. China has notably charged forward with its CBDC development in 2020.

Updated: 10-20-2020

The Bahamas Launches World’s First CBDC, The ‘Sand Dollar’

This makes The Bahamas one of the first countries in the world to officially launch a CBDC beyond a pilot program.

The Central Bank of the Bahamas has announced the country’s “Sand Dollar” — a state-backed virtual currency — is now available nationwide.

According to an Oct. 20 Facebook post from Project Sand Dollar, the central bank digital currency (CBDC) became available to all 393,000 residents of The Bahamas from roughly 10:00 PM UTC. This makes The Bahamas the first country in the world to officially roll out a CBDC.

China is currently testing a pilot program for its digital yuan with a $1.5 million giveaway, and Cambodia’s “Bakong” digital currency is expected to become operational in the coming months following its pilot launch in July 2019.

Sand Dollar transfers are made by mobile phone, with roughly 90% of the Bahamian population using mobile phones as of 2017.

According to the Sand Dollar website, residents of The Bahamas can use the digital currency at any merchant “with a Central Bank approved e-Wallet on their mobile device” and transaction fees are “negligible.” The central bank selected transaction provider NZIA as its technology solutions provider for the rollout of the digital currency.

The central bank of the Bahamas has been preparing for the launch of the CBDC for a few years. In 2019, it started a pilot program using 48,000 digital Sand Dollars on the islands of Exuma and Abaco, which have a combined population of fewer than 25,000 people. Each Sand Dollar is pegged to the Bahamian dollar, which is in turn pegged to the U.S. dollar.

The Sand Dollar is intended to drive greater financial inclusion within the archipelago nation of more than 700 islands, about 30 of which are inhabited. Cointelegraph reported in September that Chaozhen Chen, the assistant manager of eSolutions at the Central Bank of The Bahamas, said the CBDC would help provide “access to digital payment infrastructure or banking infrastructure” for underbanked and unbanked residents.

Updated: 10-26-2020

Bahamas Strikes First With Sand Dollar Amid US–China CBDC Faceoff

Fed Chairman Powell sees no urgency to develop a CBDC, but eventually, the world’s top central bank must act, say experts.

The Bahamas, an island nation in the West Indies, made digital currency history on Oct. 20 with the official launch of a new central bank digital currency, the so-called Sand Dollar.

It became the first country to roll out a CBDC available to all residents, and while the Bahamas is a small nation — with only 393,000 people — it appears to be an event of some global financial significance.

Or is it? “It could be if it succeeds,” Ross Buckley, KPMG-KWM professor of disruptive innovation at University of New South Wales, Sydney, told Cointelegraph. “Other small island nations — as in my backyard in the Pacific — are watching it carefully and could well follow suit.”

James Barth, a finance professor at Auburn University, placed the event in the context of a series of CBDC milestones, beginning with the launch of Bitcoin (BTC) in 2009 and including Facebook’s Libra announcement in 2019, China’s CBDC trials in April, and the European Central Bank’s statement about the possible issuance of a digital euro in October.

“These developments and the COVID-19 pandemic made it virtually certain that a country — most likely a small country — would go live with a central bank digital currency,” he said.

Some, however, said it was too early to tell. Hans Gersbach, an economics professor at ETH Zurich in Switzerland, told Cointelegraph: “First, we have to see whether it will function well in practice.”

Jay Joe, CEO of Nzia Limited — the technology solutions provider for the Bahamas rollout — told Cointelegraph that the Sand Dollar was introduced in the Bahamas to help facilitate financial inclusion across the nation:

“The Bahamas as a vast archipelago spreading across over 100,000 square miles of ocean, has many remote islands and communities where residents do not have access to formal financial services.”

Because of population sparsity, it often isn’t economically viable for banks to build branches and sustain infrastructure. The new CBDC “enables the people of The Bahamas universal access to digital payments and extends the reach of financial services to all corners of the nation,” Joe told Cointelegraph.

Among the key questions the nation’s central bank and others were looking to answer with the rollout, Joe said, were “how existing regulations and policies will be shaped, and, eventually, how the CBDC will be embraced by the people to some day become as ubiquitous as cash.”

A Sense of Urgency?

The global demand for online services has accelerated dramatically with the COVID-19 pandemic, and this is arguably driving the development of CBDCs around the world. As the deputy governor of the Central Bank of Canada, Timothy Lane, said recently.

“If we want to be ready to develop any kind of digital central bank product, we need to move faster than we thought was going to be necessary.” Barth further explained:

“The virus has shifted behavior in favor of more social distancing and therefore greater use of online communication and transactions, both domestically and globally. This certainly makes digital currencies more relevant as money and for payments.”

But this sense of urgency isn’t universal, as Jerome Powell, chairman of the United States Federal Reserve, said on Oct. 19 at an International Monetary Fund event. He believes that CBDCs face many critical challenges, such as preventing fraud and cyber attacks, ensuring financial stability, and protecting privacy, saying:

“There’s a great deal of work yet to be done. […] In fact, I actually do think that CBDC is one of those issues where it’s more important for the United States to get it right than it is to be first.”

The U.S. needn’t worry about losing the “first-mover” advantage with regard to a digital currency, Powell implied. Was he right?

“Probably in the immediate sense, yes,” according to Buckley, who added: “Longer term though if China or another nation allows its CBDC to be used in international trade, the U.S. will have to respond and quickly.”

The U.S. draws extraordinary benefits from minting the world’s reserve currency, and the loss of exclusivity in that regard could cost the U.S. economy dearly. It would also have political consequences — for instance, placing many countries outside the scope of U.S. financial sanctions. Buckley believes that China’s “long game” is, arguably, to upend the U.S. dollar as the world’s reserve currency.

“It [China] hates that the global economic system is built upon the U.S. dollar, and it aims to build a parallel system that it controls,” he said, further adding: “This was the impetus behind the denomination of trade contracts of other country’s exporters and importers with China in renminbi.”

It was also a motivation behind the New Development Bank established by the BRICS states — Brazil, Russia, India, China and South Africa — and also for the Asian Infrastructure Investment Bank, continued Buckley, referencing another multilateral development bank whose creation was proposed by China in 2009 to make better use of Chinese foreign currency reserves amid a global financial crisis.

“A [Chinese] CBDC will interact really well with dematerialized digital trade documentation so if China allows DC/EP offshore it will be a total game changer. In time I think they will.”

Barth, for his part, agreed that the U.S. didn’t have to hurry to bring a CBDC to market, as the U.S is the world’s largest economy, accounting for 20% of global gross domestic product, and the U.S. dollar remains the world’s dominant currency.

“Chairman Powell is right that the U.S. does not have to worry about losing any ‘first mover’ advantage by rushing to issue a central bank digital currency.”

On the other hand, Sidharth Sogani, founder and CEO of analytics firm Crebaco Global, told Cointelegraph that being first to market among large economies does matter. “China is already testing its CBDC. They have integrated POS machines, mobile apps and many other source codes to develop apps on their CBDC.”

He further opined: “First mover advantage is crucial in this case — especially when you are competing with China.” Financially, the U.S. is still dominant, but with regard to CBDC technology, it trails — “And here China is going to lead for sure as they are ready with their CBDC and are the second biggest economy globally.”

Sogani explained this from the point of view of a bank customer: “If you are already having a great experience with Bank A,” which uses a Chinese CBDC, “will you open an account or download an app with Bank B — which does business with a U.S. dollar CBDC?” If/when China launches its CBDC, it will attract large numbers of global customers very quickly. “It will be difficult to catch them.”

The U.S. should have a CBDC ready to go — just in case — suggested Gersbach. “Preparation should be stepped up in order to follow fast if successful models of CBCDs are introduced.” But according to Barth, the big question is how the “CBDCs will affect money and payments, particularly the role of the government.”

Gersbach also outlined several other factors: “Preventing cyber attacks, privacy issues, and financial stability. Security of all kinds and financial stability are the two most important issues to be resolved.”

Sogani, assuming that CBDCs would be built on a blockchain platform, questioned how CBDCs would relate to Bitcoin and other cryptocurrencies. “It’s [a CBDC] a completely different thing, with different fundamentals and uses. Understanding the nitty gritty is the biggest challenge.”

How Close Is The First Mass CBDC?

It seems that the development of CBDCs around the world has picked up in 2020, and if this is the case, when might one see the first massive-scale CBDC? According to Barth: “Most of the major countries have been studying CBDCs for some time now.” He added:

“China, of course, has been engaged in trials but with no information provided about a nationwide adoption date. Nevertheless, it is likely to be the first major country to issue a CBDC, and if so, it is likely to trigger other major countries to follow suit.”

Regarding China, Sogani said: “Their legal framework seems to be in the making. It will launch it for the masses in a few months. I don’t see any other country as close to China’s development stage.”

Meanwhile, according to Buckley: “China intends clearly its digital currency/electronic payment project to dominate payments and money within China domestically, and they’ve been working on it for five to seven years.”

As long as the project remains domestic, there is no real challenge to the United States. But if China takes it global, “It will take the U.S. years of work to respond with a CBDC of its own, the so-called digital dollar,” said Buckley.

Meanwhile, Sogani sees big benefits, even for small countries — like the Bahamas — that take the digital path. “A CBDC enables a country’s currency to go global which the current financial ecosystem doesn’t offer.” To make an international transfer, ample paperwork needs to be signed and fees paid. “This is expensive. It takes up to two days and is complicated,” commented Sogani, adding:

“But if it is a CBDC, it can go directly to the mobile apps, and it can be tracked. Yes, there will be compliance but the SWIFT method, which involves nostro and vostro accounts, will be eliminated — making life simpler.”

Joe called the Bahamas’ rollout “the world’s first production-grade live implementation of a retail CBDC.” Asked if there were lessons here for other nations, the NZIA CEO told Cointelegraph that there were many, “including the importance of grassroots engagement and understanding of CBDC and its effects on the intermediated financial system,” further adding:

“A CBDC is more than elaborate software and mobile wallet systems. It needs to be designed from the ground up and built as part of a national payments infrastructure that addresses the needs of everyday people.”

In sum, there appears to be a certain global logic to recent events. Because the U.S. dollar, the incumbent global currency reserve, has much to lose by coming to market with a flawed CBDC, it appears to be moving cautiously, content to let smaller players such as the Bahamas do its beta testing.

Meanwhile, China, the challenger, is moving fast, but its DC/EP project is focused on the nation’s mass market for now. A truly global digital yuan may still be some years away.

“A CBDC is a total game changer that raises a host of tough issues,” concluded Buckley. “This is why no one country has yet done it. Central banks never like stepping into the unknown — it’s not in their DNA for good reasons. But I think China will force other nations’ hands.”

 

Updated: 10-21-2020

Brazil’s Central Bank Just Revolutionized Instant Payments

Its new digital app turns free money transfers into a public good.

Earlier this year, my kitchen sink sprang a leak. With Brazil bracing for coronavirus, how to find a repairman willing to risk Rio de Janeiro’s pathogen-friendly public transit for a one-off job in a stranger’s home? Lucky for me, Antonio was game.

A freelance plumber, Antonio is part of Latin America’s vast shadow economy, where today’s gig is tonight’s meal. Unfortunately, most Brazilian handymen prefer cash, just the sort of high-touch tender I had foresworn in times of Covid-19.

We settled on a bank transfer, and a few pecks at my phone app and a hefty transfer fee later, I’d whisked the money from my account to his. Or so I thought. Two days, four phone calls and several worried text messages from Antonio later, the funds finally landed.

Fortunately, those anxious days may be numbered. Next month, the Central Bank of Brazil will debut a new instant payments tool. Called PIX, it promises hassle-free transactions within seconds for anyone with a mobile phone and a bank account.

And it comes free of charge. The bank has already logged more than 39 million requests by prospective PIX clients, both corporate and individual, eager to lock in access “keys” to the service.

Brazilian banking was long due for a shakeup. Latin America’s signature economy boasts some of the world’s biggest and most lucrative banks, where dexterous moneymen finessed hyperinflation and the shell game of serial government stabilization plans through market acumen and innovation.

Yet these sophisticated brand banks still deliver many of their headline services on last century’s clock — Monday to Friday from 10-to-4, and 10-to-2 during the pandemic — and often at bruising lending rates and fees.

No wonder some 45 million Brazilians have no bank account, and 71% still prefer to do business in cash.

“Brazilian banking has long been dominated by a few big players who enjoy a practically captive clientele,” said Paulo Bilyk, chief executive of Rio Bravo Investimentos, a Sao Paulo asset management firm.

Reinforcing this sweetheart market is the cozy system that deposits the paychecks of 11.4 million relatively well-paid public employees in banks they did not even choose. “The new system facilitates exchanges by making it simpler, faster and cheaper to pay bills. That’s a win for the economy and for social inclusion,” Bilyk said.

Sensing the opportunity, regulators began preparing early last decade to disrupt the financial monopoly by greenlighting virtual banks, which peddle checking and savings accounts, credit and debit cards exclusively online and at considerable discounts. Investment in Brazilian fintech has since soared, from $52 million in 2015 to $1.6 billion last year.

Brazil is now home to the world’s largest digital-only bank, Nubank, with 20 million clients nationally and operations in Argentina, Colombia and Mexico.

Brazil is actually a relative latecomer to instant digital payments. Kenya launched its M-Pesa system (42 million subscribers) via mobile phone in 2007; India’s four-year-old Unified Payments Interface clocked 1.62 billion transactions in June; China’s two biggest digital wallet competitors, Alipay and WeChat Pay, have more than 2.2 billion active users.

Yet those are competitive businesses, each of which takes a cut per transaction. PIX, by contrast, is a public good, launched by the Central Bank and free of charge. The initiative was an attempt to lay the ground rules — and perhaps get a jump on the competition — in the relatively cloistered Brazilian economy for an aggressive frontier business dominated by international giants.

Tellingly, the Central Bank in June withdrew authorization for WhatsApp Payments, the Facebook-owned phone-based payment tool, a week after its Brazilian rollout.

A rare oasis of institutional continuity in the Brazilian policy desert, the Central Bank has already helped promote a more inclusive financial market by eschewing the monetary populism that has kept inflation high and lending dear.

Brazil’s interest rates hit record lows this year. The surging digital culture — 150 million internet users and 205 million mobile phones in a country of 212 million people — has only sharpened the public appetite for innovation.

“Brazilian society is much closer to China than to the U.S. or Europe,” said Claudio Lucena, technical director for the National Data Protection Institute. “We have millions of low-income people with limited access to market information, but who have mobile phones. For them, reducing the cost of banking could be a major incentive.”

Legacy banks, understandably, are less enthusiastic. They stand to forfeit a bundle in fees for moving money. The bank transfers nest egg has grown 31% since 2017, according to Moody’s Investors Service, which says banks could forfeit as much as 8% of their annual winnings in traditional transfers to PIX users.

The Sao Paulo market research company Eleven Financial Research projects a much smaller hit of around 1% of their yearly fee income. “Traditional banks might have wished that PIX had never come along,” said Bilyk.

Indeed, they had no choice. The Central Bank has ordered all financial institutions with more than 500,000 clients to offer account holders the option to sign up for the no-charge pay app. Lenders have joined the October scramble to lock up PIX accounts.

Brazil’s enterprising bandits have been right behind them, hoping to lure unwitting early adopters to divulge their identities and banking information on fake websites. “The rollout for PIX will probably be gradual,” said Eleven Financial’s head of equity research Carlos Daltozo. “Security and fraud are key concerns.”

Instant payments won’t revolutionize Brazilian productivity, stanch fiscal incontinence or fix the regressive and enterprise-choking tax system.

“We basically know what we have to do put the economy right,” Bloomberg Economics analyst Adriana Dupita told me. “But by making it easier and more affordable to pay bills and transfer money, you invite more people into the system and make financial transactions more accessible.”

At a time when Brazilian politics has devolved into a contest over how to spend more, a tool allowing individuals to spend better is already a blessing.

 

Updated: 10-21-2020

Brazil’s Central Bank Just Revolutionized Instant Payments

Its new digital app turns free money transfers into a public good.

Earlier this year, my kitchen sink sprang a leak. With Brazil bracing for coronavirus, how to find a repairman willing to risk Rio de Janeiro’s pathogen-friendly public transit for a one-off job in a stranger’s home? Lucky for me, Antonio was game.

A freelance plumber, Antonio is part of Latin America’s vast shadow economy, where today’s gig is tonight’s meal. Unfortunately, most Brazilian handymen prefer cash, just the sort of high-touch tender I had foresworn in times of Covid-19.

We settled on a bank transfer, and a few pecks at my phone app and a hefty transfer fee later, I’d whisked the money from my account to his. Or so I thought. Two days, four phone calls and several worried text messages from Antonio later, the funds finally landed.

Fortunately, those anxious days may be numbered. Next month, the Central Bank of Brazil will debut a new instant payments tool. Called PIX, it promises hassle-free transactions within seconds for anyone with a mobile phone and a bank account. And it comes free of charge.

The bank has already logged more than 39 million requests by prospective PIX clients, both corporate and individual, eager to lock in access “keys” to the service.

Brazilian banking was long due for a shakeup. Latin America’s signature economy boasts some of the world’s biggest and most lucrative banks, where dexterous moneymen finessed hyperinflation and the shell game of serial government stabilization plans through market acumen and innovation.

Yet these sophisticated brand banks still deliver many of their headline services on last century’s clock — Monday to Friday from 10-to-4, and 10-to-2 during the pandemic — and often at bruising lending rates and fees.

No wonder some 45 million Brazilians have no bank account, and 71% still prefer to do business in cash.

“Brazilian banking has long been dominated by a few big players who enjoy a practically captive clientele,” said Paulo Bilyk, chief executive of Rio Bravo Investimentos, a Sao Paulo asset management firm.

Reinforcing this sweetheart market is the cozy system that deposits the paychecks of 11.4 million relatively well-paid public employees in banks they did not even choose. “The new system facilitates exchanges by making it simpler, faster and cheaper to pay bills. That’s a win for the economy and for social inclusion,” Bilyk said.

Sensing the opportunity, regulators began preparing early last decade to disrupt the financial monopoly by greenlighting virtual banks, which peddle checking and savings accounts, credit and debit cards exclusively online and at considerable discounts. Investment in Brazilian fintech has since soared, from $52 million in 2015 to $1.6 billion last year.

Brazil is now home to the world’s largest digital-only bank, Nubank, with 20 million clients nationally and operations in Argentina, Colombia and Mexico.

Brazil is actually a relative latecomer to instant digital payments. Kenya launched its M-Pesa system (42 million subscribers) via mobile phone in 2007; India’s four-year-old Unified Payments Interface clocked 1.62 billion transactions in June; China’s two biggest digital wallet competitors, Alipay and WeChat Pay, have more than 2.2 billion active users.

Yet those are competitive businesses, each of which takes a cut per transaction. PIX, by contrast, is a public good, launched by the Central Bank and free of charge.

The initiative was an attempt to lay the ground rules — and perhaps get a jump on the competition — in the relatively cloistered Brazilian economy for an aggressive frontier business dominated by international giants. Tellingly, the Central Bank in June withdrew authorization for WhatsApp Payments, the Facebook-owned phone-based payment tool, a week after its Brazilian rollout.

A rare oasis of institutional continuity in the Brazilian policy desert, the Central Bank has already helped promote a more inclusive financial market by eschewing the monetary populism that has kept inflation high and lending dear.

Brazil’s interest rates hit record lows this year. The surging digital culture — 150 million internet users and 205 million mobile phones in a country of 212 million people — has only sharpened the public appetite for innovation.

“Brazilian society is much closer to China than to the U.S. or Europe,” said Claudio Lucena, technical director for the National Data Protection Institute. “We have millions of low-income people with limited access to market information, but who have mobile phones. For them, reducing the cost of banking could be a major incentive.”

Legacy banks, understandably, are less enthusiastic. They stand to forfeit a bundle in fees for moving money. The bank transfers nest egg has grown 31% since 2017, according to Moody’s Investors Service, which says banks could forfeit as much as 8% of their annual winnings in traditional transfers to PIX users.

The Sao Paulo market research company Eleven Financial Research projects a much smaller hit of around 1% of their yearly fee income. “Traditional banks might have wished that PIX had never come along,” said Bilyk.

Indeed, they had no choice. The Central Bank has ordered all financial institutions with more than 500,000 clients to offer account holders the option to sign up for the no-charge pay app. Lenders have joined the October scramble to lock up PIX accounts.

Brazil’s enterprising bandits have been right behind them, hoping to lure unwitting early adopters to divulge their identities and banking information on fake websites. “The rollout for PIX will probably be gradual,” said Eleven Financial’s head of equity research Carlos Daltozo. “Security and fraud are key concerns.”

