Banking and CBDC Weekend Roundup 04/08/2024
Offline digital euro and eSIM, low traction for digital rupee, e-CNY extends use cases, Brazil's DREX and Pix integration. Ripple and Open Eden in T-bill tokenization.
For all the key details of new Distributed Ledger Technology (DLT) projects in the banking world, real-world asset (RWA) tokenization, stablecoins, and central bank digital currency (CBDC) updates, the Observers 'Banking and CBDC Roundup' has you covered.
CBDC Updates
The European Central Bank (ECB) is considering using embedded Secure Element (eSE) and embedded SIM (eSIM) in mobile phones to deliver offline functionality of the planned digital euro. ECB published a call to join expert discussions as a part of the two-year preparation phase of its retail CBDC project. The talks are expected to take place between the 16th and 30th of September and involve equipment manufacturers, telecoms, and observers from National Central Banks.
The idea of using SIM (Subscriber Identity Module) cards to support offline functionality of digital cash has already been tested in China. However, with modern phones switching to eSIM, the availability of such devices could perish sooner than the new European money is introduced. Meanwhile, embedded elements and chips are already used by various payment applications for storing various sensitive data.
Per our observations, the ECB is more attracted to the mobile phone-based offline functionality for the digital euro than other options, such as plastic or smart cards. However, it is subject to proprietary limitations by the device producers. In April, ECB called Apple to open up the infrastructure that powers iPhone payments.
The Reserve Bank of India (RBI) has already implemented offline functionality in its digital rupee pilot. It has also selected mobile phones to deliver the service, but probably due to the same issues with Apple, only Android devices are currently supporting offline digital rupee use.
To use digital rupees offline, the tokens in the digital rupee wallet must be marked as such. Interestingly, the digital rupee comes in fixed denominations, so users can only mark the amount that can be formed with the exact tokens in the wallet.
According to the most recent report of the RBI, the digital rupee pilot now has 5 million users and 420,000 participating merchants at the end of June, around 10% increase from the previous quarter.
China’s authorities haven’t recently updated on the number of e-CNY users. The People’s Bank of China (PBoC) last time reported 261 million registered e-CNY wallets in October 2021. The transaction values at that time were reported to be over RMB 87 billion (around $14 billion). At the end of May, the PBoC reported already 6.6 trillion (almost $1 trillion) cumulative transaction volume.
The country’s authorities are currently increasing use cases to make the e-CNY digital wallet as attractive as commercial payment methods Alipay and WeChat. E-CNY is used for various government support programs. Recently, several regions added wage payment functionality to it, and tax payments are currently being implemented.
DREX, the Brazilian CBDC, is also facing competition from well-established local digital payment methods. Pix, a payments system developed by the Central Bank of Brazil (BCB) has more than 150 million users, (equal to the Brazil’s adult population) leaves little use cases for the planned CBDC. During his presentation on Blockchain Rio 2024 conference, BCB President Roberto Campos Neto talked about a comprehensive super app that will aggregate the two services, as well as integrate with Open banking, AI and data monetization tools.
Tokenization News
Ripple will bring its tokenization business onto its XRPL ledger in collaboration with Open Eden platform. The company will issue TBILL tokens backed by U.S. Treasury bills, and Ripple will invest $10 million in the first batch.
Open Eden is the 5th largest U.S. treasury bill token issuer, with $90 million value locked. The largest protocols working with U.S. T-bills are Securitize, Ondo and Franklin Templeton, each locking around half a billion in value.
Ethereum is an absolute leader among blockchain networks holding around $1.5 billion in tokenized U.S. treasury bills, followed by Stellar with $427 value locked.
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