India Central Bank, RBI, Considers Rolling Out Digital Rupee In A ‘Phased’ Manner

India Central Bank, RBI, Considers Rolling Out Digital Rupee In A ‘Phased’ Manner

The Reserve Bank of India (RBI) is working on a phased implementation strategy for its central bank digital currency (CBDC) program.

India Considers Running CBDC Pilot Programs

The Deputy Governor of RBI, T. Rabi Sankar, said the bank is investigating the issuance of a CBDC and may consider running a series of pilot programs to that effect.

While speaking at a conference organized by the Vidhi Center for Legal Policy, Sankar said introducing a CBDC would help protect the Indian populace from volatile private digital assets.

According to the deputy governor, a phased introduction of a digital Rupee would allow time for needed legal changes to the country’s foreign exchange rules.

Sankar said that several issues would be examined before CBDC implementation could be considered. He added that security or privacy concerns and how retail payments would be organized would also be looked into.

“Some key issues under examination are – (i) the scope of CBDCs – whether they should be used in retail payments or also in wholesale payments; (ii) the underlying technology – whether it should be a distributed ledger or a centralized ledger, for instance, and whether the choice of technology should vary according to use cases; (iii) the validation mechanism – whether token-based or account-based, (iv) distribution architecture – whether direct issuance by the RBI or through banks; (v) degree of anonymity etc.”

While the Indian government has shown signs of interest in CBDC previously, that has not been the same with cryptocurrencies. The country has exhibited various attempts to ban cryptocurrencies outrightly.

Earlier this year, the government hinted at its plans of introducing a law to ban private cryptocurrencies. The legislation had sought to prohibit cryptocurrencies while allowing for certain exceptions to promote blockchain technology.

However, the mood has somewhat changed in recent months, with signs of the country taking a moderate approach and regulating the crypto market.

CBDCs Making Progress In Different Countries

CBDCs have gained a lot of attention over the past year. Several countries have moved forward to study and implement CBDC pilot tests in the wholesale and retail segments.

South Korea recently chose Ground X, a blockchain subsidiary of a local internet company Kakao, as the technology provider for the pilot tests of its digital Won.

According to local media agency Korea JoongAng Daily, Ground X would participate in the South Korean CBDC project alongside US-based blockchain company ConsenSys. Other Kakao affiliates like KakaoBank and Kakao Pay would also participate.

The European Central Bank is also making progress. Last week the bank approved an investigation phase for a CBDC, which would last for 24 months. This stage would focus on addressing issues surrounding design and distribution.

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Author: Jimmy Aki

European Central Bank Kicks Off New Phase Of Digital Euro Project

European Central Bank Kicks Off New Phase Of Digital Euro Project

The European Central Bank (ECB) is moving forward with its central bank digital currency (CBDC) plans. Today, the bank announced that its Governing Council had approved the investigation phase of the digital euro project.

Investigation Phase Scheduled For 24 Months

The ECB, which has been discussing the potential launch of the CBDC for years, will now move to the exploration stage. According to the announcement released by the bank, the investigation phase of the euro-zone CBDC would last for 24 months.

This phase is aimed at addressing key issues in the design and the distribution of a CBDC. For this purpose, the ECB said it would consult with stakeholders ranging from banks to retailers.

The ECB further noted that the digital Euro is aimed at complementing cash and not replacing it. The project is focused on making sure digital payments are still within the purview of central banks. This is to avoid leaving digital payments to the private sector. ECB President Christine Lagarde said,

“Our work aims to ensure that in the digital age, citizens and firms continue to have access to the safest form of money, central bank money.”

Lagarde added that the CBDC would meet the needs of EU citizens and avoid making negative impacts on local financial stability and the ECB’s monetary policy.

Lagarde had previously said in an interview with Bloomberg that she expects the CBDC to launch within four years.

According to Fabio Panetta, an ECB Executive Board member, experiments carried out so far show that the digital Euro would be environmentally friendly. He said that the energy usage would be negligible compared with the energy consumption and carbon footprints of cryptocurrencies like Bitcoin.

ECB Digital Euro Journey

The ECB has been discussing the potential issuance of the digital Euro for years. In January, the European Commission and the ECB collaborated to evaluate the potential issues that could arise from the digital Euro.

The bank also held a public consultation in which 8,000 participants gave feedback. The consultation that closed on January 12th found privacy a primary concern among 41% of respondents.

