People’s Bank of China (PBoC) Testing Digital Yuan (DCEP) for Credit Card Payments

China has been aggressively developing its central bank-issued digital currency (CBDC), popularly known as digital yuan. As per the latest reports, the People’s Bank of China is currently running a pilot project to test the use cases of its digital yuan for card payments, fees, credit card payments, and more.

China has been at the forefront of developing a national digital currency called DCEP. The government authorized the research for the project more than five years ago, and many people were speculating for an official launch by September last year. However, digital yuan was eventually made public at the start of 2020, and the PBOC jas been testing various use case for the digital currency ever since.

The first pilot program for DCEP saw it being used as a travel subsidy for government employees in 4 cities. Later the pilot program was expanded to several universal fast food and beverage companies operating in China, which included Starbucks and McDonald’s as well.

Chinese Central Bank Tests Final Use Case for DCEP

As per a report published in the local daily 8BTC, the PBOC is currently testing digital yuans use a case in the credit card ecosystem as it could be a key to bringing in more customers. The trials in the credit card domain are also being seen as the final trial before the much anticipated public launch.

The central bank also revealed three new pilot-free trade zones (FTZ), in addition to the one already functioning in the Zhejiang province. These free trade zones are key to China’s dream of becoming a blockchain hub for enterprises.

The central bank of China also announced three large innovation trial projects, namely the National Small and Micro Enterprise Digital Credit Reporting Pilot, Digital Currency, and Financial Technology Innovation supervision.

While most of the countries have shown interest in researching and developing their own national digital currency (besides Australia), China managed to complete the research and development of its national yuan quietly and is slated to become the first country to launch its own digital currency. It is also important to note that while the national yuan project is being propagated as one of the true CBDCs, but many have warned that digital yuan would not work on a decentralized blockchain. Rather it is a sophisticated way for the government to control the flow of money outside the country.

Whether the project turns out to be what many are speculating, it would be interesting to see how digital currency is rolled out for the world’s most populated country.

Read Original/a>
Author: Rebecca Asseh

Japan’s Govt. Is Strongly Considering Launching A CBDC In Cooperation With The US and Europe

Japan is increasing its efforts in developing a central bank digital currency (CBDC), reported the largest financial paper in Japan, Nikkei on Wednesday. The post further confirms that the Japanese government plans to add the development of a digital yen into its policy framework this year.

Governments and central banks are looking at digital payments and currencies more seriously in a bid to plan for future financial systems. With China and Russia leading the field of digital payments, Japan is trying to catch up on developing its own.

Lawmakers in the country have long been calling for regulations and policies to be set in developing a digital yen. Moreover, cooperation with the US and Europe is on the cards to build a local electronic payment system.

Earlier this month, the Bank of Japan (BoJ) released a technical study report on launching a digital yen but said they had no plans to launch it soon. The BoJ has had a knack for CBDCs and digital payment systems for a while now since China’s announced it’s digital yuan is nearly complete.

Other top banks in the country are also exploring the digital asset world as seen with the recent joining of three top Japanese banks – Mizuho Financial Group, Sumitomo Mitsui Financial Group and Mitsubishi UFJ Financial Group (MUFG) – to a crypto exchange-led study group.

Read Original/a>
Author: Lujan Odera

CBDC’s Are the Future of Money and Payment Ecosystems: Visa’s Head of Crypto

Central Bank Digital Currencies (CBDC) are here to stay and may set the stage for a paradigm shift to a digital economy, according to Visa’s Head of Crypto, Cuy Sheffield.

In a recent series of tweets, the Visa crypto chief highlighted that the growing interest in CBDC’s is not fading away; hence stakeholders ought to be more involved in these developments.

Sheffield went on to note that governments will play an essential role in the adoption of Bitcoin and other crypto-assets given policy implications in issues like privacy:

“As governments evaluate CBDC, the path that they decide to take will have major implications for privacy, monetary sovereignty, geopolitics, and financial inclusion, as well as the global adoption of crypto dollars and Bitcoin.”

