Jerome Powell: Fed is Studying Risks of Stablecoins As A ‘Very High Priority’

Jerome Powell: Fed is Studying Risks of Stablecoins As A ‘Very High Priority’

Meanwhile, the central bank isn’t feeling the “urge or need to be first” on CDBC’s as they already got the first-mover advantage with the U.S. dollar being the reserve currency.

The US Federal Reserve Chairman, Jerome Powell, said on Thursday that the central bank needs to find “better regulatory answers” for global stablecoins, and it is their “high-level focus.”

“That’s been a high-level focus, and that will continue to be a high-level focus because they could become systemically important overnight,” Powell said while speaking at an online event hosted by Yahoo Finance and conducted by the Princeton economist Markus Brunnermeier in New Jersey.

“We don’t begin to have our arms around the potential risks and how to manage those risks. The public will expect that we do and have every right to expect that. So that’s something that we’ve been working on with our colleagues around the world… It’s a very high priority.”

Just last month, the U.S. President Trump’s Working Group on Financial Markets said stablecoins must meet the same regulatory standards as banks and other financial institutions.

European Central Bank President Christine Lagarde shared similar views when in November, she warned in an op-ed that if stablecoins became widely adopted, they could “threaten financial stability and monetary sovereignty” around the world.

This week, she called Bitcoin a “highly speculative asset” that is facilitating “funny business.” As such, “there has to be regulation,” Lagarde added, “This has to be applied and agreed upon.”

No Need for CBDC Yet

The Fed, meanwhile, is in no hurry regarding a central bank digital currency (CBDC); it is actually estimated to take “years rather than months” before the central bank releases a CBDC, said Powell. “We don’t feel an urge or need to be first” on CDBCs, reiterated Powell while continuing,

“Effectively, we already have a first-mover advantage because (the U.S. dollar is) the reserve currency.”

Still, the Fed is “investing heavily” in understanding the technology and studying all the policy risks CBDCs pose.

According to him, it was when private-sector money, like Bitcoin and other cryptos, was created that the Fed looked into CBDC. But while people think of these cryptocurrencies as money, “at some point, they find out that it’s not money and that’s a really bad thing we need to avoid,” he said.

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Author: AnTy

Former PBoC Governor: China Doesn’t Have ‘An Ambition to Replace Existing Currencies’

China’s former head of the central bank said digital yuan could be useful for cross-border trade and support its efforts to promote yuan as an international currency.

Zhou Xiaochuan, who stepped down as governor of the PBOC in 2018, spoke at the Shanghai Financial Forum on Friday. According to him, digital currency allows payments and currency conversions in real-time and “brings new possibilities for interconnection.”

“If you are willing to use it, the yuan can be used for trade and investment,” said Zhou, who has been a leading advocate for China’s sovereign digital currency. He also noted that the digital yuan isn’t intended to replace globally accepted fiat currencies like the US dollar.

“We are not like Libra and we don’t have an ambition to replace existing currencies.”

China has learned a lesson from Diem and took a more cautious approach. The idea is to persuade consumers and merchants to accept digital yuan payments as it quickly resolves “the problem of cross-border remittances.” He said.

“Some countries are worried about the internationalisation of yuan.”

“We can’t push them on sensitive issues and we can’t impose our will. We must avoid the perception of great power chauvinism.”

China is preparing for cross-border testing of digital yuan in partnership with Hong Kong. Additionally, over $3 million in digital yuan was airdropped to 10k residents of Suzhou on Friday. Trials are being run in other cities, including Chengdu, the Xiong’an New Area, and Hong Kong, in collaboration with companies like Didi Chuxing, Meituan, and Bilibili.

Central Banks Divided on Private Sector’s Role

According to a survey by the Official Monetary and Financial Institutions Forum (OMFIF), more than half of the central banks surveyed expect countries to collaborate with the private sector to build and run payments systems.

