May 2021

• Ex-Head of China’s Digital Yuan Effort Says CBDCs May Operate on Ethereum (May 31, 2021)

  The former head of the digital currency initiative at the People's Bank of China, Yao Qian, said central bank digital currencies could one day operate on blockchain networks like Ethereum, which would allow them to incorporate smart contract functionality. Yao cautions that the number of security incidents arising from smart contracts vulnerabilities shows the technology still needs to mature. As such, Yao believes central banks should take a cautious approach, starting with simple smart contracts and building complexity as security and legality become more assured. Go to Article.

• OKex Embraces Brazil’s Official Fast Payments System PIX (May 28, 2021)

  Increasing numbers of offshore cryptocurrency exchanges are embracing Brazil’s instant payments infrastructure, PIX. Likewise, OKEx announced a strategic partnership with local payments firm CuboPay and Crypto.com’s peer-to-peer platform Localbitcoins, allowing them to facilitate Tether ($USDT) purchases in exchange for Brazilian real via PIX. These integrations come as the Central Bank of Brazil, or BCB, published preliminary guidelines for a central bank digital currency, or CBDC, on May 25. With the president of the Central Bank of Brazil, Roberto Campos Neto, previously emphasizing the role of PIX in supporting its CBDC ambitions through providing “an instant payment system that is efficient and interoperable,” the BCB’s response to PIX being adopted by off-shore cryptocurrency exchanges remains to be seen. Go to Article.

• Swedish Central Bank Working with Handelsbanken for Digital Coin Trial (May 28, 2021)

  Sweden’s Central Bank, Riksbank, will be collaborating with lender Handelsbanken to test their digital currency, the e-krona. This research will be focusing on how the e-krona will handle everyday payments. At this point, Sweden and China are the only countries currently trialing their respective eCurrencies. Go to Article.

• Bank of Canada sees No Strong Case for a Digital Dollar (May 27, 2021)

  The Bank of Canada does not see a strong reason for issuing a central bank digital currency at the moment. The Canadian Central Bank has been researching CBDC implementations, but has not found a strong case for issuing a CBDC. Furthermore, in October of 2020, the Bank of Canada released a list of risks associated with releasing a digital currency, paying special attention to threats arising from CBDC storage issues and competition between crypto exchanges and banks in terms of attracting users. Go to Article.

• Big Tech, not Cryptocurrency, is the real threat to Central Banks’ Autonomy (May 27, 2021)

  Although crypto trading volumes are increasing, many central banks do not see the rise of crypto trading as a serious economic threat. Many banks, including the Danmarks Nationalbank, are more concerned by advancements major tech companies are making in the payments field. Denmark has been exploring the possibility of a central bank digital currency since 2016 and have concluded that a CBDC solution would do little to improve the current financial infrastructure of the country. Other central banks around the world have voiced different takes on cryptocurrencies. The Central Bank of Kuwait issued a warning on crypto usage last week, while Canada’s central bank said it considers Bitcoin and other crypto-assets to be high risk “because their intrinsic value is hard to establish.” Go to Article.

• Bank Indonesia Plans to Launch its Central Bank Digital Currency (May 26, 2021)

  Bank Indonesia is planning to launch a digital version of their national currency, the rupiah. Since 2017, the Indonesian government has completely banned cryptocurrencies for payment purposes. However, it did not prohibit transactions among cryptocurrencies. BI plans to launch a digital rupiah currency as the only legal digital payment tool. Currently, there is no official timeline for the currency’s release. Go to Article.

• US Lawmakers Introduce Bill to Require Digital Dollar Updates (May 26, 2021)

  A pair of U.S. congressmen, Reps. French Hill (R-Ark.) and Jim Himes (D-Conn.), have introduced a bill that would require the Treasury Department to evaluate the digital yuan, digital dollar and the fiat dollar’s role in the global economy. Additionally, the bill, dubbed the “21st Century Dollar Act” will require the Treasury Department to describe progress made by major foreign central banks on their respective CBDCs. This report will be sent to the Senate Banking and House Financial Services committees. Go to Article.

• US Must Win CBDC Race to Maintain Dollar’s Global Reserve Currency Status (May 25, 2021)

  The Fed’s governor has argued that The United States must be at the forefront of developing a central bank-issued digital currency, or CBDC, to bolster the role of the U.S. dollar as a global reserve currency. Recently, Lael Brainard, the Federal Reserve Governor, announced that the Fed will be sharpening its focus on four key areas of CBDC development: the growing role of digital private money, the migration to digital payments, plans for the use of foreign CBDCs in cross-border payments, and concerns about financial exclusion. In her announcement, Brainard also emphasized potential risks associated with the widespread adoption of private stablecoins, suggesting that a CBDC could provide the utilities and benefits associated with existing USD stable tokens without undermining the government’s control over monetary policy. Go to Article.

