Tag: Central Bank Digital Currencies

Financial Stability Board Finalizes Global Crypto Asset Regulatory Framework

by Blockchain News

The Financial Stability Board (FSB) has finalized a global regulatory framework for crypto-asset activities, aiming to promote comprehensive and internationally consistent regulatory and supervisory approaches. The announcement was made on July 17, 2023, and the framework is based on the principle of ‘same activity, same risk, same regulation.’

The FSB’s framework incorporates insights from the past year’s events in crypto-asset markets and feedback received during the FSB’s public consultation. It provides a robust basis for ensuring that crypto-asset activities and so-called stablecoins are subject to consistent and comprehensive regulation, commensurate to the risks they pose.

The framework consists of two distinct sets of recommendations. The first set includes high-level recommendations for the regulation, supervision, and oversight of crypto-asset activities and markets. The second set comprises revised high-level recommendations for the regulation, supervision, and oversight of “global stablecoin” arrangements.

The final recommendations draw on the implementation experiences of jurisdictions and build on the principles that informed the consultative framework. These principles include ‘same activity, same risk, same regulation’; high-level and flexible; and technology neutral.

The FSB has strengthened both sets of high-level recommendations in three areas: ensuring adequate safeguarding of client assets, addressing risks associated with conflicts of interest, and strengthening cross-border cooperation.

The FSB and standard-setting bodies will continue to coordinate in promoting globally consistent regulation by considering the need for further guidance or standards and monitoring implementation status at the jurisdictional level.

The recommendations focus on addressing risks to financial stability and do not comprehensively cover all specific risk categories related to crypto-asset activities. Central Bank Digital Currencies (CBDCs), envisaged as digitalized central bank liabilities, are not subject to these recommendations.

The FSB has been collaborating closely with sectoral standard-setting bodies (SSBs) and international organizations to ensure a coordinated, mutually supportive, and complementary approach to monitoring and regulating crypto-asset activities and markets.

This global framework includes a shared workplan that the FSB and SSBs have developed for 2023 and beyond.

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BIS Survey: 93% of Central Banks Engaged in CBDCs, 15 Retail and 9 Wholesale CBDCs Expected by 2030

by Blockchain News

The Bank for International Settlements (BIS) has released a survey revealing that 93% of central banks are now engaged in some form of Central Bank Digital Currency (CBDC) work, with retail CBDCs taking the lead over wholesale CBDCs.

The survey, which gathered responses from 86 central banks, shows that over half of these institutions are not just exploring CBDCs but are conducting concrete experiments or working on pilots. The progress in retail CBDCs is more advanced, with almost a quarter of central banks piloting a retail CBDC.

The BIS survey also highlights the perceived value of CBDCs. More than 80% of central banks see potential benefits in having both a retail CBDC and a fast payment system (FPS). The unique properties and additional features that a retail CBDC can offer are seen as key advantages.

The emergence of cryptoassets and stablecoins has been a significant influence, accelerating CBDC work for nearly 60% of the respondent central banks. However, the survey also notes that stablecoins and other cryptoassets are rarely used for payments outside the crypto ecosystem.

The survey suggests that by 2030, we could see 15 retail and nine wholesale CBDCs in public circulation. This projection reflects the growing interest in digital currencies by central banks worldwide.

In terms of motivation, central banks in emerging market and developing economies (EMDEs) are more likely to be driven by financial inclusion-related motivations in their CBDC work. On the other hand, the desire to enhance cross-border payments primarily drives the work on wholesale CBDCs.

Currently, four central banks have issued a live retail CBDC: The Bahamas, the Eastern Caribbean, Jamaica, and Nigeria. This development marks a significant milestone in the global adoption of CBDCs.

The BIS survey provides a comprehensive overview of the current state of CBDC development and offers valuable insights into the future trajectory of digital currencies. As the exploration and experimentation with CBDCs continue, their role in the global financial system is set to become increasingly significant.

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At least 70% of Global Finance Leaders Believe CBDCs Will Spur Financial Inclusion – Ripple Study

by Blockchain News

Central bank digital currencies (CBDCs) have triggered overwhelming consensus among global finance leaders, according to a survey by Ripple, a leader in enterprise crypto and blockchain solutions.

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The study called “New Value Report” interviewed 1,600 worldwide finance leaders and found a heavy inclination towards CBDCs. Ripple stated:

“More than 70% of respondents surveyed across five global regions believe CBDCs stand to deliver major social change within the next five years, with the Asia Pacific ranking the highest at 89%.”