The central banking and economic policy forum found that central banks are split over whether to work with private sectors in payments as three-quarters of the banks said it was the state’s job to govern such systems.

The survey by the think tank involved 20 central banks and regulators in advanced and developing economies. Bhavin Patel, OMFIF’s head of fintech, said,

“It’s up to the central banks to balance how they approach collaboration – whether it’s setting joint projects together … or if it’s more just making sure that what comes to the market is properly regulated.”

The report was produced with fintech firms that include PayPal, Citigroup, Mastercard, and Novi, the digital wallet division of Facebook. Patel said,

“Regulators need to keep pace with these innovations. New, non-traditional payment entities will emerge as systemically important components of the financial system. Proactive central banks and regulators, keen to harness the benefits of payments innovation without undue policy risks, engage more with industry.”

Demand for more efficient payments is growing, a trend that has accelerated during the coronavirus lockdowns but regulators fear that the wide use of private currencies could lower their control over monetary policy. Just last week, German Finance Minister Olaf Scholz said,

“We must do everything possible to make sure the currency monopoly remains in the hands of states.”

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Author: AnTy

Swedish Government Launches Exploration Into Digital Krona

The Swedish government was one of the first in Europe to explore a possible Central Bank Digital Currency (CBDC). It has now moved into an exploratory phase, with a panel studying the potential benefits and consequences of digitizing its currency.

Ready to Roll

On Friday, Blomberg reported that the Swedish government had launched a formal review of a possible e-krona. The review will explore the feasibility of moving its currency into the digital standard, utilizing its current digital payments infrastructure.

The Nordic country has one of the world’s most advanced cashless payment systems, and many believe that transitioning into a full-fledged CBDC won’t take as much effort as others. The initiative will be led by Anna Kinberg Batra, a former chairwoman of the Riksbank’s finance committee.

Per Bolund, Sweden’s financial markets minister revealed that the government expects to complete the review by the end of November 2022.

Bolund emphasized the need to ensure that the country’s digital payments infrastructure functions safely and inclusively. He added that depending on the technology’s design and utilization, it could have substantial consequences for its financial system.

The Question of Time

When it comes to CBDCs, most countries are in the exploratory phase. The European Union has confirmed that plans will explore a possible digital Euro soon, with the region looking to bolster digital payments and improve its overall economy.

However, even that effort still seems to be a long shot. The European Central Bank (ECB) believes its exploratory efforts would yield results in 2021, and it will begin drafting the module for the digital Euro then.

Experts from several European banks believe proof of concept for the digital Euro could arrive in the next half-decade. The panel, titled “Upgrading Money to the Digital Age: Introducing Digital Euro,” saw everyone agree that the most pressing task will be getting everyone on board with the specifics of the digital Euro. With that in mind, implementation could take years on its own.

Austėja Šostakaitė of the European Central Bank pointed out that the bank won’t even decide on whether to pursue the digital Euro until the middle of 2021. For her, the primary issue will be introducing the asset into the European financial ecosystem and ensuring that it collaborates effectively with bank money.

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Author: Jimmy Aki

G7 Finance Ministers Strongly Support Regulating Digital Currencies

Central bankers and finance ministers from the Group of Seven (G7) advanced economies have “strong support” on the need to regulate digital currencies. The U.S. Treasury Department in a statement after a virtual meeting of the officials on Monday. Steven Mnuchin, the current US Treasury Secretary, tweeted,

“Productive #G7 call this morning. We discussed the effective actions in response to COVID19, strategies to achieve a robust recovery, and cryptocurrencies.”

The official discussed domestic and international responses to achieve a robust global recovery along with the responses to the “evolving landscape of crypto assets and other digital assets and national authorities’ work to prevent their use for malign purposes and illicit activities,” the statement reads.

Facebook’s stablecoin Diem (renamed from Libra just last week), in a statement after the video conference, German Finance Minister Olaf Scholz said it would take more than renaming the cryptocurrency to address regulators’ concerns regarding its launch in Germany and Europe. He added,

“A wolf in sheep’s clothing is still a wolf.”