• South Africa’s Central Bank Preliminary Study for Retail CBDC (May 25, 2021)

  On May 25th, South Africa announced that the South African Reserve Bank has begun studying the desirability and appropriateness of central bank digital currencies within the country. South Africa’s CBDC study is expected to last until 2022 and will potentially align with the existing institutional digital payments pilot under the aegis of “Project Khokha.” Back in June 2018, the SARB launched a pilot test for Project Khokha — the country’s tokenized fiat interbank payment system. The project utilizes the Ethereum-based Quorum infrastructure to test digital clearing and settlements for interbank payments. Go to Article.

• South Korea Seeks Tech Partner to Build CBDC Pilot (May 25, 2021)

  South Korea is seeking a technology partner to help advance its pursuit of a Central Bank Digital Currency (CBDC) through its apex financial institution, the Bank of Korea. The tech partner will be choose based on an open bidding process. The test program is expected to run from August to December of 2021. Go to Article.

• South Africa’s Central Bank Starts Research on Retail-Focuses Digital Currency (May 25, 2021)

  South Africa’s Reserve Bank will be studying the pros and cons of releasing their own central bank digital currency, which will be called the digital rand. More specifically, this research aims to gauge any implications for policy, regulation, security, and risk management. The central bank has been working on a blockchain-based system for interbank clearance since 2018. Go to Article.

• China’s CBDC Could Give Beijing ‘Leeway for Economic Retaliation’ (May 25, 2021)

  Yaya Fanusie, a senior fellow at the Center for a New American Security, believes that China’s central bank digital currency could give the country more leverage over international companies that are required to use it. Fanusie also believes that any fears that a Chinese CBDC could displace or undermine the U.S. dollar as the world’s reserve currency are “overblown.” Go to Article.

• US has CBDC Hurdles to Clear (May 24, 2021)

  Lael Brainard, the Federal Reserve Governor, believes that the United States is not ready for a digital dollar. First, Brainard claims that there are a few policy considerations to tackle, such as upholding access to “safe central bank money” payment and clearing efficiency, complementing bank deposits, increasing financial inclusion and protecting privacy and financial stability. Brainard also warned that the rise of private money could ultimately harm the American payment system, leading to rising costs for businesses and consumers. Brainard's comments came just days after Fed Chairman Jerome Powell called for greater public input on state-run digital currencies. Go to Article.

• US Fed Aims to Publish Discussion Paper on CBDC (May 21, 2021)

  The Digital Dollar Foundation and Accenture have teamed up to conduct CBDC trials in the United States. Over the next year, five CBDC pilot programs will be carried out with the goal of retrieving US-based data to inform policymakers on how to develop a domestic digital currency. While the U.S. Federal Reserve has been conducting research into the technology and applications for a CBDC, the United States lags behind the digital currency initiatives currently ongoing in numerous other jurisdictions. Go to Article.

• State Digital Currency to Get More Trust than Cryto (May 20, 2021)

  Former Russian Prime Minister and President Dmitry Medvedev believes that it is time to recognize the importance of crypto and CBDCs. The official pointed out the crucial role of digital transparency associated with emerging financial technologies like public cryptocurrencies. While Medvedev is confident that CBDCs like a digital ruble would be associated with more trust than crypto, some major crypto players think otherwise. Changpeng Zhao — CEO of the world’s largest cryptocurrency exchange, Binance — believes that CBDCs would be less attractive for the crypto community due to limited freedom and uncapped supply. The news comes shortly after the Bank of Russia's first deputy governor Olga Skorobogatova confirmed the central bank’s plans to complete a digital ruble prototype by the end of 2021. Go to Article.

• It is Probable UK Will Launch a Digital Currency (May 14, 2021)

  Sir Jon Cunliffe, Britain’s deputy governor for financial stability, announced that the United Kingdom will be releasing their own digital currency, which is often dubbed “Britcoin.” Cunliffe believes that the state would need to issue some form of digital cash to retain citizens’ confidence in the availability of public money. Thus farm the central bank has only published a discussion paper and announced a taskforce to explore a CBDC. Go to Article.

• Central Bank of Bahrain and JPMorgan to Work on Digital Currency Pilot (May 13, 2021)

  The Central Bank of Bahrain is collaborating with JPMorgan and the Arab Banking Corporation BSC, or Bank ABC, in a pilot scheme to introduce an instant cross-border payment solution based on digital currency technology. The pilot aims shorten settlement processing time while involving transferring funds from and to Bahrain in U.S. dollars for payments from buyers and suppliers. JPMorgan has been aggressively promoting blockchain technology for months, having worked with banks in both Singapore and India. Go to Article.

• Hong Kong to Expand Pilots for Cross-Border Use of Digital Yuan (May 13, 2021)

  The Digital Currency Institute of the People’s Bank of China and the Hong Kong Monetary Authority have been successfully testing the digital yuan for cross-border payments. The next phase of the pilot will include broadening and deepening the use of the digital yuan for cross-boundary payments. Go to Article.

• Hybrid Banknotes Can Bank Cash and Crypto (May 12, 2021)

  As central bank digital currencies (CBDC) become reality and the use of cryptocurrencies for payments becomes more mainstream, how do we make sure these new digital monies are available to everyone, everywhere, at all times? To date, the only payment technology that can do this is cash. Currently, many experts believe that the only solution would be to combine the advantages of banknotes and digital currencies as a way to help transition into a cashless society; many believe that a hybrid banknote would be able to achieve this. Hybrid banknotes would work like cash, but would include some digital marker – let that be a QR Code or a RFID chip – to connect to a blockchain network. Go to Article.