Most finance leaders acknowledged that CBDCs would be a stepping stone toward more financial inclusion. The report highlighted:

“Four out of five regions see financial inclusion or greater access to credit as the largest potential breakthrough to be driven by CBDCs.”

Once rolled out, CBDCs are expected to drive the financial inclusion of nearly 1.7 billion people left out of the banking system, given that they are pegged to a real-world asset and backed by central banks.

 

Ripple acknowledged that CBDCs were gaining traction based on the benefits accrued. For instance, their digital nature can enhance underserved communities’ accessibility to loans and other financial services. 

 

The study stated:

“Consensus on the potential for CBDCs to bring about more inclusive financial systems is clear. While much work remains to be done, many expect the transformation to be timely and that we will begin to see the fruits of this transition before the turn of the decade.”

On the other hand, the survey highlighted that some hurdles to implementation included security protections, privacy, offline access, identity verification, and consumer education. 

 

Meanwhile, Bank Indonesia recently conducted a CBDC feasibility study by offering a white paper concerning establishing the digital Rupiah. 

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Federal Reserve and MIT Begin Developing a New Digital Dollar

by Dailyhodl

The United States Federal Reserve and researchers at the Massachusetts Institute of Technology (MIT) are collaborating on a central bank digital currency (CBDC) initiative called Project Hamilton.

Project Hamilton has now tested a digital dollar that the Fed claims can process 1,700,000 transactions per second.

According to the project’s whitepaper,

“Our primary goal was to design a core transaction processor that meets the robust speed, throughput, and fault tolerance requirements of a large retail payment system. Our secondary goal was to create a flexible platform for collaboration, data gathering, comparison with multiple architectures, and other future research. With this intent, we are releasing all software from our research publicly under the MIT open source license.”

Phase 1 of the project sought to implement two different digital dollar architectures which address the performance, resiliency, and flexibility problems associated with CBDCs.

“The first idea is to decouple transaction validation from execution, which enables us to use a data structure that stores very little data in the core transaction processor. It also makes it easier to scale parts of the system independently. The second idea is a transaction format and protocol that is secure and provides flexibility for potential functionality like self-custody and future programmability. The third idea is a system design and commit protocol that efficiently executes these transactions, which we implemented with two architectures.

Both architectures met and exceeded our speed and throughput requirements.”

According to the project whitepaper, phase 1 of the project highlighted key insights into digital dollar design.

“Select ideas from cryptography, distributed systems, and blockchain technology can provide unique functionality and robust performance…

CBDC design choices are more granular than commonly assumed…

[And] by implementing a robust system, we identify new questions for CBDC designers and policymakers to address, regarding tradeoffs in performance, auditability, functionality, and privacy.”

Project Hamilton now plans to move to Phase 2, which will explore alternative technical designs from a wide range of research topics.

“Research topics may include cryptographic designs for privacy and auditability, programmability and smart contracts, offline payments, secure issuance and redemption, new use cases and access models, techniques for maintaining open access while protecting against denial of service attacks, and new tools for enacting policy.”

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Surging Crypto Adoption Will Ultimately Require National and Global Regulations: UNICEF Report

by Dailyhodl

UNICEF, the United Nations fund devoted to helping disadvantaged children around the globe, says the widespread adoption of crypto will necessitate national and international regulations.

In a new report, the UN agency argues digital assets have the potential to increase financial inclusion, offering “significant benefits to the livelihoods of families around the world.”

UNICEF says digital asset technology could improve remittances and make social assistance programs more transparent and efficient.

The agency also says that unregulated crypto projects pose serious threats.

“On the other hand, unregulated cryptocurrencies pose a threat to the stability of financial systems, government revenues on which many child services depend, and children directly when they facilitate unregulated transactions that underpin child trafficking, sexual exploitation, the sale and purchase of content depicting child abuse, and the defrauding and extortion of children.” 

UNICEF says “now is the time” to incorporate crypto child safeguards into online child protection initiatives.

The UN Fund also notes that 87 countries representing 90% of the world’s economy are actively exploring central bank digital currencies (CBDCs).

Says the agency,

“These developments will eventually require the emergence of national and international legal and regulatory frameworks.

Developing countries will have to choose between adopting digital currencies of major economies, issuing their own and figuring out interoperability (the direction Tunisia appears to be moving in with the eDinar), or betting on decentralized cryptocurrencies and decentralized finance (as Ecuador has done).”

UNICEF began accepting Bitcoin (BTC) and Ethereum (ETH) donations in 2019, billing itself as the first UN organization to utilize crypto.

