Bank of England Tests DLT Settlement System

The Bank of England and the Bank for International Settlements (BIS) Innovation Hub London Center have successfully tested a distributed ledger technology-powered settlements system between the institutions. As a result, the Bank of England will use the insights from this project in its real-time gross settlement (RTGS) system.

The joint pilot project, called Project Meridian, was recently documented in a report published by BIS on April 19. The 44-page document highlighted the successful synchronization of distributed ledger technology (DLT) between the banks for the purchase of houses in Wales and England.

This synchronization network allowed for the transmission of messages between the synchronization network and RTGS system using APIs, providing a generic interface that could be “relatively easily” extended to other asset classes, such as foreign exchange. By extending this system to other asset classes, it could significantly reduce the time, costs, and risks of transactions.

The Bank of England and BIS have been exploring the potential of DLT for financial settlements and transaction processing for several years. They have been working on multiple projects, including a cross-border payments project called Project Stella, which was completed in 2019.

The Bank of England has also been developing its own RTGS system, which is set to be launched in 2022. The new system will be built on modern technology and will replace the current system, which has been in operation for almost 20 years. The integration of DLT technology into the new RTGS system could further enhance its efficiency and security.

DLT technology, also known as blockchain, has the potential to revolutionize the financial industry. Its decentralized and transparent nature allows for secure, efficient, and cost-effective transactions, without the need for intermediaries. It has the potential to streamline the financial system and reduce the risk of fraud and errors.

The successful completion of Project Meridian is a significant milestone in the exploration of DLT technology in financial settlements. The potential for extending the system to other asset classes could significantly enhance the efficiency and security of financial transactions, which would benefit the entire industry.

In conclusion, the Bank of England and BIS Innovation Hub London Center have successfully tested a DLT-powered settlements system through Project Meridian. The synchronization network allowed for the transmission of messages between the synchronization network and RTGS system using APIs, which could be extended to other asset classes, reducing the time, costs, and risks of transactions. This is a significant milestone in the exploration of DLT technology in financial settlements and could enhance the efficiency and security of financial transactions in the future.

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BIS has long taken a cautious approach

Bitcoin (BTC) and other cryptocurrencies have been regarded with suspicion by the Bank for International Settlements (BIS) for a considerable amount of time. According to the BIS, however, there is no longer any need to exercise care since the “war has been won” between fiat and cryptocurrency.

In an interview with Bloomberg, the general manager of the BIS, Agustn Carstens, who is responsible for making the assertion, emphasized that “technology does not make for trustworthy money,” among other objections of cryptocurrency.

The Bank for International Settlements (BIS), which serves as the central bank for central banks, has emphasized the need for regulation and risk management in the cryptocurrency space. However, the BIS’s assertion that the battle between cryptocurrencies and fiat currencies has been won sparked outrage, satire, and corrections within the Bitcoin and cryptocurrency community.

“Want to irritate those fools to no end? Ignore their fear, uncertainty, and doubt (FUD) bait and put all of your attention on what’s occurring in the global south and on the streets of Nigeria.

In the meanwhile, Lady Anarki, an advocate for Bitcoin who recently shut down a firm that provided Bitcoin Security Education, said that “fiat and crypto are fundamentally the same exact swindle.”

“In the case of fiat currency, it is a group of wicked elite oligarchs who are building a rigged game system in order to benefit themselves at the expense of everyone else. Bitcoin is a system that was created with incentives and good economic concepts in mind, and it is meant to empower anybody who contributes value to the world.

As Carstens said, this is another another allusion to the fact that Bitcoin has been proclaimed dead, dead, and dead again. It is also a reference to the reality that Bitcoin lost the “battle” for money. The bear market in 2022 and 2023 is not going to be any different, and Bitcoin supporters on Twitter have been quick to embrace the chance to ridicule financial gurus who are dancing on the fictitious grave of the decentralized currency.

