Sweden’s central bank chief has explained that Facebook’s Libra cryptocurrency should serve as a catalyst for central banks around the world to rethink their role and reform to incorporate the digital age.
In an interview with CNBC’s Squawk Box Europe Stefan Ingves, governor of the Riksbank, explained that the Facebook’s led Libra project was an ‘incredibly imperative catalytic event’ that is forcing central banks around the world to rethink their primary aspect of money production and control.
The governor explained that part of the job for every central bank is to issue money that is convenient for use by the citizens of the country and the time has come for central banks to factor in the digital era or age when it comes to production of money.
According to Ingves, the Riksbank has had to reconsider its money development procedures in the wave of private currencies that have mushroomed in the recent past. In light of this, the Riksbank has been looking at the potential of issuing digital money even as use of cash in Sweden has declined tremendously in the recent past. Most of retail outlets in the nation do not accept physical or fiat currencies and are discouraging their customers from paying in cash.
The swedish central bank is in the process of piloting a digital currency dubbed e-krona before the end of the year and could be rolled out after the assessment of the piloting stage. According to Ingves, creation of a new currency is almost done and marks an unprecedented event that occurs only once after various centuries.
Sweden is not the only country that exploring the digital money aspect. Since Facebook announced its plans to venture into the digital currency market with its Libra cryptocurrency in June. Key among them is China which is developing its own digital currency to counter Libra with Chinese central bank announcing the project is almost done and launching will be done soon. Additionally, Swiss central bank announced last week that it was looking at how the virtual currencies could be used in trading.
CoinDesk reports that the Libra Association met in Geneva on Monday to agree on an official charter for its 21 initial members.
Author: Joseph Kibe
The Chinese central bank, known as the People’s Bank of China, has recently put up a recruitment notice on its official site. According to the job post, the state bank is looking for six tech experts who have a lot of experience with blockchain technology.
Most of the people hired are set to work on the Digital Currency Research Institute. Candidates who apply should know that they are expected to be experts in cryptography, computing, microelectronics and/or econometrics.
The new employees would be responsible for developing software that would be used in the country’s new digital currency. They should also be able to do technical research and develop trading terminals, as well as study methods of payments and clearing.
Another important point is that the bank revealed that people with experience in systematic framework design, big data platforms, blockchain development and crypto research will be preferred.
The Mysterious Chinese Digital Currency
China is not very open with information, so the state-backed digital currency of the country is pretty mysterious so far. The People’s Bank of China is supposed to be working on it since 2014 and it said that it is ready to be launched this year, but the lack of official information makes it hard to know.
What is certain is that this project could certainly change the world and help China to improve its financial system, something important for a country that intends to become the largest economy of the world in the future.
Author: James Fox
United Kingdom’s central bank, Bank of England, has announced a raft of rules that Facebook’s Libra crypto must adhere to if it wishes to launch in UK.
In its October Financial Policy and Summary released by the bank’s Financial Policy Committee, BoE stated that it discussed innovative explorations within the financial and payment sector. As per the release, the bank noted that Libra has the capability of becoming ‘a systemically important payment system’ in the future.
According to the FPC, a system like Libra should comply with the highest standards of resilience and fall under the relevant supervisory oversight. In addition, the FPC called on regulators to come up with terms of engagements for various innovative payment systems before they can be introduced in the market.
A key aspect of the policy summary is that BoE stated it would require access to allow for monitoring of the payment chain information as a key condition. However, the FPC urged regulators to utilize their powers accordingly as per the published principles.
The document also explained that the Libra Association, as well as the Libra Reserve of different fiat monies, are of high importance. The FPC continued to explain that the platform participants, wallet providers as well as validators will also need to be regulated and scrutinized thoroughly.
CoinDesk reports a similar form of measures and conditions were discussed by Olaf Scholz who was earlier this week nominated as the EU Commission’s finance minister. During the discussion, Scholz stated that EU should come up with a regulatory framework for such payment networks like Libra.
The Libra project has come under intense scrutiny and skepticism with both German and French finance ministers saying that Libra cryptocurrency should never be allowed to launch on European soil since it will undermine the sovereignty of their nations, Cointelegraph reports. The two ministers argued that it was the work of the government to issue currency and that mandate should never be left on private entities.
The UK seems to be open to a discussion on the prospect of Libra being launched in the country as it positions itself as Europe’s financial hub in the wake of Brexit.
Author: Joseph Kibe
Swiss National Bank (SNB), Switzerland’s central bank, together with Bank for International Settlements (BIS) are jointly exploring on how a central bank digital currency (CBDC) can be used to trade tokenized assets, the Block reports. Bank for International Settlements (BIS) acts as the central bank for other central banks in the world.
In a press statement, the SNB stated that it had already inked an operational contract with BIS and the two will launch a hub in Switzerland whose main mandate is to explore the possibility of a central bank issued digital currency in the country.