“It is clear to me that Germany and Europe cannot and will not accept its entry into the market while the regulatory risks are not adequately addressed.”

“We must do everything possible to make sure the currency monopoly remains in the hands of states.”

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Author: AnTy

PBOC Planning Technical Pilot Testing of Digital Renminbi (e-CNY) for Cross-Border Payments

The central bank of China and Hong Kong Monetary Authority is now discussing the technical pilot testing of digital renminbi for cross-border payments, said HKMA on Friday. The launch date for e-CNY hasn’t been set yet.

Sharing the recent development in the cross-border payment area, Eddie Yue, the chief executive of Hong Kong’s central banking institution wrote,

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

He further notes that with renminbi already in use in Hong Kong and e-CNY being the same as cash in circulation, “it will bring even greater convenience to Hong Kong and Mainland tourists.”

This development was shared in HKMA’s article on “A New Trend for Fintech – Cross-border Payment,” where it talks about the share of e-payment in Hong Kong being one of the highest among the world’s developed economies.

While the domestic payment service has become highly digitized, development in cross-border payments is lagging behind globally.

For this, HKMA launched a joint research project with the Bank of Thailand last year to address the various cross-border payment issues by using central bank digital currencies (CBDC) and a blockchain platform. Yue noted,

“The research project has entered its second stage, including exploring specific business applications as well as the operability and scalability of the platform to allow the participation of three or more CBDCs.”

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Author: AnTy

ECB Experts Maintain a Cautious Approach to Digital Euro Development

The European Central Bank (ECB) has been talking a big game about its forthcoming digital euro, particularly considering its functionality.

However, the agency remains resolute in its stance that it shouldn’t rush an asset and instead move with caution.

Synergy is Required for Optimal CBDC Performance

Earlier this week, several experts from the ECB agreed that a cautious approach would be the best way forward considering the digital euro.

In a panel tagged “Upgrading Money to the Digital Age: Introducing Digital Euro,” participants argued that the primary goal would be to form a consensus on the digital euro and the form it should take.

In the panel, Austėja Šostakaitė, a Market Infrastructure Expert at the ECB and a former Senior Economist at the Bank of Lithuania, explained that the ECB would not be considering a digital euro until the middle of 2011. She wants the ECB to focus on solving the most critical questions on introducing the asset into the European financial ecosystem and how to collaborate it with commercial bank money.

Carl Andreas Claussen, an advisor to the Swedish Riksbank, also explained that the Riksbank is currently working on a proof-of-concept for the e-krona. However, he highlighted that a launch for the asset is “four to five years away.” Claussen highlighted,

“There are some legal questions and this is such a big issue that we cannot decide on this. We need some political backing. We suggested to the parliament that they should have an expert committee looking at this.”

Top ECB Brass in On Board

All opinions appear to be in line with the official stance of the ECB. While it first announced its digital euro in September, the agency has made it clear that it wouldn’t be rushing development for the asset. In an online panel from November 12, Christine Lagarde, the agency’s President, explained that it had chosen to focus on the proper implementation.

Lagarde pointed out that the ECB had set a consultation panel to explore the potential of a CBDC. She added that the panel would give a consultation report by January 2021. This report will help the bank make decisions on whether to launch – and what course to follow. While Lagarde highlighted that she believed a digital euro would come to light, she also understood that everyone needed to agree on the right implementation format.

The President has been an ardent supporter of Central Bank Digital Currencies (CBDCs) for a while. Earlier this week, she explained in an article that the digital euro would help bring the Eurozone into the digital financial age.

Lagarde added that the digital euro could complement cash and ensure seamless access to central bank money. It would surely ensure the maintenance of monetary sovereignty – especially in a future where the use of physical cash declines.

