Another U.S. state pushes for CBDCs to be banned — as a tokenization platform secures a crucial license for rolling out in the EU. Also in this issue: an overview of developments in China, Russia, and the EU central bank digital currencies.
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' weekly has you covered.
We start in the US, where another state has introduced a bill that calls for CBDCs to be banned entirely — even though the Federal Reserve has no plans to launch one.
Missouri's bill would prohibit public entities from accepting payments using digital dollars, or participating in trials to test them.
The treasury would also have to hold at least 1% of reserves in physical gold and silver — and all of this comes as other states dabble in adding Bitcoin to their balance sheets.
Even though there's been scant information on how a potential U.S. CBDC would work, critics have argued they could erode privacy and be used to secretly monitor consumer transactions.
The European Central Bank has published a second quarterly report outlining the progress it's making on preparing for a digital euro.
Consumers, retailers and payment providers have given their views — and this has been reflected in an updated rulebook "aimed at harmonizing digital euro payments" across the continent.
Applications have now closed to businesses interested in helping to build this CBDC, with successful bidders due to be announced next year.
Meanwhile, further online surveys are planned to canvass the views of small merchants and vulnerable consumers — driven by concerns that a push towards digitization could isolate those still reliant on cash.
Questions also remain surrounding holding limits for this CBDC, with policymakers worried that larger balances could undermine financial stability. The inputs from the previous limit calibration sessions were incorporated in the current design, with a plan to develop a more comprehensive framework in the future. The most commonly discussed level is at 3,000 euro however a recent study paper co-written by a Deutsche Bundesbank staff suggest an even lower 1,000 euro limit.
Finally, it's worth remembering that the ECB hasn't actually made a firm commitment on whether to launch a CBDC just yet — and as the roadmap above shows, a decision may only be made in October 2025. However, from what we observe from the progress reports, the probability of launch is very high.
In Russia, the government is being urged to relax deadlines for the launch of the digital ruble.
Right now, larger retailers are expected to start allowing their customers to pay using this CBDC from July 2025, with smaller businesses due to follow in subsequent years.
But according to Izvestia, a longer two-year transition is needed to ensure the technology is introduced smoothly.
Key concerns include potential expenses companies may incur, and doubts that lower transaction costs will feed into lower prices for customers.
A blistering report in The Epoch Times argues that China's CBDC has failed — weakening the power of President Xi Jinping as a result.
All of this comes after the digital yuan's architect, Yao Qian, was dismissed from the Chinese Communist Party amid allegations of bribery.
The article suggests that there may be "people behind the scenes who don't want the project to continue."
And while this CBDC has undergone extensive trials in recent years, a poll on X suggested that 90% of respondents had neither seen nor used it.
According to the source, the global use and replacement of the dollar major goal of the digital renminbi remains
In further bad news for the space, a new report from OMFIF suggests eagerness for CBDCs is waning among central bankers.
While 31% had described central bank digital currencies as the most promising avenue for improving cross-border payments back in 2023, that figure has now plunged to just 13%.
The number of central bankers who say they are now working on a CBDC has also now halved to 10% — with 64% declaring they have no intention of building a multi-currency CBDC platform.
Meanwhile, the Bank for International Settlements has released a new report examining Faster Payment Systems and CBDCs — and whether countries should embrace one, or both.
FPS infrastructure has enjoyed "widespread adoption and success" around the world, with the authors saying economies that lack "a comprehensive and well-functioning payment ecosystem" could benefit from rolling out one of these platforms first.
However, a retail CBDC could prove useful if "gaps in inclusion and adoption" still remain when Faster Payments are available, with the report adding:
"At least some of the central banks interviewed do see a role for both retail CBDCs and FPS."
A German FinTech firm 21X has secured permission to launch a tokenization platform in the European Union.
The exchange for tokenized financial instruments will launch in the first quarter of 2025 — including equities, debt securities and real-world assets including property and artwork.
The license to 21X has been issued under the EU’s DLT Pilot Regime, a regulatory framework designed to enable the testing and operation of distributed ledger technology-based trading and settlement systems. It was of four applications and involved reviews of German regulator BaFin, the German Federal Bank (Deutsche Bundesbank), the European Securities and Markets Authority (ESMA) and the European Central Bank (ECB).
CEO Max Heinzle said the framework is crucial for unlocking mass adoption in Europe, adding:
"This is more than just a license — it’s a revolutionary moment for capital markets. For the first time ever institutional and retail investors can trade and settle tokenized securities on a fully regulated, blockchain-based exchange with the same level of trust, security and compliance as traditional markets."
On the technical side, 21X partnered with Polygon, the global financial services provider Apex Group and SBI Digital Markets, a subsidiary of the Japanese SBI Group.
A British-regulated digital asset exchange called Archax is beginning to offer access to a tokenized version of a money market fund by abrdn.
It's the first of its kind to be offered on Ripple's XRP Ledger, dubbed "one of the leading blockchains for real-world asset tokenization."
Duncan Moir, senior investment manager at abrdn, said:
"Real benefits are to be had from leveraging the efficiency of moving the end-to-end investment and cash settlement process on-chain. The XRPL is an established venue for this thanks to its institutional-grade functionality, cost efficiency and built-in compliance capabilities."
All of this comes as XRP goes on a tear — rising by a staggering 64% in the past days to hit $2.40. That's been enough to propel the altcoin back up the rankings, making it the third-biggest by market cap once again.