Sweden Is Working with Corda’s DLT for the e-Krona CBDC Proof-of-Concept

Sweden Is Working with Corda’s DLT for the e-Krona CBDC Proof-of-Concept

The Swiss central bank is already working with Corda’s Distributed Ledger Technology (DLT) for its CBDC proof-of-concept in the proposed e-krona digital currency. Cecilia Skingsley, the bank’s deputy governor, confirmed this development while speaking yesterday at the CFC St. Moritz conference panel. Sweden had recently announced the commencement of e-krona’s exploratory phase.

According to Skingsley, Corda was recommended by Accenture, which began working with Riksbank as early as 2019 on the possibilities of a CBDC. This DLT provider was apparently selected because of its current fit with e-krona’s proposed criteria. Skingsley emphasized that,

“The reason we use Corda is not that we necessarily think that Corda is the best and optimal choice for an eventual future e-krona, but when we did our procurement process, the proposal from Accenture based on Corda we found was the one that fitted our criteria the best.”

With the exploratory phase kicking off, Sweden’s population, which is used to cashless money, could soon witness a transition to digital monetary policy as well. The country has been actively involved in CBDC research and development, ranking among the frontrunners in this space. Nonetheless, Skingsley noted that the developments are but an exploration into the CBDC ecosystem,

“Although we are exploring this issue, the Riksbank has not decided to issue an e-krona. We are still in the phase when we are investigating different options.”

Other prominent jurisdictions like the U.S and France have also started the year with a keen interest in the value proposition in CBDCs. The Fed Reserve Chairman Jerome Powell recently mentioned in an interview that CBDCs are of high priority in the combat against ‘bad private money.’ Meanwhile, China has continued with the digital yuan pilot, having rolled out ATMs in the Shenzhen region.

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Author: Edwin Munyui

The European Central Bank & EC Join Together to Research A Digital Euro Launch

The European Central Bank & EC Join Together to Research A Digital Euro Launch

European Union entities, the European Commission, and the European Central Bank (ECB) will be coming together to discuss the potential challenges that come from the creation of the Central Bank Digital Currency, the Digital Euro.

Within a joint statement from both the Commission and European Central Bank, the aims of their effort were to explore its prospects for public and private sectors:

“The European Commission and the European Central Bank (ECB) are pursuing their efforts towards ensuring a strong and vibrant European digital finance sector and a well-integrated payments sector to respond to new payment needs in Europe.” The ECB will go on to decide whether the project will be put into motion in mid-2021.

“Such a project would answer key design and technical questions and provide the ECB with the necessary tools to stand ready to issue a digital euro if such a decision is taken,” the joint statement reads.

While the ECB officially closed its public consultation phase on January 12th, the news service EURACTIV, a news service centered on EU policy, found that 41% of polled respondents expressed serious concerns. Concerns regarding security (17%) and Pan-European reach (10%) also emerged.

While the European Union has entered the introductory stages of its CBDC, China’s digital currency – the Digital Yuan – has already established itself as the powerful front-runner and sets its sights on a global payments framework based on CBDCs.

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Author: James Fox

French Central Bank Settles $2.4 Million Simulated Monetary Shares in CBDC Pilot

French Central Bank Settles $2.4 Million Simulated Monetary Shares in CBDC Pilot

Banque de France has announced that it successfully settled €2 million (US$2.43 million) worth of simulated monetary shares on a private blockchain network as part of its CBDC pilot. The central bank, which has previously expressed openness to the idea of CBDCs, said that the pilot began on Dec 17 with the support of private players in the financial market. French Central Bank Settles $2.4 Million Simulated Monetary Shares in CBDC Pilot

According to the announcement, Banque de France collaborated with a U.K blockchain startup dubbed SETL, which provided the blockchain infrastructure and CBDC stablecoin. Other notable partners include DXC, OFI AM, GROUPAMA AM, CITIGROUP, CACEIS, and IZNES.

With the conversation on CBDCs starting on a high note this year, the Central Bank of France is among the global monetary authorities moving relatively fast in research and development. The bank had requested CBDC use case proposals as early as March 2020; they are now set to continue with more pilot experiments within the course of this year. It is also quite noteworthy that France is among the countries that are willing to partake in a digital Euro pilot, should one be rolled out soon.

Meanwhile, other jurisdictions, including the U.S, are now taking a keen interest in the potential of a CBDC based monetary ecosystem. Last week, the Fed reserve Chair Jerome Powel said in an interview that developing CBDCs is of ‘high priority’ in the fight against ‘bad private-sector money.’ China is also forging ahead with its CBDC pilot and recently rolled out the pioneer digital yuan ATMs in the region of Shenzen. These developments concur with the BIS findings last year, where it noted increased activity in CBDCs.

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Author: Edwin Munyui

China’s Central Bank Successfully Completes Its Largest CBDC Pilot Program In Shenzhen

China’s Central Bank Successfully Completes Its Largest CBDC Pilot Program In Shenzhen

  • China’s central bank completes a second successful test on its digital currency project in Shenzhen.
  • Over 140,000+ transactions were completed, $3 million given away, and 100,000 residents participated in the test.

The People’s Bank of China (PBoC) completed its largest digital currency electronic payment (DC/EP) test in Shenzhen. Over $3 million of the central bank’s digital currency was given away to over 100,000 residents in Shenzhen via a red envelope lottery, a WeChat post confirmed. The 10-day long test, which began on January 7th, saw over 140,000 transactions completed at points of sale designated to accept the digital yuan.

As we reported, the first test in Shenzhen saw over $1.3 million worth of digital yuan disbursed to over 47,000 consumers in the Luohu district during the week-long trial. According to the report by PBoC, over 2 million people applied to the first lottery, with a total of 50,000 red envelopes, for a chance to win 200 digital yuan.

According to the post, 1.8 million residents applied for the ‘red envelopes’ in the latest lottery, with 95,628 winners receiving the digital yuan in their wallets. A total of 139,794 transactions were made during the 10-day trial period, totaling $2.8 million spent by the residents. Residents deposited a further 1.51 million digital yuan (approx. $232,000) to their DC/EP wallets during the trial period.

In November, local reports from China confirmed that the PBoC worked on launching trials and piloting the digital yuan project to other provinces starting with Suzhou in Xiangcheng. Suzhou trials will be carried out similarly to Shenzhen ‘red envelope’ trials but are expected to feature offline payment channels and a smartphone touch feature.

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Author: Lujan Odera

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