Instant payments won’t revolutionize Brazilian productivity, stanch fiscal incontinence or fix the regressive and enterprise-choking tax system. “We basically know what we have to do put the economy right,” Bloomberg Economics analyst Adriana Dupita told me. “But by making it easier and more affordable to pay bills and transfer money, you invite more people into the system and make financial transactions more accessible.”

At a time when Brazilian politics has devolved into a contest over how to spend more, a tool allowing individuals to spend better is already a blessing.

Updated: 10-26-2020

Digital Yuan Will Work With WeChat And Alipay, Says Bank Exec

Details regarding the digital yuan’s characteristics are taking shape.

The forthcoming digital yuan will reportedly be compatible with major payment networks within the country.

Mu Changchun, the head of the People’s Bank of China’s digital currency research institute, said that the central bank-backed digital yuan will be compatible with major mobile payment wallets like WeChat Pay and Alipay.

According to a report from South China Morning Post, Mu said during a conference that the digital yuan will not compete with WeChat Pay and Alipay:

“They don’t belong to the same dimension. WeChat and Alipay are wallets, while the digital yuan is the money in the wallet.”

These recent statements would appear to contradict earlier reports from local sources suggesting that China may launch its digital currency as an alternative to the two payment giants.

The digital yuan is currently accessible to limited users through an exclusive mobile wallet application. At the conference, Mu said that the mobile wallets for digital yuan face the age-old problem of counterfeiting, stating that there were multiple fake digital yuan wallets in the market.

Mu said it would only be possible to reduce the impact of counterfeit wallets if all parties involved, from the central bank to the users, take necessary cautions.

On a different note, Mu said that the digital yuan operates on a centralized infrastructure, differentiating it from private currencies like Facebook’s Libra and Bitcoin (BTC).

China has progressed rapidly with its central bank digital currency initiative. Last week, it published a draft law to provide a regulatory framework and legitimacy for its digital yuan. At present, the central bank is conducting pilot tests across the country for its CBDC.

In one of the largest pilot tests, local authorities distributed $1.5 million worth of digital yuan to 50,000 of the 1.9 million people who signed up for a giveaway.

Updated: 11-2-2020

China’s Digital Yuan Pilots Have Processed $300M So Far, Says PBoC Head

China’s digital yuan pilot program is picking up speed.

The governor of China’s central bank has given more details about the country’s ongoing digital currency pilot.

Yi Gang, governor of the People’s Bank of China, said that the digital yuan pilots have processed over four million transactions to date, totaling more than 2 billion yuan ($299 million). The official delivered his latest remarks at the Hong Kong Fintech Week conference on Nov. 2, Bloomberg reported.

According to Yi, the pilots have been going smoothly so far, having rolled out for extended testing in four cities.

Growth in demand for digital and contactless payment methods amid the coronavirus pandemic have posed major challenges for central banks, as they try to juggle user security with convenience, Yi said.

The official noted that fintech companies have some key advantages over commercial banks in terms of building a customer base and managing risks.

The PBoC launched the first pilots for its forthcoming digital yuan in April 2020. The initial trial reportedly included four major cities: Shenzhen, Chengdu, Suzhou and Xiongan. The program was reportedly expanded to nine cities, including Guangzhou, Hong Kong and Macau.

In early October, the PBoC officially announced that the digital yuan wallets processed $162 million in transactions between April and August 2020.

Major tech companies have already begun preparing for the seemingly inevitable launch of the digital yuan. Huawei recently announced that its newest smartphone, Mate40, will feature a wallet for the currency and allow users to transact with it, even when they are offline.

Reserve Bank of Australia Forms Partnerships To Research CBDC

The project will “explore if there is a future role for a wholesale CBDC in the Australian payments system,” according to the RBA.

According to a Nov. 2 announcement from The Reserve Bank of Australia, or RBA, the financial institution will be partnering with the Commonwealth Bank, National Australia Bank, the financial services company Perpetual, and software company ConsenSys on a project to explore the potential use of a wholesale central bank digital currency in the country using “Ethereum-based distributed ledger technology.”

The RBA stated it would be researching the development of a proof-of-concept for “the issuance of a tokenized form of CBDC.” It specifically mentioned wholesale market participants potentially using the digital currency for tokenized syndicated loans on an DLT platform and exploring the implications of delivery-versus-payment security settlements with cross-chain atomic swaps.

“With this project we are aiming to explore the implications of a CBDC for efficiency, risk management and innovation in wholesale financial market transactions,” stated Reserve Bank of Australia Assistant Governor Michele Bullock.

“While the case for the use of a CBDC in these markets remains an open question, we are pleased to be collaborating with industry partners to explore if there is a future role for a wholesale CBDC in the Australian payments system,” he added.

The move is part of an ongoing about-face for the RBA when it comes to CBDC policy. On Oct. 14, the head of payments policy at the RBA said the bank would continue to research CBDCs despite the financial institution stating there was not a strong policy case for issuing one in September.

As alternatives to issuing a CBDC, the bank has pointed to the success of the country’s efficient, real-time New Payments Platform, and stated it is willing to provide access to fiat banknotes “for as long as Australians wish to keep using them.”

The central bank said the project will be finished by the end of the year and it will issue a report in 2021.

Updated: 11-9-2020

US Fed Economists Are Exploring The “Intrinsic” Value Drivers Of CBDCs

Fed economists are beginning their deep dive into CBDC research, hoping to identify the “intrinsic” value drivers of a digital dollar.

The United States Federal Reserve has broadened its research on central bank digital currencies, or CBDCs, in a new review that was posted to its website Monday.

In a report titled “Central Bank Digital Currency: A Literature Review,” Fed economists Francesca Carapella and Jean Flemming compile research exploring the potential impact of a digital dollar on commercial banking and monetary policy. The review provides a theoretical underpinning for understanding how CBDCs could influence consumer adoption and financial stability.

The Authors Write:

“From a theoretical standpoint, the introduction of a central bank digital currency (CBDC) raises long-standing questions relating to the provision of public and private money […] and the ability of the central bank to use CBDC as a means for transmitting monetary policy directly to households.”

A literature review is essentially an environmental scan on a particular topic that is used to justify the need for additional research. The Fed’s report identified the “intrinsic features of CBDC” as the most important research question to tackle moving forward:

“As with any new literature, many questions remain. We believe the most crucial question is which intrinsic features of CBDC as a means of payment and a store of value are important for households’ portfolio choices as to which monies to use.”

On Aug. 13, the Fed released an original research paper comparing CBDCs with other payment methods. Authors Paul Wong and Jesse Leigh Maniff concluded that a CBDC would “never be able to fully replicate” all the features of cash and real-time gross settlement services but that it could enhance both modes of payment.

Although CBDCs have been described as the central bank “arms race” of the decade, the Fed is in no rush to adopt the so-called digital dollar. Fed Chair Jerome Powell said last month that a CBDC is unlikely to be rolled out anytime soon because the U.S. already has a “safe and active dynamic domestic payment system.”

Powell emphasized that resolving risks to privacy and security is more important than having a first-mover advantage in this space.

China, meanwhile, is taking a far more active approach in rolling out its digital currency. Last month, the People’s Bank of China concluded its largest pilot project on the digital yuan by distributing online wallets to 50,000 randomly selected consumers.

Updated: 11-10-2020

Lebanon To Launch Digital Currency In Face Of Economic And Financial Turmoil

Lebanon’s central bank governor says the country, whose lira has been in freefall, is preparing to launch a digital currency in 2021.

Lebanon’s central bank plans to launch a new digital currency in 2021 as part of a broader effort to combat a parallel economic and financial crisis that has engulfed the country.

Central bank governor Riad Salameh told a gathering of officials Monday that “We must prepare a Lebanese digital currency project” as a way to shore up confidence in the banking system.

“As for the monetary supply in the Lebanese market, it is estimated that there are $10 billion stored inside homes,” Salameh said, according to the state-run National News Agency.

The central banker added that a digital currency project launched in 2021 will help implement a cashless financial system to enhance the flow of money locally and abroad.

Lebanon relies heavily on remittances from its vast global diaspora. In 2019, personal remittances represented nearly 14% of Lebanese gross domestic product, according to the World Bank. That figure was as high as 26.4% in 2004.

Salameh says Lebanon will maintain its gold reserves as a hedge against a wider market crisis. If such a crisis occurs, the central bank can liquidate its bullion on foreign markets for immediate relief.

Banque Du Liban, the country’s central bank, has been kicking around the idea of a state-run digital currency since at least 2018. Efforts appear to have accelerated earlier this year after violent protests and silent bank runs brought Lebanon’s financial system to a halt.

Faced with a dollar crisis, banks tightened restrictions on foreign currency transactions, with at least one major institution limiting withdrawals to just $400 a month. A plunging Lebanese lira made it almost impossible to transact in the local currency.

In June, protestors set fire to the central bank in Tripoli in a show of anger over the collapse of the lira, which had long been pegged at 1,500 per U.S. dollar. The lira would eventually plunge to more than 5,000 per dollar before restabilizing.

The growing confusion over Lebanese fiat triggered a wave of Bitcoin buying among locals, with peer-to-peer marketplaces like Localbitcoins seeing a sharp rise in activity.

Political chaos is nothing new for Lebanon. The tiny Mediterranean country has struggled to form an identity following its 15-year-long civil war. A sectarian power-sharing system ruled by feudal elites has made governing the country extremely difficult, even during periods of relative calm.

Updated: 11-10-2020

US Central Banker Urges Digital Dollar Development

FOMC member Robert Kaplan believes the Fed should prioritize creating a digital dollar.

President of the Dallas Federal Reserve Robert Kaplan believes the US central bank should begin work on a digital currency immediately, a clear indicator that some policymakers view this as an urgent matter.

Speaking Tuesday at a virtual conference hosted by Bloomberg, Kaplan reportedly said:

“It is critical that the Fed focuses on developing a digital currency in the coming months and years.”

The central banker’s remarks were part of a broader discussion on the economy and fiscal policy.

Kaplan is a member of this year’s Federal Open Market Committee (FOMC), the organization tasked with setting monetary policy. The 2020 Committee slashed interest rates to record lows in March as part of a synchronized policy response to Covid-19.

Kaplan and the rest of the FOMC have been instrumental in flooding the market with liquidity since Sept 2019, when irregularities in the overnight repo market caused short-term interest rates to spike.

Blockchain technology is certainly on policymakers’ radar. Last month, Fed Chairman Jerome Powell said that 80% of central banks around the world are exploring the potential utility of a CBDC.

While the Fed has given no indication of whether it will pursue a digital dollar, it has deployed economists to explore the subject in greater detail.

On Monday, the Fed released a literature review of central bank digital currencies, or CBDCs, to explore the impact of a digital dollar on commercial banking and monetary policy. The review concluded by recommending additional research be devoted to exploring the “intrinsic” value drivers of a government digital currency.

Back in August, the central bank released a full-length research report comparing a digital dollar with other payment methods.

Although the idea of a CBDC is scoffed at by proponents of truly decentralized digital currencies like Bitcoin, the digital dollar is believed by some to be the natural progression of a cashless society.

It may assist governments in supporting financial innovation, boosting payment functionalities and supporting greater financial integration worldwide.

Updated: 11-25-2020

US intelligence Is Looking At Chinese CBDC As A National Security Threat

The Director of National Intelligence wants to have the SEC’s leader briefed on the dangers of the U.S. falling behind in crypto.

The United States national security apparatus is warning other agencies about China’s upcoming digital currency.

On Wednesday, news outlet the Washington Examiner reported on a letter that National Intelligence Director John Ratcliffe had sent Securities and Exchange Commission Chairman Jay Clayton earlier in the month.

According to the report, Ratcliffe offered to have staff brief Clayton on the security issues that derive from China’s dominance in crypto mining as well as the country’s progress in digitizing the yuan. Ratcliffe’s letter also apparently pushed Clayton to ensure that U.S. crypto firms remain competitive.

Cointelegraph has reported extensively on the race for a central bank digital currency, or CBDC. Among major economies, China seems to be closest to launch.

Since Bretton Woods in 1944, the U.S. has enjoyed a privileged status as the issuer of the world’s reserve currency, the U.S. dollar. To this day, almost all international trade is settled in dollars, though that is changing for countries like Russia and China, which are subject to extensive U.S. sanctions.

The dollar’s special status affords the Federal Reserve extra flexibility in printing more dollars without running into hyperinflation, as there is huge demand beyond U.S. shores. It is also this special status that allows U.S. sanctions to be such useful instruments of international influence.

A successful digital yuan could challenge the status of the dollar in international trade. The flip side, however, is that many see a digital yuan as a tool of surveillance for the Chinese Communist Party. While that might reduce demand, the upgraded access to information may be another factor that Ratcliffe is worried about.

Updated: 12-04-2020

China’s Central Bank Plans Digital Yuan Pilot For Payments To Hong Kong

Preliminary talks are underway to begin testing the e-CNY in the special administrative region of Hong Kong.

China’s central bank and the Hong Kong Monetary Authority, or HKMA, are in the preliminary stages of piloting the digital yuan for cross-border payments — underscoring another key development in the rollout of a central bank digital currency, or CBDC.

In a media release that appeared on the HKMA website on Friday, chief executive Eddie Yue provided an update on the ongoing work surrounding cross-border payments. He indicated that HKMA is in dialogue with the People’s Bank of China, or PBOC, to begin pilot testing the e-CNY.

Yue Said:

“The HKMA and the Digital Currency Institute of People’s Bank of China are discussing the technical pilot testing of using e-CNY, the digital renminbi issued by the PBoC, for making cross-border payments, and are making the corresponding technical preparations.”

Hong Kong and Mainland Chinese tourists could greatly benefit from e-CNY, Yue says, because it represents the same value as cash already in circulation. And because the yuan is already used in Hong Kong, a digital equivalent would be a matter of convenience.

China continues to be at the forefront of CBDC development, with its digital yuan pilots processing $300 million worth of transactions as of early November. The first pilot projects were rolled out across four major cities in April before expanding to nine metropolitan areas.

As for Hong Kong, the Special Administrative Region has been exploring potential use cases for CBDCs for at least the past three years. As Yue noted, HKMA launched a joint research project with the Bank of Thailand in 2019 to address various concerns related to cross-border payments and digital currencies. Yue said this project has entered its “second stage,” which looks at operability and scalability of cross-border CBDC participation.

Long-Term, Yue Says The Goal Is To Build An Integrated Cross-Border Payment Platform For The Region:

“From a longer-term perspective, we have a good chance of building a regional cross-border payment platform by riding on the global trend of strengthening cooperation in cross-border payment.”

Updated: 12-14-2020

China Has No Plan To Replace USD With Digital Yuan, Former PBoC Head Says

A former PBoC official says that his country has taken a cautious approach with the digital yuan.

The Chinese government is not seeking to replace existing fiat currencies with its own digital currency, according to a former governor of the People’s Bank of China, or PBoC.

Zhou Xiaochuan, the president of the Chinese Finance Association and former PBoC governor, claimed that China’s digital yuan is not intended to replace global fiat currencies like the United States dollar and the euro, the South China Morning Post reported on Dec. 14.

Also known as a digital currency electronic payment, or DCEP, China’s digital yuan is purely designed to transform cross-border trade and investment, Zhou said. Zhou contrasted China’s digital currency to Facebook-backed cryptocurrency project, formerly known as Libra:

“If you are willing to use it, the yuan can be used for trade and investment […] But we are not like Libra and we don’t have an ambition to replace existing currencies.”

Zhou went on to say that China learned a lesson from global regulatory pushback to the Libra project, with regulators fearing that it would disrupt financial systems and monetary sovereignty. Zhou said that China took a more cautious approach:

“Some countries are worried about the internationalization of yuan […] We can’t push them on sensitive issues and we can’t impose our will. We must avoid the perception of great-power chauvinism.”

Zhou noted that one of the major benefits of DCEP is that it enables both payments and currency conversions in real time. “If the currency exchange is realized at the moment of a retail transaction, and there is oversight of that exchange […] it brings new possibilities for interconnection,” he said.

Zhou also emphasized that most retail cross-border payments involving Chinese consumers are already cashless and settled via credit cards or payment services like Alipay and WeChat Pay, but a digital yuan has additional benefits like real-time processing and transparency.

As China actively progresses with its digital currency pilots, some financial experts in other countries have voiced concerns that they are lagging behind in developing their own central bank digital currencies. In October 2020, Japan’s vice-finance minister for international affairs warned the global community of the potential risks of China’s digital yuan, mentioning the potential threat of China getting a first-mover advantage.

Updated: 12-14-2020

Chinese Residents Make 20K Transactions In Digital Yuan Trial Event

The numbers come following the Suzhou municipal government giving away roughly $3 million in a digital yuan lottery for residents.

People in China have conducted roughly 20,000 transactions through e-commerce company JD.com in a trial of the country’s digital yuan.

According to local media outlet Global Times, JD.com reported that 80% of participants born in the 1980s and 1990s used the platform to conduct transactions in the digital currency starting on Friday evening, with at least one transaction larger than $1,527.

The e-commerce site also reported the numbers as the city of Suzhou conducted a real-world trial for digital yuan at the “Double Twelve” shopping festival, in which 10,000 physical storefront locations participated.

The trial in Suzhou is one of many that may be conducted across China to test use cases for the central bank digital currency.

The city’s municipal government reportedly gave away roughly 100,000 “red envelopes” — a traditional method of presenting gifts in China — containing $3 million in digital yuan in a lottery for residents. In October, the city of Shenzhen launched a similar pilot program to promote the digital currency with a public giveaway of $1.5 million to 50,000 lottery winners.

“In 2021, China will continue to look for more scenarios to test the digital yuan, but an extensive launch is still unlikely,” said Cao Yin, managing director of the Digital Renaissance Foundation in Shanghai. He added that the Chinese government would likely continue controlled trials until officials are certain the digital currency can be safely issued:

“We have only ourselves to compete with on this matter, and there’s no need to rush it.”

The People’s Bank of China launched the pilot programs for its digital yuan in April in Shenzhen, Chengdu, Suzhou and Xiongan. As of November, the programs had reportedly processed more than 4 million transactions, totaling roughly $300 million.

Since launching the digital yuan trials, the central bank has announced it would expand the number of testing cities to include Beijing and Tianjin as well as the surrounding province of Hebei. Cointelegraph reported in August that the bank may launch the digital currency before the 2022 Winter Olympic Games, scheduled to be held in Beijing that February.

Updated: 1-13-2021

Bitcoin In Race For Adoption Before Central Banks Launch Digital Currencies: Australia’s Macquarie

With a runway of a year or more before the Federal Reserve and other major central banks can launch digital currencies, bitcoin and other private cryptocurrencies could gain a foothold in electronic commerce.

Central banks like the Federal Reserve and European Central Bank risk losing the digital-currency race if private cryptocurrencies like bitcoin become too entrenched in electronic commerce, according to a new research note from the Australian investment bank Macquarie.

* “The central bank digital currency (CBDC) landscape in free markets is lagging the pace of crypto adoption – it is still unclear how entrenched private cryptos will become before CBDCs become a viable alternative for more efficient transactions,” the report reads.

* “We think the use cases for private crypto could come to fruition if commerce becomes too accustomed to private crypto use prior to a CBDC alternative launching as a stable, legitimate alternative. And fiat debasing could also in fact help demand stick.”

* “In the interim (1-2 years), absent structural regulatory changes that inhibit its potential utility, we expect private cryptos, particularly those with an upper limit like bitcoin (BTC, +12.18%), to continue rising in fiat-equivalent value.”

* “If central banks work expeditiously and deliberately with private partners as we outline above, delivering on reliability, security, and functionality, we think government-promoted CBDCs more likely than not could displace private cryptos (and conventional fiat for that matter) in legitimate commerce, reducing the aggregate demand for private coins, limiting the demand-side factors to ‘store-of-value’ speculation and illicit dealings.”

* China’s central bank could launch a digital currency as soon as this year, but the Fed and ECB aren’t likely to have their versions ready until at least 2022, according to the report.

* “Central banks face difficult tasks in not just deciding how CBDCs will operate, but also building the infrastructure to get them up and running.”

* “U.S. regulatory officials wield quite a bit of power over how cryptos function and how their ecosystems develop. This becomes less meaningful as the network effect of cryptos grows, utility and acceptance broaden, and fiat potentially loses some demand for commerce.”

Updated: 1-15-2021

US Fed: CBDC A ‘Very High Priority’ To Combat Bad Private Sector Money

The United States Federal Reserve needs its own digital currency to protect against a possible overnight proliferation of stablecoin technology, says Fed chairman Jerome Powell.

Cryptocurrency stablecoins could become systemically important overnight, says United States Federal Reserve Chairman Jerome Powell, and that’s why the Fed is determined to get its own central bank digital currency right.

CBDCs are the banking industry’s answer to cryptocurrency stablecoins. While they are often hosted on the blockchain, they share little in the way of philosophical parity with their decentralized counterparts.

