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Japan’s Central Bank Takes A Plunge Into The CBDC Game

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After China, Japan seems to be moving in full force. The central bank digital currency market has been firing up as digitalization has been gaining momentum. While several countries have just started out exploring the prospects of the CBDC, a few others like China have already begun testing the digital yuan.

Now, Japan seems to be catching on to the CBDC train. In a recent announcement, the country’s central bank, Bank of Japan revealed that it was moving ahead with respect to the pilot of its CBDC.

Japan Steers Towards The Development Of CBDC

The Bank of Japan had reportedly rolled out the Liaison and Coordination Committee to spearhead the development of the CBDC. While the first meeting of the Liaison and Coordination Committee on Central Bank Digital Currency was recently concluded, the Executive Director of the Bank of Japan, UCHIDA Shinichi addressed the same. The speech read,

“We will begin to test the technical feasibility of the core functions and features required for CBDC through a Proof of Concept (PoC) from April 2021. If the Bank judges it necessary to go a step further, it will also consider a pilot program that involves payment service providers (PSPs; e.g., banks and non-bank PSPs) and end users.”

Additionally, the Japanese central bank revealed that Phase 1 of the CBDC pilot would make a debut by next month. The bank has reportedly been working on the pilot since October, last year.

Furthermore, speaking about the repercussions of launching a CBDC, the Exec suggested that the Japanese central bank would roll out one keeping in mind its compatibility with the future payment and settlement systems. Its coexistence with cash was also mentioned in the speech. The speech further read,

“These role-sharing arrangements will still be necessary even in a world with CBDC. I believe that it is the private sector, such as yourselves, that should be the chefs who serve up the dishes, or convenient payment services, by using CBDC — provided as a public good — as an ingredient.”

German Central Bank Steers Clear Of A CBDC; Blockchain-Based System Underway

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Deutsche Bundesbank, the German central bank seems to be clear on its stance regarding the development of a CBDC. In its latest announcement, the bank revealed that it was instead focusing on the incorporation of blockchain technology.

China’s plunge into the development of central bank digital currencies (CBDC) has inspired several countries to get into this race. While an array of governments have been fearing china’s dominance over the financial sphere with it’s CBDC launch, Germany seems to be untethered. The country has time and again revealed that it doesn’t intend on rolling out a CBDC. Its latest move further reveals that the country aspires to function without a CBDC.

German Bank To Lay Its Focus On The Development Of Blockchain Tech

The German central bank seemed to be relaxing while all the governments are trying get ahead in the CBDC game. In a recent post, the bank pointed out that it was successful in testing a settlement interface for securities. However, this is via the distributed ledger technology [DLT]. With this, the country intends to bring blockchain tech into the conventional payment systems.

The Executive Board member of Deutsche Börse, Stephan Leithner, spoke about this innovation and said,

“New technologies are a key component in creating infrastructures of tomorrow that meet the markets’ needs. This project marks a major step towards more efficient securities settlement and securities digitalisation by combining new technologies with existing infrastructures in a smart way.”

While this would facilitate payments through blockchain tech, the post eliminated the need for the creation and development of a CBDC. This statement was a clear indication that the German bank wanted to go about without a central bank issued currency.

The post further elaborated on the project as it read,

“This test sees Bundesbank and Deutsche Börse now joining forces with the Finance Agency to continue the work they started on the Blockbaster (blockchain-based settlement technology research) project back in 2016. The functionality of blockchain technology in securities settlement and the cash leg settlement of transactions was successfully demonstrated in previous project phases.”

Digital Yuan To Uphold Privacy By Supporting Anonymous Transactions

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China’s central bank digital currency [CBDC], the digital yuan has been making headlines for quite a while now. The country’s plunge towards digitalization inspired an array of other countries to start developing their own digital asset. While China is well ahead in the game, all the other countries were trying to catch up.

Despite, the emergence of the digital yuan, rumors pertaining to the Chinese government controlling their citizens finances began surfacing. While privacy was a great concern of many citizens, with regard to the digital yuan, an official of the Chinese central bank affirmed that a certain magnitude of privacy would be given to those using the country’s CBDC.

Digital Yuan To Entail “Controllable Anonymity”

In a recent report by a local Chinese news portal, it was revealed that the People’s Bank of China [PBoC] intended to uphold privacy with the launch of the digital yuan. Speaking about the same at the 2021 China Development Forum, the head of the digital currency research institute of the People’s Bank of China, Mu Changchun, addressed the potentials of the country’s CBDC.