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Disclaimer: Opinions expressed at The Daily Hodl are not investment advice. Investors should do their due diligence before making any high-risk investments in Bitcoin, cryptocurrency or digital assets. Please be advised that your transfers and trades are at your own risk, and any loses you may incur are your responsibility. The Daily Hodl does not recommend the buying or selling of any cryptocurrencies or digital assets, nor is The Daily Hodl an investment advisor. Please note that The Daily Hodl participates in affiliate marketing.

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Big Four Accounting Firm Says Financial Institutions Need Regulatory Clarity on Crypto To Remain Competitive

by Dailyhodl

Ernst & Young, one of the world’s leading accounting institutions, says that financial services firms must learn how to navigate the regulatory issues in the crypto markets to remain competitive.

In a new wide-ranging report about the 2022 global regulatory outlook, the firm discusses how the recent growth of digital assets and big tech companies means each must now enter the conversation about further regulation.

“New entrants that have traditionally operated outside the regulatory perimeter… are now offering financial activities such as payments or credit.

These new entrants either rely on regulatory arbitrage to operate without being subject to full-blown financial services regulation or are subject to much lighter regulation than, for example, banks.”

The report also says that financial services firms must keep in step with the evolving regulatory landscape concerning crypto assets.

“A second way that the regulatory perimeter is expanding is addressing cryptocurrencies, digital assets, tokens and related products and services.

As the acceptance and transaction volume of these assets has grown, there is increasing momentum to address regulatory concerns – along with financial stability and investor protection – head on.”

Ernst & Young says one challenge is that risk assessment and technological innovation usually don’t work hand in hand, and so there is a need to bridge the gap.

“The people who understand risk and regulation often do not overlap significantly with the people who understand evolving technologies, such as application programming interfaces (APIs), cloud technology, crypto or related solutions.

As a result, many firms need to find talent that can sit at the intersection of those realms and facilitate conversations so that risks can be identified and anticipated and controls embedded.”

The report also notes that governments and central banks have begun to enter the nascent space through the creation of central bank digital currencies (CBDCs).

“Some jurisdictions, such as the Bahamas, have already launched CBDCs and a number have experiments underway (such as the US digital dollar)… or policy plans (the Bank of England and EU) that would introduce retail or wholesale CDBCs.”

Back in December, Mexico announced that its central bank would release a CBDC by 2024.

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Disclaimer: Opinions expressed at The Daily Hodl are not investment advice. Investors should do their due diligence before making any high-risk investments in Bitcoin, cryptocurrency or digital assets. Please be advised that your transfers and trades are at your own risk, and any loses you may incur are your responsibility. The Daily Hodl does not recommend the buying or selling of any cryptocurrencies or digital assets, nor is The Daily Hodl an investment advisor. Please note that The Daily Hodl participates in affiliate marketing.

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Central Bank Digital Currency To Launch in This Populous Latin American Country

by Dailyhodl

The government of Mexico says that it’s planning on releasing a central bank digital currency (CBDC) by 2024.

A new post from the Central American nation’s official Twitter account cites the importance of emerging financial technologies in facilitating access to banking for its population.

The Gobierno de Mexico says,

“The Banxico [Central Bank of Mexico] reports that by 2024 it will have its own digital currency in circulation, considering that these new technologies and the next-generation payment infrastructure are extremely important as options of great value to advance financial inclusion in the country.”

The announcement is a significant development toward formal cryptocurrency adoption for Mexico. Back in June, the Central Bank of Mexico issued a press release affirming the institution’s stance against cryptocurrencies.

“Virtual assets do not constitute legal tender in Mexico nor are they currencies under the current legal framework.

The country’s financial institutions are not authorized to carry out and offer to the public trading with virtual assets… in order to maintain a healthy distance between them and the financial system.”

Regarding stablecoins, the document says,

“Recently there have been announcements about the issuance of the so-called ‘stablecoins.’

It should be remembered that Mexican legislation establishes that in no case shall be understood as a virtual asset any other asset denominated in currency of legal tender or in foreign currency.“

Mexican billionaire and cryptocurrency advocate Ricardo Salinas Pliego, when prompted by another Twitter user for his opinion on the forthcoming CBDC, replied with one word,

“Bitcoin.”

Pliego has previously touted Bitcoin specifically due to the BTC‘s portability and capped supply.

“It’s an asset that has international value that is traded with enormous liquidity at a global level.

The finite supply of Bitcoin, the 21 million, is the key part.