CBDCs will be overseen by the banks that issue them and will be regulated under the laws of their respective jurisdictions.

Speaking in an interview with Yahoo Finance, Powell said advances in technology had enabled private entities to create their own money — and that history had shown this was something to be avoided:

“Technology has made this possible and effectively private sector actors can create the equivalent of digital money. We know in the past with private sector money, the public sometimes just thinks of it as money, and then at some point they find out it’s not money. That’s a very bad thing we need to avoid.”

Powell can envision a scenario where stablecoins are suddenly relevant to a large enough number of people to become “systemically important” overnight. He said the Fed still doesn’t know how it might respond to such an occurrence, and admitted that it isn’t even close to understanding the risks:

“[Stablecoins] could become systemically important overnight and we don’t begin to have our arms around the potential risks, how to manage those risks — and the public will expect that we do, and has every right to expect that […] It’s a very high priority.”

As high a priority as launching a CBDC may be, the Fed won’t fall into the trap of trying to be the first.

Russia, China, Sweden, Australia and the European central bank have all taken steps towards launching a CBDC (some are further along than others), but according to Powell, the U.S is always going to have first-mover advantage because of the dollar’s status as the world’s reserve currency:

“Since we are the world’s reserve currency, we actually think we need to get this right and we don’t feel an urge or a need to be first. Effectively it means we already have a first-mover advantage because we’re the reserve currency.”

Powell’s laid back approach to the prospect of a “CBDC gap” emerging between world superpowers isn’t shared by everyone. In October a senior Japanese finance minister warned that China’s digital currency could eclipse the fiat monies of world nations if the digital yuan gets first-mover advantage.

The president of the Chinese Finance Association dismissed this notion, adding that the digital yuan was not like Libra, and that it had no intention of replacing international currencies.

Any prospective “Fedcoin” is still years away, according to Powell, who is determined to do it right, rather than fast — even if it means losing ground to private sector money in the meantime.

“We’re determined to do this right rather than quickly, and it’ll take some time […] Measured in years rather than months.”

Updated: 1-17-2021

Decred Co-Founder Explains The Possible Effects Of A CBDC Takeover

How would mass-scale CBDC issuance impact the crypto space?

Over the course of 2020, numerous countries across the globe raced toward their own digital versions of their currencies, known as central bank digital currencies, or CBDCs. The crypto industry still has its selling points, however, even if most countries launched CBDCs, according to Jake Yocom-Piatt, co-founder of crypto project Decred.

“I expect many nation states will create their own CBDCs in the not-so-distant future, but there is a key differentiator between CBDCs and cryptocurrencies,” Yocom-Piatt told Cointelegraph. “Cryptocurrencies, e.g. Bitcoin and Decred, are fundamentally fairer systems than fiat currencies, so while CBDCs may adopt many cryptocurrency features, they cannot compete on fairness.”

Last year, China led the way in terms of CBDC development pace, while the United States took a slower approach. Recent developments indicate an increased sense of importance around CBDC development in the U.S.

CBDCs will likely represent digital versions of countries’ dollars, although many details remain in flux at this stage.

As mentioned by Yocom-Piatt, crypto assets pose different core frameworks, depending on the asset and its makeup. Bitcoin (BTC), for example, remains untied to national currencies and borders, run by computer code and miners.

“Based on cryptocurrencies being demonstrably fairer with deterministic issuance schedules and self-custodied assets, I expect them to be relatively unaffected by CBDCs, which are just digital fiat,” Yocom-Piatt said.

Stablecoins, on the other hand, might logically feel more effect from a CBDC-run world, as their main purpose is to represent fiat in digital form, on the blockchain, pegged to specific value. The future of crypto-native stablecoins could still depend on the upcoming specifications of CBDCs though.

“Depending on what actions you can perform with your CBDC assets, it could make stablecoins mostly obsolete,” the Decred co-founder noted. “If there are too many restrictions on CBDC assets, stablecoins may compete on a flexibility front.”

Stablecoins, such as USDT and USDC, function on the blockchain and allow for a bevvy of transactions and storage accommodations. USDC in particular saw a notable amount of usage within the decentralized finance, or DeFi sector of crypto in 2020.

Updated: 1-19-2021

French Central Bank Trials Digital Currency For Interbank Settlement

The pilot involved the settlement on a private blockchain of around €2 million.

Banque de France has successfully conducted a central bank digital currency (CBDC) experiment using a blockchain platform for interbank settlement.

* According to a Banque de France statement, the pilot involved the settlement on a private blockchain, provided by U.K. blockchain startup SETL, of around €2 million (US$2.43 million).

* The French bank used SETL’s fund management platform Iznes, along with Citi, CACEIS, Groupama AM, OFI AM, and DXC, as part of the process for the first settlement of funds using CBDC.

* More experiments of the pilot program are underway through mid-year and the process will be an important contribution to research around the interest of a CBDC, said the bank.

* Francois Villeroy de Galhau, governor of the Banque de France, has spoken openly of the potential benefits in the development and issuance of the CBDC.

* In 2020, the French bank published a request for proposals for CBDC “experiment” applications. The project’s aim was to help France’s central bank understand the risks and mechanisms of CBDCs and also contribute to the eurozone’s digital cash conversation.

Updated: 1-27-2021

Central Banks Representing A Fifth Of World’s Population Likely To Issue CBDC In 3 Years: BIS

Many nations are moving to advanced stages of CBDC engagement, according to the Bank for International Settlements.

Central bank digital currencies, or CBDCs, are entering the “advanced stages” of engagement as nations around the world look to capitalize on blockchain technology, according to a new report by the Bank for International Settlements.

In its latest survey of CBDC development, the BIS shows that central banks representing roughly a fifth of the world’s population are set to introduce a “general purpose CBDC in the next three years.”

The 23-page document is based on primary consultations with more than 60 monetary authorities conducted in late 2020.

The survey indicates that 86% of global central banks are actively exploring CBDCs. While the majority remain unlikely to issue a digital currency in the foreseeable future, a sizable minority are moving ahead.

Roughly 60% of central banks are experimenting with digital currencies, while 14% are moving forward with development and pilot programs.

“Around the globe, interest in CBDCs continues to be shaped by local circumstances,” said authors Codruta Boar and Andreas Wherli. “In emerging market and developing economies, where central banks report relatively stronger motivations, financial inclusion and payments efficiency objectives drive general purpose CBDC work.”

The United States Federal Reserve is one of the monetary authorities actively researching CBDCs. Fed economists are exploring the so-called “intrinsic value” of the digital dollar and have issued several research papers on the subject.

The BIS Authors Conclude:

“Most central banks are now exploring the case for CBDCs in some way and, overall, the survey indicates a continuous move from purely conceptual research to experimentation and pilot projects. Yet despite these developments, a widespread roll out of CBDCs still seems some way off.”

In prepared remarks released alongside the report, BIS general manager Agustin Carstens said CBDCs can “serve as the basis for well functioning payments,” but only when accompanied with “good law enforcement.” Anonymous tokens “will not fly,” he said.

Carsten explained that CBDCs without attached identity would elevate money laundering concerns, undermine efforts to boost financial inclusion and contribute to cross-border instability.

He Continued:

“If they are properly designed and widely adopted, CBDCs could become a complementary means of payment that addresses specific use cases and market failures. They could act as a catalyst for continued innovation and competition in payments, finance and commerce at large.”

Commonly referred to as the “bank for central banks,” the BIS promotes monetary and financial stability and international cooperation among global central banks. Founded in 1930 and headquartered in Basel, Switzerland, the organization’s mandate has expanded over the decades to include emergency funding for troubled governments.

As Cointelegraph reported last week, the BIS is currently working on a CBDC settlement platform. Early-stage trials are set to begin later this year.

Updated: 2-8-2021

Hardware Wallet For Digital Yuan Debuts In Xiong’an New Area

China’s first hardware wallet for the digital yuan supports dual offline payments without an internet connection.

A Chinese banking institution has completed the development of a hardware wallet for the country’s central bank digital currency, the digital yuan

According to a Feb. 7 announcement by Xiong’an authorities, the Xiong’an branch of the Agricultural Bank of China in Hebei has produced the first hardware wallet designed for the digital yuan. The product was developed by the Party Working Committee of the Xiongan New Area and the People’s Bank of China branch in Shijiazhuang.

New areas in China are urban districts that are provided special economic support by the central government. They are divided into state, provincial and prefecture levels. Xiong’an is a state-level new area.

According to the announcement, the new hardware wallet supports dual offline payments without an internet connection. The digital yuan wallet also features payments without the use of mobile phones.

The new hardware wallet for the digital yuan comes in conjunction with the upcoming New Year holidays in China, providing an extra opportunity for local residents. The new hardware wallet reportedly allows users to send gifts to their family members and friends to express their New Year’s wishes.

The wallet marks another milestone in the adoption of the digital yuan adoption in China. As previously reported, Xiong’an was one of the first four regions to pilot China’s CBDC in April 2020. The wallet’s launch in the Xiong’an New Area comes in accordance with China’s plan to accelerate the construction of a smart new city in Xiong’an New District in 2021.

In late 2020, local tech giant Huawei announced that its upcoming Mate40 smartphone series will feature an integrated hardware wallet for the digital yuan.

Updated: 2-9-2021

ECB Leader Floats 3K Threshold For Digital Euro Holdings

The central bank said it will reach a decision on releasing a digital euro “towards the middle of 2021.”

In an interview today, Fabio Panetta, executive member of the European Central Bank said the ECB may only allow digital euro holdings “up to a certain threshold” but added that the rollout of the central bank digital currency was unlikely to cause banks to lose deposits.

Specifically, Panetta said that this threshold “could be around €3,000” — worth roughly $3,600 — which he said would still meet most people’s cash needs.

He added that these figures were ”still under discussion” and that the ECB had also not yet decided on a cap for digital euro payments. Panetta emphasized that the ECB would not be competing with commercial banks, but rather just offer financial services with “one more digital option.”

“The digital euro won’t destabilise the financial system and the banks,” said Panetta. “If people decide to turn some of their cash into digital euros, the banks won’t lose any deposits. And as I said, we will discourage large holdings of digital euro. If banks do in fact lose deposits, then we can make more liquidity available to them.”

Panetta added the results of the consultation the ECB launched in October on a digital euro showed that the first concern for many was privacy:

“We received 8,000 responses during the consultation phase. What people are most concerned about is data protection. They consider it important that no improper use is made of their personal data, which is something that can be guaranteed by the central bank.”

The ECB has already pushed back the timeline proposed by President Christine Lagarde of when it should reach a decision on releasing a digital euro. According to its website, the central bank will decide “towards the middle of 2021.”

From that point, according to Panetta, the ECB could launch a digital euro in “four or five years” following consultations with lawmakers and deciding on technical solutions.

A member of the executive board of the European Central Bank said the institution would attempt to discourage people from holding large sums in digital euros after the currency is released in the next five years.

Authorities in China have already begun trials of a digital yuan in select cities across the country, resulting in thousands of residents receiving free money as part of a lottery. Panetta said that trialing a CBDC in different European cities would also “probably be a wise move” as part of the rollout.

Former British MP Says Central Banks Should Ban Bitcoin

Nick Boles, who served as a Member of Parliament from 2010 to 2019, believes the world would be better off without Bitcoin.

Nick Boles, a former Member of Parliament for Grantham and Stamford from 2010 to 2019, took to Twitter Tuesday to criticize Bitcoin over its negative environmental impact.

He retweeted a post from BBC correspondent Rory Cellan-Jones showing that Bitcoin has overtaken Argentina in annual energy consumption. The data was compiled by the University of Cambridge and presented in the Cambridge Bitcoin Electricity Consumption Index.

Boles Commented:

“Central banks should ban the trading of it, and force anyone who holds Bitcoin and wants to use it in any transaction, to exchange it for another currency that does not have such a damaging side effect.”

“There are other cyber currencies that do no harm in the real world at all,” he added, likely in reference to more environmentally-friendly proof-of-stake-networks.

The surge in Bitcoin’s energy consumption has sparked an internal debate within the crypto industry about how to offset the ecological impact of mining. The flagship digital currency is now estimated to consume 77.9 TWh per year, with annual greenhouse gas emissions from mining reportedly reaching levels comparable to the whole of New Zealand.

Boles doesn’t appear to have much commentary on Bitcoin aside from his recent tweet. Currently, there are no strict regulations on Bitcoin in the U.K., though it is commonly treated as a foreign currency for most purposes.

A United Kingdom lawmaker who quit the Conservative Party in 2019 over Brexit believes governments should ban the use of Bitcoin (BTC), offering further evidence that the digital currency still has its fair share of detractors.

Updated: 2-17-2021

Chinese Bank Tests Biometric Hardware Wallet For Digital Yuan Payments

Another Chinese banking institution has created a hardware wallet for the country’s central bank digital currency.

China’s large-scale digital yuan testing across several cities continues to gather pace with some financial institution leading the development of hardware wallets for the central bank digital currency.

According to news agency Xinhua, the Postal Savings Bank of China has created a biometric hardware wallet for the project.

The biometric hardware wallet enables easy identity verification for users via fingerprint sensors on the card.

Consumers participating in the CBDC trials in Beijing are also able to use the card to access healthcare services.

Indeed, the Postal Savings Bank of China said the hardware wallet, which is still in the testing stage, was designed to provide easier access to the CBDC and healthcare services for the elderly without needing to use smartphones, adding:

“With this card, it is much more convenient to enter and exit public places, and you can pay with just one touch. It is especially suitable for the elderly who have difficulty using smartphones.”

As previously reported by Cointelegraph, the Postal Savings Bank of China first began to develop physical wallet cards back in January.

The biometric card is part of a growing list of hardware wallets for the digital yuan. Earlier in February, the Xiong’an branch of the Agricultural Bank of China also developed a hardware wallet for the digital yuan.

Chinese banks and financial institutions have been at the heart of CBDC-linked developments. Apart from creating hardware wallets, the Agricultural Bank of China also launched an ATM pilot program allowing citizens to convert cash to the digital yuan.

Several municipal authorities have also utilized airdrops and lotteries as means of bootstrapping early adoption of the Digital Currency Electronic Payment.

Sweden Extends Digital Krona Digital Currency Pilot Until 2022

Sweden’s exploration into CBDCs will continue until 2022 as the nation’s central bank seeks to construct a digital version of the krona.

Sweden’s central bank, the Riksbank, recently announced that it has extended an ongoing pilot aimed at creating a digital version of the Swedish krona until 2022.

In combination with professional services firm Accenture, the “e-krona” pilot program was created to address what the Riksbank sees as “the marginalization of cash”:

“The Riksbank sees potential problems with the marginalisation of cash and has therefore initiated a pilot project to develop a proposal for a technical solution for a central bank digital currency, an e-krona that can work as a complement to cash.”

The recent announcement states that no decision has been made on how, or even if, the e-krona will be issued. But a brief whitepaper from 2020 details the use of R3’s Corda blockchain — a private distributed ledger created for business and enterprise. Unlike public blockchains such as Bitcoin and Ethereum, projects built on Corda will be accessible via invite only.

Central bank digital currencies, or CBDCs, are digital currencies issued and overseen solely by the central bank of a given country. Unlike coins on open-source, decentralized, public blockchains, CBDCs don’t pretend to be alternatives to the current fiat system. Rather, they are being devised as a possible safeguard against the spread of digital currencies, acting as a mere digital version of existing national monies.

The pilot program will continue over the course of the coming year and is set to end in February 2022. The recent announcement notes that the testing of offline functionality and onboarding of external participants will be prioritized in the coming months:

“The main aim of the pilot is for the Riksbank to increase its knowledge of a central bank-issued digital krona. The project is now being extended to the end of February 2022. The aim for the coming year is to continue developing the technical solution, with the focus on performance, scalability, testing of off-line functions and bringing external participants into the test environment.”

The Bahamas Gets A Card For Its Sand Dollar National Digital Currency

The Central Bank of the Bahamas partnered with Mastercard and digital payment startup Island Pay to launch a card for its central bank digital currency.

The Bahamas is moving to make its national digital currency more accessible by launching a prepaid card for the “sand dollar.”

The Central Bank of The Bahamas has partnered with global payment giant Mastercard and local payment startup Island Pay to create a card that supports the sand dollar central bank digital currency.

According to a Wednesday announcement, the card is running under a new program from Mastercard and Island Pay, allowing users to convert the digital currency to traditional Bahamian dollars and pay for goods and services. The new card will be accepted for payments across the Caribbean region and other locations supporting Mastercard, the companies said.

The new solution is based on technology from Island Pay, a digital payment startup mainly operating across the Caribbean region. The company holds a license from the Central Bank of The Bahamas to operate as a payment service provider and electronic money institution.

“Island Pay is the issuer of the Sand Dollar Mastercard. The card is integrated into our mobile wallet so that customers can view their balance and transaction information, enable/disable the card and check their PIN,” a spokesperson for Island Pay said.

The representative said that the card is now in private beta, while the full launch is scheduled for March 2021. Once launched, the card would be linkable with mobile payment services like Google Pay and Samsung Pay.

The announcement does not provide more details on how exactly Mastercard’s CBDC technology works. As previously reported, the company has been actively engaged with several major central banks around the world to support CBDC initiatives.

The Bahamas is known as one of the first countries in the world to ever launch a CBDC. The sand dollar launched in pilot mode in late 2019 and became available across its entire archipelago in October 2020.

Central Bank Digital Currencies May Drive Cash ‘Shadow Economy’ To Crypto

“Shadow economy” participants, those who use deal mostly in hard cash for anonymity’s sake, are unlikely to be drawn to using a CBDC, according to a Reuters column.

Central bank digital currencies (CBDCs) may signal the end of physical cash and thus propel interest in cryptocurrency from the darker side of society, according to Mike Dolan, editor-at-large for finance and markets at Reuters.

“Shadow economy” participants, those who use deal mostly in hard cash, are unlikely to be drawn to using a CBDC, which may make it harder to stay anonymous, Dolan argues in his column for the news agency.

Dolan suggests that even bitcoin cannot guarantee completely anonymity as coins can be traced from wallet to wallet, so it is unlikely that “legal tender tokens” could be relied on either.

The “shadow economy,” as described by the International Monetary Fund (IMF), is an ecosystem of consumers and business owners who rely mostly on cash to avoid taxation and regulatory oversight.

This can include everything from sole traders to organized crime, and could be worth more than €2 trillion (US$2.4 trillion) in the eurozone, nearly twice the €1.2 trillion worth of banknotes currently in circulation.

Economists argue that a CBDC should closely replicate cash, whereby digital tokens are held in private digital wallets, in order to avoid driving some users towards crypto. That option may not sit well with anti-money laundering rules, however, they noted.

Dolan further suggests that crypto’s recent explosion is partly due to an expected surge in adoption in the shadow economy, as CBDCs are developed and the decline of cash accelerates.

Updated: 2-21-2021

Morocco Considers Launching A Central Bank Digital Currency

Although bitcoin was banned for use in Morocco four years ago, the cryptocurrency continues to thrive there.

Morocco’s central bank, Bank-Al-Maghrib (BAM), is investigating the benefits of launching a central bank digital currency (CBDC).

* BAM has launched an exploratory committee to investigate the pros and cons of a CBDC four years after banning cryptocurrencies, according to a Morocco World News report.

* Morocco’s central bank is continuing to take a cautious approach due to the “speculative nature” of cryptocurrencies, the report said.

* BAM’s new committee will seek to identify and analyze the advantages and drawbacks of CDBCs for the Moroccan economy, said the report.

* Previously Morocco has expressed concern around the lack of regulation around cryptocurrencies and warned the use of virtual currencies entails significant risk for users.

* Although bitcoin (BTC, +2.04%) was banned for use in Morocco four years ago, the cryptocurrency continues to thrive in the country, with Nigeria, South Africa and Kenya being the only African countries with more trading volume.

Updated: 2-24-2021

Fed Chair Says It’s Up To Congress To Bring A Digital Dollar To Market

Jerome Powell added that the Federal Reserve needs to consider the health of other markets when creating a digital currency.

Federal Reserve hair Jerome Powell said 2021 will likely have the central bank engaging with the public and lawmakers regarding the digital dollar.

In a House Financial Services Committee hearing today, Powell responded to questions from Rep. Patrick McHenry, who said the digital dollar would likely face national and economic security issues for the United States. Powell said there were many concerns surrounding the project and the Fed intended to reach out to the public.

“This is going to be the year in which we engage with the public pretty actively, including some public events that we’re working on,” he said. “In the meantime, we’re working on the technical challenges and also collaborating and sharing work with the other central banks around the world that are doing this.”

Powell added that the Fed needed to consider the health of other markets when creating a digital dollar, adding that the project may need to go to lawmakers first:

“We could well need legislative authorization for such a thing. It isn’t clear until we see which way we’re going.”

