December 2020

• CBR’s Digital Ruble Might Not Need SWIFT (December 28, 2020)

  The Central Bank of Russia (CBR) continues to work on their CBDC and Olga Skorobogatova, first deputy governor of the CBR, believes SWIFT may not be necessary for their digital ruble. Politicians in the West are considering broader sanctions which may prevent Russia’s use of SWIFT, so they have been working on SPFS, their own financial messaging network. The CBDC is currently intended to complement cash and non-cash rubles and it will be released as a trial in Crimea sometime in 2021. Also, the CBR said that the digital ruble could help reduce reliance on the U.S. Dollar. Go to Article.

• Second Digital Yuan Trial by PBoC Concluded (December 27, 2020)

  The People’s Bank of China has concluded its second trial for their CBDC as 100,000 Suzhou citizens received 200 digital yuan each and could spend it at numerous shops such as JD.com, Meituan, and Didi. Unlike the previous trial, Digital Yuan was able to be transacted offline with device to device contact which will help businesses with bad internet connections. As of November, PYMNTS wrote that 2 billion yuan has been used in roughly 4 million transactions in earlier trials in 2020 across four cities of China. Go to Article.

• Turkey to Begin Testing Phase for Digital Lira (December 26, 2020)

  Since 2019, Turkey has been working on a digital Lira for their central bank digital currency (CBDC). Conceptual research for the CBDC is completed and according to Naci Agbal, Turkey’s Parliament central bank governor, practical tests will begin in the second half of 2021. The CBDC is being developed as Turkey reaches inflation rates as high as 14% but Agbal is determined to lower the inflation rate to 9.4% by the end of 2021. It has been reported that 20% of the Turkish population has digital money but new research shows that this might be inflated. Go to Article.

• Turkey’s CBDC on the World Stage (December 25, 2020)

  Naci Agbal, Turkey’s chief central banker, told members of parliament that piloting for Turkey’s CBDC will begin in the second half of 2021 as the conceptual phase has already been completed. Turkey joins other fast-moving governments for CBDC as only Sweden, China, and the Bahamas have entered the pilot phase which is impressive as according to the Bank for International Settlements, 80% of central banks are considering CBDC. Relatively, Turkey has been keeping their CBDC secretive and details are murky at best. Go to Article.

• Japan’s Current Efforts Towards CBDC (December 24, 2020)

  Japan has been working on both the public and private sectors for the issuance of a digital currency. The ‘Digital Currency Forum’ in Japan, chaired by Hiromi Yamaoka, a former senior official in charge of payment and settlement systems at the Bank of Japan (BOJ), is working with around 30 major companies including MUFG Bank, Sumitomo Mitsui Banking Corp., and Mizuho Bank. The Forum plans to start a study in 2021 for its virtual currency and it will be testing the feasibility behind having a ‘common’ digital currency to help interoperability. Yamaoka hopes to have a digital currency by 2023 while potentially working with the BOJ to develop needed technologies. Go to Article.

• Russian Banks’ Concerns Over Digital Ruble (December 21, 2020)

  Russian Banks raise concern about how a digital ruble would affect them, but the Bank of Russia does not believe it will hurt its banks. Sber, Russia’s largest retail bank, calculated that banks could lose up to 4 trillion rubles (~$54 billion) in liquidity in the first three years of the project. Elvira Nabiullina, chair of the Bank of Russia, believes that if the Russian banks were to struggle, it would be due to inflation rates and general monetary policies instead of the digital ruble. Nabiullina also said that if a liquidity shortage in the banks were to arise, the Bank of Russia has tools to fix it. Russian banks are scared that the Bank of Russia will be too centralized and lesser banks will be competing with it for Russian people’s money. The Bank of Russia does not explain why they need a CBDC and it is not yet certain if the digital ruble will even happen, but it looks like it is the Russians’ fear of being left behind that has caused them to progress. If the digital ruble is approved by the regulator, Nabiullina said that the first pilot might take place at the end of 2021. Go to Article.

• The World’s Central Banks Watch the Sand Dollar (December 18, 2020)

  The Bahamas launched their Sand Dollar digital currency in October and so far, everything is functioning as it should. Advantages to the CBDC include easy transaction of currency over the complex geography of the country, not having a 4% fee included in purchases unlike most card networks today, and in the era of Covid-19, contactless transacting. Although there are only $130,000 worth of Sand Dollars in circulation, more and more merchants are joining the system and outside countries look in and analyze the country’s success. Go to Article.