Privacy has been one major concern for governments regarding CBDCs as they struggle with finding a balance between preventing illicit financial activity and preserving confidentiality.

However, several central banks around the world are moving forward with their CBDC plans. Central banks in countries like the United Kingdom and Japan are moving from discussion to exploration of a CBDC.

If the ECB eventually adopts a CBDC, it would most likely follow in China’s footsteps. China has already advanced CBDC plans with trial runs in different provinces across the country. Meanwhile, both South Korea and Sweden appear to have moved from exploration to testing in recent months.

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Author: Jimmy Aki

MAS Head says Central Banks and Regulators “Should Welcome” Decentralized Finance

While the future of money shouldn’t be “left entirely to central bankers,” Ravi Menon warns not to discount the possibility of crypto whose widespread use could “lead to an erosion of the nation state’s monetary sovereignty.”

The head of the Monetary Authority of Singapore (MAS) is bullish on decentralized finance (DeFi), and that central banks and regulators can potentially shape this decentralization.

Earlier this week, Ravi Menon, Managing Director at Singapore’s central bank, gave remarks at the “Decentralised Finance and the Future of Money” panel at the Andrew Crockett Memorial Lecture by Mark Carney via Video Conference.

Here, he talked about centrifugal forces driving financial functions away from the traditional core and affecting all aspects of the monetary system.

“The delivery of retail financial services is being decentralized,” said Menon, explaining that it is happening in two ways.

One is by non-financial players, including big tech, fintech, and smaller technology firms which are often unregulated and providing payments, lending, savings, and investments as complements to their core digital service.

The second is regulated financial players who are reinventing their business models and leveraging on technology to offer an array of non-bank digital platforms in an attempt to reach new customers at lower acquisition costs.

“Central banks and regulators should welcome both these developments,” said Menon, adding, regulators also need to be on alert about new sources of risk.

What needs to be done is “adapt our regulatory approaches,” including paying greater attention to market conduct, consumer protection, and technology risks and making regulatory frameworks more modular and agile.

“Technology is enabling a fundamentally different approach to financial infrastructure, compared to the centralized systems of today.”

Menon takes note of crypto networks here which are based on self-executing smart contracts and non-custodial financial services, where users maintain control over their assets at all times.

While by replacing intermediaries and central parties, these networks reduce cost and risk, by decentralizing key aspects of financial infrastructure, they “can also potentially enhance inclusion and innovation.”

Though self-governing networks can not meet the high standards of governance, security, and resilience that are demanded of critical infrastructure, “central banks would do well to incorporate these innovations in designing the next generation of payment infrastructure,” he added.

However, while cryptos like Bitcoin have “failed to become money,” Menon urges not to discount the possibility of better algorithms leading to such cryptocurrency whose widespread use “could lead to an erosion of the nation state’s monetary sovereignty” and have implications for “central banks’ ability to safeguard financial stability,” to which small economies may be particularly vulnerable.

Given that currency competition is not an unfamiliar challenge, the top official says, the benefits of an independent monetary policy have to be weighed against the efficiency gains from adopting a more widely used currency.

“The future of money is too important a matter to be left entirely to central bankers.”

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Author: AnTy

Tanzania’s Central Bank says It’s Working on President’s Directive to Prepare for Bitcoin Adoption

Tanzania’s Central Bank says It’s Working on President’s Directive to Prepare for Bitcoin Adoption

The central bank of Tanzania said it is working on President Samia Suluhu’s directive to prepare for cryptocurrencies, which could reverse the ban put on digital assets in 2019.

The new president came to power in March after the death of her predecessor John Magufuli and is much more open to foreign investment than him. Earlier this month, she said the arrival of crypto assets in the East Africa nation was inevitable.

“In the financial sector, we have witnessed the emergence of blockchain technology or cryptocurrency,” Hassan said during the opening of a new central bank branch in Mwanza this month.

“Many countries in the world have not accepted or started using these currencies. However, I would like to advise the central bank to start working on those issues. Just be prepared.”

These comments came not long after El Salvador became the first country in the world to adopt bitcoin as a legal tender.

Back in November 2019, Tanzania’s central bank banned crypto, saying they were not recognized by local law as legal currencies, and warned its citizens to stay away as they might lose money if they invested in such speculative assets.