The Fed chair’s remarks come on the heels of his appearance before the Senate Banking Committee yesterday, in which he said the Fed was “looking carefully” at whether the U.S. should roll out a digital dollar, but also that it was unlikely for stablecoins and digital currencies to affect monetary policy transmission. Powell has previously said that it is “critical that the Fed focuses on developing a digital currency.”

In the meantime, the Federal Reserve faced another technical challenge today, as nearly all of the services it provides through its online portal went offline for more than an hour. At the time of publication, all Federal Reserve Bank Services with the exception of Account Services are now back online.

Updated: 2-25-2021

Fed’s Digital Dollar Would Look Nothing Like Bitcoin

Fedcoin wouldn’t need the massive computations of cryptocurrencies, but it would effectively nationalize the payment industry, competing with banks, credit cards and Venmo.

Treasury Secretary Janet Yellen recently mentioned the idea of creating a so-called digital dollar — a new form of electronic currency that would make the payment system easier for Americans and presumably compete with Bitcoin and other cryptocurrencies.

But there’s little rationale for a government-managed online dollar that looks anything like Bitcoin. There are probably better ways for the Federal Reserve to make it easier and cheaper for Americans to pay for things.

Yellen is not the first to suggest the idea of a digital dollar — or “Fedcoin,” as some call it. Fed Governor Lael Brainard contemplated the concept last year. And David Andolfatto, a senior vice president at the Federal Reserve Bank of St. Louis, has been investigating the possibility for a number of years now. In 2015 he wrote about it on his personal blog, noting several potential benefits.

A Fedcoin, Andolfatto notes, would allow people to make transactions without opening a bank account — like physical cash, but using an app on your phone instead of your physical wallet. He argues it would also be harder to steal than a bank account that can be hacked. In addition, it would leave an electronic trail that would let the government track down criminals if necessary .

These are all advantages of an electronic currency run by the central bank. But it’s crucial to note that none of these features need to employ the kind of decentralized process that enables Bitcoin. (Full disclosure: I own Bitcoin and other cryptocurrencies.)

Bitcoin is designed to operate without the need for a trusted intermediary, such as a bank. When two people make a transaction in dollars, a bank verifies and logs the transaction, and makes sure that the money is debited from one account and credited to another.

With Bitcoin, that verification is instead done by a distributed network of computers, called “miners.” The economics of the system by which the miners compete to verify the transaction — and are rewarded with bitcoins for doing so — keeps the whole system honest.

But it also requires enormous resources. The mining process — called a “proof-of-work” system — involves solving very hard math problems, which takes a lot of computing power, which in turn requires a huge amount of energy — about as much as the entire country of Argentina, by a recent estimate. Whether that energy use will ultimately hold back Bitcoin as a monetary system is a question that remains to be answered.

What’s clear, however, is that there’s no need for the Fed to create its own proof-of-work system for Fedcoin. Proof of work is an expensive way to establish trust in a decentralized world; the Fed, which is a centralized and already trusted entity, doesn’t need to spend massive amounts of electricity reestablishing trust every time someone wants to spend a digital dollar.

Instead, it could just clear the transaction like any bank does, cheaply and easily. As long as people trust the Fed not to steal their money (and why would it, when it can print as much as it likes?), a Fed payments system could be incredibly cheap without relying on any cryptocurrency technology at all.

So a Fedcoin shouldn’t look anything like Bitcoin. But that doesn’t mean the central bank can’t get involved in processing payments. The Fed could absolutely create an app by which people could cheaply send digital dollars to each other in a peer-to-peer way, without a bank account.

Instead of being stored on a distributed ledger like a cryptocurrency, these dollars would simply exist on the Fed’s own centralized database, which people could access through their phones — much as they currently use phones to access their Venmo accounts.

A Fed-run electronic payment system would compete with existing payment applications, such as PayPal, Venmo, Stripe, Visa and MasterCard. That would put those companies at an inherent disadvantage, since they all require banks to operate, and the Fed is its own bank. And because the Fed is part of the government, it doesn’t even need to turn a profit, so its payment service could be very cheap indeed. Fee-charging payment services might be put out of business.

In fact, since the digital dollars that people held at the Fed would be an alternative to keeping those dollars in a checking account, the Fed would also be competing with private banks and credit unions. Many checking accounts are already free, but as Andolfatto notes, simply downloading a Fed-made app would be easier than applying for a bank account, and you probably wouldn’t have to worry about any hidden or surprise fees.

So the Fed could create its own distributed, peer-to-peer payments and cash storage system, and do it much more cheaply than Bitcoin. But by doing so, it would be directly competing with much of the world’s existing financial and payments infrastructure.

Maybe that’s a good thing — maybe payment and cash storage is simply such a mature and commodified product now that there’s no reason to have profit-making companies doing it, and government can safely muscle them out. But that would in effect be nationalizing an industry, which is always a risky move. Yellen is correct to promise only to do more research into the idea.

Updated: 3-7-2021

Sen. Sherrod Brown Says US Should ‘Lead The Way’ On CBDCs, Disses Diem And Bitcoin

“We cannot be left behind,” Brown wrote about other nations’ central bank digital currency efforts.

The Federal Reserve should “lead the way” on a central bank digital currency (CBDC), said Sen. Sherrod Brown (D-Ohio).

The Chairman of the Senate Committee on Banking, Housing and Urban Affairs endorsed the idea of a U.S. central bank–issued digital currency in a letter to Fed Chair Jerome Powell and Lael Brainard, who runs the Boston branch of the Fed.

“Some of our international counterparts are moving quickly to determine whether to implement a central bank digital currency,” Brown wrote, linking to a press release about a digital euro. “The United States must do the same. We cannot be left behind.”

Importantly, Brown specified that the Fed should work both on token-based digital dollars as well as account-based efforts. Last year, he introduced a bill to the Senate Banking committee that would create a digitized version of the existing U.S. dollar and grant every U.S. resident financial access through so-called FedAccounts.

In this week’s letter, dated March 1 but shared on Friday, Brown suggested that a token-based dollar based on a blockchain could complement the FedAccount version.

“Both are intended to ensure that working families have the same access to the payments system as Wall Street banks and wealthy corporations,” he wrote. “The Federal Reserve’s recent publication outlining the goals for a central bank digital currency is a step in the right direction.”

He went further, writing that the Fed and the Treasury Department should “establish a concrete timetable in deciding whether to implement a CBDC.”

However, any digital dollar should address consumer protection, financial access, security and individual privacy concerns, he said.

He referenced private efforts, like the Facebook-initiated Diem stablecoin project, warning that efforts by technology companies could exploit the very people they claim to want to help.

“The Fed must not stop at regulating a privately-issued digital currency. It must go further and explore a publicly-issued digital dollar,” Brown wrote.

The digital dollar debate exploded into the Congressional scene last year, when various bills introduced to both the Senate and the U.S. House of Representatives sought to find more efficient ways of sending funds to U.S. residents.

None of these efforts went anywhere, but research by the U.S. central bank expanded last year. Brainard announced that the Boston Fed was looking into a digital dollar through a joint research project with the MIT Digital Currency Initiative.

More recently, Consumer Financial Protection Bureau Director Nominee Rohit Chopra said the Fed should accelerate its efforts to build a modernized real-time payments system, though he didn’t specifically reference CBDCs.

In his letter, Brown warned that private efforts like bitcoin could undermine the dollar.

“The potential for non-sovereign crypto-assets, like Bitcoin, to become more widely-used as a payment mechanism, poses significant monetary policy and financial stability risks, including risk to our climate,” he wrote. “They are highly volatile and speculative, can be used for illegal activity, and consume incredible amounts of energy, driving up electricity use rates, and putting the resilience of local grids at risk.”

Inside Bakong: How Cambodia Hopes To Leapfrog Into the Future With Digital Currency

In this week’s “Money Reimagined” podcast episode, we take the discussion around central bank digital currencies (CBDCs) down from the high-level geopolitical themes we’ve addressed previously and into what the technology can do for people at the grassroots level.

To do so, Sheila Warren and I talked to Serey Chea, director general at National Bank of Cambodia, and Makoto Takemiya, co-CEO of Tokyo-based blockchain technology provider Soramitsu, about Cambodia’s new “bakong” central bank digital currency and payments system.

They provide a thought-provoking look at how small economies can use CBDCs to leapfrog their otherwise underdeveloped financial systems into something far more advanced.

With the financial world obsessing about China’s launch of its new digital yuan and the competitive threat that poses to the U.S, which is now accelerating its work on a digital dollar, this is a reminder that there is real potential to do good with this technology in the realm of financial inclusion.

However, there are real challenges – the impact on the banking system, privacy and security, to name a few. We address all of those and explore where this is going in this far-reaching conversation.

China’s Plan For Digital Yuan Imperils Bitcoin’s Biggest Markets

Trouble may be brewing in China for Bitcoin’s raucous and divisive rally as the nation pushes ahead with a world-leading effort to create a digital version of its currency.

That’s because the eventual rollout of the virtual yuan could roil cryptocurrency markets if Chinese officials tighten regulations at the same time, according to Phillip Gillespie, chief executive of crypto market maker and liquidity provider B2C2 Japan, which mainly works with institutional investors.

“Once a digital yuan is introduced, that’s going to be one of the biggest risks in crypto,” Gillespie, who previously worked in currency markets for Goldman Sachs Group Inc., said in an interview. “Panic selling” is possible if the new rules end up sucking liquidity from trading platforms for digital coins, he said.

Central banks’ power to issue virtual money and proscribe rivals is one of the key risks for the crypto sector.

Chinese citizens are already banned from converting yuan to tokens but the practice continues under the table using Tether, a digital coin that claims a stable value pegged to the dollar. The money parked in Tether then gets routed to Bitcoin and other tokens.

Tokyo-based Gillespie sees potential for an outright ban on Tether, which could raise the stakes for anyone minded to continue using it.

A draft People’s Bank of China law setting the stage for a virtual yuan includes a provision prohibiting individuals and entities from making and selling tokens. In recent days, China’s Inner Mongolia banned the power-hungry practice of cryptocurrency mining.

Representatives of the People’s Bank of China didn’t reply to a fax seeking comment on the prospect of regulatory changes. While there’s no launch date yet, the PBOC is likely to be the first major central bank to issue a virtual currency after years of work on the project.

Tether officials have downplayed the concern, saying that central bank digital currencies won’t mean the end of stablecoins.

“Tether’s success has provided a blueprint for how a CBDC could work,” said Paolo Ardoino, chief technology officer for Tether and Bitfinex, an affiliated exchange. “Furthermore, CBDC’s are unlikely to be available on public blockchains such as Ethereum or Bitcoin. This last mile may be left to privately-issued stablecoins.”

Still, Gillespie points out that Tether is “this massive amount of fuel for Bitcoin purchases” and few people realize the potential for disruption. A “tremendous amount of liquidity” is coming from exchanges tapping Chinese demand, he added.

Tether Questions

Bitcoin surged fivefold in the past year and hit a record above $58,000 last month before dropping back about $10,000. The rally has split opinion, with some arguing a new asset class is emerging and others seeing pure gambling by retail investors and speculative pros in the Wild West of finance.

Tether is an equally controversial token deep in the plumbing of the nascent cryptocurrency market. Traders use it to park money as they shift from virtual to fiat cash.

More than $18 billion of Tether moved overseas from East Asian addresses over a one-year period, including spikes suggesting Chinese origin, according to an August report from Chainalysis, which analyzes the blockchain network technology underlying tokens. The report indicated citizens may be using Tether to dodge rules that limit capital transfers abroad.

Questions about Tether continue to swirl. The companies behind it were banned from doing business in New York last month as part of a settlement with state officials who found that they hid losses and lied about reserves.

‘Liquidity Shock’

A recent report from JPMorgan Chase & Co. said there’d likely be “a severe liquidity shock to the broader cryptocurrency market” if issues arose that affected the “willingness or ability of both domestic and foreign investors to use Tether.”

“All the volume goes through Tether,” said Todd Morakis, co-founder of digital-finance product and service provider JST Capital. “As regulators become more and more restrictive on stablecoins, that could be very negative for the market because that could mean less liquidity.”

B2C2 Japan’s Gillespie said Tether is “such a risky asset” and a “massive liquidity shock” is possible if China does ban it. “What would happen is there’s going to be massive panic selling,” he said.

Updated: 3-12-2021

Chinese Banks Pilot Digital Yuan At Shanghai Department Stores

The Bank of Communications and China Construction Bank conducted digital yuan trials at two major department stores in Shanghai.

Shanghai’s New World City and New World Daimaru Department Store, and food caterer Taikang Food Store handled thousands of digital yuan transactions over the past weekend, Shanghai Daily reports.

As part of the trial, the retailers featured digital yuan payments as part of a sales campaign in conjunction with International Women’s Day. Brand director of Shanghai New World Li Wei said that the firm reached out to commercial banks to offer discounts as part of the campaign.

“We have worked to upgrade the digital payment module ahead of the trial program, and we believe it offered extra stimulus for shoppers on top of the existing sales campaign,” Li said.

Major Chinese banks including the Bank of Communications and China Construction Bank participated in the trial by providing retailers with virtual coupons to reward customers paying with the digital yuan. Specifically, the Bank of Communications gave 100 yuan ($15) coupons to 6,500 local shoppers, while China Construction Bank offered 150 yuan ($23) coupons to 2,000 individuals when they made purchases of over 380 yuan ($58).

Participants were reportedly required to visit pre-selected local branches of the bank in order to apply for the trial and add a digital yuan application on their smartphones.

As Shanghai continues to accelerate its digital yuan pilots, the city will likely feature the new payment option at all merchants on Nanjing Pedestrian Road Mall during the upcoming shopping season in early May, the report states.

China initially launched CBDC trials in four regions — Shenzhen, Suzhou, Xiong’an and Chengdu — in April 2020, and subsequently extended the pilot to Shanghai, Hainan, Changsha, Qingdao, Dalian and Xi’an as part of the 2021 agenda.

Updated: 3-16-2021

Bank Of Japan Governor Says CBDC Preparation Can’t Wait Until Hour Of Need

In fresh remarks, Bank of Japan Governor Kuroda Haruhiko said that experiments with a domestic central bank digital currency will begin in spring 2021.

Japan is taking a measured but attentive approach to global interest in central bank digital currency issuance. In his latest remarks published on Tuesday, Bank of Japan Governor Kuroda Haruhiko noted that the institution has not changed its stance and still does not currently have a concrete plan to issue a CBDC.

However, this non-commitment does not mean inactivity on the CBDC research and development front by any means. In October 2020, Japan’s central bank pledged to begin the first of several testing phases for its own CBDC proof-of-concept.

Haruhiko has now confirmed that these are due to begin this spring.

The governor underscored that, as per a Bank of International Settlements report, 86% of central banks globally are currently exploring the benefits and downsides of CBDCs. Of these, 60% are already at an experimental or proof-of-concept stage of development. Haruhiko noted:

“Central banks share the view that it is not an appropriate policy response to start considering CBDC only when the need to issue CBDC arises in the future.”

Haruhiko said that “From the viewpoint of ensuring the stability and efficiency of the overall payment and settlement systems, we consider it important to prepare thoroughly to respond to changes in circumstances in an appropriate manner.”

Taking into consideration the “significant changes” that are underway in an increasingly digital society, he signaled that the bank is taking the opportunity to carefully weigh the various approaches to potential changes in central bank money provision.

Haruhiko went so far as to group these emergent approaches under the theme of “Central Banking-as-a-Service.” In his wider account of these trends, he argued that “as-a-service” is an emerging tendency in finance more broadly, transposed from earlier developments in the corporate and software spheres.

This implies a move toward constructing business models that hinge on providing services on customer demand, rather than taking a traditional sales approach centered on products.

“Everything as a Service,” as Haruhiko noted, now spans phenomena such as mobility-as-a-service (purchasing a mobility service rather than a car) and infrastructure-as-a-service, which increasingly makes it redundant for firms to own certain hardware. In the framework of finance, he summarized:

“There is also a recent trend toward unbundling financial services that financial institutions used to provide as tightly coupled, thereby enabling componentized financial services to be combined with services of non-financial firms. This is referred to as ‘Banking as a Service’ […] also known as embedded finance.”

The Bank of Japan has been tracking innovations across public and private finance closely, cooperating with the Bank for International Settlements and five other major global banks on CBDC research since January 2020 and devoting attention to issues such as offline availability when it comes to supporting a digital currency.

Updated: 3-19-2021

How China’s Digital Yuan Could Go Global

China has been quietly testing platforms where the digital yuan can be freely traded with other fiat currencies.

China aims to be a global blockchain superpower, and its national digital currency is part of that plan. But if China really wants to achieve its global ambitions it will need help from other countries.

To that end, China has been quietly testing pilot digital currency trading platforms in different nations as well as setting up a legal framework for CBDCs with global financial regulators.

“You have central bank digital currencies (CBDC) developed on various platforms such as enterprise blockchain Corda or Hyperledger, and the digital yuan is technically not even on a blockchain,” Michael Sung, co-director of the Fintech Research Center at Fudan University, said. “That is a very balkanized ecosystem.”

For the digital yuan to achieve global adoption, China would thus need to work with trading partners or regional financial hubs to have a platform where the digital yuan is technically, legally and financially interoperable with other countries’ digital currencies.

One such platform is Inthanon-LionRock (Note), which is a central bank digital currency project for cross-border payments initiated by the Hong Kong Monetary Authority (HKMA) and the Bank of Thailand (BOT).

Eight Thai banks and two Hong Kong banks, including HSBC, participated in the Note project and tested the feasibility of digital currency-based transactions between Thailand and Hong Kong, according to its white paper.

According to a Feb. 23 statement by HKMA, the digital currency arm of People’s Bank of China and the Central Bank of the United Arab Emirates (UAE) have joined the second phase of this project and it has been renamed as the Multiple Central Bank Digital Currency (m-CBDC) Bridge.

The project aims to help central banks with cross-border fund transfers, international trade settlement and capital market transactions. The idea is to alleviate regulatory, cost and inefficiency pain points in cross-border fund transfers, the statement said.

“The Note project is very emblematic of China’s approach to internationalize the digital yuan,” Tavni Ratna, CEO and founder of blockchain and digital currency think tank Policy 4.0, said. “China might want to negotiate with one central bank at a time and come up with a mechanism for everything ranging from a legal framework to exchange rate between the two currencies.”

The Wholesale Shift

Two elements have set the project apart from other digital yuan projects in China so far. While such projects are usually only between two countries through a bilateral collaboration, the Bridge appears to have a third country – the UAE – involved in the CBDC trading platform, Ratna said.

The other element is the project is wholesale-oriented, which is a shift from China’s focus on retail use cases. The project will continue to explore other potential business cases such as cross-border funds transfers between institutions such as companies, banks rather than individual users, according to the white paper. In October 2020, the Hong Kong Treasury Secretary Christopher Hui also said the city is interested in these transactions.

The project will act as a cross-border corridor network for big financial institutions. It would entice more central banks to join the network by offering a more competitive foreign exchange rate than the open market, where each country has to buy other local currencies from intermediaries at a premium. It would also allow countries to borrow more other currencies in the short term to increase their liquidity to settle transactions in real time.

Indonesia and China also signed a memorandum of understanding to promote local currencies in the two countries in September 2020. The partnership would allow the direct exchange rate quotations and interbank trading between the Chinese yuan and the Indonesian rupiah.This process, which could enable real-time transactions and avoid using the U.S. dollar as a reserve currency to settle and clear transactions, is crucial for a CBDC-trading platform to work.

As of January, China is Indonesia’s biggest trade partner and an important source of investment. The largest economy in Southeast Asia, like many other major countries in the region, has seen a fast growing deficit to China in recent years.

The Hub

Some countries might be reluctant to trade central bank digital currencies on a platform designed by China due to privacy concerns, said Paul Triolo, head of the geo-technology practice at risk consultancy Eurasia Group.

To that end, China’s central bank could also join an inclusive digital currency platform, where it can trade the digital yuan with other digital currencies freely. As the largest offshore center for RMB deposits, Singapore’s blockchain project Ubin would be one possibility.

The Monetary Authority of Singapore (MAS) has worked with JPMorgan and state-backed conglomerate Tamasek to use CBDCs and other digital currencies, including the tokenized dollar JPM coin, on the Ubin platform.

Founded in 2016 by MAS, ConsenSys and JPMorgan’s Quorum, which was acquired by ConsenSys in August 2020, the Ubin project aims to settle inter-bank transactions, cross-border remittances and tokenized securities through distributed ledger technology.

In contrast to a platform that is controlled by China, a more neutral and inclusive platform by MAS could be more acceptable for many other countries.

The Ubin project envisions having a common messaging platform to coordinate different settlement systems and establishing a common messaging standard to ease communications between the systems, according to the report, which cites the Society for Worldwide Interbank Financial Telecommunication (SWIFT) as an example for such coordination.