While suggesting that a entirely anonymous CBDC was out of the picture, Mu pointed out that it wouldn’t be very feasible. Since the Chinese currency would soon be used throughout the country as a national currency,it needs to come under certain anti-money laundering, anti-tax evasion as well as counter-terrorist financing procedures. However, privacy would still find its place, Mu announced.

Limited anonymity would be available, revealed the official. The PBoC will reportedly permit anonymous digital yuan transactions, however, in dainty amounts. He added,

“The digital renminbi adopts a design of small amounts anonymous, keeping large amounts traceable. In short, the protection of user privacy by digital renminbi is the highest among the current payment tools.”

Additionally, the digital yuan is already out and about for testing. The PBoC has been testing the Chinese CBDC on various platforms across the globe.

Bank Of Thailand Publishes Guidelines On CBDC Shortly After Warning Its Citizens

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Central Bank Digital Currencies, or as popularly known as CBDC, is the talk among central banks across the world. Riding the wave of a massive digital revolution, CBDCs offer risk-free, that is backed by the country’s central bank money denominated in cash. The latest country to jump the bandwagon is Thailand.

The Southeast Asian country published guidance outlining its views on central bank digital currencies [CBDC]. The Bank of Thailand [BOT] categorized stablecoins into two groups – one that is backed by the country’s currency, the baht, and other forms of stablecoins.

Thailand’s CBDC:

The guidance revealed that BOT is currently in the process of developing a retail central bank digital currency [CBDC] to accommodate the demands of the general public, enhance service efficiency in the business sector, as well as increase access to financial services. It further stated,

“The BOT will continue to closely monitor the developments of new technologies, taking into account the benefits and related risks in the effort to adopt policies supportive of promoting ongoing economic development while maintaining financial system stability.”

According to BOT, Baht-backed stablecoins are cryptocurrencies that are essentially designed to reduce volatility by pegging its value to the Baht. These are used as a means of payment. The guidelines mentioned that such stablecoins may be designated as electronic money [e-Money] under Thailand’s Payment Systems Act 2017.

While acknowledging that the bank oversees risks associated with e-Money, like in cases of settlement, money laundering cybersecurity, and consumer protection risks, BOT stated that the service providers of Baht-backed stablecoins are required to consult with it for consideration before starting any operations.

The Other Kind:

With regards to the ‘other forms of stablecoins” that include foreign currency-backed, asset-backed, and algorithmic stablecoins., BOT maintained that they are not illegal. The bank also welcomed dialogues and said that it is “open to receive comments and feedback before considering regulatory guidelines as appropriate”.

The latest development comes shortly after Thailand reportedly alerted its citizens against privately-issued stablecoin.

Previously in June 2020, Bank of Thailand had announced a partnership with The Hong Kong Monetary Authority, for the development of a prototype for a cross-border blockchain payment system known as “Project Inthanon-LionRock“.

CBDC Needs To Coexist With Cash, Says Fed Chairman

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Central bank digital currencies aka CBDCs have been taking the world by storm. Governments of several countries, despite despising cryptocurrencies, have been leaning towards developing their own. While this could be a great move towards digitalization, several believe that CBDCs had the ability to replace cash in the near future. However, Jerome Powell, the Federal Reserve Chairman of the United States of America suggested otherwise.

China has been undoubtedly spearheading the CBDC movement. The country has already made the digital yuan available to the public in several regions. While countries were trying to catch up to China, a few others were still examining the prospects of this.

CBDC Replacing The Dollar Highly Unlikely

In a recent event held in Switzerland, the Fed Chairman addressed the potential rise of CBDCs. The event preceded by the Committee on Payments and Market Infrastructures, had over seven central banks including the US’s reportedly looked into the prospects of the CBDC. Powell stated,

“A recent report from the Bank for International Settlements and a group of seven central banks, which includes the Fed, assessed the feasibility of CBDCs in helping central banks deliver their public policy objectives,”

While several across the globe have been speculating that central banks currencies could possibly take over cash, Powell suggested that every CBDC should “coexist” with cash as well as other forms of money. He pointed out flexibility and an “innovative payment system” as major criteria for the same.

Its no doubt that the COVID-19 pandemic accelerated the leap towards digitalization. The lack of human touch made the globe realize the importance of going digital. This further gave rise to an array of innovations in the same field.