• Israel’s Central Bank Considers Issuing a Digital Shekel (May 11, 2021)

  The Bank of Israel is accelerating its research into central bank digital currencies (CBDCs) and making preparations in case it decides to issue a digital shekel. The bank is readying an action plan so it will be prepared should the benefits of issuing a national digital currency outweigh the costs and potential risks. The Bank of Israel has been discussing a CBDC since 2017. Go to Article.

• Hungary Plans Bitcoin Tax Cut as Part of Economic Recovery Program (May 11, 2021)

  Hungarian lawmakers plan on cutting Bitcoin taxes in half as early as 2022 as part of their economic recovery program. As part of the post-COVID-19 relief efforts, lawmakers are considering reducing taxes on cryptocurrency trading to 15% of income, down from the current rate of 30.5%. Such a move would make Hungary a far more competitive jurisdiction with respect to crypto-based capital gains taxes. Similarly, Hungary has been involved in preliminary conversations regarding developing a central bank digital currency. Go to Article.

• MakerDao on Collision Course with Banking Regulators (May 10, 2021)

  MakerDao, a decentalized bank, made its first “real world” loan in April. The loan was to Americans who wanted to fix and flip residential real estate. Like any other bank, MakerDAO creates deposits and lends them out. However, unlike traditional banking, MakerDAO documents its dollar-denominated deposits, known as dia, on a decentralized ledger, the Ethereum blockchain, and then lends them using smart contracts. Go to Article.

• Card-Based Digital Yuan Wallet Manufacturer to Use Fingerprint ID Tech (May 10, 2021)

  China’s Chutian Dragon, a maker of high-end smart cards, plans to make a card-based wallet for the digital yuan with fingerprint identification technology from Norway’s IDEX Biometrics ASA. It is unclear whether the People’s Bank of China (PBOC), the country’s central bank, was involved in the collaboration. Chutian Dragon’s move is one of the many recent efforts from Chinese tech companies to support the mass adoption of the digital yuan. The AliPay-backed online payment services within the digital yuan mobile app have gone live, and all four major commercial banks in China already allow customers to pay for food delivery and online shopping services with their digital yuan apps. Go to Article.

• Alipay Set to Allow Users to Test China’s Digital Yuan (May 10, 2021)

  China’s e-payment, Alipay, will allow some users to link their accounts to the country’s digital yuan app. This feature is a result of MYbank’s participation in the country’s expanded digital currency electronic payments testing protocols. Ant Group has been collaborating with the PBoC on digital currencies sine 2017. China’s central bank is reportedly using the firm’s mobile app development environment to create digital yuan-linked apps. However, the testing arena is dominated by six state banks, some of whom have created user wallets for the digital yuan. Go to Article.

• Kazakhstan Opens Public Consultation for Central Bank Digital Currency (May 6, 2021)

  The National Bank of Kazakhstan, or NBRK, published Wednesday a report on a digital tenge pilot project and opened a public consultation on the potential central bank digital currency. The bank emphasized that the CBDC is not intended to replace either cash or cashless payments but would rather be an alternative used in parallel with existing payment solutions. The bank will first conduct a comprehensive study of benefits and risks related to a potential CBDC. Kazakhstan authorities initially announced that the government started considering a national digital currency in July 2020 alongside plans to increase investment in cryptocurrency mining. Go to Article.

• Bahamas Central Bank Prepares National Sand Dollar Push for Summer (May 5, 2021)

  The Central Bank of the Bahamas is preparing a national push for its digital currency this summer to get more Bahamians signing up for the Sand Dollar. To do this, they are implementing improvements that will help integrate the Sand Dollar ecosystem into the preexisting ones. One way to achieve this will include connecting mobile Sand Dollar wallets with commercial banking systems. These improvements come months after the CBDCs official roll out in October of 2020. Go to Article.

• Georgia’s Central Bank is Exploring ‘Digital Gel’ CBDC (May 5, 2021)

  The National Bank of Georgia (NBG) said that it is considering launching a central bank digital currency, or CBDC. The NBG will invite fintech firms and other financial institutions to participate in the project, named "Digital Gel" after the symbol for the country’s fiat currency, the lari. The Bank plans to conduct extensive testing of the CBDC to ensure a smooth rollout, but did not provide any details regarding a timeline for launch. Go to Article.

• TaiwanBinance CEO Warns of CBDC Drawbacks as Digital Dollar Pilots Proceed in US (May 4, 2021)

  CBDCs will never offer the same freedom of use as cryptocurrencies like Bitcoin, according to Binance CEO Changpeng Zhao. Many of the key features of cryptocurrencies like Bitcoin – freedom of use and limited supply – will not be offered by central bank digital currencies. These differences make central bank-issued digital currencies unattractive to people in the crypto industry. Zhao’s remarks on CBDCs come as the U.S. moves forward with its CBDC plans, with the nonprofit Digital Dollar Project announcing five pilot digital dollar program. Go to Article.