The IMF's been warned that it might have bitten off more than it can chew as it leads the charge on CBDC policies, as McKinsey claims the tokenization market in 2030 will be worth a lot less than previous estimates. Iran, Ethiopia and South Korea in CBDC news.
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.
UniCredit's CEO has thrown his support behind plans for a digital euro, on the condition that banks continue to have a central role in money flows.
Speaking in Milan, Andrea Orcel even went as far as saying a CBDC needs to be developed—and would be beneficial for the eurozone and financial institutions.
"It's a matter of sovereignty for Europe: we cannot not have a digital euro."
Orcel's biggest concern is how a digital euro would be established, and whether banks would be a core part of its infrastructure, just like they are with cash.
"If banks are fully integrated, i.e. 'Dear Customer, you can have cash or you can have digital' ... then it's seamless and it will be very good for Europe and very good for banks."
However, Orcel cautioned that, if this CBDC ends up operating on a parallel system, this would have huge ramifications for the financial sector at a time when their business models are already being upended.
Now... is the International Monetary Fund stretching itself too thinly? Potentially, according to its Independent Evaluation Office.
A report has warned a slew of new policies in recent years—including digital money—is placing an excessive burden on staff.
The IMF's budget has been broadly flat in real terms over the past 20 years, and efforts to lead the charge on CBDCs has mainly been funded through "reallocating resources, internal savings and staff overtime."
Recommendations include easing this pressure by collaborating more closely with other international organizations and producing less.
Largely excluded from collaborations with Western international organizations, Iran announced that will launch the pilot of its digital rial next month. It will work for banking customers and tourists on the local free zone, Kish Island for purchases and transfers with digital wallets and QR codes. The Central Bank of Iran has been developing its CBDC since 2022. The announcement specifically mentions that the sole objective of the CBDC is to improve the domestic payment infrastructure.
Over in Asia, the Bank of Korea has announced that it's investing $14.5 million in its domestic blockchain sector, with new efforts to create CBDC vouchers.
At the moment, vouchers are given to Koreans in need of financial support with things like childcare, tuition and housing. But they're mainly delivered on paper or cards, meaning they're susceptible to being misused.
It's hoped that this would both speed up settlement times and reduce fraud, meaning vouchers can be issued on smartphones. Similar methods are already used in China to drive the adoption of e-CNY.
Finally, the Ethiopian government has given the green light to establishing a legal framework for a CBDC. Earlier this year, it became the first country in Africa to fully embrace Bitcoin mining.
If you're a regular reader, you'll know that there's been some breathless enthusiasm about tokenization, and lofty predictions that this market could be worth $10 trillion by 2030.
But a new report from McKinsey strikes a much more cautious tone and puts its estimate for the end of the decade at just $2 trillion—80% less.
While the authors acknowledged that there are big benefits, they warned "there have been many false starts and challenges so far."
"Broad adoption of tokenization is still far away. Modernizing existing infrastructure is challenging, especially in a regulation-heavy industry such as financial services."
McKinsey went on describe the digitization of assets as "even more inevitable now as the technology matures"—but even in a bullish scenario, it believes the market will only be valued at $4 trillion in six years' time as loans, mutual funds, bonds and exchange-traded notes start to make the switch.
Shifting dynamics are also causing some companies to reassess their priorities, with Paxos laying off 65 employees—20% of its workforce—"to best execute on the massive opportunity ahead in tokenization and stablecoins."
Finally, the Swiss National Bank has declared that its digital franc pilot, which led to the issuance of tokenized bonds, was "very successful" and will now be extended by a further two years. The SNB's governing board added:
"The future success of the pilot project will largely depend on whether new financial market participants join, whether the volume of transactions increases, and whether additional financial market transactions are settled on this platform."
They went on to warn that the SNB is not committing itself to embracing this technology permanently.