An ECB research paper on CBDC adoption strategies and cross border CBDC projects in Asia. Another digital note from HSBC as a new report on the state of tokenization reveals surging trading volumes and a spike in experimentation.
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.
Researchers at the European Central Bank have released a new study that delves into consumer demand for a CBDC.
It's an interesting report that suggests the public may be reluctant to try something new — unless digital alternatives are tailored to their needs.
Policymakers were urged not to underestimate the impact that such a change would have, with Luca Nocciola and Alejandro Zamora-Pérez writing:
"Introducing a novel payment method presents an inherent 'cost' to consumers, and this is not purely a monetary cost — it also encompasses the effort, time and adjustments required of consumers when adapting to a new payment method."
They paint a picture of consumers reluctant to change existing habits, and draw parallels with adults who have hesitated to embrace mobile payments because they prefer cash and cards.
But none of this is to say that CBDCs won't take off. The report says blending the speedy transactions and ease of use of cards, along with the privacy preservation and expense tracking of cards, could make digital versions of fiat currency much more attractive to the public at large.
Both researchers went on to stress that an "effective information campaign" would be essential for winning around skeptical consumers — and the COVID pandemic illustrated that there can be widespread and relatively quick changes to the way they behave.
"Our analysis confirms that three drivers are key to consumer demand: how CBDC is designed, the level of consumer awareness and the growth of current new payment technologies."
Meanwhile, a paper by the Veblen Institute argued a year ago the ECB "is missing an opportunity to develop an appealing and public digital alternative to private bank deposits" — accusing policymakers of heeding lobbyists and baking the interests of financial institutions into how it is designed. Five key recommendations included:
Elsewhere, the Hong Kong Monetary Authority has now advanced to phase two of its e-HKD pilot program — meaning tokenized deposits will now be trialed as well as retail CBDCs. Offline payments, programmability and the settlement of tokenized assets are key areas of focus.
In mainland China, State Power Investment Corporation Finance Co., Ltd., completed a cross-border digital renminbi settlement pilot with Hong Kong. The state corporation collaborated with the Bank of China and the Digital Currency Research Institute of China.
Asian Development Bank (ADB) initiated the building of a digital asset platform aimed "to modernize financial infrastructure by enhancing payment systems and promoting financial inclusion for its member countries." In the call for service provider proposals, the regional development bank described certain features of the planned platform such as dual offline payments (re-spendable offline tokens), centralized destruction of tokens, seamless transfers between the digital currency and commercial bank money, etc.
According to our observations, the wider Asian region is genuinely interested in cross-border payment systems. The blockchain developer of Cambodia Bakong system, Soramitsu, announced plans for a region-wide digital payment network in August last year.
In July, Malaysian Central Bank Deputy Governor Jessica Chew shared the country's plans to scale down its retail CBDC project and focus on cross-border tools.
In the area of retail payments, we have no immediate plans to issue retail CBDC given the highly efficient domestic retail payment systems operating today. Central banks in this region have however, deepened our cooperation significantly in recent years to enhance cross-border payment connections given the strong trade and economic ties between our countries.
No observable plans for retail or any other CBDC in the U.S. at the time of writing.
John Deaton, who is running against crypto-skeptic Senator Elizabeth Warren in Massachusetts, has said opposing a digital dollar in the U.S. is a hill he's "willing to die on."
In an interview with Generation Infinity, he repeated criticism that such a CBDC could lead to unprecedented restrictions on how consumers can spend their money — as well as intrusive government oversight on transactions.
HSBC has issued another digital note on its Orion digital ledger - a HKD 1 billion (USD 128 million) one-year note. The previous was the Hong Kong government's $756 million digital green bond. HSBC Orion uses Digital Asset’s DAML combined with Hyperledger Fabric. The important aspect of these projects is the emphasis on the availability of the issued bonds through the traditional investor channels as well.
The Tokenization Asset Coalition has released a new report that anticipates the value of this asset class could surge to $30 trillion in the next decade.
It notes that there's been a 179% surge in the value of tokenized Treasuries — with responsive regulation contributing to a rise in experimentation in major economies.
And in a significant milestone, the value of tokenized metals is now fast approaching the $1 billion mark.
The coalition also announced that it has attracted 21 new members — with a16z, Galaxy Digital and Wisdom Tree among the biggest names.