He added,

“The Covid crisis has brought into even sharper focus the need to address the limitations of our current arrangements for cross-border payments. […] And as this conference amply demonstrates, despite the challenges of this last year, we still have been able to make important progress.”

China Stays Ahead In The CBDC Game As Digital Yuan Does In For Testing

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China’s keenness towards digitalization, particularly in the development of Central Bank Digital Currencies [CBDC] has forced all the other countries across the globe to start exploring the same. China undoubtedly has an upper hand in this considering the country’s ever-growing interest and fast-paced development in the same.

While news pertaining to the country releasing the digital yuan for testing had taken over the headlines, all the other countries began speeding up the process. Now, two prominent stores in Shanghai have decided to test the Chinese CBDC.

China Still Ahead In The CBDC Game

Recently, a news portal reported that the New World City and New World Daimaru Department Store in Shanghai along with Taikang Food Store, a food caterer had carried out more than a thousand transactions with regard to the digital yuan, just during the last weekend.

Li Wei, the brand director of Shanghai New World spoke about the same and said,

“We have worked to upgrade the digital payment module ahead of the trial program, and we believe it offered extra stimulus for shoppers on top of the existing sales campaign.”

The latest trial coincided with International Women’s Day which further spruced up the sales. Banks like China Construction Bank and the Bank of Communications joined in to facilitate the latest trial. Users were reportedly provided with virtual coupons for using the digital yuan.

Rewards worth 150 yuan were given to over 2,000 participants by the China Construction Bank and 100 yuan for about 6,500 shoppers by the Bank of Communications.

A shopper surnamed Xu spoke about the latest trial and said,

“The payment procedure takes no more effort than other existing third-party services, and it wouldn’t hurt to try to use the payment method at other places.”

This undoubtedly puts China on a pedestal as all the other countries are still exploring the prospects of rolling out a CBDC.

Russia’s Digital Ruble Trials Could Make A Debut By 2022

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Russia seems to be gliding ahead with its central bank digital currency [CBDC] plans. The country was seen walking in the footsteps of China as its sprucing up its CBDC game.

An array of countries were seen elevating their efforts towards digitalization. The pandemic undoubtedly paved the way for less human contact and more virtual connections. This further acted as a catalyst for the fast-paced development in the digital sector. The Bank of Russia reportedly revealed that a prototype of the digital ruble would be making a debut by the end of 2021.

Russia Sprints Towards CBDC Development

A local news portal reported that the Bank of Russia would start testing the digital ruble in 2022. Russia was a little late in terms of getting on to the CBDC bandwagon as one of the country’s regulators spoke about the idea of the digital ruble only last October. Nevertheless, Russia seems to be zooming ahead with this plan.

Speaking at an online meeting preceded by the NES, the Deputy Chairman of the Central Bank Alexey Zabotkin said,

“By the end of the year, hopefully, we will be able to present a prototype of the digital ruble platform – some technological platform that can be rotated in the hands, but within which real transactions cannot yet be made. Next year, based on this prototype, taking into account its revision we will already be launching testing rounds.”

The country even went on to seek consultation from the public for the development of the digital ruble. A 48-page paper was released over the prospects of CBDC.

In the meantime, China is moving ahead at full speed with respect to its CBDC development. The digital yuan has been given to the public for testing and two new departmental stores just supported this. Other countries like Japan and the UK are also probing the possibilities of rolling out a CBDC.

Sweden Takes A Plunge Into CBDCs As It Prolongs Its Pilot Till 2022

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Central bank digital currencies aka CBDC have been making the rounds around the globe. Sweden seems to be the latest country to explore the prospects of these currencies.

The value of the cryptocurrencies as well as their functions have time and again proved to be extremely propitious. Therefore, the governments decided to take things up a notch by rolling out their own regulated digital asset. China’s progress in the field agitated several other countries to begin their research on CBDCs.

Sweden’s Steer Towards Digitalization

In a recent announcement, the central bank of Sweden, Riksbank revealed that the country was going to prolong its pilot program until 2022. The bank specified that it had partnered with Accenture to carry out the e-krona pilot program. With this partnership, the bank intends to find ways that the e-krona could be on par with the fiat in Sweden.

The announcement further read,

“The main aim of the pilot is for the Riksbank to increase its knowledge of a central bank-issued digital krona. The project is now being extended to the end of February 2022. The aim for the coming year is to continue developing the technical solution, with the focus on performance, scalability, testing of off-line functions and bringing external participants into the test environment.”