Despite this, Bitcoin has gained more over forty percent from its lows in 2022, and adoption of the Lightning Network is thriving as the community looks to be becoming more outspoken.

This week, the Bitcoin Information Service (BIS) issued another incendiary remark, and the famous podcast What Bitcoin Did, which is hosted by Peter McCormack, tweeted some helpful numbers to rectify the statement. Notably, the BIS said that “almost all economies incurred losses on their Bitcoin holdings” between August 2015 and December 2022. This is an important point to note.

In spite of the BIS’ best attempts to the contrary, it seems like the price of bitcoin will continue its upward trajectory.

The Bank for International Settlements (BIS) has been an outspoken opponent of cryptocurrencies, expressing worries about the volatility, scalability, and energy consumption of these digital assets. In contrast to Carsten’s statement in the Bloomberg interview that “technology does not make for trustworthy money,” the BIS has conducted research on stablecoins and is leading the creation of central bank digital currencies in conjunction with numerous nations.

Willem Middelkoop, an author and enthusiast for Bitcoin, recently emphasized that the conflict between fiat currencies and cryptocurrencies is not yet resolved. If one were to skim over the comments on the initial tweet from Bloomberg Crypto, one would get the impression that the conflict is just beginning to heat up.

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The Bank for International Settlements

In the days that immediately followed the collapse of the cryptocurrency firms FTX and Terraform Labs, there was an increase in the amount of trading activity that took place on significant exchanges, according to a report that was released by the Bank for International Settlements (BIS).

According to a report released by the BIS on February 20 and headlined “crypto shocks and retail losses,” after the announcement of the bankruptcy of Terra and FTX, the number of daily active users at some exchanges such as Coinbase and Binance “rose considerably.” This discovery was made in spite of the fact that the prices of Bitcoin (BTC), Ether (ETH), and a variety of other cryptocurrencies all fell in 2022. The bank provided the appearance that “customers wanted to weather the storm” by shifting their money into stablecoins and other tokens that were likely not looking as gloomy at the time. This was done in order to give the bank the impression that “customers sought to weather the storm.”

In contrast, the BIS reported that whales at the aforementioned exchanges “probably cashed out at the expense of smaller holders” by reducing their BTC stockpiles as retail investors bought cryptocurrency. This occurred as whales reduced their BTC stockpiles as retail investors bought cryptocurrency. This took place when whales sold off their BTC holdings while regular investors purchased bitcoin. The financial institution said that its experts had looked at the number of times bitcoin investing apps were downloaded. Assuming that each user bought $100 worth of bitcoin during the first month and each month thereafter, they found that approximately 75% of users had downloaded an app when the price of bitcoin was higher than $20,000. This was determined by assuming that each user bought $100 worth of bitcoin during the first month.

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The Financial Stability Board (FSB) is pushing for international regulations

A global financial regulator known as the Financial Stability Board (FSB) has the backing of the Bank for Worldwide Settlements (BIS). The FSB is now advocating for worldwide standards for decentralized financial systems (DeFi).

The Financial Stability Board (FSB) published a study on decentralized finance and the risks it presents to the overall financial stability of the country on February 16th. The research evaluated the hazards that decentralized finance posed to the overall financial stability of the country. The focus of the study was on identifying significant flaws, tracking transmission networks, and investigating the development of decentralized financial systems.

The authority said in the study that decentralized finance (DeFi) “does not vary materially” from conventional finance (TradFi) in its operations, despite the fact that DeFi offers a variety of “new” services. This was spoken in relation to the actions that DeFi was participating in. According to the reasoning of the Financial Stability Board, the fact that DeFi attempts to mimic certain aspects of TradFi’s activities raises the possibility for increased vulnerabilities brought on by the use of innovative technologies, a high degree of ecosystem interlinkages, and a lack of regulation or compliance. These three factors are what the Financial Stability Board considers to be the three main causes of increased vulnerability. This is the conclusion that one may reach by examining the evidence provided in the argument.