But now, the Bank of Tanzania is adapting following the president’s comments.

“The bank is working on the directives given,” a central bank spokesperson told Reuters this week but declined to give further detail.

The spokesperson didn’t share if they plan to adopt existing cryptocurrencies or look to issue their own central bank digital currency (CBDC).

Tanzania Bankers’ Association chairman Abdulmajid Nsekela welcomed the President’s push for the $63 billion economy that relies heavily on cash transactions.

“The most challenging element for regulators is to be caught by surprise by innovations,” he said, adding: gradual preparations would help them assess the risks and come up with ways of addressing them in advance.

However, analysts warned that progress might be slow because while the change in tone from the president is clear if it’s to be seen “whether the central bank will take concrete steps towards embracing cryptocurrencies,” said Faith Mwangi, an analyst at Tellimer.

Similar moves to adopt Bitcoin as legal tender is being made by Paraguay and Panama as well.

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Author: AnTy

Cryptocurrencies’ Rising Popularity Is “of Great Concern,” Says Irish Central Banker

Cryptocurrencies’ Rising Popularity Is “of Great Concern,” Says Irish Central Banker

Derville Rowland is all set to take over as chairwoman of the European Securities and Markets Authority’s investment management standing committee in July, which helps prepare regulations for the funds’ industry.

Yet another central bank official is concerned about the rise of Bitcoin and cryptocurrencies.

Derville Rowland, one of the top officials at Ireland’s central bank, is the latest one who has the same views about cryptos as other officials.

“Crypto assets are quite a speculative, unregulated investment,” and people should be “really aware they could lose the whole of that investment,” said the central bank’s director-general for financial conduct in an interview.

Rowland has joined a host of central banks issuing more or less the same warnings on crypto investments.

The rising popularity of crypto assets such as bitcoin is “of great concern,” she added.

Rowland, who is known for imposing heavy fines on some of the nation’s biggest financial firms, will be taking over as chairwoman of the European Securities and Markets Authority (ESMA)’s investment management standing committee in July.

This committee helps prepare regulations for the funds’ industry.

Besides cryptos, Rowland also focuses on the “gamification” of stock investing, which she expects to become an issue for Europe soon.

ESMA and Ireland’s central bank both have held discussions on the issue, said Rowland. But while no timeline for any regulations has been set, they need to be “technology-neutral,” she said, “so that you’re not getting better protections in older paper-based processes than you are in more online processes.”

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Author: AnTy

BoJ Gov Calls Bitcoin Speculative; Central Bank’s Assets Quadrupled to $6.5T Under Aggressive Easing

BoJ Governor Slams Bitcoin as ‘Speculative’ while Central Bank’s Assets Quadrupled to $6.5T Under his Aggressive Easing

Despite keeping both long and short-term rates low and stable, the Bank of Japan couldn’t achieve its 2% inflation target, which it still won’t be able to, by the time Haruhiko Kuroda’s tenure ends in April 2023.

Bank of Japan Governor Haruhiko Kuroda’s views on Bitcoin and cryptocurrencies are the same as other central bankers.

“Most of the trading is speculative, and volatility is extraordinarily high,” Kuroda said in an interview Thursday. “It’s barely used as a means of settlement,” he added.

While he doesn’t have anything different from his peers to say about cryptos, he did differentiate cryptocurrencies from stablecoins.

But these fiat or asset-backed coins must meet legal standards and healthy governance codes as well, so they could become a convenient way of payment in the future, Kuroda said.

While the central bank official is busy slamming cryptocurrencies, total assets held by the Bank of Japan have risen to 714.56 trillion yen ($6.5 trillion) in fiscal 2020.

Under Kuroda’s aggressive monetary easing, total assets have quadrupled in these eight years, growing to 1.3 times the size of the country’s economy.

Despite the ultra-loose monetary policy, the BOJ has yet to achieve its 2% inflation target, which will still be unattainable by the time Kuroda’s tenure ends in April 2023, as per BOJ projections.

Japan’s consumer prices actually declined by 0.4% year-on-year in April 2021, following a 0.2% drop in the prior month — representing the seventh straight month for a fall in consumer prices.

Of the BOJ’s assets, government bonds totaled 532.17 trillion yen ($4.84 trillion), up 9.5% from a year earlier, and loans to financial institutions marked a 2.3x increase to 125.84 trillion yen ($1.14 trillion).

