Banking and CBDC Weekly Roundup: 16/09/2024

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

We begin with significant news from North Carolina, which has passed a law banning central bank digital currencies in the state. Such a measure had previously been blocked by Governor Roy Cooper, who had argued it was "premature, vague and reactionary."

But the state's General Assembly has now overriden this veto, with many politicians voicing concerns over privacy.

All of this comes despite Fed Chairman Jerome Powell insisting that a digital dollar is not a priority for the central bank. Back in July, he said there had been no progress in developing a retail CBDC—and even if there was, the Fed had no authority to launch one.

Meanwhile, Circle CEO Jeremy Allaire says he believes a digital dollar will never launch in the U.S., primarily because there's a lack of public support. His company issues the USDC stablecoin, which is pegged on a 1:1 basis to the dollar and boasts a market cap of $35.7 billion.

Elsewhere, Accenture has revealed that it has invested in Emtech, a company that helps central banks modernize their processes.

The company counts seven countries among its clients, primarily in Africa, and created a CBDC proof-of-concept for Haiti.

Accenture executive Oliver Reppel says reinvention is crucial for central banks amid "constant innovation and digital disruption" in the finance sector, adding:

"Our investment in Emtech will enable Accenture to help central banks modernize their payments systems, enhance their supervisory capabilities and develop the critical infrastructure needed for tokenization and central bank digital currency.”

Over in Russia, the country's largest banks have been told they will need to allow all of their clients to perform transactions using digital rubles by July 2025.

Regulators say consumers and businesses must be given the ability to use this CBDC freely "on an equal basis with cash and non-cash funds."

Companies are also being given deadlines for when they'll have to start accepting digital rubles, with a gradual rollout based on their annual revenue.

In China, the 2024 International Fair for Trade in Services (CIFTIS) dedicated a separate pavilion to digital renminbi exhibition. Commercial banks showcased various draw and discount programs, red envelopes and gifts available in e-CNY wallets. The Industrial and Commercial Bank of China (ICBC) presented a metro gateway with offline e-CNY functionality.

Surprisingly, the digital renminbi was barely discussed during the CBDC Conference last week. The conference was dominated by European participants and seasoned with attendees from the Bahamas, South Korea, Uruguay, the Philippines and several African countries. This year the event was hosted by Turkey and many representatives of Turkey's Central Bank, TCMB, were present in the conference hall.

It was interesting to observe central bankers in a new role: researching and developing an end-user product.

There was less discussions about the need and purpose of CBDCs this time. Most of the conference discussions centered on the challenges of CBDC development, such as security, privacy, and financial stability. It seemed like people in suits and ties had taken control of the digital money revolution and the phased process will inevitably bring us to the end goal.

Tokenization Updates

Britain's new Labour government has proposed a law that would give greater legal clarity to digital asset investors.

Cryptocurrencies, NFTs and carbon credits can now be considered as personal property, eliminating uncertainty during legal disputes.

This legislation will prove significant as demand for tokenization grows, and it's clear that the government wants England to be the jurisdiction of choice when contracts and agreements related to digital assets are being signed.

Meanwhile, a new paper from Binance Research reveals that the value of tokenized real-world assets has now exceeded a record-breaking $12 billion.

Authors attributed high U.S. interest rates for the booming popularity of tokenized treasuries, which have now become "an attractive investment vehicle."

But given the Fed is expected to start slashing the cost of borrowing, potentially as early as next week, heightened demand may not last.

And in other developments, Galaxy Digital Holdings founder Mike Novogratz told a conference in New York that every asset manager his company has reached out to is "frantically" working on creating tokenized funds.

BlackRock was an early mover in this space, with its BUIDL fund surpassing a $500 million market cap over the summer.