In June 2020, Ravi Menon, the managing director of MAS, said Singapore welcomes collaboration with China’s central bank on digital currency in a speech about financial cooperation between Singapore and Shanghai.

“With Temasek and JPMorgan in the project, the whole point was this financial hub pushing for more efficient and less-costly cross-border settlements,” Sung said. “While Hong Kong is obviously the place for China to start internationalizing the digital rmb, Singapore is a nice cross-border settlement point.”

Team Player

The world has shown wariness of overly ambitious digital currencies. Given the political pressure on the Facebook-led diem (formerly libra) project, Beijing might have a hard time positioning China’s digital yuan as the national digital currency to dominate the global financial system, Triolo said.

Perhaps learning from this, China has tried to be more proactive and collaborative in setting an international legal framework for CBDCs. Chinese President Xi Jinping said the country should proactively participate in creating the international regulatory framework on digital currency and digital tax, according to an Oct. 31 essay he published in Chinese state media.

HKMA also emphasized the m-CBDC project has been supported by the Bank for International Settlements Innovation Hub Centre in Hong Kong. PBOC subsidiaries, including its digital currency unit, have set up the second joint venture with SWIFT in Beijing in February but the new group’s mission remains unclear.

China’s motivations for internationalizing the digital yuan rang from curbing Chinese fintech giants, weakening SWIFT to countering the U.S. dollar dominance over the global financial system, Ratna said.

“But one thing is for sure, China does not want to antagonize anyone along the way,” she said.

Updated: 3-22-2021

China’s Digital Yuan Will Offer Best Privacy Protection, Says Official

The People’s Bank of China intends to enable anonymous digital yuan transactions of small amounts in order to protect “reasonable” anonymity needs.

Chinese authorities are willing to ensure maximum user privacy for the country’s central bank digital currency, or CBDC, according to an official at the People’s Bank of China.

Mu Changchun, head of the People’s Bank of China’s digital currency research institute, spoke of China’s digital yuan privacy capabilities at the 2021 China Development Forum on Sunday, local news agency Sina Finance reported.

Mu stated that a completely anonymous CBDC “is not feasible” because a national digital currency must meet requirements related to Anti-Money Laundering, Counter-Terrorist Financing and anti-tax evasion. However, that doesn’t mean that China’s digital yuan lacks user privacy, he assured.

The so-called “controllable anonymity” approach is a key feature of China’s digital yuan, meaning that the government is providing certain tools to ensure maximum user privacy and financial security in conjunction with AML measures, Mu said. He stressed that telecom operators — which are involved in the research and development of the digital yuan — are not allowed to disclose personal data and phone numbers of users to third parties, including the central bank.

Third parties like e-commerce platforms are also not able to access the personal data of digital yuan users, as customer payment information is encrypted in the form of a sub-wallet, Mu explained. Additionally, the digital yuan features a wide number of technical capabilities to ensure privacy, including ID anonymization technology and a personal data protection system and internal control management mechanism in accordance with relevant Chinese laws, the executive noted.

In order to protect “reasonable” anonymity needs, the PBoC is also planning to adopt a CBDC design that enables anonymous digital yuan transactions in small amounts, Mu reportedly claimed. “The digital renminbi adopts a design of small amounts anonymous, keeping large amounts traceable,” he said.

“In short, the protection of user privacy by digital renminbi is the highest among the current payment tools,” Mu concluded.

As previously reported by Cointelegraph, many global jurisdictions like the United States have considered user privacy issues as one of the biggest problems of a CBDC. According to the European Central Bank’s digital euro public consultation, user privacy is the top requested feature for a European CBDC, followed by security and pan-European reach.

People’s Bank of China Official Says Fully Anonymous Digital Yuan ‘Not Feasible’

The central bank needs to balance privacy for users with “international consensus” on risk control, the director of the PBoC’s Digital Currency Research Institute said.

The director of the People’s Bank of China’s (PBoC) Digital Currency Research Institute says designing its digital currency to be fully anonymous isn’t “feasible.”

Mu Changchun said the bank needs to balance privacy for users with “international consensus” on risk control, according to a report from STCN, a state-owned daily newspaper.

“The anonymity of the central bank’s digital currency is limited under the premise of controllable risks,” Mu said at the China Development Forum in Beijing on Saturday. “A completely anonymous central bank digital currency is not feasible” as it would would violate anti-money laundering, anti-terrorist financing and anti-tax evasion regulations, he said.

However, Mu argued the digital yuan would provide more privacy than commercial payments products like bank cards, WeChat or Alipay, which are tied more closely to the banking system.

The most anonymous digital yuan wallet would be linked to a cellphone number and allow users to make small payments.

Those wishing to transact larger amounts would need to upgrade to one with more know-your-customer verification procedures, according to Mu.

China is leading major nations in the development and piloting of a central bank digital currency (CBDC), but the project has raised concerns around the amount of insight it would give authorities into users’ financial data and behavior.

Its planned “controllable anonymity” will mean the central bank could observe and monitor transactions taking place while the transacting parties would remain private. But it still allows the PBoC to analyze transactions to monitor “crimes.”

Mu said digital yuan wallets use “ID anonymization technology” meaning personal information is concealed from “counterparties, operating agencies and other commercial institutions.” However, too great an emphasis on anonymity raises the cost of fighting crime, and could bring severe consequences, he said.

Central Banks Are Getting Serious About Digital Money

The rise of Bitcoin and other cryptocurrencies has prompted the greatest push yet among central banks to develop their own digital currencies. In 2020, the Bahamas launched its sand dollar to make payments more efficient across the archipelago’s 700 islands, and China is likely to be one of the next to follow suit after numerous consumer pilot tests. The topic will be a key focus at a Bank for International Settlements event this week, where central bank officials are set to discuss the future of digital money.

Here’s How A Central Bank Digital Currency Could Work

Central Banks Warm To Issuing Digital Currencies (#GotBitcoin?)

Most of global payments are already digital, yet a central bank digital currency would provide risk-free, central-bank backed money denominated in a national unit of account — like cash, though updated to the demands of a digital financial system. The motivations for issuing CBDC vary across countries and regions, and the policy approach and technical designs will also differ, according to research by Bloomberg Economics. Based on BIS terminology and what’s known from China and Sweden on CBDC infrastructure and access, a hybrid between light-touch and a full version looks like the most likely solution for a digital krona or a digital yuan.

Federal Reserve’s Digital Dollar Push Worries Wall Street

Central Banks Warm To Issuing Digital Currencies (#GotBitcoin?)

The financial services industry, braced for what could be its biggest disruption in decades, is about to get an early glimpse at the Federal Reserve’s work on a new digital currency.

Wall Street is not thrilled.

Banks, credit card companies and digital payments processors are nervously watching the push to create an electronic alternative to the paper bills Americans carry in their wallets, or what some call a digital dollar and others call a Fedcoin.

As soon as July, officials at the Federal Reserve Bank of Boston and the Massachusetts Institute of Technology, which have been developing prototypes for a digital dollar platform, plan to unveil their research, said James Cunha, who leads the project for the Boston Fed.

A digital currency could fundamentally change the way Americans use money, leading some financial firms to lobby the Fed and Congress to slow its creation — or at least ensure they’re not cut out.

Seeing the threat to their profits, the banks’ main trade group has told Congress a digital dollar isn’t needed, while payment companies like Visa Inc. and Mastercard Inc. are trying to work with central banks to make sure the new currencies can be used on their networks.

“Everyone is afraid that you could disrupt all the incumbent players with a whole new form of payment,” said Michael Del Grosso, an analyst for Compass Point Research & Trading LLC.

Lawmakers, U.S. Treasury Department officials and the Fed haven’t yet approved the rollout of a U.S. virtual currency, which could still be years away. Nor have they decided how a digital dollar would interact with the existing global payments network.

Still, the U.S. and other countries seem committed enough to digitizing their currencies that it’s making financial industry executives nervous.

“The fire has been lit,” said Josh Lipsky, who has helped convene government officials from the U.S. and other countries working on digital currencies as director of the GeoEconomics Center at the Atlantic Council. “The world is moving very quickly on these projects.”

At issue are forms of digital cash being considered by the U.S. and other governments. The growing popularity of Bitcoin, Ethereum and other cryptocurrencies, whose market value has grown to more than $1 trillion, inspired the projects. Unlike those privately created tokens, the new currencies would be issued by central banks as an alternative to paper bills. Cash wouldn’t go away, but its use would likely decline.

Central Banks Warm To Issuing Digital Currencies (#GotBitcoin?)

Using the currencies could be as simple as holding up the screen of a mobile phone to be scanned. Behind the scenes, the digital cash would move from one account to another.

This is similar to how most money already works — the majority of U.S. dollars are just digital entries in bank accounts — but the new currency could potentially avoid the go-between of a commercial bank or credit-card network. For vendors, settlement would happen almost immediately, without having to wait for the money or worry about fraud.

The U.S. effort got an extra push last month, when Treasury Secretary Janet Yellen said such a project could help Americans who don’t have access to the banking system.

In video remarks last week to a payments conference in Basel, Switzerland, Federal Reserve Chair Jerome Powell may have eased some of the banks’ concerns when he said “digital currencies would need to be integrated into existing payment systems alongside cash and other forms of money.”

Powell in a Bank for International Settlements panel on Monday said the Fed has “an obligation to be on the cutting edge of understanding the technological challenges” and the costs and benefits of a digital dollar but wouldn’t rush the project. Powell also said the Fed wouldn’t proceed without support from Congress, ideally in the form of legislation.

Cunha said the Boston Fed and MIT hope to unveil some of their work in the third quarter, including at least two prototype software platforms that could move, store and settle transactions made with digital dollars. He wouldn’t say if either platform uses the blockchain technology that underlies Bitcoin and other cryptocurrencies. Once the prototypes are released, Cunha said, others will be able to see and build on the code.

The Fed’s work is meant to show what’s possible without taking a stand on major issues that the central bank, Treasury and Congress must address, Cunha said. These include whether the Fed itself should host customer accounts, whether to allow anonymity, and what protections consumers would have in case of a cyber-breach or mistaken transaction.

“We think it’s important that we not wait for the policy debate because then we’ll be a year or so behind,” Cunha said. “This will take significant outreach to the industry and serious debate.”

The potential that the central bank could cut banks out of their middleman role in the lucrative U.S. payments system is causing angst among banks.

So is the push coming from Ohio Democratic Senator Sherrod Brown, the new chairman of the Senate Banking Committee.

Brown is urging the Fed to move quickly to create digital-currency accounts for Americans who can’t easily access the financial system and have been forced to deal with payday lenders who charge higher fees and interest rates. Brown’s plan could threaten the deposits that commercial banks rely on to make mortgages and other loans.

“Rushing anything of this potential magnitude could introduce unintended consequences that threaten the stability of the banking system without contributing meaningfully to economic inclusion,” said Steve Kenneally, senior vice president of payments at the American Bankers Association.

The ABA, which says it’s lobbying Congress on the issue, last year in written testimony called the digital dollar a costly solution in search of a nonexistent problem.

Two lobbyists for a large bank said they’re in contact with lawmakers to keep track of the issue. They expect lobbying to pick up once banks can actually see the Fed’s work and how it might affect them, said the lobbyists, who requested anonymity to discuss internal conversations.

Interest in a digital currency has gathered momentum in part because many banks take days to give consumers access to checks deposited in their accounts and some charge stiff overdraft fees. Those without bank accounts sometimes must pay high fees to cash paychecks or transmit money to relatives.

Some of the profits of credit-card companies, such as Visa and Mastercard, could be at risk if the new currencies let Americans more easily make transactions without their involvement and fees.

Spokespeople from both companies say their firms are working with central banks to ensure the new currencies can run over their networks. Mastercard in February began to issue pre-paid debit cards loaded with the “Sand Dollar,” a digital currency issued by the Bahamas.

“We’re increasingly having conversations with central banks as they think about designing potential central bank digital currency, CBDC, and we’re talking to them about how they think about design,” said Visa’s North America president Oliver Jenkyn, at a Morgan Stanley conference earlier this month. “So there’s a lot of talking, but there’s actually a lot of action alongside it as well.”

Other countries are further along. China is currently piloting a digital yuan in several cities. Lipsky said there’s a chance its currency could be ready for a broader debut at the 2022 Winter Olympics in Beijing, which he said could cause tensions if American athletes are asked to use a currency that the Chinese government can completely track.

Brown earlier this month sent a letter to Powell urging him to speed up the research. “We cannot be left behind,” Brown wrote.

Among other threats, Brown pointed to the development by Facebook Inc. and other companies of their own cryptocurrency, once called Libra. That currency, since renamed Diem, was slated to launch in 2020 but has struggled to win regulatory approval.

Advocates of existing cryptocurrencies, like Bitcoin, have mixed feelings about the Federal Reserve muscling into the industry.

A Fedcoin could acclimate Americans to purchasing Bitcoin, said Jerry Brito, who heads Coin Center, a cryptocurrency advocacy group. But depending on the government’s direction, such a currency could be used to track Americans’ spending, destroying the partial anonymity that was once the promise of crypto, he said.

A U.S. digital dollar could also put the final nail in the coffin for Bitcoin as a means of exchange, Brito said. Crypto enthusiasts have already started to acknowledge that’s happening anyway, and instead tout the currency as a store of value or “digital gold.”

Updated: 3-24-2021

Fed Chair Powell: Digital Dollar Would Need Stronger Privacy Than Digital Yuan

“The lack of privacy in the Chinese system is just not something we could do here,” Powell told a House committee.

China’s central bank and the U.S. Federal Reserve agree that a fully anonymous national digital currency is not feasible. But Fed Chair Jerome Powell believes when a digital dollar is developed it must provide users with more privacy than the People’s Bank of China’s (PBOC) planned digital yuan.

“The lack of privacy in the Chinese system is just not something we could do here,” Powell said while testifying before the House Committee on Financial Services on Tuesday. “We’re only beginning to think carefully about these things and it’s going to be a careful, detailed and probably lengthy process of consideration.”

Powell’s comments came after Changchun Mu, the head of PBOC’s digital currency arm, was reported as claiming the digital yuan will offer greater privacy protection than any other digital payment system.

The Chinese official said the digital yuan will have “controllable anonymity,” in which the most private account would only require a cell phone number. However, people need to register with a phone service carrier with their ID to have a phone number. Users would also have to disclose more personal information if their deposit amount hits a certain threshold.

The Fed has not specified how much anonymity any digital dollar would allow users to have, in part because there is no concrete timetable for a digital dollar. While there will be detailed research on the proposed stablecoin coming out as early as July, Fed officials have yet to disclose whether the central bank would host customer accounts or enlist a trusted third party, and what privacy protections users would have in case of a breach.

Powell said he agreed with Rep. Bill Foster (D-Ill.), who said during the hearing an anonymous, untraceable digital dollar “is not a viable option for our country or free world” because of the potential for money laundering or funding terrorism.

Powell and Treasury Secretary Janet Yellen, who also testified before the committee, have voiced their concerns in recent months about how cryptocurrencies could be used for such illicit transactions because of their anonymous nature.

Updated: 3-25-2021

German Federal Bank Runs Successful Blockchain System Without A CBDC

Executives at the Deutsche Bundesbank are eager to launch a blockchain-based system without the need for a CBDC — and they just might succeed.

Germany’s federal bank, the Deutsche Bundesbank, has run successful tests on a project which bridges the traditional finance infrastructure with blockchain technology.

Despite the current global rush by central banks to familiarise themselves with central bank digital currency technology, the testing carried out by the Bundesbank, in conjunction with the Deutsche Börse Group and the German Finance Agency, required the issuance of no CB, or any tokenized money at all.

The system reportedly relies on two software modules which form a connection between the Bundesbank’s internal system and distributed ledger technology. Instead of creating a token-based system, the bank simply created an interface that initiates a “trigger,” signifying that a transaction has been settled and that money can safely change hands.

Germany has made no secret of the fact that it isn’t too keen on a CBDC. That may be because the Bundesbank’s position as the most powerful member of the European System of Central Banks makes it the organization with the most influence to lose. That’s a sentiment that was echoed by German politician Burkhard Balz himself in 2020.

Following the announcement of the Bundesbank’s recent tests, Balz, who is also a member of the Bundesbank executive board, suggested the entire Eurosystem could adopt the technology in a much quicker fashion than it could launch a CBDC.

“Following successful testing, the Eurosystem should be able to implement such a solution in a relatively short space of time — at least in far less time than it would take to issue central bank digital currency, for instance,” said Balz.

As part of the testing, the German Finance Agency issued a 10-year federal bond via the DLT trigger system, while also testing securities trading on primary and secondary markets. The testing included participants from Citibank, Barclays, Goldman Sachs, Commerzbank, DZ Bank and Société Générale.

Microsoft President Smith Is No Fan of Private Digital Currency

Microsoft Corp. President Brad Smith cast doubt on whether financial technology companies should issue currencies, saying governments are still best-placed to play that role.

“The money supply almost uniquely needs to be managed by an entity that is responsible to the public and thinks really only about the public interest, and that means governments,” Smith said on Wednesday at an online conference hosted by the Bank for International Settlements. “I’m not a big fan myself of encouraging or asking or wanting us to participate in the issuing of currency.”

The pandemic has accelerated the shift to digital payments, while the massive injection of money into the financial system to shield the economy has fueled interest in cryptocurrencies such as Bitcoin. Even before the crisis, Facebook Inc. launched plans to build a cryptocurrency and payment network known as Libra, since renamed to Diem.

Such trends have raised concerns among policy makers worldwide, with politicians and regulators fretting about privacy, money laundering and loss of control over the monetary system.

“I think the world has been better served by what has been a movement over centuries to put that in the hands of governments,” Smith said. “We’re not a bank and we don’t want to become a bank and we don’t want to compete with our customers who are banks.”

Central banks including the U.S. Federal Reserve are studying whether to implement their own digital currencies, though Fed Chair Jerome Powell and European Central Bank Governing Council member Jens Weidmann said at the same conference this week that they’re in no rush.

China Digital Yuan Will Co-Exist With Alipay, WeChat, PBOC Says

China’s central bank said its planned digital currency will co-exist with technology platforms like Ant Group Co.’s Alipay and Tencent Holdings Ltd.’s WeChat Pay, which currently dominate the online payments market.

Mu Changchun, director of the People’s Bank of China’s digital currency research institute, outlined four reasons for the central bank’s development of its own electronic yuan:

* Safeguard Monetary Sovereignty. Bitcoin’s Popularity In The Past Posed A Threat To Capital Account Management
* As A Back-Up To Alipay And Tencent Pay, In Case They Experience Problems, Either Financially Or Technically. The Two Together Make Up 98% Of The Mobile Payment Market And If They Had A Setback, It Could Negatively Affect China’s Financial Stability
* Improve Efficiency Of Payments System
* Promote Financial Inclusion

Mu was speaking Thursday during a panel discussion organized by the Bank for International Settlements.

Regarding potential cross-border applications, Mu said digital currency supplied by one central bank shouldn’t impede other central banks’ ability to carry out their mandates for monetary and financial stability.

He also called on other central banks to protect their monetary sovereignty and avoid the “dollarization” of digital currency.

The PBOC is already trialing its digital yuan in some parts of the country and could be the first major central bank to issue a virtual currency.

Speaking at a conference on the weekend, Mu tried to allay concerns around privacy, saying the electronic yuan has the “highest level of privacy protection” compared with existing payment methods. Users’ personal information will not be available to vendors, unlike with other digital payment platforms, he said.

European Central Bank Tries To Quell Germans’ Doubts About Digital Euro

A future digital euro wouldn’t be a threat to savers, say officials from the European Central Bank.

The European Central Bank, or ECB, has been investigating the possibility of launching a digital euro project within five years to complement existing central bank money. But whereas high-profile leaders such as ECB president Christine Lagarde have been largely positive about the prospect, officials from Germany’s Bundesbank have remained unconvinced.

In a new op-ed for the Frankfurter Allgemeine Zeitung, ECB board member Fabio Panetta and fellow official Ulrich Bindseil attempted to tackle some of the Germans’ misgivings head on:

“The ECB is by no means planning to use a digital euro to enforce interest rates that are significantly more negative. As long as there is cash, it will always be able to be held at an interest rate of zero percent.”

Panetta and Bindseil’s comments picked up directly on the Bundesbank’s previous suggestions that a digital euro could be “catastrophic for savers,” and economist Richard Werner’s opinion that the ECB’s interest in a digital euro would wrest crucial deposit-taking business away from commercial banks.

Yet Panetta and Bindseil argued that the digital euro’s design could ensure that it would not compete with bank deposits, in reference to earlier proposals for caps on digital euro holdings for citizens. Most crucially, they stressed the project’s importance for securing the Eurozone’s financial autonomy and resilience against overseas corporations and other regional actors:

“We have to prevent European payment transactions from being dominated by providers outside Europe, such as global technology giants who will offer art currencies in the future. […] By preparing for a digital euro, we are also securing the autonomy of Europe. It is a safeguard in the event that undesirable scenarios occur.”

