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 2/28/22 Robert Murray 2/28/22

February 2022

After the digital yuan’s release at the Beijing Olympics, there is speculation whether Russia will adopt the CBDC as a substitute for the SWIFT system. While this would boost use of the digital yuan, the digital currency may not be ready for cross-border transactions yet. The Russian adoption of the digital yuan could also be a motivator to create a digital dollar. Go to Article.
In response to President Vladimir Putin’s invasion of Ukraine, the US has banned many major Russian banks from accessing SWIFT, a mechanism that allows the US government to surveil cross-border fund flows. However, this move will likely cause Russia to adopt the digital yuan (e-CNY), bypassing SWIFT and CHIPS and undermining the US’s financial authority. Go to Article.
Congress has adopted a more positive and proactive attitude towards crypto regulations as discussions on cryptocurrencies become more mainstream. Policy makers’ urgency in regulating digital currencies depends on the risk level each currency holds. Go to Article.
Christopher Giancarlo, former Commodity Futures Trading commission (CFTC) Chairman, advocates for a digital dollar since foreign CBDCs could undermine US sanctions. Giancarlo has consistently endorsed a US CBDC beginning with his Digital Dollar Project in 2020. A digital dollar, Giancarlo says, will help maintain the US’s global economic dominance. Go to Article.
The International Monetary Fund (IMF) has warned Nigeria that using the eNaira for cross-border payments risks financial terrorism and money laundering. The IMF encouraged Nigeria to monitor possible risks of the CBDC. Go to Article.
Governor of the Federal Reserve System Lael Brainard insisted that the US must renovate its financial system and possibly explore a CBDC in a speech at the US Monetary Policy Forum. While Brainard didn’t express concerns about the growing crypto markets, she did mention that stablecoins may undermine the US’s financial stability. Go to Article.
FinTech startup M-DAQ has purchased cross-border payment provider Wallex to help expand into Southeast Asia and pave the way for an initial public listing (IPO). M-DAQ has also purchased a series of other companies for its Southeast Asia expansion and plans to continue obtaining companies before going public in the US, London, or Singapore. Go to Article.
Jamaica has announced that its CBDC will be named the Jamaica Digital Exchange, or Jam-Dex, with tagline “No Cash, No Problem!” and has also settled on a design for its logo. The name, tagline, and logo were each chosen from about 100 entries and selected for their uniquely Jamaican impressions. Go to Article.
Lael Brainard, member of the Federal Reserve’s Board of Governors, encouraged the US to develop its own CBDC as the People’s Bank of China (PBoC) continues its trials of the digital yuan. A US digital dollar, Brainard says, would ensure the dollar’s continued global dominance. Go to Article.
The digital yuan (e-CNY) has been used in about two-million-yuan ($315,761) payments a day at the Beijing Winter Olympics, where foreign visitors may use the CBDC via apps, payment cards, or wristbands. The Bank of China has also erected many ATMs to convert foreign banknotes into both digital and normal yuan. The US government is concerned about US athletes using the digital yuan, suspecting it may hold a security threat. Go to Article.
Russia has launched its digital ruble trial and has successfully completed its first CBDC transfers among citizens. This first stage of testing will allow users to open digital ruble wallets and complete transactions using digital ruble tokens, and the CBDC will eventually be available and free throughout the country. Russia has previously opposed crypto-friendly regulation and will continue to fight the adoption of crypto. Go to Article.
The Central Bank of Kenya has issued a CBDC discussion paper seeking comments from the public, indicating the country is considering a CBDC. Kenya already has a digital money market with the popular M-Pesa wallet, but a CBDC would allow the creation of “smart money” and act as a bridge between traditional and decentralized finance, as well as ease cross-border transactions. Go to Article.
The Zambian central bank expects to complete its CBDC research study in quarter four of 2022. A CBDC is attractive to Zambia and many other African countries because it could help narrow the financial exclusion gap and reduce transaction costs, as well as enhance the safety and efficiency of payment systems. Go to Article.
Singapore’s crypto-friendly and anti-money laundering regulations, low taxes, utilization of blockchain technology, and high rate of energy-efficient crypto exchanges across multiple platforms all serve to make Singapore the most crypto-friendly country in the world (named so by Coincub). Singapore also has a large crypto mining industry, an environmentally friendly electronic shipping industry, and is considering adopting a CBDC. Go to Article.
Ripple as joined the Digital Euro Association (DEA) to help provide technological expertise on CBDCs. While the DEA will likely not directly develop a digital Euro, it might influence its design. Ripple already has experience developing a CBDC in partnership with the Digital Pound Foundation, Bhutan, and Palau. Go to Article.
The Central Bank of Kenya has published a CBDC discussion paper and is seeking the public input on potential benefits and risks of a Kenyan CBDC. A CBDC could make cross-border payments cheaper and more efficient and protect the public from private cryptocurrencies or stablecoins but would involve several security risks. Go to Article.
Senator Pat Toomey states that China’s digital yuan may undermine the US’s sanctions and facilitate illegal money flows, as well as increase the country’s surveillance capabilities. Toomey’s warning comes as China’s international test of the digital yuan begins at the Beijing Winter Olympics. However, Toomey notes, China’s subsequent ban on crypto may help the US’s crypto markets. Go to Article.
While digital yuan adoption soared during the People’s Bank of China (PBoC)’ international test of the CBDC at the Beijing Winter Olympics, usage of the digital currency is still small. It seems that WeChat and Alipay, two popular payment platforms in China, are still dominating public interest. Go to Article.
The Venezuelan government approved a bill requiring local firms and individuals to pay 2-20% for cryptocurrency and foreign currency transactions. The initiative aims to incentivize the use of the Venezuelan bolivar, the country’s national currency, which lost 70% In value last year and has experienced hyperinflation in the last decade. Go to Article.
The Federal Reserve’s white paper on CBDCs was disappointingly inconclusive and stated that the Fed wouldn’t move forward with a digital dollar without direction from Congress and the White House. Stablecoins and cryptocurrencies both hold risks that could be mitigated with a CBDC. It will likely be years before a decision on a digital dollar is made. Go to Article.
Despite China’s crackdown on crypto, Asia remains a safe haven for crypto trading and mining without China. Singapore is a leader in progressive regulatory framework for crypto, Thailand has found success with DeFi, and Indonesia (though still undecided about crypto regulation) has experienced massive growth in crypto transaction volume. Go to Article.
The armed forces of Myanmar (in control since 2021) plans to release a CBDC to help the local economy. Military officials are undecided on whether to work with local companies or release a token on their own. Its unclear whether a CBDC would be adopted Myanmar citizens, especially as the country faces instability from the COVID-19 pandemic and the overthrow of the civilian government. Go to Article.
The Federal Reserve Bank of Boston and the Digital Currency Initiative at the MA Institute of Technology have published their findings from the first phase of their CBDC research initiative, Project Hamilton. The initiative has succeeded in creating a scalable CBDC research model. Project Hamilton is a multi-year collaboration between the two institutions and is not affiliated with the Federal Reserve’s investigation into CBDCs. Go to Article.