"Even if CBDC is not used, we still need it for interlinking", conclude Canadian researchers. Meanwhile, the digital euro overcomes a key technical hurdle, as Israel and Taiwan say they won't launch CBDC until someone else does first.
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.
Canada's Central Bank published a paper discussing a hypothetical economy without public money (cash or CBDC). The researchers argued that such a monetary system would be prone to fragmentation, with different types of private money trading below or above par, leading to to loss of uniformity of money. Canadian central bankers pointed also to higher risks of market manipulation by the issuers of private money.
The research concluded that in the situation where cash use declines, an alternative, new form of public money such as CBDC does not necessarily need to be widely used either. Rather, it should perform an interlinking function by being economically relevant and universally accessible.
Complimentary to that conclusion, Sveriges Riksbank's research into the matter has proved that central bank digital currency (CBDC) can be economically feasible by comparing its electricity consumption to that of existing retail payment services such as card payments.
Private and public money partnerships can work sooner in Europe. Apple is now opening up its 'tap to pay' technology to rival mobile wallet developers across the EU, in what could be a significant development for the digital euro.
The European Commission had claimed that the tech giant may have been "abusing its dominant position" because iPhone users were only able to complete transactions through Apple Pay.
But in legally binding commitments that will last for 10 years, other third-party providers will be able to access this technology free of charge—a move that could "innovation and choice" for consumers.
Meanwhile, the Bank of Israel has announced that it's going to wait for another advanced economy to roll out a CBDC before it launches the digital shekel. Deputy governor Andrew Abir told the Reuters news agency:
"We're all waiting for the first Western central bank to pull the trigger, which is almost certainly going to be the ECB. And then you may see a rush of countries going forward with it."
Abir also admitted that it's unclear whether there will be much appetite for a CBDC among consumers, and "a good set of use cases" is needed to encourage adoption.
Similarly, Taiwan has declared that it's in no rush to launch its CBDC—and is not in competition with other countries worldwide to be first. Central bank president Yang Chin-long noted that some pilot programs held in other nations have yielded disappointing results, meaning digital payment policies should be rolled out "steadily."
At the same time, Yang Chin-long said that the works on CBDC are ongoing and the central bank plans to integrate the prototype with the country's digital vouchers platform that the Digital Affairs ministry has previously used for the distribution of stimulus programs.
In other developments, China and Kazakhstan have inked a memorandum of understanding to cooperate on digital currencies, with the latter country set to introduce a CBDC of its own some time next year.
Finally, North Carolina Governor Roy Cooper has vetoed a bill that called for the state to ban CBDCs.
Amid concerns about privacy, Cooper said efforts are continuing at a federal level "to protect consumers, investors and businesses"—and it'll take time for these standards and safeguards to be established. He wrote:
"This legislation is premature, vague and reactionary and proposes an end result on important monetary decisions that haven’t even been made yet. Instead of this bill, the legislature should have passed a budget to provide more funding for cybersecurity threats that actually exist now."
Goldman Sachs' global head of digital assets has revealed that the investment bank will launch three tokenization projects in the U.S. and Europe this year.
Mathew McDermott said the move is in response to growing interest from clients, but success will hinge upon creating products that investors want. He told Fortune magazine:
"There’s no point doing it just for the sake of it. The definite feedback is, this is something that actually will change the nature of how they can invest."
Blockchain technology can make changes to the nature of financial markets in much smaller communities. Palau, a tiny country in the Pacific region, is reportedly saving half of the costs required to acquire a traditional bond market infrastructure. The government has contracted Tokio-based Soramitsu to build a platform that would allow them to issue bonds to individual investors and manage principal and interest payments on a digital ledger.
And, to wrap up this week, just four months after launch, BlackRock's BUIDL token has now achieved a valuation of $500 million—becoming the first tokenized money market fund to achieve such a milestone. Based on the Ethereum blockchain, it allows institutional investors to gain exposure to U.S. Treasury bills.