Project mBridge reveals details of its workings ahead of MVP, commercial debut

October 31, 2023 Coin Telegraph

BIS

Project mBridge has put together a slick publication with lots of new information to let the world know what the hottest project in CBDC is.

The Bank for International Settlements (BIS) released a colorful and fact-filled Project mBridge update on Oct. 31. The publication combines technical and promotional discussions in a shift of tone as the project prepares to become a minimum viable project for commercial launch next year.

The update gathers a significant amount of information about the central bank digital currency (CBDC) bridge that had been scattered or completely unavailable until now. The governance structure is explained in general terms, and technical details are slipped into the text at a level of readability that makes it accessible to non-specialists.

A next envisaged stage in Project #mBridge is whether the tested platform can become a minimum viable product, with continued work on the technology, legal and governance, and welcoming new participants and use cases. Read the new report: https://t.co/dzQCxz9UYL #BISInnovationHub pic.twitter.com/4ZtHDrERK8
— Bank for International Settlements (@BIS_org) October 31, 2023

The update explains the project’s use of the Dashing consensus algorithm, which was introduced earlier this month and had previously only been announced in Chinese-language media. It describes it as:

“A Byzantine Fault Tolerance (BFT) consensus protocol that uses proofs of partial confirmation of a block validation to reduce the time needed to achieve consensus and to improve the overall protocol performance.”

The use of legal entity identifiers for Anti-Money Laundering and Countering the Financing of Terrorism is also new information.

The technical information is sandwiched in text that is, at least by the standards of central banking, blatantly promotional:

“With Project mBridge, the number of steps [in cross-border payments] can be significantly reduced by allowing direct, bilateral connectivity between the payee’s and payer’s local banks supported by interoperability with participants’ domestic payment systems.”

One of the bigger revelations in the update is a list of observer organizations in the project. Their presence was known before but never specified. There are 25 observers, which include central banks and organizations such as the International Monetary Fund and Federal Reserve Bank of New York. Eleven of them are active in the project’s sandbox. Their identities were not revealed.

*Observing members of Project mBridge. Source: BIS*

Project mBridge was initiated in 2021 by the central monetary authorities of China, Hong Kong, Thailand and the United Arab Emirates in partnership with BIS. It announced plans for its commercial launch in September. This publication calls "see[ing] if the platform tested can evolve to become a Minimum Viable Product" the project's next step.

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Kenya to introduce digital IDs for citizens by year-end

October 31, 2023 Coin Telegraph

Africa

The Kenyan government plans to roll out its digital identification system in December 2023 after the testing period, which will take the next few months.

The Kenyan government plans to roll out its digital identification system in December 2023 after the testing period, which will take the next few months. According to the president of Kenya, William Ruto, whose speech at the East Africa Device Assembly Kenya plant in Athi River was cited by local media on Oct.30:

“The digital ID, which has been a major problem to us for a very long time, is now on testing mode for the next two months. I have been assured by all the stakeholders and the ministries concerned that by December we will be able to launch digital IDs.”

Digital IDs will be introduced in the country along with Maisha Namba, a system of lifelong personal identification numbers assigned to Kenyan citizens upon registration. The joint ID system will help the country to digitalize its registries and provide citizens with swifter access to state, educational and medical resources.

As the Principal Secretary of Immigration and Citizen Services, Julius Bitok explained in August:

“The digital identity system will provide Kenyans with a secure and reliable way to verify their identity for a variety of purposes, including accessing gov’t services, opening bank accounts, and traveling [...] It will also help to reduce fraud and corruption, and improve efficiency.”

In September, Bitok urged private businesses to embrace the digital ID systems, as they “enable innovative solutions like mobile banking and agent networks, transforming e-commerce processes.” He promised that the government will ensure the design of the digital ID will “facilitate commerce and ease business transactions.”

In June 2023, the Central Bank of Kenya expressed its doubts about the necessity to implement the central bank digital currency (CBDC) in the short to medium term, referring to “other innovative solutions around the existing ecosystem” that could address Kenya’s “pain points” in payment.

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Hong Kong advances CBDC pilot, bringing e-HKD trials to Phase 2

October 31, 2023 Coin Telegraph

CBDC

e-HKD Phase 1 trial was dedicated to full-fledged payments, programmable payments, offline payments, tokenized deposits, settlement of Web3 transactions and settlement of tokenized assets.