Fiat is a fraud.”

Earlier this month, U.S. Secretary of the Treasury Janet Yellen said she’s still undecided whether or not the United States will implement a CBDC.

And back in March, the Bank of Korea’s governor speculated that CBDCs could reduce the demand for digital assets not sanctioned by governments, such as Bitcoin.

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Disclaimer: Opinions expressed at The Daily Hodl are not investment advice. Investors should do their due diligence before making any high-risk investments in Bitcoin, cryptocurrency or digital assets. Please be advised that your transfers and trades are at your own risk, and any loses you may incur are your responsibility. The Daily Hodl does not recommend the buying or selling of any cryptocurrencies or digital assets, nor is The Daily Hodl an investment advisor. Please note that The Daily Hodl participates in affiliate marketing.

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Top Banking Regulator Nominee Concerned About Tech Giants Controlling Crypto, Undermining Economy: Report

by Dailyhodl

Saule Omarova, President Joe Biden’s nominee for Comptroller of the Currency, is troubled by the prospect of the US dollar being circumvented and replaced by private digital currencies.

While giving testimony before the Senate Banking Committee, the Cornell Law School professor says she is particularly concerned that big tech companies might utilize cryptocurrencies to consolidate even more power.


 

“My concern is… we may end up in a situation where a large company, like a big tech company, might control all of the infrastructures through which the money that every American and every American business uses in their daily [lives].”

Omarova adds that national sovereignty and the status of the US dollar could be put at risk by multinational companies issuing a competing currency.

“My concern is that in the system where a lot of private actors like Facebook can issue their own version of currency, that can potentially outpace and even displace the US dollar.”

The professor says she prefers for the US dollar to remain the world’s dominant currency.

“I believe that we do have government-issued money right now in this country, and it’s working great, and I worry about allowing private innovation to undermine a lot of important public policies that we need to pursue.”

When asked by Wyoming Republican Senator and cryptocurrency proponent Cynthia Lummis which specific policies that she intends to pursue, the nominee cited national security, to which Lummis replied, “Do you think Bitcoin [BTC] threatens national security?”

Omarova responded,

“I am not an expert on Bitcoin, but I would worry if all of our financial transactions were [reliant upon] some blockchain system where various actors who might actually be located in other countries, not particularly friendly to us, control the functioning of that system. That would be my worry.”

The professor is open to the idea of a central bank digital currency (CBDC), however.

“Central bank digital currency, like any digital currency, would make a couple of things easier to achieve in the financial system than they are today.

One is the efficiency of moving money around… [That] is an incredible risk-reducing tool in the financial system…

The one potential advantage of a CBDC over private stablecoins is that it will be issued subject to statutory mandate, legal decisions made by democratically elected lawmakers.

That would allow the central bank, under the oversight of Congress… to ensure that everybody has fair access to the new form of money.”

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Disclaimer: Opinions expressed at The Daily Hodl are not investment advice. Investors should do their due diligence before making any high-risk investments in Bitcoin, cryptocurrency or digital assets. Please be advised that your transfers and trades are at your own risk, and any loses you may incur are your responsibility. The Daily Hodl does not recommend the buying or selling of any cryptocurrencies or digital assets, nor is The Daily Hodl an investment advisor. Please note that The Daily Hodl participates in affiliate marketing.

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G7 to discuss CBDC and digital taxation this week

by Cointelegraph

Japanese Finance Minister Taro Aso has revealed the G7’s financial leaders will discuss central bank digital currencies during a meeting on Feb. 12.

The meeting will be chaired by Britain, with representatives from the world’s largest economies set to discuss strategies for navigating their way out of the global economic crisis caused by the coronavirus pandemic.

Friday’s meeting will commence on the topic of CBDCs, but the minister noted the G7 will also discuss the implementation of digital taxation and emerging debt problems.

The G7, or Group of Seven, is an intergovernmental organization consisting of the United States, Canada, France, Germany, Italy, Japan, and the United Kingdom.

The G7 has recently pushed to prioritize the regulation of digital currencies, with the organization reiterating its October statement calling for robust legislation to govern the digital payments sector during a meeting last month.

The October statement also noted CBDC’s could realize significant efficiency savings and reduce friction in the payments sectors of G7 member states.

The G7’s meeting comes as China makes major progress in rolling out its Blockchain Service Network, or BSN, with “big four” consulting firm Ernst & Young announcing it will deploy two blockchain-powered products on the BSN last week. The BSN is the first blockchain network to be developed and maintained by China’s central government.

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