Reuters also reported last week that Olaf Scholz, the German Finance Minister, had called on the ECB to expedite the asset’s development. Scholz, an ardent critic of private cryptocurrencies, explained that there is already significant demand for digital payments across the European Union. As he believes, it is time for the ECB to move swiftly towards developing its CBDC.

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Author: Jimmy Aki

ECB’s President ‘Hunch’ is EU Might Push Forward with CBDC Plans; Decision in January, 2021

European Central Bank (ECB) president, Christine Lagarde, said on Thursday that the EU would make its decision on whether to pursue a digital euro in January 2021. This comes as more jurisdictions pay closer attention to Central Bank Digital Currencies, given the accelerated paradigm shift to virtual payment networks amidst the COVID-19 pandemic.

Lagarde shared her sentiments during the virtual ECB Forum on Central Banking. In-attendance were other prominent monetary authority figures, including the Fed Reserve chair Jerome Powel and Andrew Bailey, Bank of England governor.

While all the three figures commented on the ongoing developments in CBDC, Lagarde hinted that the EU might decide to move forward with a CBDC, although the decision will be made collectively. She stated that,

“We might well go in that direction … My hunch is that it will come.”

Lagarde was also keen to highlight that the ECB is not in a race to be the first but rather seeks to derive value from a CBDC. She noted that if the CBDC option is fast, cheap, and highly secure, then the ECB should explore the possibilities of joining other nations that have forged ahead with CBDC plans.

“If it is going to contribute to better monetary sovereignty, a better autonomy for the euro area, I think we should explore it. If it is going to facilitate cross border payments, which are very laborious in quite a few corners of our big world, then we should explore it.”

Per Lagarde’s time-frame estimates, a digital euro will take at least 2-4 years before it is finally launched. This will allow the ECB to adequately prepare and get it right once the project is ready for mainstream adoption. Some of the ECB issues are still trying to figure out include Anti-money laundering, terror-financing, and users’ privacy.

Notably, the ECB intensified its efforts in CBDC research this year and recently published a report on the possibilities and implications of a digital euro. The central bank also applied for a trademark the name ‘digital euro’ as part of its effort to hedge, should it chose to roll out a CBDC.

The Fed Chair & Bank of England Governor’s Takes

Jerome Powel, who also shared his comments during the virtual policy panel, said that the U.S is committed to looking at the ‘potential costs and benefits of a central bank digital currency.’ However, he reiterated that it is more important to get it right than being first, especially with the U.S dollar’s position as the world’s reserve currency.

Andrew Bailey, the BoE governor, touched on private stablecoins in what seemed to be a warning to issuing authorities. According to him, the bar is very high for stablecoins, given the users’ expectation of value certainty. In fact, he went on to highlight that the bar or answer might actually be CBDCs.

“They haven’t met that bar in my view. And it may be that the answer to that bar is actually central bank digital currency.”

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Author: Edwin Munyui

Lebanon to Launch a CBDC in 2021 to Boost Confidence In the Country’s Banking Sector

According to the country’s central bank governor, Riad Salameh, Lebanon is set to debut its own Central Bank Digital Currency (CBDC) in 2021. Bloomberg, which reported on this development, cited a Lebanese state-run News Agency, noting that the Mediterranean island plans to make the paradigm shift due to transitioning to cashless networks and restoring confidence in the banking sector.

This comes as more jurisdictions begin to pay closer attention to CBDCs and the possibility of launching country-specific projects to support digital ecosystems. In fact, recent months have seen a spike in CBDC activity by local banks such as the PBoC and international bodies like the Bank of International Settlements (BIS). The latter published its first CBDC series report in collaboration with 7 major central banks.

With Lebanon set to join this bandwagon, Salameh emphasized the need to prepare for a Lebanese CBDC, per the global trends but mainly as a confidence boost to the country’s banking ecosystem. According to the central banker, implementing a CBDC will help increase cash flow efficiency both locally and internationally. Currently, this remains a challenge despite a good chunk of Lebanon’s GDP being complemented by remittances.