In addition, the authority said that the actual degree of decentralization in DeFi systems “frequently deviates greatly” from the statements that were initially made by the system’s founding fathers and mothers about the capabilities of the system. These assertions were made in the beginning, back when the technology was still in its infant stages of development.

In order to forestall the emergence of financial stability risks that are associated with decentralized finance, the Financial Stability Board (FSB) is collaborating with global standard-setting agencies to evaluate decentralized finance rules in a number of different jurisdictions. This will allow the FSB to prevent the risks from materializing in the first place. Because of this, the FSB will be able to forestall the appearance of these threats.

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BIS analysis reveals unequal CBDC uptake in Africa

According to a report that was published on November 24 by the Bank of International Settlements (BIS), many of the central bankers on the African continent have greater faith in CBDC than mobile money, which has been a strong competitor to central bank digital currency (CBDC) in Africa. Mobile money has been a strong competitor to CBDC in Africa.

According to the BIS, central bankers in Africa saw greater utility in CBDC for the implementation of monetary policy than bankers in other parts of the world did.

In response to the survey that served as the foundation for the report, nineteen different central banks in Africa gave their responses, and all of them indicated that they had an active interest in CBDC.

Only Nigeria has issued a retail CBDC, called the eNaira, which is intended for use by the general public. Ghana is currently in the process of piloting a retail CBDC project, and South Africa is in the process of running a project for a wholesale CBDC, which is intended for use by institutions.

The provision of cash was listed as a major motivation for the introduction of a CBDC by African central bankers in the responses of 48 percent of survey participants.

They believed that a CBDC would result in cost savings regarding the printing, transportation, and storage of banknotes and coins.

All respondents made mention of the importance of financial inclusion.

In the year 2021, less than half of Africa’s adult population had their DNA banked.

Two-thirds of the world’s total volume of money transfers come from sub-Saharan Africa, and more than half of all users are located there.

According to the findings of the report, the participation of CBDC in this market may result in increased competition and decreased prices.

“support new digital technologies and their integration with the broader economy.” would be one of the goals of a CBDC.

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BIS to Adopt DeFi Implementation in Forex CBDC Markets

In its exploration of blockchain technology, the Bank for International Settlements (BIS), along with the “Eurosystem” – central banks of France, Singapore, and Switzerland will be launching a new project called “Project Mariana.”

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According to the press release, the project would use decentralized finance (DeFi) protocols to automate foreign exchange markets and settlement while also improving cross-border payments between the Swiss franc, euro, and Singapore dollar wholesale central bank digital currencies, or CBDCs.

The project is built mainly with the applications used in the DeFi sectors, such as smart contracts and automated market maker protocols (AMMs). Project Mariana merges pooled liquidity with innovative algorithms to dictate the prices between two or more tokenized assets to aid the cross-border exchange of CBDCs.

Aside from Project Mariana being used as DeFi implementation, the centralized financial institution also stated that the automated market-making technology can become the “basis for a new generation of financial infrastructure.”

Cecilia Skingsley, Head of the BIS Innovation Hub, commented, “This pioneering project pushes our CBDC research into innovative frontiers, incorporating some of the promising ideas of the DeFi ecosystem.” She added, “Mariana also marks the first collaboration across Innovation Hub Centres; expect to see more in the future,”

BIS and its central bank partners have set a tentative date to deliver a proof of concept by mid-2023. Notably, this is not the first project BIS will launch. In September, the organization launched Project Icebreaker along with the central banks of Sweden, Norway, and Israel to see how CBDCs can be utilized for international remittance and retail payments.

The project icebreaker was built concerning cross-border payments being accustomed to insufficient transparency, limited access, low speeds, and high costs. As reported by Blockchain.News, this project seeks to explore how central bank digital currencies (CBDCs) can bridge the gap by scrutinizing the technological feasibility and specific vital functions of interjoining various domestic CBDC networks.