Panetta and Bindseil’s emphasis clearly alludes to Facebook’s longstanding attempts to launch a stablecoin backed by fiat currency. Meanwhile, ascendant economic powers such as China are already well ahead of the game with their own central bank digital currency.

German Finance Minister Olaf Scholz has recently critiqued Facebook’s Diem stablecoin proposal, rebranded from its former name, Libra, as being a “a wolf in sheep’s clothing.” He reiterated that the German government would “not accept its entry into the market,” citing inadequately addressed regulatory risks.

Updated: 3-26-2021

China’s Digital Yuan Is Backup To AliPay And WeChat Pay, Says Official

Alibaba’s Alipay and Tencent’s WeChat Pay reportedly account for 98% of the mobile payment market in China.

China’s central bank digital currency, or CBDC, will provide backup for major retail payment services like AliPay and WeChat Pay as its key objective, according to an official at the People’s Bank of China.

Mu Changchun, head of the People’s Bank of China’s digital currency research institute, claimed that China’s digital yuan is needed to ensure financial stability in case “something happens” to AliPay or WeChat Pay, the South China Morning Post reports.

Speaking at an online panel discussion on Thursday, Mu stated that Alibaba’s Alipay and Tencent’s WeChat Pay account for 98% of the mobile payment market in China, which poses certain risks should they experience any issues.

“If something happens to them, financially or technically, that would definitely bring a negative impact to the financial stability of China. In order to provide a backup for the retail payment system, the central bank has to step up and provide a central bank digital currency service,” Mu said.

Mu’s latest remarks come amid a government crackdown on monopolistic practices by the private sector in China as Ant Group and Tencent dominate the nation’s digital payment market. In early March, China’s antitrust regulator fined Tencent for failing to disclose their acquisitions to the state. Previously, Chinese authorities red-flagged a $37 billion initial public offering by Ant Group amid concerns about the company’s size.

During the online panel, Mu also urged global central banks to cooperate to ensure that national digital currencies are compatible with each other. “Central bank digital currency supplied by one central bank should not impede another central bank’s ability to carry out its mandate for monetary and financial stability,” Mu noted.

As previously reported by Cointelegraph, China has been actively expanding its CBDC expertise jurisdiction. In February, the PBoC joined Hong Kong, Thailand and the United Arab Emirates to explore a cross-border CBDC. Previously, an official at the Hong Kong Monetary Authority announced that the regulator and the PBoC were at the preliminary stages of piloting the digital yuan for cross-border payments.

Updated: 3-26-2021

Jamaica’s Central Bank Taps Irish Tech Outfit For CBDC Project

The Bank of Jamaica has partnered with an Ireland-based tech firm for its central bank digital currency project scheduled to begin in May.

Jamaica is the latest country making concrete efforts towards issuing its own sovereign digital currency.

According to a press release by the Bank of Jamaica on Tuesday, eCurrency Mint, a cryptography security company specializing in central bank digital currency issuance has been selected as the technology provider for the sovereign digital currency project.

As previously reported by Cointelegraph, Jamaica’s central bank invited technology solution providers to submit applications for its CBDC project back in July 2020. At the time, the BoJ clarified that its planned sovereign digital currency would not be based on crypto technology.

Based in Ireland, eCurrency Mint is reportedly working with central banks and other international finance organizations to develop protocols for CBDC design and implementation.

As part of the announcement, Jamaica’s central bank revealed that the CBDC pilot will commence in May under the aegis of the BoJ’s Fintech Regulatory Sandbox. ECurrency Mint will support the central bank in testing protocols during the pilot stage scheduled to be completed by December.

The Ireland-based tech outfit will also serve as Jamaica’s CBDC provider when the full national roll-out commences in early 2022. According to previous statements by the BoJ, the CBDC will be available for both individuals and businesses as a payment means similar to cash.

Like many countries in the Caribbean, Jamaica has somewhat liberal crypto and blockchain laws with regulated entities like the nation’s Stock Exchange participating in cryptocurrency trading.

The BoJ is one of the Caribbean central banks currently working on CBDCs. Back in October 2020, The Bahamas became one of the first countries to officially launch a sovereign digital currency.

Regional CBDC efforts are also ongoing with the Eastern Caribbean Currency Union working on a blockchain-based sovereign digital currency project.

Outside the Caribbean, Asia’s largest economies are accelerating their CBDC development projects. Multiple banks in China have issued digital wallets for the country’s digital currency electronic payment project.

In Japan, the central bank is leading a public-private partnership to examine proof-of-concept protocols for a possible digital yen. Earlier in March, Kuroda Haruhiko, governor of the Bank of Japan, said that the country must work out modalities for issuing a CBDC.

China And Japan Go Full Steam Ahead With CBDC Pilots

Asia’s largest economies are pushing forward with their respective CBDC trials, with six Chinese banks offering digital wallets and Japan establishing a new committee.

China and Japan are pushing forward with their respective pilots for central bank-issued digital currencies, or CBDCs.

On March 26, Bank of Japan announced it had established the Liaison and Coordination Committee on Central Bank Digital Currency to convene with both the private sector on the banks upcoming CBDC proof-of-concept, or PoC, stating:

“The Bank, through this committee, will share details of, and provide updates on the PoC with the private sector and the government and will seek consultation on future steps to facilitate smooth implementation of the PoC.”

The announcement also noted the bank has been preparing to conduct a pilot CBDC since October 2020, and will formally commence Phase 1 of its CBDC pilot next month.

On March 23, Chinese state media outlet Sina reported that six major government-owned banks have begun testing wallet services for the digital renminbi. Customers can apply for the banks’ whitelists to participate in the trial, and if approved, will be issued sub-wallets connected to the central bank’s digital RMB application.

The central bank will review applications on a case-by-case basis.

Approved applicants are sent text messages containing instructions on downloading and setting up the digital wallets by scanning a QR code. Sub-wallets are initially set with a payment limit of 1,000 yuan daily, but users can apply to raise the limit in future. Wallets can optionally be linked to existing bank cards issued by the participating institutions.

The six banks participating are the Agricultural Bank of China, Bank of China, Bank of Communications, China Construction Bank, Postal Savings Bank of China, and The Industrial and Commercial Bank of China.

China has also been piloting its CBDC in the metropolitan centres of Beijing, Shenzhen, Suzhou, and Chengdu since October.

Updated: 3-29-2021

Bahamas’ Sand Dollar Nears Commercial Rollout As Interoperability Completed

Following cybersecurity assessments, commercial institutions are being cleared to issue the world’s first CBDC: the Bahamas’ Sand Dollar.

The Central Bank of the Bahamas has announced that its central bank digital currency, the Sand Dollar, is expected to achieve full interoperability between its various wallet providers within the week.

A recent statement released by the CBoB revealed that authorized financial institutions, or AFIs, such as payments service providers are expected to be finalized within the coming days.

Essentially acting as wallet providers and prospective issuers of the Sand Dollar, the AFIs in question have been subject to rigorous cybersecurity assessments, the bank stated.

The institutions that adopted the bank’s own app have already been cleared to participate, while those that intend to use their own proprietary apps are still being processed. A deadline of Wednesday is expected to be met.

In October 2020, the Sand Dollar became the first CBDC in the world to go beyond the pilot stage and achieve an official launch. The centrally issued digital currency became available for use by all Bahamian citizens upon release, while integration with the commercial banking system has been subject to a gradual rollout. The completion of that integration is now imminent, according to the bank.

“The Central Bank expects to imminently complete the technical integration of the digital infrastructure with the commercial banking system. This will establish links between wallets and bank deposit accounts, through the Bahamas Automated Clearing House (the ACH), and allow transfer of funds in both directions,” the bank stated.

Nine institutions have been cleared to operate as CBDC issuers to date, consisting of four money transmission businesses, three payment services institutions, one credit union and one commercial bank.

Interoperability between these entities would allow for the Sand Dollar to be distributed and used more efficiently across a range of different applications. Each Sand Dollar is pegged to the value of the Bahamian dollar, which in turn is pegged to the value of the U.S. dollar.

The CBoB also released new draft regulations aimed specifically at the way payment services providers interact with the Sand Dollar, with a purported focus on consumer protection. The regulation is expected to be finalized by May 1.

“The draft Regulations are intended to enhance the existing legislative framework governing Payment Services Providers (PSPs), specific to their provision of central bank digital currency (CBDC) linked services,” the statement said.

Updated: 3-31-2021

Digital Euro Could Take Four Years, Says ECB President Christine Lagarde

The ECB will decide whether to proceed with digital euro pilots by mid-2021, Lagarde said.

It could be a while before European Union gets a central bank digital currency, if it gets one at all.

In a Wednesday interview with Bloomberg Television, European Central Bank President Christine Lagarde laid out the complex decision-making process with which the bank will determine the future of a digital euro.

The ECB will soon release its analysis of eight thousand responses received from its digital euro consultation process. “That will be communicated to the European Parliament which is one of the key players as well as the Commission and the Council with which we operate,” she stated.

Based on that consultation, alongside the parliamentary work, the ECB’s Governing Council will decide whether the institution will begin experimenting with a CBDC by mid-2021.

Following an initial experimentation phase, the council would then hold a six-month or a one-year assessment on whether to roll out the digital euro, Lagarde stated.

“The whole process — let’s be realistic about it — will in my view take another four years, maybe a little more. But I would hope we can keep it within four years,” she said, adding:

“Because it’s a technical endeavor as well as a fundamental change because we need to make sure that we do it right. We owe it to Europeans, they need to feel safe and secure. They need to know that they are holding a central bank-backed […] equivalent of a digital banknote. […] We need to make sure that we’re not going to break any system, but enhance the system.”

Lagarde also mentioned that some financial intermediaries have expressed concerns about the ECB launching a CBDC. She said that these intermediaries will continue to co-exist with the new ecosystem as well as cash, which “will also continue to be available.”

As previously reported by Cointelegraph, the ECB launched a public consultation on a potential digital euro in October 2020.

Updated: 4-1-2021

Eastern Caribbean Central Bank’s DCash Digital Currency Goes Live

The ECCB has launched a regional central bank digital currency in partnership with Caribbean fintech outfit Bitt.

The Eastern Caribbean Central Bank, the main financial institution of the Eastern Caribbean Currency Union, has launched DCash.

The ECCB announced the launch of its CBDC for the region via a media event held on Wednesday.

DCash is the digital version of the Eastern Caribbean dollar — the official currency of the eight countries in the union.

However, as announced during the launch, DCash is only available in four of the currency union’s member states: Grenada, St. Kitts and Nevis, Antigua and Barbuda, and Saint Lucia.

Wednesday’s launch marked a culmination of the project over two years in development with the ECCB first announcing its plans for a CBDC back in March 2019.

As part of the launch, ECCB governor Timothy Antoine performed the first-ever live DCash cross-border transaction. Governor Antoine reportedly sent 100 DCash dollars from the ECCB headquarters in St. Kitts to DCash wallet holders in the three other countries involved in the launch.

Using Bitt’s CBDC management protocols, the ECCB will reportedly be able to mint and issue DCash. The ECCB will also be able to redeem and burn the DCash CBDC.

As part of the rollout, the ECCB state that DCash will support both business and private transactions with vendors and merchants signing up for the DCash Merchant App. Users will also be able to transfer DCash to residents within the currency union.

Speaking during the launch on Wednesday, the ECCB governor commented on the central bank’s decision to partner with Bitt for the CBDC project, adding:

“The ECCB chose to partner with Bitt because of the company’s shared values of citizen empowerment through financial inclusion and its respect and understanding of the unique needs of emerging economies. These past two years have been an intensely collaborative journey, and both Bitt and the ECCB have learnt many transferable lessons along the way.”

For Bitt CEO Brian Popelka, DCash is a “game-changer” for the currency union adding that the CBDC was designed to be interoperable with digital currencies around the world.

Following the public rollout, both the ECCB and Bitt say the next step is to work towards full incorporation of DCash into the financial infrastructure of the four nations participating in the initial launch over the next year.

Beyond this point, both partners are also looking to extend DCash to the remaining four countries in the currency union: Montserrat, Commonwealth of Dominica, Anguilla, and Saint Vincent and the Grenadines.

In other Caribbean-related CBDC news, Jamaica’s central bank recently partnered with Ireland-based tech firm eCurrency Mint to develop its own sovereign digital currency.

Hong Kong And China Test Cross-Border Digital Yuan, Says PBoC Official

The digital yuan continues to develop apace.

China has completed its first cross-border pilots of the digital yuan with Hong Kong.

Wang Xin, director of the People’s Bank of China research bureau, said that the Hong Kong Monetary Authority and the PBoC have conducted technical tests on the cross-border use of China’s central bank digital currency.

The official announced the news at a Thursday press conference hosted by the State Council Information Office of China, local news agency Sina Finance reports.

The news comes shortly after Mu Changchun, head of the PBoC’s digital currency research institute, proposed a set of global CBDC rules last week. Speaking at a Bank for International Settlements seminar, Mu called on global financial institutions to ensure the global interoperability of national digital currencies.

“Interoperability should be enabled between CBDC systems of different jurisdictions and exchange. The PBoC had shared the proposals with other central banks and monetary authorities,” the official said.

The latest news brings a significant update to China’s aggressive CBDC development. After debuting internal digital yuan pilots in April 2020, the Chinese central bank has been actively pursuing to move its CBDC expertise beyond its own jurisdiction.

As such, the PBoC joined central bank authorities in Hong Kong, Thailand and the United Arab Emirates to explore a cross-border CBDC in February 2021. In late 2020, an official at the HKMA claimed that the regulator and the PBoC were at the preliminary stages of piloting the digital yuan for cross-border payments.

Updated: 4-2-2021

Bitcoin Surge Could Be Driving Digital Yuan Interest, Says People’s Bank of China

The central bank says strong interest in its CBDC project is partly being driven by Bitcoin’s recent surge, despite cryptocurrency still being banned in China.

The cryptocurrency space may be helping to spawn its own competitors after a representative of the People’s Bank of China said Bitcoin’s (BTC) recent surge had caused renewed interest in the nation’s digital yuan project.

The digital yuan is China’s central bank digital currency, and like all CBDCs its foundational principles are completely antithetical to those of the cryptocurrency space.

Core crypto concepts of decentralization and autonomy are dispensed with in favor of centralization and oversight, in an effort by government authorities to more easily control the flow of money. The digital yuan is also expected to be central to China’s smart city ambitions, which would see entire cities made cashless in the coming years.

But the PBoC believes the “very strong” interest that the digital yuan is receiving is a result of Bitcoin’s recent ascension to new all-time highs, despite cryptocurrency still being banned in China.

PBoC research bureau director Wang Xin said interest in the digital yuan was driven in part by the ambitions of other countries to follow suit, and also by Bitcoin’s price hike. According to CNBC’s mandarin translation of his comments, Xin said:

“On one hand, this is related to more and more central banks in the world participating in the development of domestic digital currencies. On the other hand, this (interest) may also be related to the large increase in the price of bitcoin.”

China has run numerous pilot tests of the digital yuan in the past couple of years, with its experimentation extending to biometric hardware wallets, on-street ATMs, national lottery draws, and more.

 

Thai Central Bank To Pilot Its Retail Central Bank Digital Currency In 2022: Report

Thailand’s central bank is open to accepting public feedback on its retail CBDCs by 15 June this year.

The Bank of Thailand (BoT) will begin piloting its retail central bank digital currency (CBDC) in the second quarter of 2022, according to a published report.

* Thailand’s central bank assistant governor announced Friday it is open to accepting public feedback on its retail CBDCs by 15 June this year.

* BoT said the main objective of the currency is to provide citizens with access to more convenient and secure financial services.

* The bank is planning to fully implement the currency over the next 3-5 years, according to a Reuters report.

* The CBDCs will be aimed at providing access to convenient and secure financial services and, “it will not affect the Thai financial system,” Vachira Arromdee, the assistant governor of the financial markets operations group, Bank of Thailand, said at a briefing, according to Reuters.

* In March, BoT said it will issue regulations on asset-backed stablecoins later this year after warning against the illegal use of a baht-denominated stablecoin that was created outside the country.

Updated: 4-2-2021

Central Bank ‘Money Drops’ With Digital Currencies Could Fuel Inflation: Bank of America

CBDCs could facilitate central bank stimulus in the form of money drops, and lead to higher inflation, says BofA.

Central bank digital currencies (CBDCs) could potentially facilitate powerful, directed “money drops” and raise inflation expectations, according to a March 31 report by Bank of America.

“CBDCs could boost the future transmission of monetary and fiscal stimulus,” the bank’s analysts wrote.

While the report doesn’t mention bitcoin (BTC), the analysis might show how countries’ adoption of CBDCs might indirectly create extra demand for the largest cryptocurrency as an investment hedge against inflation.

The Bank of America report, titled “Digital Love: Central Bank Digital Currencies,” explained the benefits of CBDCs, including the potential to increase the speed of domestic and international payment systems, while lowering costs.

Those advantages could make it easier for governments and central banks to distribute stimulus money, according to the report.

* “CBDCs represent the next frontier for central bank stimulus, potentially acting as a potent conduit for policies such as stimulus checks, emergency lending programs, UBI (universal basic income), inducing a more powerful, directed ‘money drop.’ The evolution of central bank digital currencies is likely to increase inflation expectations, boosting the case for inflation assets in the 2020s.”

* “Disruption from cryptocurrencies is prodding central banks to secure their role as the dominant means for settlement of payments, and their ability to supervise banks and conduct monetary policy,” wrote Bank of America.

* Digital currencies issued by central banks could provide disadvantaged populations with greater access to financial services without bank intermediation, according to the report.

* “CBDCs could also speed the delivery of directed stimulus or helicopter drops. For example, many of the Fed’s recent pandemic credit programs were hampered by legal and logistical issues,” including the Main Street Lending Program, which has extended only $31 billion of its $600 billion authorization.

* “The existence of a CBDC would likely have allowed simpler designs and facilitated the targeted extension of credit. In cooperation with fiscal authorities, stimulus could be surgically tailored. In contrast to broad fiscal measures like the recent $1,400 stimulus checks issued by the U.S. Treasury, governments could credit smaller amounts to specific populations or industries to achieve their policy aims.”

* However, the report also lists potential drawbacks. Governments could obtain access to private individual spending data.

* There’s also a crowding-out effect: “CBDCs could compete with banks and money funds by providing another option to store value, curtailing cheap deposit funding for banks and reducing margins on money funds.”

* Bank of America expects the evolution of CBDCs to increase inflation expectations, boosting the case for inflation assets over the next few years.

Updated: 4-7-2021

China using Bitcoin As ‘Financial Weapon’ Against United States: Peter Thiel

Peter Thiel has urged the U.S. government to reappraise China’s relationship with Bitcoin from a geopolitical perspective.

PayPal co-founder and venture capitalist, Peter Thiel, has warned that the Chinese central government may be supporting Bitcoin as a means to undermine the foreign and monetary policy of the United States.

But, he added, it has tried to use the Euro the same way.

Speaking at a virtual event hosted by conservative non-profit, the Richard Nixon Foundation, Thiel was commenting on whether China’s central bank-issued digital currency, or CBDC, could threaten the U.S. dollar’s status as a global reserve currency.

While Thiel, who is known to be pro-Bitcoin, suggested an “internal stablecoin in China” will amount to little more than “some sort of totalitarian measuring device,” he added that China may view Bitcoin as a tool to erode the dollar’s hegemony:

“From China’s point of view, they don’t like the U.S. having this reserve currency, because it gives a lot of leverage over oil supply chains and all sorts of things like that,” he said, adding:

“Even though I’m a pro-crypto, pro-Bitcoin maximalist person, I do wonder whether if at this point, Bitcoin should also be thought of in part as a Chinese financial weapon against the U.S. where it threatens fiat money, but it especially threatens the U.S. dollar.”

Thiel alluded to Chinese efforts to denominate oil trades in Euros during recent years in a bid to undermine the global standing of the dollar, stating: “I think the Euro, you can think of as part of a Chinese weapon against the dollar — the last decade didn’t really work that way, but China would have liked to see two reserve currencies, like the Euro.”

The venture capitalist speculated China does not actually want its renminbi to become the global reserve currency, noting the government would have to “open their capital accounts” among other measures “they really don’t want to do.”

As such, Thiel concludes that supporting Bitcoin offers China an elegant means to weaken the dollar’s standing internationally:

“China wants to do things to weaken [the dollar] — China’s long Bitcoin, and perhaps, from a geopolitical perspective, the U.S. should be asking some tougher questions about exactly how that works.”