Salameh also highlighted that a cool $10 billion is held by Lebanese in their homes, an issue that could be attributed to the volatility of the country’s fiat currency ‘Lira.’ Earlier this year, Lebanese citizens found themselves in limbo after the currency devalued by almost 50% times compared to the dollar. At the time, they took to the streets with the sophisticated citizens opting to hedge against the Lira volatility by buying Bitcoin.

Notably, Lebanon began CBDC talks as early as 2018 but now seems to be in a more urgent position than in previous years. The country’s economy took a great hit this year, forcing local banks to cap withdrawals and increase foreign currency cash flows’ limitations. Previously, the main CBDC motivation was to curb terror financing and money laundering; this later shifted to making payment networks efficient, but now the urge seems to be a confidence boost in Lebanon’s banking sector.

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Author: Edwin Munyui

Cue to Buy BTC: Fed and Bank of England Vows to Do ‘Everything’ to Help their Economy Recover

Markets are flying right now. And the central banks are ready to give them even more reason to continue to do so.

We are less than a week into November, and the S&P 500 has already pumped 7.35% as the US dollar struggles, and yields on US Treasury debt securities remain unchanged.

Gold and Bitcoin particularly enjoy the greens as the precious metal goes back to the $1,950 level, and BTC makes 35-month highs, itching to break $16,000.

While green is splashed across the markets, the Federal Reserve pledged again to do whatever it can use “full range of tools” to sustain the speed at which the US economy is recovering.

Amidst the uncertainty around the still undecided US presidential election, the Fed kept the loose monetary policy intact — asset purchase and interest rate (near zero) remains unchanged.

Chairman Jerome Powell said the Fed has begun to consider whether it needs to extend the emergency credit facilities beyond their expiration on Dec. 31.

But the Fed chief said the economy is now recovering at a slower speed after being boosted earlier in the year by fiscal aid and re-opening of businesses adding the recent rise in coronavirus infections in the US and abroad was “particularly concerning.”

The same day the Bank of England governor also vowed to do “everything we can” to support the economy amidst the resurgence of Covid-19 cases.

As the central bank announced another £150bn of support, Andrew Bailey said it was important policymakers acted “quickly and strongly.”

However, with new restrictions in England and tighter lockdown rules, a slower and bumpier recovery is expected. “We are here to do everything we can to support the people of this country – and we’ll do it and will do it quickly,” said Bailey.

All of this basically, “is code for buy Bitcoin.”

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Author: AnTy

Huawei’s Flagship Phone, Mate 40, Will Support China’s Digital Currency Wallet On Launch

Huawei announces support for the upcoming Chinese central bank digital currency in its upcoming flagship smartphone, Mate 40. The smartphone will include a hardware wallet for the digital renminbi, a Weibo post stated.

The Chinese digital currency electronic payment (DC/EP) project was launched back in 2014, but tests only took to the public earlier this year. The project looks ready to go mainstream with the latest announcement of the Mate 40 supporting a digital wallet for the token. The smartphone offers users a self-custodial “hardware-level security, controllable anonymous protection, and dual offline transactions,” the statement on the Weibo post reads.

Huawei Mate 40

The latest Huawei support for the digital yuan follows a public test run across the country. The People’s Bank of China (PBoC) distributed over 10 million yuan to 50,000 random participants in Shenzhen in a public trial of the DC/EP system.

With the DC/EP, users can spend the digital yuan at any of the thousands of merchant stores that support it or at any point of sale devices with support for the token.

The post, however, did not clarify how the digital DC/EP project will work or how users could convert their bank balances and cash to the digital yuan using the Mate 40 hardware wallet. Moreover, it remains unclear if the Mate 40 smartphones in other regions will support the DC/EP wallet or restricted in some regions.

However, China is not the first state to release a national digital currency – being beat to the race by the Bahamas. The island nation announced a public launch of the “Sand Dollar” as the first public CBDC worldwide.

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Author: Lujan Odera