The Hong Kong Monetary Authority (HKMA) is gearing up for the second phase of the e-HKD (e-Hong Kong dollar) pilot program as it announced the successful completion of the Phase 1 trial of its in-house central bank digital currency (CBDC).

The HKMA launched the e-HKD pilot program in November 2022 to evaluate the commercial viability of an in-house CBDC as part of its “Fintech 2025” strategy. Phase 1 was dedicated to studying e-HKD in six areas, which include full-fledged payments, programmable payments, offline payments, tokenized deposits, settlement of Web3 transactions and settlement of tokenized assets.

*Summary of pilots by category and participants. Source: hkma.gov.hk*

Detailing the findings of the e-HKD phase 1 trial, the HKMA report highlighted programmability, tokenization and atomic settlement as three key areas where Hong Kong’s CBDC could benefit consumers and businesses.

*e-HKD specimens issued by three note-issuing banks. Source: hkma.gov.hk*

The report read:

“The next phase of the e-HKD pilot program will build on the success of Phase 1 and consider exploring new use cases for an e-HKD.”

HKMA plans to “delve deeper” into some use cases that showed promising CBDC applications in the phase 1 trial. Technical considerations show an inclination toward using distributed ledger technology (DLT)-based design considering its interoperability and scalability capabilities.

*Three-rail approach for the potential implementation of an e-KHD. Source: hkma.gov.hk*

As shown above, Hong Kong’s CBDC program consists of a three-rail approach — foundation layer development, industry pilots and iterative enhancements and full launch. Currently, at its second rail, the e-HKD program trial is supported by public and private organizations to ensure commercial viability for both parties.

HKMA said it will also continue to work on rail 1 initiatives such as laying the legal and technical foundations for e-HKD.

Alongside localized efforts for CBDCs, numerous central and commercial banks joined hands under Project mBrigde to explore solutions for faster, cheaper, more transparent cross-border payments.

On Sept. 25, HKMA CEO Eddie Yue revealed that mBridge will expand and be commercialized as it welcomed new banking members from China, Hong Kong, Thailand and the UAE.

“We are expecting to welcome more fellow central banks to join this open platform. And very soon, we will launch what we call a minimum viable product, with the aim of paving the way for the gradual commercialization of mBridge,” Yue added.

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October 27, 2023 The Daily Hodl

Turkey plans to craft crypto framework in 2024

October 27, 2023 Coin Telegraph

CBDC

Crypto asset providers, such as crypto exchanges, will also be given a legal definition.

The 2024 Turkish Presidential Annual Program, published on Oct. 25 in the Official Gazette of the Republic of Turkey, aims to finalize crypto regulations in the country within the calendar year of 2024.

Article 400.5 of the almost 500-page document reveals the planned studies to define crypto assets, which might be taxed appropriately afterward. Crypto asset providers, such as crypto exchanges, will also be given a legal definition. However, the document contains no other details on the future regulations.

In September 2023, the former CEO of Turkish crypto exchange Thodex, Faruk Fatih Özer, was sentenced to 11,196 years in prison by a Turkish court. Thodex, which was one of the largest trading platforms in the country, abruptly imploded in 2021.

According to a 2022 study, Turkey was the second nation in the world in terms of crypto-related search requests, with 5.5% of the population making them. The country saw an elevenfold rise in crypto use in 2021 amid the ongoing inflation crisis of the local fiat currency, the Turkish lira.

In December 2022, the Central Bank of the Republic of Turkey completed the first trial of its central bank digital currency, the digital lira, and has signaled plans to continue testing throughout 2024. And while the government has still made no commitment to the ultimate digitalization of the country’s currency, Turkish President Recep Tayyip Erdoğan has repeatedly supported the digital lira project.

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JPM Coin handles over $1B in daily transactions — JPMorgan exec

October 26, 2023 Coin Telegraph

JPM Coin handles over B in daily transactions — JPMorgan exec

CBDC

The volume represents a massive surge since the latest update in June, with the company saying that $300 million was transacted in the three years since JPM Coin’s launch.