Updated: 4-8-2021

US Must Embrace Bitcoin To Counter Chinese ‘Financial Attack’ — Pomp

Without suitable allowances from lawmakers, Bitcoin, like the internet, can be used in ways that could compromise U.S. prowess, says Anthony Pompliano.

Bitcoin can undermine the U.S. dollar if the United States does not take a lead role in accepting it, argued Anthony Pompliano.

Speaking to CNBC on April 8, the Morgan Creek Digital co-founder followed up on a warning from investor Peter Thiel that China could use Bitcoin (BTC) to destabilize U.S. dollar hegemony.

Thiel Cautions Over Bitcoin Threat

“I do wonder at this point whether Bitcoin is to be thought of, in part, as a Chinese financial weapon against the U.S. It threatens fiat money, but it especially threatens the U.S. dollar,” Thiel had said in an appearance at the Nixon Seminar.

Asked whether this was a potential problem, Pompliano was quick to point out that Thiel was not an opponent of Bitcoin but rather that it, like the internet, could have both positive and negative consequences for Washington should policymakers make ill-thought-out decisions.

“I think what we’ve got to understand is that Bitcoin is an open, decentralized protocol,” he explained to CNBC’s “Squawk Box” segment.

“Everyone in the world has an opportunity to use this, just like the internet. And so, just because other countries, maybe adversarial or not to the United States, are going to use it, it doesn’t mean [Thiel] is taking an anti-Bitcoin stance. Actually, it’s quite the contrary.”

The legal landscape surrounding Bitcoin in the U.S. remains a patchwork one, despite certain states, notably Wyoming and Florida, actively seeking to become a haven for its adoption.

“I think what [Thiel] is doing here is he’s saying, ‘Look, there’s a global competition happening here, and there are other countries who are going to try to use this to try to destabilize or financially attack the United States,'” Pompliano continued.

“What we need is for the United States to be the leader here. We need to embrace this, so we need to make sure that we use this technology to continue to be a leader on the global stage.”

A Familiar Headache

Institutional and retail investor interest in cryptocurrency as a whole remains prominent thanks to higher prices this year.

Beneath those movements, however, a separate narrative continues to play out — one involving state-focused power struggles for a piece of, specifically, the Bitcoin network’s power.

This so-called “hash war” could yet affect any state, including those targeted by U.S. sanctions in recent years, such as Iran and Venezuela.

China’s place in the Bitcoin mining game, meanwhile, has been well known for years, despite a ban on transacting and its central bank’s digital yuan project.

Updated: 4-9-2021

Pakistan’s Central Bank Is ‘Carefully Studying’ CBDCs, Says Governor

State Bank of Pakistan governor Reza Baqir says the country is “waiting to burst as far as digitization is concerned.”

The governor of the State Bank of Pakistan, Reza Baqir, has indicated that the institution is carefully studying the possibilities opened by central bank digital currencies.

In an interview with CNN reporter Julia Chatterley on Thursday, Baqir noted that countries, such as China, are “already showing the way” when it comes to CBDC issuance, further outlining the motivations behind the central bank’s interest in CBDCs:

“The benefit for us is twofold: Not only does [potential CBDC issuance] give another boost to our efforts for financial inclusion but, second, if the central bank issues a digital currency, it allows us to make further progress in our fight towards Anti-Money Laundering, towards countering terrorism financing. So, we are at a stage where we are studying it. We hope to be able to make an announcement on that in the coming months.”

Baqir added that the central bank has already given the green light for a framework, within which digital banks can begin to operate in Pakistan — among them, challenger or neobanks that don’t necessarily have a brick-and-mortar presence.

In response to a question regarding Stripe, the world’s largest fintech, and its reported interest in the Pakistani market, Baqir said that the company would be “very welcome.” He emphasized that Pakistan is a market that is home to the fifth-largest concentration of people worldwide, with high levels of tech literacy and a relatively young population. The country, in his view, is “waiting to burst as far as digitization is concerned.”

Baqir also noted that during the coronavirus pandemic, the central bank had moved to eliminate fees on interbank transfers, which led to a 150%–200% growth in mobile banking transactions for the quarter ending in December 2020 as compared with the previous year.

The State Bank of Pakistan had announced back in spring 2019 that it aims to have issued a CBDC by 2025. As reported, regional Pakistani legislators, meanwhile, have been advocating for more movement on the decentralized digital currency front, with a resolution passed recently in the northwest of the country calling on the government to legalize cryptocurrency mining in the country.

Can A Digital Pound CBDC Retake London’s Financial Hub Status Post-Brexit?

Could a digital pound accelerate Britain’s growth post-Brexit and retake London’s status as the European financial hub?

A financial think tank has suggested that Britain should adopt a digital pound in an effort to strengthen London’s status as a global trade center in the wake of Brexit. Previously the gravitational center-point of Europe’s financial sector, London saw much of its influence lost at the end of 2020 when Britain’s exit from the European Union was finalized.

The United Kingdom’s Finance Ministry will now take proposals on how to make the City of London more attractive to global traders and pull activity back from Amsterdam, which emerged as the new EU trading hub post-Brexit.

Euro-skeptic politicians and London finance veterans have formed CityUnited, a think-tank that is proposing ideas on how to foster growth in an independent Britain. CityUnited chairman Daniel Hodson told Reuters that the Bank of England’s consideration of a central bank digital currency was commendable but that the process should be accelerated.

“The Bank of England is talking about a CBDC but it ought to be a greater priority as this form of technology is the future, and would bring other benefits like real-time regulation to cut costs,” said Hodson.

The progress made by China in launching a CBDC should worry British finance authorities, said Hodson, who warned that such technology could “steal a long march” on the United Kingdom. Hodson said:

“A central bank digital currency (CBDC) should be a fundamental foundation for a competitive City after Brexit, otherwise China will steal a long march on us.”

China’s progress in creating a CBDC has seen the issuance of biometric passports linked to digital yuan wallets, along with numerous similar pilot projects, as the nation edges closer to issuing its CBDC. Although not the first country to issue a CBDC — that honor goes to the Bahamas — the global economic impact of a Chinese CBDC could stand to be much greater.

Expected to power China’s digital, cashless cities at some point in the near future, the digital yuan will also reportedly be used as part of the Beijing Winter Olympic Games in 2022.

Sweden’s Central Bank Completes First Phase Of Digital Currency Pilot

The Sveriges Riksbank said that CBDC technology still requires further investigation.

After completing the first phase of its digital currency pilot project, Sveriges Riksbank has found some critical issues that must be addressed before Stockholmers can buy coffee and kanelbullar with e-krona.

In a recent study, Sweden’s central bank presented the first results of its central bank digital currency pilot on a network based on R3’s Corda blockchain.

The Riksbank simulated core aspects of a potential CBDC system, including liquidity supply via the Riksbank’s settlement system, RIX, and network members serving as e-kronor distributors. The central bank also simulated participants, end-users and payment instruments like mobile apps.

The Riksbank said that the new CBDC technology needs further investigation, with scalability presenting a major bottleneck.

“The solution tested in phase one of the e-krona pilot has met the performance requirements made in the public procurement. But this has taken place in a limited test environment and the new technology’s capacity to manage retail payments on a large scale needs to be investigated and tested further,” the report noted.

The central bank also noted some privacy challenges, stressing that the information contained in an e-krona transaction must be protected to uphold banking secrecy laws and avoid revealing personal data.

“The Riksbank is currently analysing to what extent the information stored in the transaction history can be regarded as information covered by banking secrecy and whether it comprises personal data,” the bank stated.

Mithra Sundberg, head of Riksbank’s e-krona pilot division in Stockholm, said that Sweden’s CBDC could probably require a new legal framework before it can be used. Given the scope of issues that need to be addressed before an e-krona can be seriously developed, Riksbank may continue its blockchain pilots until 2026.

Riksbank stated that it will extend its agreement with accounting giant Accenture as a technical supplier to continue e-krona testing. The focus for the second phase will include potential distributors of the e-krona, CBDC performance in retail payments, as well as storage methods. The new phase will also test offline e-krona functionality and integration with existing point-of-sale terminals.

As previously reported, Sweden has emerged as one of the world’s earliest CBDC explorers, announcing a pilot platform for the e-krona in late 2019.

Updated: 4-11-2021

The Future of Digital Currency And Electronic Payments May Be Chinese

China has led the world in electronic payments, and its central bank is pushing forward with its digital-currency plan. The U.S. needs to pay attention.

Will China Mint the Money of the Future?

Last year, the People’s Bank of China seized the opportunity presented by the pandemic to rush its central bank digital currency into the hands of Chinese consumers, conducting trials in three cities — Shenzhen, Suzhou and Chengdu — as well as the Xiong’an New Area near Beijing.

Crucially, its design is two-tier, with the PBOC dealing with the existing state-owned commercial banks and other entities (including telecom and tech companies), not directly with households and firms. The abbreviation “DC/EP” (with the slash) captures this dual structure.

The central bank controls the digital currency, but the electronic payment platforms can participate in the system, alongside the banks, as intermediaries to consumers and businesses.

However, the easiest option for consumers will clearly be to withdraw “e-CNY” from bank ATM machines onto their smartphones’ e-wallets. The system even allows transactions to happen in the absence of an internet connection via “dual offline technology.” In 2018, I predicted there would soon be “bityuan.” I only got the name wrong.

How The Digital Yuan Stablecoin Impacts Crypto In China: Experts Answer

Here’s what crypto and blockchain industry experts from China think about the digital yuan and how it has affected the blockchain space.

China has been discussing the possibilities of national digital currency for half a decade, and the Chinese digital yuan project — referred to as the Digital Currency Electronic Payment, or DCEP — has years of history. Back in 2014, the People’s Bank of China set up a research group “to study digital currencies and application scenarios.”

The research team was conducting a digital currency study and reportedly considering issuing its own digital currency. In 2016, the PBoC announced plans to de­velop a digital cur­rency of its own and started to hire blockchain experts. The same year, Chi­na’s State Coun­cil included blockchain technology in its 13th Five-Year Plan.

In 2017, the PBoC launched the Digital Currency Research Institute, which focused on the development and research of digital currencies. According to China’s National Intellectual Property Administration (formally known as the State Intellectual Property Office), the institute filed more than 63 patent applications related to blockchain and crypto during its first year of existence alone.

In 2018, a report — released by the Chinese Institute of International Finance, operated under the People’s Bank of China — indicated that the central bank would institute a regulatory crackdown on all types of digital currencies.

Back in July 2019, Wang Xin, director of the PBoC’s research bureau, stated that Facebook’s plan to launch its own stablecoin, Libra (now known as Diem), had influenced China’s plans to launch a digital form of the Chinese yuan. Back then, some experts predicted that the Chinese government-backed digital currency aimed to be rolled out earlier than the official launch of Libra.

Last year, the DCEP project made significant progress; meanwhile, the details of the project remained limited. While the question of whether being the first in launching a CBDC will be enough to win global reserve currency status remains open, China is clearly moving toward leading the charge into the digital economy.

This year alone, China started testing infrastructure for the digital yuan prior to its official launch and the Chinese city of Shenzhen provided a chance for its citizens to participate in a lottery event that aimed to encourage the adoption of the country’s new central bank digital currency.

Also this year, China completed the development of hardware wallets for the digital yuan project; the first one was produced by the Xiong’an branch of the Agricultural Bank of China in Hebei and the second by the Postal Savings Bank of China. And earlier in March, the Bank of Communications and China Construction Bank conducted digital yuan trials at two major department stores in Shanghai.

Digital Yuan vs. Cryptocurrency

A major concern among experts is that China’s CBDC is unlikely to be a cryptocurrency. As was underlined by Bloomberg in 2019: “The PBOC will, of course, back the digital yuan, making it the opposite of decentralized.” China’s new digital currency will most likely be a centralized digital currency rather than a true cryptocurrency.

As Shao Fujun, chairman of China UnionPay and a former PBoC official, said back in August 2019, China’s state-owned digital currency “will have lots of positive impacts, including tracking the money flow in economic activities and supporting making monetary policy.”

Mu Changchun, deputy director of the Chinese central bank’s payments department, said back in 2019 that the forthcoming digital yuan would strike the balance between facilitating anonymous payments and preventing money laundering.

He repeated the statement earlier this month, saying that a completely anonymous CBDC “is not feasible” because a national digital currency must meet requirements related to Anti-Money Laundering, Counter-Terrorist Financing and anti-tax evasion.

Meanwhile, Chinese authorities are willing to ensure maximum user privacy for the country’s central bank digital currency, according to Mu’s recent statement.

The question of whether the PBoC’s currency will be like decentralized blockchain-based cryptocurrencies or if it will give Beijing more control over its financial system is an important one. Nonetheless, the development of the digital yuan has undoubtedly influenced the development of the digital economy both within and outside of China.

Cointelegraph reached out to experts in the blockchain and crypto space from China for their opinions on the following questions: How has the development of the digital yuan affected the entire crypto and blockchain industry in China? Will the Chinese CBDC stay centralized or gradually become decentralized over time?

Chang Jia, Founder of Bytom And 8btc:

“The Chinese digital yuan is designed and launched by the PBoC (China’s central bank). It is based on the construction of China’s basic financial network for decades, and it is endorsed by state credit.

Therefore, its birth undoubtedly encourages China’s whole blockchain industry, especially those corporations that have been persisting in the underlying technology of blockchain, digital currency infrastructure construction, and industrial blockchain solutions for several years to see their future use, and even realize the great vision of listing on the STAR Market.

At the beginning, the Chinese digital yuan DCEP focused on a trial operation in the CCB (China Construction Bank). After proving its basic operation, it will also get basic feedback from all walks of life and urban people’s livelihood in China.

With the gradual clarification and strengthening of DCEP in the national economy and the people’s livelihood, such a huge digital currency system like DCEP certainly needs the joint construction of the state and the people in many aspects to create a new digital yuan network and to actively explore internationalization.”

Daniel Lv, Co-Founder Of Nervos:

“The fact that China is working on a digital yuan is proof that there’s value in digital assets and the underlying blockchain technology. The primary purpose of introducing a central bank digital currency is to protect monetary sovereignty out of concern that Bitcoin and other cryptocurrencies will have an impact. The DCEP will also improve the efficiency of payment systems and enhance the convenience of yuan payments.

Blockchain itself is a combination of many existing mature technologies, such as asymmetric cryptography, consensus algorithm, time-stamping, etc. As seen from its latest disclosed patent, DCEP is integrated with asymmetric cryptography, unspent transaction output (UTXO), and smart contracts.

The digital yuan adopts a two-layered system for issuance and distribution — the central bank issues DCEP to banks or other financial institutions, and then these institutions further distribute the digital currency to the public. While the issuance of DCEP is centralized, the circulation could be based on traditional financial account systems or blockchains.

If DCEP transactions happen on a public blockchain, I assume it will probably help the yuan to internationalize. China’s central bank had previously announced that the DCEP pilot scenario included Winter Olympics venues. Foreign entities can simply open a DCEP wallet to conduct the cross-border transaction, as the requirements to open a DCEP wallet are much lower than those to open a yuan deposit account. Peer-to-peer transactions can be initiated between any two DCEP wallets.”

Discus Fish, co-founder of F2Pool And Cobo:

“Essentially, the central bank digital currency is completely different from Bitcoin and other cryptocurrencies because it is still the centralized fiat currency in essence. However, the CBDC may strengthen the public’s perception of blockchain and cryptocurrency.

In the long run, under the education of the central bank, the blockchain industry will attract a large number of new users, especially the young people growing up in the mobile Internet environment, thus leading to the rapid development of the industry. It has a long-term positive impact on the industry.

The essence of CBDC is the centralized fiat currency, which is still the central bank’s debt to the public. Therefore, the central bank will adhere to the centralized management mode. This relationship between creditor’s rights and debt will not change with the change of monetary form. Therefore, I think no matter how the form develops, it is impossible for the central bank’s digital currency to be decentralized.”

Kevin Shao, co-founder of Bitrise Capital:

“The development of the Internet has brought the popularization of electronic payments, especially the applications of Alipay and WeChat payment, which have changed the habits of many people around using cash. Such changes are profoundly affecting China’s financial development. The central bank is also following the trend of digital economic development, starting from the top-level design of the country, and building a complete set of electronic payment infrastructure.

At present, the central bank has not made a final decision on which technical means will be used for the digital currency. However, we have seen that some cities have experimented with digital currencies. But overall, China’s digital currency still serves the central bank’s monetary policy and monetary functions.”

Updated: 4-11-2021

Biden Team Eyes Potential Threat From China’s Digital Yuan Plans

The Biden administration is stepping up scrutiny of China’s plans for a digital yuan, with some officials concerned the move could kick off a long-term bid to topple the dollar as the world’s dominant reserve currency, according to people familiar with the matter.

Now that China’s digital-currency efforts are gathering momentum, officials at the Treasury, State Department, Pentagon and National Security Council are bolstering their efforts to understand the potential implications, the people said.

American officials are less worried about an immediate challenge to the current structure of the global financial system, but are eager to understand how the digital yuan will be distributed, and whether it could also be used to work around U.S. sanctions, the people said on the condition of anonymity.

A Treasury spokeswoman declined to comment. A National Security Council spokeswoman did not reply to a request for comment.

The People’s Bank of China has rolled out trial issuance of a digital yuan in cities across the country, putting it on track to be the first major central bank to issue a virtual currency. A broader roll-out is expected for the Winter Olympics in Beijing next February, giving the effort international exposure.

Many key details of the digital yuan are still in flux, including specifics on how it would be distributed. China’s recent establishment of a joint venture with SWIFT, the messaging nexus through which most cross-border settlements pass through today, suggests it is possible a digital yuan could work within the current financial architecture rather than outside of it.

U.S. officials are reassured that China’s intentions aren’t to use the digital yuan to evade American sanctions, according to people familiar with the matter. The dollar’s current dominance in cross-border transactions gives the U.S. Treasury the power to cut off much of a business or even a country’s access to the global financial system.

China’s officials have said the main intentions of the digital yuan are to replace banknotes and coins, to reduce the incentive to use cryptocurrencies and to complement the current private-sector run electronic payments system — dominated by Ant Group Co.’s Alipay and Tencent Holdings Ltd.’s WeChat Pay. The PBOC has been working for years on the digital yuan, also called the e-CNY, having set up a specialist research team in 2014.

​​“To provide a backup or redundancy for the retail payment system, the central bank has to step up” and provide digital-currency services, Mu Changchun, the director of the PBOC’s digital-currency research institute, said at an event last month.

The PBOC is also examining the potential for using the digital yuan in cross-border payments, launching a project studying the issue with a unit of the Bank for International Settlements along with the United Arab Emirates, Thailand and Hong Kong’s monetary authority.

The Biden administration isn’t currently planning to take any action to counter longer-term threats from China’s digital currency, the people familiar with the discussions said. However, China’s plans have given renewed impetus to efforts to consider the creation of a digital dollar, they said.

Members of Congress have also been increasingly interested in a digital dollar, aware of China’s moves, and asked Federal Reserve Chair Jerome Powell and Treasury Secretary Janet Yellen about the issue in hearings earlier this year.

Powell said in February the Fed was looking “very carefully” at a digital dollar. “We don’t need to be the first. We need to get it right.”

Yellen has signaled interest in research into the viability of a digital dollar, a shift from a lack of enthusiasm under her predecessor, Steven Mnuchin.

“It makes sense for central banks to be looking at” issuing sovereign digital currencies, she said at a virtual conference in February. Yellen said a digital version of the dollar could help address hurdles to financial inclusion in the U.S. among low-income households.

A recent report from the U.S. Director of National Intelligence said the extent of the threat of any foreign digital currency to the dollar’s centrality in the global financial system “will depend on the regulatory rules that are established.”

China’s currency makes up little more than 2% of global foreign exchange reserves compared with nearly 60% for the U.S. dollar. Policy decisions, rather than technical developments, will also be necessary to push forward yuan internationalization, as China maintains a strict regime of capital controls.

China’s financial system is too “fragile and weak” to pose a real threat to the dollar’s status as the world’s reserve currency, according to Mark Sobel, U.S. chairman for the Official Monetary and Financial Institutions Forum.

“At the end of the the day the markets have more confidence in the Fed” than China’s central bank, said Sobel, a former senior U.S. Treasury official for international matters.

Updated: 4-12-2021

Peter Thiel Defines Bitcoin’s Unstoppable Role In Global Politics

Thiel’s comments about China “weaponizing” bitcoin to hurt the U.S. are a warning about the cost of inaction.

The battle over bitcoin’s evolving role just became a piece in a complex game of political strategy.

Peter Thiel’s talk earlier this week at a Richard Nixon Foundation event thrust the cryptocurrency even further out onto the geopolitical stage and highlighted two important macro narratives that investors should keep an eye on and not just for their potential impact on crypto returns.

Here’s One Extract From His Comments:

“I do wonder whether bitcoin should be thought of as a Chinese financial weapon against the U.S. It threatens fiat money, but it especially threatens the U.S. dollar.”

