Banking and CBDC Weekly Roundup: 08/09/2024
Russia's biggest bank is stepping up support for the digital ruble. Meanwhile, a new Citi report suggests demand for CBDCs among financial institutions is waning... and fast.
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
Plans for a digital real in Brazil have been plagued by multiple delays—but a new update from the central bank indicates there's newfound momentum.
Over a dozen companies are going to be involved in the second phase of testing for Drex, including the likes of Visa and Santander.
International trade, foreign exchange, real estate and even transactions with automobiles are among key themes for the next round of trials.
Meanwhile, there's been a considerable increase in the number of consumers and companies putting Russia's digital ruble through its paces.
It's been confirmed that the country's biggest financial institution, Sberbank, will begin using this CBDC with its clients from early next year.
A new wave of testing by the nation's central bank means 9,000 people and 1,200 firms are experimenting with this digital asset in real-world scenarios.
All of this comes as Russian President Vladimir Putin moves quickly to relax laws surrounding crypto—meaning the likes of Bitcoin can be mined and used for international transactions. The isolated nation is looking to mitigate the impact of sanctions imposed following the war in Ukraine.
Elsewhere, local media reports in China suggest the digital yuan has now been used to complete 7 trillion yuan (nearly $1 trillion) in transactions. That figure's accurate up to the end of June, and is reportedly four times higher than a year earlier.
There's a bombshell statistic in a new Citi report that's worth your attention—and it suggests that demand for CBDCs is diminishing fast among financial institutions.
While 52% of respondents in 2023 said they need a CBDC for digital asset settlements, that figure's dwindled to just 15% this year. All of this indicates that private stablecoins and tokenized money market funds are proving much more popular options.
Meanwhile, the International Monetary Fund has set out its vision for ensuring that CBDCs offer as much privacy as possible—an issue that's repeatedly topped the rankings of consumer concerns.
Acknowledging that countries will take differing approaches during the design process, the authors wrote:
"Central banks may be well positioned to strike a good balance between CBDC data use and privacy protection as CBDC systems could start as a 'clean slate.' In designing CBDC, central banks may wish to offer a variety of CBDC privacy settings to cater to the privacy needs of different users. In setting up the CBDC ecosystem, central banks should focus on addressing externalities that may exist in CBDC data use, and on shaping the incentives of the stakeholders in the CBDC ecosystem."
Tokenization News
The New York Fed has published a blog post that suggests the financial sector may be "on the cusp of profound technological change" as tokenization continues to gain momentum.
Authors Christopher Desch and Henry Holden argued that this innovation could lead to greater automation as well as faster settlement speeds, but cautioned that a fully digital transition would take time—and efforts could suffer a setback if there's "insufficient coordination and oversight among industry and regulators."
Meanwhile, data from RWA.xyz shows the value of tokenized Treasury notes has now exceeded $2 billion—doubling in the space of five months. As you might expect, a lot of this market momentum has been driven by BlackRock's USD Institutional Digital Liquidity Fund, otherwise known as BUIDL for short.
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