According to the press statement, the new type of central bank currency will aim at aiding the settlement of tokenized assets among various financial institutions. At the moment, the project is creating a proof of concept together with SIX Digital Exchange (SDX) which is a subsidiary of SIX stock exchange.
In a separate press statement released by SIX, the new project by SDX will seek to come up with a platform that will explore the technical options of digitizing the Swiss franc on the SDX blockchain platform. The project will also look at the possibilities of linking the Swiss Interbank Clearing System on the SDX platform.
SDX explained that distributed ledger-based tokenized assets, as well as a central bank issued digital money, will reduce counterparty risk and free financial innovations.
The head securities and exchanges at SIX, Thomas Zeeb, explained that their proof of concept about a central bank-issued digital currency for use by various participants on DLT platforms will open up technological advancement and encourage different market participants to explore the DLT technology as well as digital assets.
In the recent past SIX has been a crucial player in financial innovation and has listed various crypto-based exchange-traded assets. Just last week, a fintech-based company Amun AG stated that it had successfully listed a Bitcoin and Ether ETP that will be denominated through the Swiss franc on SIX exchange. In addition, Six is set to launch its own digital assets exchange after the release of a prototype platform in September this year.
Author: Joseph Kibe
Central Bank Digital Currencies (CBDCs) are an important subject in Switzerland right now. The Swiss National Bank (SNB) has recently started a partnership with the Bank for International Settlements (BIS) to begin a study on CBDCs, which will be conducted at the BIS Innovation Hub Center, which is based in Switzerland.
According to the latest announcement made by the banks, this will be one of the three hubs that will be established to research more about the project. The other two will be set in Hong Kong and Singapore.
The focus of the Swiss center will be on how to integrate CBDCs to the blockchain and to analyze the requirements for tracking electronic markets, which are much faster than their non-digital counterparts. The first joint project will be a proof of concept about how to release a CBDC in the country that could facilitate the settlements between financial organizations.
Another important goal of the researchers is to identify more insights and important trends of the technology that can be used by the experts of the bank to innovate in the creation of solutions.
The chairman of the SNB, Thomas Jordan, affirmed that the central bank is following the trend of the market closely and that it is important to cooperate with other banks and the financial sector to develop.
Right now, Switzerland is still unconvinced of CBDCs, but willing to learn more. Jordan recently claimed that stablecoins could hurt the country’s monetary policies and that access to a CBDC could result in a negative outcome. Despite this stance, however, the country seems willing to learn more about the technology before completely disregarding it.
Author: Denis Miriti
Mark Cliffe, chief economist of ING bank believe that central banks around the globe would move towards creating their own digital currency. Cliffe was responding to a question on when would a central bank among G20 nations can launch a full-fledged digital currency.
2019 has been the year of crypto adoption despite the ups and downs of the trade market. Private technology giants like Facebook and Telegram have announced the launch of their digital tokens, while many others are pondering over the same. SoFi, a financing firm added crypto to its trading platform, Bakkt launched “physically” settled bitcoin futures contracts.
Many governments around the globe who were either skeptical over regulating cryptocurrencies or were watching from the sidelines have decided to regulate it. China has fast-tracked its stable coin launch after Libra’s announcement, France and Portugal have made crypto transactions tax-free while Russia has proposed to tax crypto under property tax code.
Banks must strategize their digital currency plans in the same timeline as private sectors
ING last week released a report in which it discussed the growing trend of private firms releasing their own stablecoin, especially focusing on the recent announcement of Libra. The report pointed out that central banks around the globe must start thinking more seriously towards adopting the modern fintech trend before the private sector captures the future financial market.
The report also hinted that Libra is putting pressure on these central banks to start mulling about the ongoing trend of crypto. However, the report also downplayed the argument of future being cashless.
Cliffe’s response came during an event organized joint event held by ING and the central bank thinktank, OMFIF. The meeting was to discuss,
“Rapid advances in distributed ledger technology have spurred debate about the possibilities, advantages, and drawbacks of central bank digital currencies. The principal limits and trade-offs seem to stem from CBDC’s economic, monetary and financial contexts, and depend on underlying policy and political preferences concerning privacy, data administration, market power, cybersecurity, and the division of labor between the public and private sector.”
Author: Gabriel Machado
China has confirmed its plans to launch its own central bank-based digital currency but does not have a timeframe right now. This is what the local media outlet Global Times revealed after the local central bank, the People’s Bank of China, commented on the situation of the project.
The governor Yi Gang was quoted by the media outlet affirming that the bank still needs to evaluate some of the risks and to make more tests before the asset will be available for the population. According to him, the development of the national currency has moved quite a lot until now, but the country doesn’t have any timeframe for the launch at the moment.