As with most things in life, context is key, and this statement is crying out for it.

On the surface, it seems as if he is asking U.S. regulators to prevent bitcoin from becoming more of a threat to the U.S. dollar. This is the wrong interpretation. The underlying intention is both more meaningful and more supportive of bitcoin and, ultimately, the U.S. than it may at first appear.

Others have pointed out that Thiel is probably playing 4D chess here, and I agree with that. But I believe his underlying message is about more than bitcoin and about more than trying to get the U.S. to sit up and take notice.

Bitcoin As A Weapon?

Before we unpack why Thiel might have said what he said, let’s look at what he might have meant.

Why Would Bitcoin Threaten The U.S. Dollar?

As early as 2013, Thiel was talking about bitcoin’s potential to “change the world,” and has on other occasions praised bitcoin’s reserve qualities.

Thiel seems to be suggesting that bitcoin’s stable supply and worldwide reach could one day put it in a position to rival the U.S. dollar as the world’s reserve currency. And his statement implies he believes China is supporting bitcoin, effectively “weaponizing it,” for this reason.

Does He Really Believe This?

He has access to several of the best minds in the crypto industry through some of the investments made by his funds, and is arguably a very smart individual himself. He has acknowledged that bitcoin is not the best payments system, and surely recognizes the dollar is a strong reserve currency precisely because it is an efficient payment method. Countries want to hold it because it is essential for global commerce.

And as for China “weaponizing” bitcoin to hurt the dollar, Thiel is no doubt aware of just how long China is on the dollar. Chinese investment of U.S. Treasury bonds has been increasing since October of last year, and is now at almost $1.1 trillion.

What’s more, on the current macro landscape, bitcoin is probably well below central bank policies on the list of things that could hurt the U.S. currency.

And Thiel probably knows China has not exactly been “friendly” to bitcoin. On top of the years-old ban on crypto exchanges, authorities moved to shut down bitcoin miners in Inner Mongolia last month.

Given the country’s constant battle with capital flight, it’s more likely it wishes bitcoin would just go away. And if it really wanted to weaken the dollar (which is debatable), it has methods within reach that would not also cause damage to the yuan.

So, Thiel may have said that China was trying to bring down the U.S. dollar by “weaponizing” bitcoin, but I doubt he really believes that. So why did he say so? What is he hoping to achieve?

The Real Issue

To dive into these questions, we need even more ladlefuls of context.

The theme of the seminar was technology and national security. The comment flagged above was tucked into an answer to a question about China’s digital currency plans, and a discussion flowed about the potential control that would give the state over its citizens. The conversation also touched on AI, supply chains and much more, all with a sharp tinge of concern about ideological influence. Thiel even referred to the Chinese government as “omni malevolent.” Let that sink in.

Thiel’s remarks on bitcoin were most likely, as many have pointed out, an attempt to get the U.S. regulators to start taking bitcoin more seriously. But they were also about the broader threat to U.S. dominance that he sees coming from China.

The first point may seem risky – many are concerned the U.S. might decide to ban bitcoin if it starts to see it as a threat. But, as I’ve written elsewhere, this is unlikely to happen as authorities have been watching the social unrest triggered by attempts to curtail cryptocurrency activity in countries such as Nigeria. Plus, a U.S. attempt to ban bitcoin would be the best advertisement that something like bitcoin is needed, and the domestic fallout could shore up China’s soft power play.

It is more likely that greater attention to bitcoin regulation would support investment in crypto infrastructure, which would have extended effects throughout the industry. This includes putting institutional investors’ minds more at ease with the concept, and possibly even removing the last barriers to approval of a bitcoin exchange-traded fund by the U.S. Securities and Exchange Commission.

The Arc Of History

Now, let’s turn to the broader context. As a declared Republican who donated generously to Donald Trump’s first presidential campaign, Thiel was closer to the last administration than this one. He, and others, are concerned the new administration will take a more relaxed stance on relations with what many see as the greatest threat to U.S. power since the Cold War: China.

This almost nationalistic tone can also be heard in Kevin O’Leary’s insistence on CoinDesk TV last month that investors aren’t going to want “China coin.”

What’s more, the 2021 National People’s Congress held in February ratified the next five-year plan, which focuses on, among other things, shoring up China’s position on the global stage. The previous five-year plan described how a peaceful multilateral world would benefit China. This one highlights the danger of “hegemonism,” and describes a strong economic growth based on a vibrant domestic economy that is less dependent on others.

The crescendo in anti-American rhetoric and diplomatic actions point to escalating competition for not only trade but also hearts and minds on the international stage. The soft-power battle is being backed by loans and investment far beyond China’s borders in what appears to be a long game of influence.

I heard an interesting metaphor the other day: The U.S. favors chess, which is about capturing the opponent’s pieces in order to kill its king. The Chinese prefer Go, which is about a slow and stealthy occupation of territory.

Thiel seems to be saying the Chinese are playing Go with bitcoin as well as with blockchain, AI and other new technologies. He is effectively asking the U.S. to watch out for the territorial creep its inaction is facilitating.

Thiel’s talk is likely to have repercussions, slow and subtle but real and meaningful. Hopefully, U.S. regulators will recognize the real opportunity in supporting the use of bitcoin and the development of its infrastructure.

Hopefully, they will see that bitcoin is more representative of the American values of freedom and choice than many of the other new technologies making their mark on societal structures today. And hopefully they will understand that bitcoin will thrive no matter what they do, so they might as well start figuring out how to harness its innovation.

For those of us who love irony, there is much to appreciate in this emerging picture. Bitcoin is being thrust into a tussle between two world powers when it was created to live outside national boundaries. It is being associated with political intent when its inbuilt ideology is supposed to flourish outside party lines. It is being used as a tool in a shift away from globalization and towards nationalism when its design is based on decentralization.

Here’s the thing: Bitcoin doesn’t care. It can be what anyone wants it to be. It’s going to continue functioning the way it does, regardless of how people see it. I’m pretty sure Peter Thiel knows that, and so if he wants to use bitcoin to make larger points that he believes are necessary for prosperity and freedom, then I say we leave him to it.

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$2 Billion Lost In Mt. Gox Bitcoin Hack Can Be Recovered, Lawyer Claims (#GotBitcoin?)

Fed Chair Says Agency Monitoring Crypto But Not Developing Its Own (#GotBitcoin?)

Wesley Snipes Is Launching A Tokenized $25 Million Movie Fund (#GotBitcoin?)

Mystery 94K BTC Transaction Becomes Richest Non-Exchange Address (#GotBitcoin?)

A Crypto Fix For A Broken International Monetary System (#GotBitcoin?)

Four Out Of Five Top Bitcoin QR Code Generators Are Scams: Report (#GotBitcoin?)

Waves Platform And The Abyss To Jointly Launch Blockchain-Based Games Marketplace (#GotBitcoin?)

Bitmain Ramps Up Power And Efficiency With New Bitcoin Mining Machine (#GotBitcoin?)

Ledger Live Now Supports Over 1,250 Ethereum-Based ERC-20 Tokens (#GotBitcoin?)

Miss Finland: Bitcoin’s Risk Keeps Most Women Away From Cryptocurrency (#GotBitcoin?)

Artist Akon Loves BTC And Says, “It’s Controlled By The People” (#GotBitcoin?)

Ledger Live Now Supports Over 1,250 Ethereum-Based ERC-20 Tokens (#GotBitcoin?)

Co-Founder Of LinkedIn Presents Crypto Rap Video: Hamilton Vs. Satoshi (#GotBitcoin?)

Crypto Insurance Market To Grow, Lloyd’s Of London And Aon To Lead (#GotBitcoin?)

No ‘AltSeason’ Until Bitcoin Breaks $20K, Says Hedge Fund Manager (#GotBitcoin?)

NSA Working To Develop Quantum-Resistant Cryptocurrency: Report (#GotBitcoin?)

Custody Provider Legacy Trust Launches Crypto Pension Plan (#GotBitcoin?)

Vaneck, SolidX To Offer Limited Bitcoin ETF For Institutions Via Exemption (#GotBitcoin?)

Russell Okung: From NFL Superstar To Bitcoin Educator In 2 Years (#GotBitcoin?)

Bitcoin Miners Made $14 Billion To Date Securing The Network (#GotBitcoin?)

Why Does Amazon Want To Hire Blockchain Experts For Its Ads Division?

Argentina’s Economy Is In A Technical Default (#GotBitcoin?)

Blockchain-Based Fractional Ownership Used To Sell High-End Art (#GotBitcoin?)

Portugal Tax Authority: Bitcoin Trading And Payments Are Tax-Free (#GotBitcoin?)

Bitcoin ‘Failed Safe Haven Test’ After 7% Drop, Peter Schiff Gloats (#GotBitcoin?)

Bitcoin Dev Reveals Multisig UI Teaser For Hardware Wallets, Full Nodes (#GotBitcoin?)

Bitcoin Price: $10K Holds For Now As 50% Of CME Futures Set To Expire (#GotBitcoin?)

Bitcoin Realized Market Cap Hits $100 Billion For The First Time (#GotBitcoin?)

Stablecoins Begin To Look Beyond The Dollar (#GotBitcoin?)

Bank Of England Governor: Libra-Like Currency Could Replace US Dollar (#GotBitcoin?)

Binance Reveals ‘Venus’ — Its Own Project To Rival Facebook’s Libra (#GotBitcoin?)

The Real Benefits Of Blockchain Are Here. They’re Being Ignored (#GotBitcoin?)

CommBank Develops Blockchain Market To Boost Biodiversity (#GotBitcoin?)

SEC Approves Blockchain Tech Startup Securitize To Record Stock Transfers (#GotBitcoin?)

SegWit Creator Introduces New Language For Bitcoin Smart Contracts (#GotBitcoin?)

You Can Now Earn Bitcoin Rewards For Postmates Purchases (#GotBitcoin?)

Bitcoin Price ‘Will Struggle’ In Big Financial Crisis, Says Investor (#GotBitcoin?)

Fidelity Charitable Received Over $100M In Crypto Donations Since 2015 (#GotBitcoin?)

Would Blockchain Better Protect User Data Than FaceApp? Experts Answer (#GotBitcoin?)

Just The Existence Of Bitcoin Impacts Monetary Policy (#GotBitcoin?)

What Are The Biggest Alleged Crypto Heists And How Much Was Stolen? (#GotBitcoin?)

IRS To Cryptocurrency Owners: Come Clean, Or Else!

Coinbase Accidentally Saves Unencrypted Passwords Of 3,420 Customers (#GotBitcoin?)

Bitcoin Is A ‘Chaos Hedge, Or Schmuck Insurance‘ (#GotBitcoin?)

Bakkt Announces September 23 Launch Of Futures And Custody

Coinbase CEO: Institutions Depositing $200-400M Into Crypto Per Week (#GotBitcoin?)

Researchers Find Monero Mining Malware That Hides From Task Manager (#GotBitcoin?)

Crypto Dusting Attack Affects Nearly 300,000 Addresses (#GotBitcoin?)

A Case For Bitcoin As Recession Hedge In A Diversified Investment Portfolio (#GotBitcoin?)

SEC Guidance Gives Ammo To Lawsuit Claiming XRP Is Unregistered Security (#GotBitcoin?)

15 Countries To Develop Crypto Transaction Tracking System: Report (#GotBitcoin?)

US Department Of Commerce Offering 6-Figure Salary To Crypto Expert (#GotBitcoin?)

Mastercard Is Building A Team To Develop Crypto, Wallet Projects (#GotBitcoin?)

Canadian Bitcoin Educator Scams The Scammer And Donates Proceeds (#GotBitcoin?)

Amazon Wants To Build A Blockchain For Ads, New Job Listing Shows (#GotBitcoin?)

Shield Bitcoin Wallets From Theft Via Time Delay (#GotBitcoin?)

Blockstream Launches Bitcoin Mining Farm With Fidelity As Early Customer (#GotBitcoin?)

Commerzbank Tests Blockchain Machine To Machine Payments With Daimler (#GotBitcoin?)

Bitcoin’s Historical Returns Look Very Attractive As Online Banks Lower Payouts On Savings Accounts (#GotBitcoin?)

Man Takes Bitcoin Miner Seller To Tribunal Over Electricity Bill And Wins (#GotBitcoin?)

Bitcoin’s Computing Power Sets Record As Over 100K New Miners Go Online (#GotBitcoin?)

Walmart Coin And Libra Perform Major Public Relations For Bitcoin (#GotBitcoin?)

Judge Says Buying Bitcoin Via Credit Card Not Necessarily A Cash Advance (#GotBitcoin?)

Poll: If You’re A Stockowner Or Crypto-Currency Holder. What Will You Do When The Recession Comes?

1 In 5 Crypto Holders Are Women, New Report Reveals (#GotBitcoin?)

Beating Bakkt, Ledgerx Is First To Launch ‘Physical’ Bitcoin Futures In Us (#GotBitcoin?)

Facebook Warns Investors That Libra Stablecoin May Never Launch (#GotBitcoin?)

Government Money Printing Is ‘Rocket Fuel’ For Bitcoin (#GotBitcoin?)

Bitcoin-Friendly Square Cash App Stock Price Up 56% In 2019 (#GotBitcoin?)

Safeway Shoppers Can Now Get Bitcoin Back As Change At 894 US Stores (#GotBitcoin?)

TD Ameritrade CEO: There’s ‘Heightened Interest Again’ With Bitcoin (#GotBitcoin?)

Venezuela Sets New Bitcoin Volume Record Thanks To 10,000,000% Inflation (#GotBitcoin?)

Newegg Adds Bitcoin Payment Option To 73 More Countries (#GotBitcoin?)

China’s Schizophrenic Relationship With Bitcoin (#GotBitcoin?)

More Companies Build Products Around Crypto Hardware Wallets (#GotBitcoin?)

Bakkt Is Scheduled To Start Testing Its Bitcoin Futures Contracts Today (#GotBitcoin?)

Bitcoin Network Now 8 Times More Powerful Than It Was At $20K Price (#GotBitcoin?)

Crypto Exchange BitMEX Under Investigation By CFTC: Bloomberg (#GotBitcoin?)

“Bitcoin An ‘Unstoppable Force,” Says US Congressman At Crypto Hearing (#GotBitcoin?)

Bitcoin Network Is Moving $3 Billion Daily, Up 210% Since April (#GotBitcoin?)

Cryptocurrency Startups Get Partial Green Light From Washington

Fundstrat’s Tom Lee: Bitcoin Pullback Is Healthy, Fewer Searches Аre Good (#GotBitcoin?)

Bitcoin Lightning Nodes Are Snatching Funds From Bad Actors (#GotBitcoin?)

The Provident Bank Now Offers Deposit Services For Crypto-Related Entities (#GotBitcoin?)

Bitcoin Could Help Stop News Censorship From Space (#GotBitcoin?)

US Sanctions On Iran Crypto Mining — Inevitable Or Impossible? (#GotBitcoin?)

US Lawmaker Reintroduces ‘Safe Harbor’ Crypto Tax Bill In Congress (#GotBitcoin?)

EU Central Bank Won’t Add Bitcoin To Reserves — Says It’s Not A Currency (#GotBitcoin?)

The Miami Dolphins Now Accept Bitcoin And Litecoin Crypt-Currency Payments (#GotBitcoin?)

Trump Bashes Bitcoin And Alt-Right Is Mad As Hell (#GotBitcoin?)

Goldman Sachs Ramps Up Development Of New Secret Crypto Project (#GotBitcoin?)

Blockchain And AI Bond, Explained (#GotBitcoin?)

Grayscale Bitcoin Trust Outperformed Indexes In First Half Of 2019 (#GotBitcoin?)

XRP Is The Worst Performing Major Crypto Of 2019 (GotBitcoin?)

Bitcoin Back Near $12K As BTC Shorters Lose $44 Million In One Morning (#GotBitcoin?)

As Deutsche Bank Axes 18K Jobs, Bitcoin Offers A ‘Plan ฿”: VanEck Exec (#GotBitcoin?)

Argentina Drives Global LocalBitcoins Volume To Highest Since November (#GotBitcoin?)

‘I Would Buy’ Bitcoin If Growth Continues — Investment Legend Mobius (#GotBitcoin?)

Lawmakers Push For New Bitcoin Rules (#GotBitcoin?)

Facebook’s Libra Is Bad For African Americans (#GotBitcoin?)

Crypto Firm Charity Announces Alliance To Support Feminine Health (#GotBitcoin?)

Canadian Startup Wants To Upgrade Millions Of ATMs To Sell Bitcoin (#GotBitcoin?)

Trump Says US ‘Should Match’ China’s Money Printing Game (#GotBitcoin?)

Casa Launches Lightning Node Mobile App For Bitcoin Newbies (#GotBitcoin?)

Bitcoin Rally Fuels Market In Crypto Derivatives (#GotBitcoin?)

World’s First Zero-Fiat ‘Bitcoin Bond’ Now Available On Bloomberg Terminal (#GotBitcoin?)

Buying Bitcoin Has Been Profitable 98.2% Of The Days Since Creation (#GotBitcoin?)

Another Crypto Exchange Receives License For Crypto Futures

From ‘Ponzi’ To ‘We’re Working On It’ — BIS Chief Reverses Stance On Crypto (#GotBitcoin?)

These Are The Cities Googling ‘Bitcoin’ As Interest Hits 17-Month High (#GotBitcoin?)

Venezuelan Explains How Bitcoin Saves His Family (#GotBitcoin?)

Quantum Computing Vs. Blockchain: Impact On Cryptography

This Fund Is Riding Bitcoin To Top (#GotBitcoin?)

Bitcoin’s Surge Leaves Smaller Digital Currencies In The Dust (#GotBitcoin?)

Bitcoin Exchange Hits $1 Trillion In Trading Volume (#GotBitcoin?)

Bitcoin Breaks $200 Billion Market Cap For The First Time In 17 Months (#GotBitcoin?)

You Can Now Make State Tax Payments In Bitcoin (#GotBitcoin?)

Religious Organizations Make Ideal Places To Mine Bitcoin (#GotBitcoin?)

Goldman Sacs And JP Morgan Chase Finally Concede To Crypto-Currencies (#GotBitcoin?)

Bitcoin Heading For Fifth Month Of Gains Despite Price Correction (#GotBitcoin?)

Breez Reveals Lightning-Powered Bitcoin Payments App For IPhone (#GotBitcoin?)

Big Four Auditing Firm PwC Releases Cryptocurrency Auditing Software (#GotBitcoin?)

Amazon-Owned Twitch Quietly Brings Back Bitcoin Payments (#GotBitcoin?)

JPMorgan Will Pilot ‘JPM Coin’ Stablecoin By End Of 2019: Report (#GotBitcoin?)

Is There A Big Short In Bitcoin? (#GotBitcoin?)

Coinbase Hit With Outage As Bitcoin Price Drops $1.8K In 15 Minutes

Samourai Wallet Releases Privacy-Enhancing CoinJoin Feature (#GotBitcoin?)

There Are Now More Than 5,000 Bitcoin ATMs Around The World (#GotBitcoin?)

You Can Now Get Bitcoin Rewards When Booking At Hotels.Com (#GotBitcoin?)

North America’s Largest Solar Bitcoin Mining Farm Coming To California (#GotBitcoin?)

Bitcoin On Track For Best Second Quarter Price Gain On Record (#GotBitcoin?)

Bitcoin Hash Rate Climbs To New Record High Boosting Network Security (#GotBitcoin?)

Bitcoin Exceeds 1Million Active Addresses While Coinbase Custodies $1.3B In Assets

Why Bitcoin’s Price Suddenly Surged Back $5K (#GotBitcoin?)

Zebpay Becomes First Exchange To Add Lightning Payments For All Users (#GotBitcoin?)

Coinbase’s New Customer Incentive: Interest Payments, With A Crypto Twist (#GotBitcoin?)

The Best Bitcoin Debit (Cashback) Cards Of 2019 (#GotBitcoin?)

Real Estate Brokerages Now Accepting Bitcoin (#GotBitcoin?)

Ernst & Young Introduces Tax Tool For Reporting Cryptocurrencies (#GotBitcoin?)

Recession Is Looming, or Not. Here’s How To Know (#GotBitcoin?)

How Will Bitcoin Behave During A Recession? (#GotBitcoin?)

Many U.S. Financial Officers Think a Recession Will Hit Next Year (#GotBitcoin?)

Definite Signs of An Imminent Recession (#GotBitcoin?)

What A Recession Could Mean for Women’s Unemployment (#GotBitcoin?)

Investors Run Out of Options As Bitcoin, Stocks, Bonds, Oil Cave To Recession Fears (#GotBitcoin?)

Goldman Is Looking To Reduce “Marcus” Lending Goal On Credit (Recession) Caution (#GotBitcoin?)

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