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.

CBDC Updates

A new research paper has offered estimates on how much demand there might be for a digital euro.

Experts at the European Central Bank warned exact levels of adoption are "uncertain," and will depend on how the CBDC is designed.

Policymakers are expected to introduce caps on how much consumers can hold, amid fears unlimited balances could jeopardize financial stability.

In a low demand scenario, the total value of digital euros in circulation is projected to be €30 billion. That's based on how the typical citizen on the continent holds €83 in cash on average.

This rises to €125 billion in a medium demand scenario, and balloons further to €512 billion in a high demand scenario.

The authors concluded that this CBDC is unlikely to inflate the ECB's balance sheet, as design features are expected to limit its use as a store of value.

No More International Cooperation for Project mBridge?

Meanwhile, the Bank of International Settlements has updated the page of Project mBridge — the CBDC platform it suddenly pulled out of last month — removing the invitation for international cooperation on the project:

"As it enters the MVP stage, Project mBridge is now inviting private sector firms to propose new solutions and use cases that help develop the platform and showcase all its potential. Interested firms can apply to participate via the participation form."

The last few months have marked significant changes in this major cross-border project, with China taking a leading role in development.

Objectives for the project, which counts multiple central banks as partners or observers, include tackling inefficiencies in cross-border payments such as high fees and slow transfer times.

No Need for CBDC, Fed Governor Suggests

There's little enthusiasm for a digital dollar among Republicans — and now, Federal Reserve Governor Christopher J. Waller has argued that innovation in the payments ecosystem is best left to the private sector. He told a conference in New York City:

"In a speech I gave in August 2021, I asked, what problem would a CBDC solve? In other words, what market failure or inefficiency demands this specific intervention? In more than three years, I have yet to hear a satisfactory answer as applied to CBDC."

In Waller's view, the Fed's role should be limited to tackling issues that the private sector may struggle to solve alone. He pointed to FedNow as an example, a service that unified thousands of banks in a single payment network.

Experts Urge Norway to Go Slow on CBDC

Similar sentiments in Scandinavia, where a panel of experts has advised Norway's finance minister to take his time before rolling out a retail-facing CBDC.

Although a new report recommends that the government should start making "necessary regulatory changes," the report concluded cash continues to have an important role in the country, adding:

"The committee doesn’t currently see a need to introduce digital central bank money for reasons of financial inclusion, privacy or emergency preparedness."

Swiss Wholesale CBDC Pilot Found Implementing Monetary Policy on DLT Possible, Yet Premature

In June 2024, the Swiss National Bank (SNB) issued digital SNB Bills and settled them in wholesale central bank digital currency seven days later. The monetary policy intervention was done for the first time on a Corda-based permissioned digital ledger of Six Digital Exchange, which is currently being tested as part of the Project Helvetia III project.

According to the SNB's report, implementing monetary policy on a DLT-based infrastructure is feasible; however, it is not efficient at this stage:

DLT-based markets remain niches for the time being. The number of participants and the traded volumes on DLT-based infrastructures are yet to increase

Tokenization Updates

Tether Launches Hadron Platform

"A pioneering platform designed to revolutionize how tokenized assets are created, managed and monitored" has been unveiled by stablecoin issuer Tether.

It's hoped "Hadron" will allow everything from real-world commodities to corporate bonds, government debt and loyalty points to be transformed into "liquid tradable assets on a global scale." Tether's CEO Paolo Ardoino said:

"We believe Hadron by Tether will significantly improve the financial industry. By leveraging all Tether’s technology — which today has already secured $125 billion — we're making asset tokenization easier, secure and scalable. Our goal is to create new opportunities for businesses and governments, while also making the digital asset space more accessible and transparent."

BUIDL Expands to Five New Blockchains

The BlackRock USD Institutional Digital Liquidity Fund, BUIDL for short, is branching out to five new networks.

After initially launching on Ethereum, the blockchain-based money market fund will now have a presence on Aptos, Arbitrum, Avalanche, Optimism and Polygon.

Some of these chains will allow institutional investors to save up to 60% on management fees.

UK to Pilot Digital Gilts

Chancellor Rachel Reeves has confirmed that the UK is "launching a pilot to deliver a digital gilt investment" using distributed ledger technology.

In practice, this will mean government bonds are tokenized and traded on the blockchain.

The announcement has been welcomed by the finance industry, amid fears the City of London could be left behind unless legacy systems are modernized.

J.P. Morgan's Onyx is Now Kinexys

J.P. Morgan has rebranded its Onyx blockchain platform by reintroducing it as a complete "next-generation financial infrastructure." The digital asset platform will be focusing on real-world asset tokenization, payments, financial data, cross border and foreign currency exchange use cases.

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