Another deputy director of the bank, Mu Changchun, affirmed last month that the token was ready for launch, so the information is contradictory, to say the least. When we consider that the bank even denied the claims that the project existed some time ago, it is hard to say with some certainty how the project is faring.
Who Will Launch Its Crypto First? Facebook or China?
There is a lot of speculation going around right now on whether Facebook or China will release their token first. Libra has its launch scheduled for the end of 2020, but it is facing a lot of regulatory issues. China, on the other hand, would not face regulatory issues, but we are unsure about how complete the asset actually is.
Whoever takes the lead will have an important headstart in dictating how the world of centralized digital assets will work, despite the fact that Facebook and China will act on very distinct places.
Author: Daniel W
According to Chile’s Central Bank Governor, Mario Marcel, digital currencies issued by the central banks are beneficial and can run outside of the blockchain technology, the Block reports.
The governor was speaking during the OECD’s Global Blockchain Policy Forum that was held last week. Marcel stated that CBDCs are not new in the finance industry as they have existed ever since the real-time gross settlement (RTGS) were founded.
Marcel intimated that blockchain technology is highly useful in a situation where there are many participants of a given platform and they require to access the ledger information or in situations where the participants distrust each other. In this case, Marcel explained, proof of work is imperative as it makes the register immutable.
According to Marcel, in the case of a central bank issuing a currency whether in the form of fiat or virtual, trust should always be a guarantee. The governor also added that ‘it’s far from obvious’ that an entire lot of participants are entitled to crucial and sensitive information and data like CBDC transactions and movements.
Marcel gave an example of Uruguay whose digital currency, ePeso, that has already been issued in the pilot phase, is not developed on the blockchain technology. The Chile Central Bank Governor does not seem too optimistic about his country having a CBDC, arguing that developing and emerging economies need to pursue other alternatives first like offering fast and efficient payment solutions before issuing CBDC’s.
Marcel’s comments do not mean that Chile’s Central Bank is not keen on blockchain technology. The bank is currently exploring how it can use blockchain technology for other solutions other than virtual currencies such as bonds. According to the governor, the Central bank is partnering with domestic central securities depository (CSD) in efforts to find ways of issuing blockchain-based bonds. At the moment, proof-of-concept is going on and the governor stated that once the report is released more details about the project will be released.
Marcel’s comments come at a time when various central banks are exploring the idea of issuing their own digital currencies especially after Facebook announced the Libra project.
Author: Joseph Kibe
The chair of the U. S. central bank (Fed), Jerome Powell, recently spoke about some of the hottest crypto subjects during a forum sponsored by the Swiss Institute of International Studies.
During his presentation, he was asked whether central banks should issue their own centrally-backed cryptos and if they were losing an opportunity for not doing it. Powell answered that the U. S. central bank is not considering this at the moment, just like many other central banks.
According to him, one of the main issues of creating a digital version of the dollar is that it would have to be incredibly secure. It is bad enough that paper money can be counterfeit, so if someone can do it with digital money, it can be even worse. With a proper hack, someone could print as much money as they wanted, so it is hard to really create a project like this one.
This is the main reason why the Fed is not really trying. It is simply a huge effort. Also, he acknowledges that the demand for this simply does not exist yet. The consumers are absolutely not clamoring for a central bank-backed cryptocurrency.
He also spoke about Facebook’s Libra during the forum, affirming that it could become very important very quickly because Facebook simply has a huge user base. In order for something so powerful to exist, it would need to be heavily regulated and supervised constantly. Facebook will not get away with doing whatever it wants with it.
Author: Gabriel Machado
The European Central Bank (ECB) has recently emitted a new report on the cryptocurrency market. This time, the banking institution approached the issues with stablecoins. The latest report touches on questions such as whether stablecoins can be a solution for the volatility of the crypto market and whether or not they have dangers related to them.
This new report affirmed that stablecoins need a better governance system to be able to become more mainstream. They are also vulnerable to regulatory uncertainty, as many governments have not yet decided what to do with them.
For instance, in case a bank decided to launch a digital version of its token, a stablecoin’s existence would become redundant, as you could easily access digital fiat currency instead of having to use a private version of it.
According to the bank’s latest paper, stablecoins can be defined in four main different groups. They can be a tokenized fiat currency, on-chain collateral, algorithmic tokens or off-chain collateral. In order to study the case better, the bank selected 54 currencies. Most of them, 30, were tokenized versions of fiat, which is the most common type.
On-chain collaterized tokens and algorithmic ones were more evenly divided with 12 and 11 projects. Off-chain collaterized projects were the far less common type, as they only had a single project as their representant.
The bank has also affirmed that the most popular kind of stablecoin accounts for 97% of the category’s trading volume and that stablecoins are already a $4.8 million USD market. Their market cap basically tripled in a year and a half.
Author: Gabriel Machado