Today, developments within the CBDC space are more advanced, compared to research papers that previously defined the industry. Sheffield emphasized that this move from occasional papers to more solid content is triggered by the growing contribution from experts, organizations, and academics.

It is unsurprising that these sentiments coincide with Visa’s growing interest in digital currencies. The payments and card service provider filed for a digital dollar patent earlier in the year. It was also initially in the Libra association before leaving alongside the likes of Mastercard and eBay.

Global CBDC Trends

The latest annual Bank of International Settlements (BIS) report also indicates a spike in CBDC interest. However, the BIS also noted that stakeholders should be more focused on policy effectiveness as opposed to trying to outdo private projects.

That said, China seems to have taken an early lead, having piloted the digital yuan back in May as it prepares to ‘wipe out’ fiat renminbi (RMB) in circulation over time.

Europe has also taken an interest in digital currency for its member states. Though it might take much longer to get a consensus, France and Italy have already signaled the willingness to participated in a digital Euro pilot. While these tech advancements are promising, scaling to more significant masses might be the challenge as per a recent insightful report by the Bank of Canada.

Read Original/a>
Author: Edwin Munyui

Central Bank Digital Currencies are a Risk to Dollar Dominance: JPMorgan Report

According to JP Morgan Chase & Co., if the idea of central bank digital currencies (CBDC) gains traction, the US can risk losing its geopolitical power.

“There is no country with more to lose from the disruptive potential of digital currency than the United States,” wrote analysts including Josh Younger, head of U.S. interest-rate derivatives strategy and Michael Feroli, chief U.S. economist in a report.

“This revolves primarily around U.S. dollar hegemony. Issuing the global reserve currency and the medium of exchange for international trade in commodities, goods, and services conveys immense advantages.”

jpmorgan-cbdc
Source: Bloomberg

The Risks

Overall, the analysts found there to be reasonable reasons for central banks to introduce digital currencies. However, these CBDCs are unlikely to have the transformative impact that many have hoped.

Although JPMorgan doesn’t see the greenback getting toppled as the world’s reserve currency anytime soon, the “more fragile” aspects of dollar dominance could be at risk. These aspects include trade settlement and the SWIFT messaging system.

According to the analysts, the EU might want to reduce US’s sway over global payment systems and pointed to SWIFT suspending access for some Iranian banks in 2018 after US sanctions took force, which may have been in violation of EU laws.

To bypass US sanctions and continue trading with Tehran, the EU even established a “SWIFT alternative” called Instex.

As for their progress on CBDC, on May 11, Yves Mersch, Member of the Executive Board of the ECB and Vice-Chair of the Supervisory Board of the ECB shared they have to be “ready.”

Mersch talked about embracing the financial technological innovation which has the “potential to transform payments and money faster, and in more disruptive ways, than ever before.”

As for the US, Fed Chairman Jerome Powell said earlier this year that they are looking at the issues with creating a digital dollar but not making any commitments.

An exercise in geopolitical risk management

If like Europe, other countries are also able to circumvent the dollar’s domination, it would become all the more difficult for the US to carry out its goals through sanctions and terrorist-financing enforcement, analysts said. The report reads,

“Offering a cross-border payments solution built on top of a digital dollar would, particularly if designed to be minimally disruptive to the structure of the domestic financial system, be a very modest investment to protect a key means to project power in the global economy.”

“For high-income countries and the U.S. in particular, digital currency is an exercise in geopolitical risk management.”

Read Original/a>
Author: AnTy

China Will Dry Run Its DCEP in May By Paying State Employees With The Digital Yuan

China’s national digital currency or ‘CBDC’ or as they call it, “DC/EP” has been in development for 5 years now. And there has been plenty of speculation since the last quarter of 2019, that it will be released anytime soon.