To keep both short-term and long-term interest rates low and stable, BOJ has already gobbled up large amounts of government bonds, owning over 40% of those outstanding.

And this has been the reason why people have been chosen to invest in Bitcoin and cryptocurrencies. As we reported, Ray Dalio, founder of Bridgewater Associates, when he revealed that he owns some Bitcoin, said he would rather own BTC than government bonds.

According to Dalio, should cryptocurrencies continue to gain traction, investors might decide to invest in them, too, rather than bonds.

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Author: AnTy

Dutch Crypto Exchange Wins the Case Against Central Bank’s ‘Unlawful’ Registration Requirement

Dutch Crypto Exchange Wins the Case Against Central Bank’s ‘Unlawful’ Registration Requirement

Bitonic has won its case against the Dutch Central Bank, which means the country’s cryptocurrency exchanges no longer need to verify their users’ wallet addresses, stated the crypto exchange platform.

The company filed a lawsuit in a court in Rotterdam against the De Nederlandsche Bank in March regarding the apex bank’s wallet verification requirement.

But now, the regulator has formally acknowledged that its requirement was unlawful and should have never been called for the purpose of crypto exchange platform’ registration. The central bank said,

“After reconsideration, DNB comes to the conclusion that this interpretation of Article 2, second paragraph, RtSw, given by DNB, does not do enough justice to the discretion that an institution has to implement this standard in a risk-oriented manner. DNB has therefore incorrectly set the registration requirement as a condition for the registration of Bitonic.”

This statement came after the court ordered that the Dutch supervisor should motivate its registration decision better.

“DNB declares the objection well-founded and revokes its primary decision of 17 November 2020, insofar as this relates to the interpretation of Article 2, second paragraph, of the RtSw with the registration requirement, advocated by DNB.”

This means that Dutch-based crypto exchanges no longer need to implement wallet verification measures involving the screenshot of a user’s wallet and their transactions.

Bitonic said these unlawful and onerous procedures have riddled the entire Dutch crypto sector with high costs and administrative burdens and harmed innovation and the business climate in the Netherlands.

“This is in stark contrast to the claim that the Netherlands stimulates an innovative business climate.”

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Author: AnTy

Argentina’s Central Bank Warns of ‘Significant Financial Losses’ from Crypto Investing

Argentina’s Central Bank Warns of ‘Significant Financial Losses’ from Crypto Investing

The people of Argentina are actually investing in crypto to hedge themselves against the devaluation of its fiat currency peso, which has lost 80% of its value in the past four years.

The Argentine central bank and securities regulator released a joint statement Thursday warning the people about the problems associated with crypto investing.

Cryptocurrency “can cause significant financial losses for its holders, including the possibility of losing the totality of the resources invested,” said the statement. It then goes on to remind potential investors that digital assets aren’t legal tender.

The warning comes from a country that is struggling with currency turmoil and sovereign defaults. One of the biggest economies in Latin America has a history of currency devaluations and hyperinflation, making the citizens’ savings worthless.

Its fiat currency, the peso, has lost more than 80% of its value in the past four years. Because of this, despite strict controls on exchanging pesos for US dollars, Argentines largely keep their savings in USD.

Despite the risks, crypto trading isn’t at “significant levels of use and acceptance” in the country, said the government bodies in their statement.

Argentines have been shifting their focus on cryptocurrencies in the light of the decline in the economy that saw the number of crypto users in the country rising in the last 12 months, as per AFP.

Maximiliano Hinz, the head of Binance in Latin America, had reported a tenfold increase in active crypto trading accounts in the region. Hinz estimated that there were about 2 million registered trading accounts in the country.

Not only as a hedge against the currency devaluation, but people are also using their BTC, ETH, USDT, and DAI to pay for commodities.

Bitcoin and crypto have been serving as an inflation hedge against the backdrop of money printing by central banks.

In Nigeria as well, where the regulators have been letting the fiat currency weaken through multiple currency regimes, people are turning to BTC.

Besides the currency issues, Santiago R Santos of Parafi Capital also noted that crypto is the answer to remove innovation aversion and wealth distribution.

In Mexico, “wealth is very concentrated,” and the few controlling families don’t invest in innovation.