Takis Georgakopoulos, the global head of payments at JPMorgan, has revealed that the company processes over $1 billion in daily transactions through its digital asset, JPM Coin.

Speaking during an interview with Bloomberg TV on Oct.26, Georgakopoulos named three major inefficiencies of the current payment systems: the speed of the payments, especially cross-border transactions; the separate movement of money and information, which makes it hard to track or reconcile transactions; and the fungibility of money. JPMorgan is trying to solve these three issues with its digital asset, JPMorgan Coin, Georgakopoulos said, adding:

“Today, we move $1 billion every day through JPM Coin for a number of large companies.“

According to the executive, the next step would be to create a retail version of the asset. While central bank digital currency (CBDC) is one way to do it, there’s also an opportunity for banks to create a digitalized version of deposits using blockchain.

JPM Coin is a stablecoin pegged to the United States dollar at a 1:1 collateralization ratio. Launched in 2020, its only aim is to serve as a temporary vehicle for real-time gross settlement between JPMorgan’s institutional clients.

In June 2023, JPMorgan reported that more than $300 million was transacted via JPM Coin since its 2020 launch. The new data, reporting daily transactions exceeding $1 billion, is a massive surge in four months. This may be explained by the launch of euro-denominated transactions through the JPM Coin system in June.

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Bank of Spain embraces ‘digital euro,’ explains its benefits

October 25, 2023 Coin Telegraph

CBDC

The digital euro will make electronic payments a vital piece of the financial system, the statement claims.

Banco de España, Spain’s central bank, has joined a chorus of European banking institutions preparing their customers for the potential benefits of a digital euro. The central bank published a short text on Oct. 19 explaining the nature and uses of the European Union’s potential central bank digital currency (CBDC).

The bank claims that the physical cash format “does not allow to exploit all the advantages offered by the growing digitalization of the economy and society.” However, the digital euro will make electronic payments a vital piece of the financial system.

The authors highlight the possibility of offline payments within the digital euro, emphasizing its level of privacy, equivalent to cash. They also make reservations that in the online form, users’ data would still be visible only to their particular financial institutions and not the CBDC infrastructure provider, Eurosystem.

According to the project calendar published in the text, the current “preparation phase,” launched on Oct. 18, will finish by 2025. However, the final decision on the issuance of the pan-EU CBDC still wasn’t made.

The Bank of Finland recently expressed the same amicable sentiment towards the digital euro. Its board member, Tuomas Välimäki, called it “the most topical project” in the European payment sector.

On Oct. 25, the European Central Bank (ECB) shared a link to the landing page dedicated to basic information about the digital euro. It promises to deliver an “easier life” and a “stronger Europe.”

Earlier this month, the governing council of the ECB announced the beginning of the ”preparation phase” for the digital euro project. It will last two years and focus on finalizing rules for the digital currency and selecting possible issuers.

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Chinese digital yuan CBDC used for first time to settle cross-border oil deal

October 23, 2023 Coin Telegraph

bank of china

CBDC and de-dollarization saw major strides last week with the 1-million barrel deal on the Shanghai Petroleum and Natural Gas Exchange.

The digital yuan has been used for the first time to settle an oil transaction, the Shanghai Petroleum and Natural Gas Exchange (SHPGX) announced. PetroChina International bought 1 million barrels of crude on Oct. 19.

The transaction was a response to a call by the Shanghai Municipal Party Committee and Municipal Government to apply the Chinese central bank digital currency (CBDC), also referred to as the e-CNY, to international trade, the exchange said. It is “another major step forward” for the digital yuan, according to the state-controlled China Daily.

The seller and the price in the transaction were not disclosed. For comparison, the price of the “OPEC basket” of oil from 13 producers was $95.72 per barrel on Oct. 19.

The crude oil deal also marks an overall major step in the use of the yuan on the international market and in the global movement toward de-dollarization. In the first three quarters of 2023, use of the yuan in cross-border settlements was up 35% year-on-year, reaching $1.39 trillion, China Daily reported.

