Central Bank Digital Currencies

Understanding and Modeling CBDCs

Over 70 countries are conducting R&D on central bank digital currencies (CBDCs) around the world. Through our organic analytical resources and cryptocurrency modeling technologies, Terranet’s CBDCs Model offers customers the unique ability not only to fully evaluate and understand the underlying technology upon which a CBDC is built, but also to generate a “digital twin” of that technology and its highly complex macroeconomic ecosystem. From that digital twin, we will be able to fully model, simulate and perform predictive analysis of a CBDC’s usage patterns, domestic and international capital flows, and pricing and money supply dynamics.

Pairing this digital currency model with real world and simulated economic data inputs and technical parameters, we are establishing a comprehensive monitoring and simulation platform, termed the Digital Twin Analytical Platform (DTAP), that will identify characteristics of CBDC ecosystems and provide a “digital proving ground” for a wide variety of global impact scenarios. We envision this simulation and analysis platform to be accessible to member organizations from the financial, regulatory and academic sectors.

We are offering membership subscriptions to our research newsletter. If you are interested in joining our research platform as a sponsoring member, please email us for an introductory free trial, which includes a subscription to our monthly newsletter and periodic updates on our research initiatives.

We are rapidly growing our team of economists, systems engineers, scientists and blockchain experts to observe, study, and model the fast-emerging CBDCs. Please email us to learn more about our platform and to meet members of the team.