The Chinese President’s call for accelerated adoption of blockchain technology was seen as a big hint that the national digital yuan is ready to launch. However, Chinese officials and the People’s Bank of China have denied these claims.

However, the latest buzz suggests that DCEP is finally past its development stage and is being distributed among the state officials for testing purposes.

According to a report, published in ChinSci-Tech (a board of enterprise and public companies) on April 16, the new CBDC is being tested as a Transport subsidy scheme for local government officials as well as enterprise workers.

Another official report also confirmed that AliPay, a popular mobile payment subsidiary of Alibaba along with Ant Financial, was responsible for the development of digital yuan’s hardware infrastructure including distribution and payment gateway technology.

The Payment Trials Have Begun

According to reports available in local media, the Xiangcheng District of Suzhou would see local enterprises and government officials paying 50% of their worker’s transport subsidies in the digital yuan.

All the enterprises in the Suzhou district have been requested to sign a digital currency distribution agreement with a relevant bank and subsequently install a compatible digital wallet for the workers.

A total of 4 banks have been assigned across the province to make sure the testing phase begins smoothly. The four banks include Commercial Bank of China, the Agricultural Bank of China, the Bank of China and the China Construction Bank.

These reports also revealed that the enterprise must connect with one of the four banks to offer transport subsidies to their workers. The issuance agreement must be signed before the end of May.

The Finer Details of the DCEP

While there is no official statement or update from the government, however. The published letter in the ChinSci-Tec revealed finer details: including 5 patents by the Alipay group.

Examining these patents revealed that the new DCEP would work on a two-layer architecture and delivery system which would allow licensed third-party players to distribute the national CBDC.

By now it’s clear that Alipay would play a major role in the issuance and distribution of these digital currencies along with authorized banks.

A majority of the Chinese population won’t see a difference while using the CBDC, as the majority of the population is already using digital payments. The only difference would be the back-end and working of these CBDC as they are believed to function on top of the blockchain-based network.

It is also important to note that the network used by the government won’t be completely decentralized and has been mentioned by the senior officials of the People’s Bank of China.

Given the governance model of the Chinese government, speculations were high that the use of blockchain was just a facade and the whole idea behind a national CBDC was to have stricter monitoring of the flow of currency in the country.

Read Original/a>
Author: James W

Sweden’s Riksbank Launches Its Central Bank Digital Currency (e-Krona) Testing

Sweden is getting closer and closer to issuing its own central bank digital currency (CBDC), as it already started testing the e-krona.

The pilot program for the new digital currency is supposed to last for a year and thus, to end in February 2021. It’s not yet clear when the e-krona will be launched and made available to the public, but one thing’s for sure: a blockchain-based currency would improve the banking activities and payments in the country. Therefore, credit cards would no longer be swiped as transactions would be moved to the blockchain and no longer use fiat currencies.

Sweden Is Definitely Not Late

After the Bahamas, Sweden is the second country to reveal its plans about working on a national cryptocurrency. In December 2019, the Bahamas launched a CBDC pilot program that’s expected to be rolled out during 2020’s second half. While China has also talked a lot about the development of its own CBDC, it seems things aren’t as serious as in Sweden or the Bahamas. It doesn’t come as a surprise that Sweden wants the e-krona seeing the country almost no longer use cash anymore.

Riksbank to Analyze the Implementation of the E-Krona

Riksbank will analyze whether Sweden is ready or not to implement a CBDC in an efficient manner. The consultancy firm developing the e-krona is called Accenture. Preliminary tests in sandbox testnet are already being run by this company. 80% out of all payments in the country are being made through other means rather than cash.

This means the implementation of a CBDC will be an easy process for the Swedish citizens who are already used to not having money on them, not to mention the transition from credit and debit card payments to a digital currency is simpler. Germany, for example, would most likely have a problem implementing a CDBC, seeing German people are still using cash to make most of their payments.