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BIS Launches Project Icebreaker with Central Banks to Explore CBDC

The Bank for International Settlements (BIS) has rolled out Project Icebreaker together with the central banks of Sweden, Norway, and Israel to see how CBDCs can be utilized for international remittance and retail payments.

Per the announcement:

“Project Icebreaker is a collaboration between the Bank of Israel, Central Bank of Norway, Sveriges Riksbank and BIS Innovation Hub Nordic Centre to develop a “hub” to which participating central banks will connect their domestic proof-of-concept CBDC systems.”

Since cross-border payments are accustomed to insufficient transparency, limited access, low speeds, and high costs, Project Icebreaker seeks to explore how central bank digital currencies (CBDCs) can bridge the gap.

Ideally, it will scrutinize the technological feasibility and specific key functions of interjoining various domestic CBDC networks. 

The project’s final report is scheduled for the first quarter of 2023, given that it will run till the end of the year.

Andrew Abir, the Bank of Israel Deputy Governor, noted:

“The results of the project will be very important in guiding our future work on the digital shekel.”

He added:

“Efficient and accessible cross border payments are of extreme importance for a small and open economy like Israel and this was identified as one of the main motivations for a potential issuance of a digital shekel.” 

According to a survey by Ripple, CBDCs have triggered overwhelming consensus among global finance leaders.

The study disclosed that more than 70% of them were certain that CBDCs would spur financial inclusion, Blockchain.News reported. 

Once rolled out, CBDCs are expected to drive the financial inclusion of nearly 1.7 billion people left out of the banking system. This is because CBDCs are digital assets pegged to real-world assets and backed by the central banks.

In May, 90% of apex banks have shown intentions of rolling out Central Bank Digital Currencies (CBDCs), according to a study by the Bank for International Settlements (BIS). More than 110 countries are currently at one stage or another of the CBDC development process, and many more are poised to join the trend. 

-With assistance with Annie Li-

 

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9 in 10 Central Banks are Eyeing CBDCs, BIS Study Shows

90% of apex banks have shown intentions of rolling out Central Bank Digital Currencies (CBDCs), according to a study by the Bank for International Settlements (BIS).

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Per the report:

“Nine out of 10 central banks are exploring central bank digital currencies, and more than half are now developing them or running concrete experiments.”

The study surveyed 81 central banks about their engagement in CBDCs as well as their intentions and motivations about CBDC issuance. China has already set the ball rolling with its digital yuan

 

The BIS found that the emergence of cryptocurrencies like stablecoins and the Covid-19 pandemic have accelerated the CBDC drive, especially in advanced economies. Additionally, retail CBDCs have gained more momentum because they are moving to advanced stages. The survey noted:

“Globally, more than two thirds of central banks consider that they are likely to or might possibly issue a retail CBDC in either the short or medium term.”

On the other hand, wholesale CBDCs are being fronted because they are stepping stones toward cross-border payment efficiency. 

 

The BIS had previously noted that wholesale CBDCs would face challenges like differences in jurisdictional boundaries and governance provisions amongst countries. Therefore, it was willing to help countries handle these differences while fostering the development of technical capabilities and testing at a large scale level. 

 

Per the study:

“Central banks consider CBDCs as capable of alleviating key pain points such as the limited operating hours of current payment systems and the length of current transaction chains.”

Once rolled out, CBDCs are expected to drive the financial inclusion of nearly 1.7 billion people left out of the banking system. 

 

This is because CBDCs are digital assets pegged to a real-world asset and backed by the central banks meaning that they represent a claim against the bank exactly the way banknotes work. Central banks will also be in full control of the supply, one of the major features that have drawn criticism across the board.

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BIS to Explore Potential Advantages of Defi on Small & Medium Enterprises in H.K.

As part of its research plans, the Bank for International Settlements (BIS) will explore whether decentralized finance (DeFi) technologies can enhance financing for small and medium enterprises in Hong Kong.