While the central bank suggested that it was veering into the whole CBDC scene, it also revealed that it wasn’t issuing an e-krona any time soon. The bank has still not decided on the design or the technology the digital asset would be using.

In other news, payments giant Mastercard had announced the launch of the Bahamian Sand Dollar CBDC card with Island Pay. This affirms that both China as well as the Bahamas are well ahead in the CBDC game. The Sand Dollar has been functioning since October 2020 the latest move could attract more users.

The co-founder of Island Pay, Richard Douglas said,

“By working closely with the Central Bank of The Bahamas and Mastercard, we are able to issue a prepaid card unlike any other in the world. We are now able to bring immediate, critical benefits to our customers at a time when they are looking to find new, innovative ways to pay.”

CBDCs Entail The Potential Of Becoming A ‘Gigantic Flop’

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Central bank digital currencies aka CBDCs have garnered increased interest from governments across the world. China has been spearheading this evolution in the global financial scene. As the country has already begun distributing the digital yuan among its citizens, other countries have just started their research on these digital assets. Amidst this steer towards digitalization, two economists suggest that CBDCs could fail to meet the expectations it has set.

CBDCs Lack “Obvious Justification” Suggest European Economists

In a recent research paper released by European Economists, Peter Bofinger and Thomas Hass point out a different narrative to the whole CBDC game. While the globe is prepping for an elevated payments method with the launch of CBDCs, the aforementioned economists fail to differentiate the prospects of these national digital currencies from what the private banks are already rendering. Though the European Central Bank [ECB] has been enhancing its effort towards the digital euro, Bofinger and Hass suggest that the ECB should steer in a different direction.

The paper read,

“If CBDCs are designed as new payment objects that are used within existing payment systems, the user perspective implies that CBDCs must compete with existing payment objects (above all cash and traditional bank deposits). If CBDCs constitute new payment systems, their acceptance by private users must be analysed within the context of the existing payments ecosystem. For the reputation and credibility of central banks, it is important that any CBDC solution is attractive enough for potential users to adopt it.”

The economists mostly stressed the objectives that CBDCs pursue. They suggested that these national digital assets would probably succeed if they took a road that private providers do not take. However, they were adamant about central bank currencies being a great store of value as opposed to facilitating payments. Bitcoin, the largest cryptocurrency has been tussling with a similar narrative.

While countries have been putting all their resources to deliver a good central bank currency, the economists pointed out that they should entail multicurrency operability while being open to payment objects that are not specific to a single system. Paypal has time and again rendered unbeatable services to the people, competing with an already established system like that for global payments could be a task. If the central banks fail to address all of this, central bank currencies could be a “gigantic flop” the economists suggested.

Exploring Digital Rupee: RBI to Examine Introduction of CBDC in India

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India has finally started to warm the idea of a digital rupee. Thanks to the digital revolution that has taken the world of payment settlements by storm, the Reserve Bank of India [RBI] said that it is exploring if there is a need to issue a digital version of the rupee in the country.

Enter Digital Rupee

The apex bank of India asserted that it would work on a way to operationalize central bank digital currency [CBDC] if its need arises. The Reserve Bank of India on the 25th of January released a 142-page Booklet on Payment Systems, wherein it mentioned,

“In India, the regulators and governments have been skeptical about these currencies and are apprehensive about the associated risks. Nevertheless, RBI is exploring the possibility as to whether there is a need for a digital version of fiat currency and in case there is, then how to operationalize it.”

Digital Rupee is Not a Cryptocurrency

This was an interesting development considering how India has been rather apprehensive of the entire cryptocurrency industry. A quick primer: Previously in 2018, the RBI had imposed the infamous ban on cryptocurrency transactions that was eventually overturned by the country’s Supreme Court last March.

Even as the lack of clarity surrounding the space has led to chaos in the country, cryptocurrency adoption continues to soar especially after the SC’s decision.

However, CBDCs are traditional money, but in digital form; that is issued and governed by a country’s central bank. Hence, this development, in no way, depicts how friendly the laws will become with respect to cryptocurrencies as Digital Rupee makes an entry.

Over the past several years, there have been rapid innovations across the payments sector. This, in turn, has triggered central banks around the world to examine digital routes.

China, for instance, has been at the forefront of CBDC development. In a bid to encourage the usage of CBDCs several cities in the country are all set to planning to go through pilot testing of the digital yuan this year. Among many, Beijing, Shanghai are the major cities that is planning to join the testing to promote the digital currency before its launch in the near future.