Read Original/a>
Author: Oana Ularu

Sweden’s Central Bank, Riksbank, Partners with Accenture to Develop CBDC Dubbed ‘E-Krona’

The wave of Central Bank Digital Currency (CBDC) is gaining momentum after China’s progress and expected coin launch in 2020. Sweden is the latest country to announce a pilot test plan for the ‘e-krona’ digital currency; this will be its CBDC in the near future as more governments continue to embrace FinTech in digital payments.

According to a press release on Dec 13 by Sweden’s regulator, Riksbank, they will partner with Accenture to implement this DLT compatible tech. The IT consulting giant will be tasked with designing and creating the UI features for e-krona digital currency in the next one year as per the contract. Riksbank however noted that they are open to work together with Accenture for as long as 7 years which is the schedule period for running pilots on its CBDC.

This move has just brought e-krona digital currency closer to being a reality especially with the Swedish shift to digital payments in recent years. Canada’s Central Bank Deputy Governor had earlier on commented on this shift as he spoke at the Philadelphia Fed Reserve FinTech Conference noting that Swedish authorities need to act before tipping point.

Riksbank started its research on a CBDC back in 2016 and has since documented two reports on this progress. The Central Bank through its Deputy governor said that they are under pressure to shift to electronic money given stakeholders within the Swedish economy have moved away from bills and coins. Events around the globe also largely catalyzed the dive into a CBDC project; notably is Facebook’s stablecoin ‘Libra’. Stefan Ingves, the Governor of Riksbank, termed the move by Facebook as catalytic and important.

It is yet to be clear if the tech that Accenture will implement will be used to run e-krona given this procurement was classified as National Security information. This development by Sweden comes as their Switzerland crypto-friendly counterparts thwarted any plans to launch a CBDC for its population.

Read Original/a>
Author: Lujan Odera

IBM Research: A Central Bank Will Issue a CBDC Virtual Currency In 5 Years

There is a high chance that a Central Bank Digital Currency (CBDC) will be released before five years are over. A new research conducted by IBM in conjunction with OMFIF (an institute that supports central banks) shows that policy makers from various major central banks in the world are seriously considering to develop a CBDC, a report by Cointelegraph says.

The research shows that central banks see consumer-ready CBDCs as a viable alternative for fiat money.

The study concludes:

“Central banks are responding to the reality that digital currencies, either privately or publicly issued, will soon be part of the global monetary system, and that it is in their interest to ensure they are neither left behind nor displaced.”

The IBM OMFIF research involved a survey of 23 central banks from both advanced and emerging economies. The findings indicate that 73% of central banks favor the use of CBDC to address retail issues where fiat money can be easily used.

The findings also show that at least half of the respondents were wary that private projects such as Libra pose a threat to monetary sovereignty. Without proper regulations, private digital currencies have the power to undermine central banks’ monetary sovereignty as well as becoming a threat to financial stability. Central banks increasingly acknowledge that understanding and are working closely with the developers of the private digital currencies so they may boost their fiscal regulatory role.

Indeed, Libra has been a thorn to many regulators, especially in Europe where both French and Germany Finance ministers have vowed to never let the cryptocurrency operate within the Eurozone.

The report which was published on Mon 29, Oct. states that the majority of central banks are addressing the reality that digital currencies are here to stay and it is in their own interest to ensure they stay relevant or risk being displaced.

The report notes that 82% of the respondents stated that the main fiscal stability concern in terms of implementing the CBDC was the issue of digital banks which will be faster and could spoil stability as well as confidence.

Gauging on the analysis of the findings, the researchers thus concluded that the maiden CBDC will possibly be functional in a span of five years and will be an alternative to that country’s fiat currency. Interestingly, the report says that this will not come from major economies.

The report reads:

“The principal conclusion is that we are likely to witness the introduction of a central bank — that is fiat — retail digital currency within the next five years, either as a complement to or as a substitute for notes and coins.”

Read Original/a>
Author: Joseph Kibe