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The BIS – an umbrella group for central banks – said in a report Wednesday that in 2022, its Innovation Hub will “launch new projects into CBDCs, DeFi and next-generation payments systems”. Other agendas include new projects in green finance, regulatory and supervisory technology and cyber security, it added.

The BIS said that the “Hong Kong Centre will continue to work on mBridge”, referring to “multiple CBDC bridge” in detail. Primarily, to test the integration of wholesale CBDCs from four central banks; on Aurum, a retail CBDC prototype; and on a second phase of the Genesis prototypes. Ultimately, that will further explore the intersection between technology, the financing of green projects and how countries can achieve their carbon reduction targets, it added.

Agustín Carstens, BIS General Manager, said:

“With an expanded network of Hub Centres and exciting new projects, the BIS Innovation Hub is now in a stronger position to innovate in a sound, sustainable way, harnessing the benefits of digital technology, serving the public interest, and working cooperatively with the central bank community, academia and the private sector,”

The BIS Innovation Hub is expanding in 2022 with first projects in the London and Nordic Hub Centres, the expected opening of the Eurosystem and Toronto centres and also the advancement of the strategic partnership with the Federal Reserve System.

“CBDCs and improvements in payments systems continue to be an area of exploratory focus, accounting for 13 out of 17 projects that were active in 2021 or will be launched in 2022,” the BIS report stated.

According to the CBDC Tracker, at least 64 central banks were looking into a retail CBDC by the end of 2021. Among them the most successful was the Nigerian central bank’s launch of eNaira last October, meanwhile, the European central bank has kicked off a two-year experiment into a retail CBDC.

Meanwhile, Hong Kong,  the global financial hub, is also actively exploring the possibility of introducing crypto for trading activities, the financial watchdog resumed the discussion of the regulation of stablecoins recently, proposing 5 options to the public.

Image source: Shutterstock

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BIS to Explore Potential Advantages of Defi on Small & Medium Enterprises in H.K.

As part of its research plans, the Bank for International Settlements (BIS) will explore whether decentralized finance (DeFi) technologies can enhance financing for small and medium enterprises in Hong Kong.

Webp.net-resizeimage - 2022-01-26T123109.464.jpg

The BIS – an umbrella group for central banks – said in a report Wednesday that in 2022, its Innovation Hub will “launch new projects into CBDCs, DeFi and next-generation payments systems”. Other agendas include new projects in green finance, regulatory and supervisory technology and cyber security, it added.

The BIS said that the “Hong Kong Centre will continue to work on mBridge”, referring to “multiple CBDC bridge” in detail. Primarily, to test the integration of wholesale CBDCs from four central banks; on Aurum, a retail CBDC prototype; and on a second phase of the Genesis prototypes. Ultimately, that will further explore the intersection between technology, the financing of green projects and how countries can achieve their carbon reduction targets, it added.

Agustín Carstens, BIS General Manager, said:

“With an expanded network of Hub Centres and exciting new projects, the BIS Innovation Hub is now in a stronger position to innovate in a sound, sustainable way, harnessing the benefits of digital technology, serving the public interest, and working cooperatively with the central bank community, academia and the private sector,”

The BIS Innovation Hub is expanding in 2022 with first projects in the London and Nordic Hub Centres, the expected opening of the Eurosystem and Toronto centres and also the advancement of the strategic partnership with the Federal Reserve System.

“CBDCs and improvements in payments systems continue to be an area of exploratory focus, accounting for 13 out of 17 projects that were active in 2021 or will be launched in 2022,” the BIS report stated.

According to the CBDC Tracker, at least 64 central banks were looking into a retail CBDC by the end of 2021. Among them the most successful was the Nigerian central bank’s launch of eNaira last October, meanwhile, the European central bank has kicked off a two-year experiment into a retail CBDC.

Meanwhile, Hong Kong,  the global financial hub, is also actively exploring the possibility of introducing crypto for trading activities, the financial watchdog resumed the discussion of the regulation of stablecoins recently, proposing 5 options to the public.

Image source: Shutterstock

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