“Enter crypto where capital moves at the speed of information & finds the best talent across global open-source communities. Crypto is shattering this local inefficiency,” he said. “The Internet-connected the world with information. DeFi is connecting the world with capital.”

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Author: AnTy

Georgia’s Apex Bank Considers CBDC, Calls For Partnerships

Central bank digital currencies (CBDCs) have become the rave of the moment following the global outcry for a more efficient and inclusive financial system.

With the economic impact of the pandemic, the need for a digital form of value transmission has never been higher than now. National banks are rapidly rolling out CBDC programs to address this growing demand.

The latest in a long list of apex banks is the National Bank of Georgia.

Digital Gel On The Horizon

In a release posted on its website, the National Bank of Georgia (NBG) said it would be commencing a central bank digital currency (CBDC) program joining a list of national banks in the process.

According to the apex bank, this enhances the domestic payment system efficiencies and promotes financial inclusion for the underbanked in the country. To help it on this journey, the NBG said it would be accepting participants from the private sector.

In what is termed as a public-private partnership (PPP), it said private technology firms, fintech companies, and other interested financial institutions are welcome to aid in creating a “digital GEL,” named after the country’s official currency, the Georgian Lari.

However, the apex bank warns that despite its crypto efforts, its first mandate to maintain price and financial stability in Georgia remains. The official announcement says,

“CBDC holds the promise to unlock the tremendous value of innovative business models for the benefit of society. The introduction of CBDC could increase financial intermediation efficiency, help introduce new financial technologies, facilitate financial inclusion, and reach previously unbanked populations. It could also increase monetary policy efficiency by improving monetary policy’s monetary transmission mechanism and welfare effects for the society.”

The former Soviet region financial regulator said that it would be adopting the Bank for International Settlements’ (BIS) 2020 guiding principles in creating a Digital GEL wherein a set of rules for a successful CBDC program was listed.

Also, it noted that there were inherent risks attributed to CBDCs given the fact that it is a completely new and potentially disruptive technology. To ensure sound risk management, it would be creating a regulatory sandbox for potential partners to test the CBDC deployment in a controlled environment. This will see it use its Open Regulatory Framework tools to measure the economic impact of a possible CBDC use.

Meanwhile, no launch date has been chosen, and the project is still in the works.

Georgia’s Impressive Crypto Resume

Given its small population size of just 3.7 million people scattered across its Mountain Villages, Georgia is one of the smaller economies looking to join the CBDC frenzy.

But this does not make it negligible, given that the Georgian state has been active in the crypto space as far back as 2017.

In a move that saw it become the first national government to allow land authentication with blockchain, the Georgian state signed an agreement with BitFury to use the Bitcoin network to record land titles.

It also became the powerhouse of European crypto mining after hosting the world’s third-largest crypto mining operation. It also went further and concluded a deal with Cardano’s parent company IOHK in 2019 to aid in public sector administration, especially in education.

These decisive steps have since brought the Georgian state into the global blockchain community. They have since made former Prime Minister Mamuka Bakhtadze remarked that blockchain could do what the steam engine did for the first industrial revolution in an interview with Cointelegraph. According to Bakhtadze, blockchain could become the catalyst for the fourth industrial revolution.

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Author: Jimmy Aki

Iranian Banks Allowed to Use Bitcoin Generated by Sanctioned Miners to Pay for Imports

Iranian Banks Allowed to Use Bitcoin Generated by Sanctioned Miners to Pay for Imports

Iran’s central bank is now allowing its financial institutions, including banks, to use cryptocurrency, which is derived from the sanctioned miners, to pay for its imports, according to a report by the Financial Tribune.

The Central Bank of Iran (CBI) has already notified the banks and money changers of the amended regulatory framework for crypto payments. The local crypto mining industry, according to some, can generate as much as $2 million a day in revenue.

Iran, which is hit hard by the international sanctions, would now be able to pay for goods and services from other countries and circumvent the US economic sanctions.

It was back in October 2020 when the central bank first amended its regulations and allowed Bitcoin and other cryptos to be mined using subsidized energy. At the time, the bank stipulated that all miners’ coins had to be sold to the bank directly and only digital assets to be used for import funding.

Now, the central bank is extending the use of legal use of cryptos to other groups and institutions as well.

“It said lenders and money changers have been notified about the regulatory framework for crypto payment,” per the Tribune. “No further details were announced, the CBI website reported.”

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Author: AnTy