• US Falls Further Behind in CBDC Race with China (December 18, 2020)

  By the end of 2020, the United States Secretary of the Treasury, Steven Mnuchin was expected to release legislation that could limit or ban self-custodied digital asset wallets. Senator-elect Cynthia Lummis (WY), other congressional members, and Coinbase’s CEO Brian Armstrong have warned against such legislation. Lummis suggests that the United States Central Bank Digital Currency (CBDC) is already behind China’s and such legislation would slow the United States CBDC even more. This would widen the gap between the United States and China in the race for a sustainable CBDC. Go to Article.

• EMTECH Helps Bahamas initiate First CBDC (December 17, 2020)

  EMTECH, an American Fintech startup, has released a platform called the Modern Central Bank Sandbox to help central banks in their pursuit to a Central Bank Digital Currency(CBDC). The platform is meant to introduce central banks to challenges like financial exclusion, unreliable cross-border payments, meeting know-your-customer, and anti-money laundering. This platform, with the aid of Microsoft Azure, helped the Bahamas apex bank release the first CBDC, the Digital Sand Dollar. Go to Article.

• Zhou Xiaochuan and Digital Yuan (December 14, 2020)

  According to Zhou Xiaochuan, the president of the Chinese Finance Association and former People’s Bank of China governor, the digital yuan is not meant to replace global fiat currencies. The digital currency electronic payment is intended to make cross-border trade and investment easier as well as exchange currency in real time. Go to Article.

• Digital Yuan Successes and the Dollar (December 14, 2020)

  Former governor of the People’s Bank of China, Zhou Xiaochuan, said that the upcoming digital yuan is not meant to replace existing fiat currencies but instead, function with current digital payment systems. Tests have been successful with over $300 million transacted as of last month and a record $3 million transactions over the weekend before this article was written. Facebook’s Diem is now focusing as a dollar-backed stablecoin which is something the digital yuan creators have taken note of. Go to Article.

• Digital Yuan Widely Used (December 13, 2020)

  The Suzhou municipal government gave $3 million worth of digital yuan to participants in their trial and resulted in roughly 20 thousand transactions through JD.com, a large e-commerce company in China. JD.com reported that 80% of participants born in the 1980s and 1990s used the platform to exchange digital currency over the weekend the trial occurred. As of November, the People’s Bank of China’s pilot programs have processed more than 4 million transactions, totaling roughly $300 million. Go to Article.

• Digital Yuan Trials Still Occurring (December 13, 2020)

  $3 million in digital yuan was airdropped to ten thousand residents of Suzhou. This airdrop allowed people to use the money for both online and offline shops, unlike previous airdrops of the digital yuan. JD Digits, an online retail store in China wanted to open its own blockchain and decided partnering with Xiong An, the upcoming futuristic city, would be its best entry point. It is likely that future airdrops will have new features such as connections to retirement accounts and social welfare programs. But as this money is still being given out for free, it’s hard to say if this system would gain traction if there’s no free DCEP. Go to Article.

• Sweden’s E-Krona Progress (December 11, 2020)

  Sweden is analyzing and working on potentially moving their entire country’s payments infrastructure to a digital currency. The country’s government is currently undergoing a digital currency review which they expect to finish by the end of November 2022. Sweden’s financial markets minister, Per Bolund, stressed how the digital payment system would be implemented in a safe way and that it is available to everyone. To test the feasibility of a CBDC, Sweden’s central bank, Riksbank, partnered with Accenture to announce a pilot platform for a digital currency known as the e-krona in late 2019. The testing of the first e-krona pilots began February 2020 and will remain testing until February 2021. Many in the government, such as Riksbank Governor Stefan Ingves believe that an e-krona should be considered legal currency, but he believes the idea should not only be backed by Riksbank but should also have strong political support. Go to Article.

• Risks For ECB CBDC (December 9, 2020)

  Bank of America analysts Alastair Ryan and Phillip Middleton explain how the European Central Bank (ECB) could suffer if they decide to convert to a CBDC. Ryan and Middleton claim that CBDC will present significant risks of financial stability challenging the countries’ monetary sovereignty. The analysts also pointed out that a government-issued digital currency would cut the link between banks and customers causing current accounts to become less important. Having only digital currency would not allow for deposits in banks and these banks would not have money to lend which disrupts their profitability of loan servicing. Over 80% of the world’s central banks have investigated CBDCs but should continue carefully assessing how the benefits and consequences will affect their economy before true implementation. Go to Article.