CBDC News

Robert Murray 4/30/21 Robert Murray 4/30/21

April 2021

Although the Bank of England claims that it is unsure on a path forward regarding a central bank digital currency, the entity is looking to hire at least seven CBDC-related job positions. These jobs appeared on the BoE website earlier that week. Earlier in the month, Her Majesty’s Treasury and the Bank of England jointly worked on CBDC-related research, unveiling a CBDC task force. Go to Article.
The European Investment Bank issues a 100-million euro digital bond as part of a trail for their central bank digital currency. The bank also revealed plans for further experiments in the future, noting that its efforts are part of a push to provide evidence of use cases for a European CBDC. The wait for a digital euro may still take some time, as the European Central Bank did not participate in the pilot. Go to Article.
The United States does not plan to race China to develop a CBDC. The Federal Reserve’s chairman, Jerome Powell, recently stated at a policy meeting that it is better to “get it right” than be the first to develop a CBDC. Powell also commented that China’s digital currency format is not one that would work in the United States as it allows the government to track every purchase made. Go to Article.
Mastercard is aiming to help governments evaluate the utility of central bank digital currencies outside of just payments. Mastercard has a history in working with CBDCs; in February, the Bahamas launched an option for citizens to load the country’s CBDC onto a prepaid Mastercard. Gemini, a cryptocurrency exchange, recently disclosed that Mastercard would be the network behind its crypto rewards credit card, which will be released late 2021. Go to Article.
Ethereum software company ConsenSys has formed a technical partnership with Kakao’s Klaytn blockchain, with a goal to develop a private platform for the issuance of a South Korean central bank digital currency, or CBDC. The project will also encompass making Klaytn compatible with Ethereum layer-two solutions and will look to build interoperable bridges with other blockchains. Klaytn is a fork of the Ethereum blockchain; however, Ethereum’s public, decentralized attributes are generally not desired by governments or institutional entities. A private chain is being constructed to “reflect the rising concern around data protection among financial institutions,” according to a press release. Go to Article.
At the Digital China Summit, Ant Group disclosed that they had been working with the country’s central bank to develop the nation’s digital currency since 2017. MYbank, an Ant-backed online bank, is one of the operational institutions to offer the digital yuan. In June 2019, China’s digital currency institute began to use Ant’s mobile app development platform mPaaS (mobile platform-as-a-service) to develop its app. Tencent Holdings had also been working on the project. Go to Article.
The Chinese eCommerce giant JD.Com has been paying some of its employees using the digital yuan a few months as of April 2021. Additionally, JD has used the digital currency for business-to-business payments and cross-bank settlements. JD began accepting digital yuan as a payment method on its website in December, taking in around 20,000 DCEP-funded orders in just the first week. They are one of the many firms involved in CBDC’s early trials. Other companies included DiDi Chuxing, a ride-hauling service, and Bilibili, a streaming platform. Both Alipay and WeChat Pay are not included in the trail. Go to Article.
Six of China’s largest banks are promoting the digital yuan as a superior means of payment to the country’s two leading payment providers, Alipay and WeChat Pay. This support was made publicly just before an online shopping festival on May 5. The rollout of China’s digital yuan will allow the central government to gain control over a share of the massive amount of financial data that is being horded by both Alipay and WeChat Pay, as they account for nearly 98% of mobile payments in China. Go to Article.
Four years after Norway’s Central Bank first began researching CBDCs, the bank believes it is now ready for the next step. Over the following two years, Norway plans to move ahead and start testing technical solutions for a central bank digital currency. At this point, no timeline has been released. This announcement came a month after the Bank of Japan announced plans to begin experimenting their own CBDC. Go to Article.
PwC’s 2021 CBDC global index report surveyed the level of central-bank maturity in deploying cryptocurrencies based on two factors: retail applications and interbank applications. Bahamas’ Sand Dollar ranked highest in terms of retail applications when compared to the other developing CBDCs, with a score of 92. Cambodia came in second with a score of 83, followed by China and Ukraine, which scored 75 and 71, respectively. Much of the Bahamas’ high score is attributed to its successful implementation of the Sand Dollar in October 2020. Thailand and Hong Kong tied for first in the Interbank rankings with a score of 80. Despite China starting their development in 2014, they did not make it to the top ten. Go to Article.
China is planning on giving foreign athletes and visitors a chance to use its digital version of the yuan at the 2022 Beijing Winter Olympics. At its current state, the digital yuan has been launched in 10 cities throughout the country, covering around 100 million people. Currently, the People’s Bank of China is focused on how the digital yuan could be used in their domestic economy. Despite this, many experts with China have proposed that the digital yuan could advance the country’s influence on a global scale. With this rollout, China could be the first major economy to create an official, digital version of its currency. Go to Article.
Russia’s central bank recently released an in-depth roadmap for payments innovation in the country for the next three years. The digital ruble, Russia’s CBDC, is prominently featured. The Bank of Russia plans to release a prototype of the currency by the end of the year. Furthermore, they plan to release APIs which will allow the digital ruble to connect with any other private payment platform. Go to Article.
Sweden plans to release the e-Krona, the digital version of the Krona, in the next 5 years. The pilot is expected to be completed by early 2022. Sweden is leading Europe when it comes to adopting digital payments, with the country considering becoming a completely cashless society. In the past year, cash usage in the country dropped to its lowest level ever. Go to Article.
The European Central Bank published the results of a public survey which found that most European residences was a digital Euro, but only if it can be build with elements of privacy. It also highlighted that the public wants the Digital Euro to be integrated into existing banking and payment systems. Users also pointed at security, cross-border payments across the EU, no additional costs, and usability in offline conditions as the other important features they want to see in the Digital Euro. Go to Article.
Kasikornbank, or KBank, one of Thailand’s largest banks, has begun experimenting with DeFi services as part of its business expansion plan. This experiment will be run by KBank’s tech subsidiary, Kasikorn Business Technology Group, or KBTG. Ruangroj Poonpol, KBTG’s chairman, believes that DeFi could hold the key to improving financial inclusion for people in Thailand via access to innovative financial services. With DeFi adoption, KBank is looking to expand its presence in Southeast Asia, especially in countries like Vietnam where about two-thirds of the country remains unbanked. Go to Article.
The State Bank of Pakistan has began studying the possibility of a central bank digital currency. The governor of the bank, Reza Baqir, stated that their main motivators for this decision are financial inclusion throughout the country and fighting money laundering in the country. In response to a question regarding Stripe, the world’s largest fintech, and its reported interest in the Pakistani market, Baqir said that the company would be “very welcome.” The State Bank of Pakistan aims to release the CBDC by 2025. Go to Article.
A Bank of Japan (BOJ) official said on Thursday there is scope to lay out “common rules” around central bank digital currencies (CBDCs) with the world’s seven major central banks. These rules would provide the groundwork for cross-border payments. Since CBDCs play different roles in different economies, Japan emphasized the importance of creating common rules among countries with similar economic structures. Both the U.S. Federal Reserve and the European Central Bank were listed. Go to Article.
The People’s Bank of China and the Hong Kong Monetary Authority have begun testing the digital yuan for cross-border transfers. This is possible due to a DLT-based cross-border corridor network that Hong Kong and the Bank of Thailand have been developing over the past two years. Hong Kong has also announced their Multiple CBDC Bridge Project. This is a wholesale CBDC project that will be a collaborative project with the Bank of Thailand, the Central Bank of United Arab Emirate, and the People’s Bank of China. It aims to foster a collaborative environment for central banks to build DLT-based solutions. Go to Article.
The first phase of Japan’s CBDC pilots will have been completed by March 2022, the central bank states. Following initial preparations to test the technical feasibility of core CBDC functions and features in early 2021, the Bank of Japan began CBDC testing in its first phase on April 5th. According to the original CBDC experiment roadmap, the bank expects to start a pilot CBDC program involving payment service providers and end-users after the completion of the second phase of testing. Go to Article.
In a press release from April 2, the Bank of Thailand announced plans to release their own central bank digital currency, with preliminary testing protocols scheduled to begin in the second quarter of 2022. The Bank of Thailand also called for pubic comments on the proposed CBDC roadmap. Speaking during the Friday briefing, Vachira Arromdee, assistant governor of the financial markets operations group at the BoT, said that the central bank sees CBDCs as a means of providing greater access to financial services in the country. According to Arromdee, the digital baht project could be implemented within the next three to five years. Members have until June to submit their comments on the BoT’s plans for a CBDC. Go to Article.
According to a report released by Bank of America, CBDCs could potentially facilitate powerful, directed “money drops” and raise inflation expectations. Furthermore, the report shows that a countries’ adoption of CBDCs may create extra demand for Bitcoin and other large cryptocurrencies. The report highlights other advantages of CBDCs, including but not limited to their impact on disadvantaged populations. Go to Article.
Bitcoin’s recent surge in China had caused renewed interest in the nation’s digital yuan project, despite the fact that the two are foundationally opposite. Although cryptocurrencies are decentralized and autonomous, central bank digital currencies like the Digital Yuan are centralized and heavily monitored. Go to Article.
The Hong Kong Monetary Authority and the People’s Bank of China have conducted technical tests on the cross-border use of China’s CBDC, the Digital Yuan. This news came shortly after the PBoC proposed a set of global CBDC rules, which highlighted the need for CBDCs to provide interoperability of national digital currencies. This announcement also comes a year fter China first debuted its internal Digital Yuan pilots, showing the aggressive speed at which China has developed. Go to Article.
The Eastern Caribbean Central Bank, the main financial institution of the Eastern Caribbean Currency Union, has launched DCash, the digital version of the Eastern Caribbean dollar. Although the Eastern Caribbean Dollar is the official currency of eight countries, the DCash will initially be used in only four: Grenada, St Kitts and Nevis, Antigua and Barbuda, and Saint Lucia. Following this rollout, the ECCB states that the next step is to fully incorporate DCash into the financial infrastructure of the four participating nations. Go to Article.