#DEDOLLARIZATION DAILY: PETRODOLLAR SHOCK

Shanghai Oil, Gas Exchange Settles First Cross-Border Trade in E-Yuan#DigitalYuan is a game changer!#fintech #finserv @psb_dc @efipm @baoshaoshan @thecyrusjanssen @lajohnstondr @Kathleen_Tyson_@DOualaalou https://t.co/8qT4Oq2X1o
— Richard Turrin (@richardturrin) October 22, 2023

The yuan was first used for a liquified natural gas (LNG) purchase on SHPGX in March when the French TotalEnergies agreed to sell LNG to the China National Offshore Oil Corporation (CNOOC). The second LNG deal in yuan occurred last week between CNOOC and French Engie. Those transactions did not involve the digital yuan.

Also on Oct. 19, First Abu Dhabi Bank announced that it had signed an agreement on digital currency with the Bank of China, the state-owned commercial bank, at the third Belt & Road Forum for International Corporation, which had ended a day before. China and the United Arab Emirates, of which Abu Dhabi is part, are participants in the mBridge platform to support cross-border transactions with CBDC. MBridge intends to launch as a minimum viable product next year.

Abu Dhabi signed an agreement with India in August to settle oil deals in rupees.

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Central Bank of Argentina to introduce ‘digital peso’ bill ‘as soon as possible’

October 20, 2023 Coin Telegraph

Argentina

The BCRA has accelerated its work on legislation to implement the CBDC workflow in the country.

After a series of remarks about the potential benefits of central bank digital currency (CBDC) for the national economy, the Central Bank of Argentina said it has accelerated its work on the legislation to implement the CBDC workflow in the country.

On Oct. 18, during a public discussion on the Filo News channel, Argentina Central Bank director Juan Agustín D’Attellis Noguera revealed that the BCRA is working on the legislative framework for the “digital peso,” a CBDC project, recently proposed by the Minister of Economy and presidential candidate Sergio Massa.

According to D’Attellis, the project will be presented “as soon as possible” and then introduced to the national Congress. The official hailed Massa’s approach to CBDC and implicitly criticized the position of another presidential candidate, Bitcoin-friendly Javier Milei, who has been publicly proclaiming the “dollarization” of the Argentine economy.

It is not the first time D’Attellis has stepped in to defend the idea of CBDC. In early October, he expressed his belief that the “digital peso” could help stabilize the Argentine economy as soon as 2024. In the official’s opinion, the key feature of the CBDC is its traceability, which would allow the government to collect taxes.

On Oct. 2, Massa committed to introduce a digital peso should he win the election, aiming to address Argentina's enduring inflation issue. As per the latest election polls, Massa is marginally behind Javier Milei, who advocates for adopting the U.S. dollar as Argentina's official currency while opposing the central bank's role.

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EU data protection regulators urge anonymity for smaller transactions in digital euro

October 20, 2023 Coin Telegraph

CBDC

The European Data Protection Board and the European Data Protection Supervisor issued a joint opinion statement on the regulation of “digital euro.”

On Oct. 18, the European Data Protection Board (EDPB) and the European Data Protection Supervisor (EDPS) issued a joint opinion statement on the regulation of “digital euro,” proposed by the European Commission in July 2023. The regulators made several recommendations to enhance the personal data protection standards for the European central bank digital currency (CBDC).

The EDPB and EDPS suggest clarifying the proposed verification procedure for the maximum allowed amount of digital euro held by the individual account. The current draft allows the European Central Bank (ECB) and national central banks to establish a single access point to each user’s data. The EDPB and the EDPS recommend conducting an assessment to determine the necessity and proportionality of a singular access point. They emphasize that employing technical measures for the decentralized storage of these identifiers is feasible.

The regulators also point out the lack of foreseeability in the proposed fraud detection and prevention mechanism of the CBDC. The EDPB and the EDPS recommend further demonstrating the FDPM’s necessity or, otherwise, considering “less intrusive measures” from a data protection perspective.

The EDPB and the EDPS also “strongly recommend” establishing a 'privacy threshold' for online transactions, below which offline and online low-value transactions are not subject to tracking for anti-money laundering and combating the financing of terrorism (AML/CFT). However, they didn’t come up with a specific amount, referring only to the transaction limit, covering “low-value daily transactions.”

This week, the governing council of the ECB announced the ”preparation phase” for the digital euro project following a two-year investigation. The preparation phase will last two years and focus on finalizing rules for the digital currency, as well as selecting possible issuers.

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