• Debating Government Involvement with CBDC (December 8, 2020)

  Chris Giancarlo, a former CFTC chairman believes that the future of a digital dollar depends heavily on close government collaboration with the private sector. Giancarlo states that money is as much of a social construct as it is governmental which stresses the importance of the private sector. Others such as Jerome Powell, the Federal Reserve’s Chairman claimed that he was not interested in the private sector’s involvement towards a digital dollar. Go to Article.

• PBoC Still Testing Digital Yuan Features (December 7, 2020)

  The People’s Bank of China (PBoC) is working with the Chinese city of Suzhou by giving out 20 million digital yuan to 100 thousand of its citizens. The offline exchange of digital yuan is also being tested through phone-to-phone contact. The Hong Kong Monetary Authority (HKMA), the city’s central banking institution, is working with the (PBoC) to test the digital yuan for cross-border payments. Go to Article.

• Offline Digital Yuan Transactions (December 7, 2020)

  China is testing a feature that allows their digital currency to be exchanged without an internet connection. The feature wants to replicate exchanging cash by tapping phones to transact the digital currency. The People’s Bank of China selected 100,000 Suzhou residents and gave them 200 yuan each to test the feature. Go to Article.

• JD.com and China’s CBDC (December 7, 2020)

  JD.com is the first online platform to accept China’s central bank digital currency (CBDC). The People’s Bank of China, which owns China’s digital currency, gave out 20 million yuan to lottery winners and it could be spent on JD.com’s online shopping platform. China is looking to be a cashless society as well as make cross-border payments more efficient with their CBDC. Go to Article.

• China’s Hope for the Digital Yuan (December 7, 2020)

  China is testing its digital yuan by giving $3 million’s worth to the city of Suzhou on December 11th. China’s hoping that it will offer policy makers more insights into consumer spending, greater control over money supply, and potentially boost the yuan’s use overseas. Goldman Sachs estimates that the DCEP could have a total potential user base of 1 billion people in a decade. This does not pose as competition to WeChat Pay and Alipay, two of China’s dominant money transaction apps. The digital yuan would be the money and the payment tools would be “wallets”. Go to Article.

• ECB CBDC Still Unsure (December 7, 2020)

  The European Central Bank (ECB) is working on implementing a digital currency sometime soon. Holger Neuhaus, head of market innovation and integration at the ECB, stated how by mid-2021, the euro system hopes to decide on whether to investigate further a potential CBDC for the ECB. This currency would complement cash and wholesale central bank deposits instead of replacing them. Neuhaus also mentioned there are still challenges particularly related to capital flow management and the relative remuneration. The ECB intends to collect feedback from public and private stakeholders to determine if a digital euro is necessary. The ECB president, Christine Lagarde urged the bank to come up with a decision on releasing a digital euro in January 2021. Go to Article.

• Swiss Trial Successful (December 4, 2020)

  Switzerland’s central bank is skeptical about CBDCs, so they decided to implement Project Helvetia which was run by the Bank for International Settlement (BIS), the Swiss National Bank (SNB) and Swiss bourse operator SIX. The project had a successful trial that entailed settling large scale transactions between financial institutions. Although this stage of the project is done, the next trial phase is scheduled for the third quarter of 2021 which will include cross-border payments. Global central banks are increasing CBDC research to ease domestic and international payments allowing them to go through the internet or possibly be offline. German Finance Minister, Olaf Scholz, stated how the digital euro is an ideal financial instrument to help meet the demand for digital currency throughout businesses in Europe and thus, urged the European Central Bank to speed up the production of its digital currency. Go to Article.

• Canada’s Motivation Behind CBDC (December 4, 2020)

  Canada is currently working towards a CBDC and Timothy Lane, the deputy governor of the Bank of Canada, says that the world might see it “sooner than expected”. While the Coronavirus emphasized how important CBDC are for contactless transactions, the main reason behind the Bank of Canada rushing to have their own CBDC is because they fear that other emerging digital currencies have the potential to undermine or disrupt the monetary sovereignty of Canada. Lane does not necessarily view rushing to have a CBDC as a race but more as a natural progression of finance and technology. Go to Article.