BIS releases unified-ledger proposal for cross-border, tokenized asset transactions

June 20, 2023 Coin Telegraph

BIS

Like the IMF’s single-ledger proposal released a day earlier, BIS’ unified ledger uses familiar concepts, such as tokenization, without the blockchain.

The Bank for International Settlements (BIS) has released a chapter of its annual report early. That chapter, on the future of the monetary system, discusses “a new type of financial market infrastructure — a unified ledger.” The chapter was published June 20, one day after the International Monetary Fund (IMF) released a paper describing its “single ledger” cross-border payments concept.

The BIS proposal harnesses central bank digital currency and tokenized assets into “a new type of financial market infrastructure” — that is, the unified ledger, which would be powered by application programming interfaces (APIs). The authors of the proposal critiqued existing financial technology. They said:

“The collapse of crypto and the faltering progress of other tokenisation projects underline a key lesson. The success of tokenisation rests on the foundation of trust provided by central bank money and its capacity to knit together key elements of the financial system.”

One drawback of current tokenization schemes is that they exist in silos, the proposal claimed. A unified ledger would incorporate the ledgers of the counterparties, programmed reconciliation and messaging, enabling faster transactions and atomic (simultaneous) settlement in a “partitioned data environment” where privacy and transparency are controlled.

A unified-ledger system would allow for considerable disintermediation in transactions with securities. Cross-border transactions would require more coordination, assuming an intermediated system with the presence of both central banks and private payment service providers.

BIS general manager Agustín Carstens first mentioned unified-ledger technology at the Singapore FinTech Festival in February. Like the IMF “single ledger” introduced a day earlier, the unified ledger uses concepts and technology familiar to the cryptocurrency community. The IMF proposal was met with immediate pushback from the crypto community.

Neither the single ledger nor the BIS unified ledger crucially relies on blockchain technology. Project Rosalind, undertaken by the BIS and the Bank of England, also depended on API technology. The full BIS annual report is due out on June 25.

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Fear of a digital euro prompts Slovakia to add cash rule to constitution

June 19, 2023 Coin Telegraph

CBDC

Slovakia’s parliament passed a measure to amend its constitution to codify the right of its citizens to pay for goods and services with cash.

Slovakia will codify the right to use cash as a method of payment after a vote to amend the nation’s constitution passed in parliament on June 15.

The new legislation was sponsored by the Sme Rodina party, also known as the “We Are Family” party, and was reportedly drafted as a precautionary measure against the proposed digital euro.

Per a report from European news agency Euractiv, legislator Miloš Svrček, one of the legislation’s co-authors, told members of parliament during a debate that the amendment was necessary to protect Slovakia’s financial sovereignty:

“It is very important that there is a provision in the Constitution based on which we can defend ourselves in the future against any orders from the outside, saying there can only be digital euro and no other payment options.”

In tandem with legislation codifying the right to use cash, Euractiv also reports Slovakia will amend its constitution to shore up shopkeepers’ rights to refuse cash for payments of goods and services. This, reportedly, is meant to protect shopkeepers from robberies and exposure to germs and to provide an exclusion to existing cash-acceptance laws for shops offering card-only vending machines.

The European Union has been exploring the advent of a central bank digital currency (CBDC) or digital euro for some time. Analysts conducting research on behalf of parliament recently described the issue as a “solution looking for a problem” yet advised the EU to be prepared to pursue the option further in the future.

Among the largest points of contention in the potential development and implementation of a digital euro is the idea that such a currency would be entirely centralized and, thus, allow a single government entity to control transactions conducted with it. Some experts believe this presents an intrinsic threat to personal privacy.

There’s also the issue of competition. Though CBDCs could empower citizens who may have limited or no access to traditional digital banking tools without charging account premiums or intrinsic transaction fees, they present a potential threat to companies and private sector banks that profit from offering credit solutions for the underbanked.

New ‘Global CBDC Platform’ Must Be Built To Outrun Cross-Border Crypto Adoption: IMF Managing Director

June 19, 2023 The Daily Hodl

IMF envisions ‘new class’ of cross-border payment platform with single ledger

June 19, 2023 Coin Telegraph

AML

The XC platform could operate domestically using tokenized assets, including deposits, with or without CBDCs.

The International Monetary Fund (IMF) has presented the outlines of a “new class” of cross-border payment system that uses a single ledger to record central bank digital currency (CBDC) transactions, programmability and improved information management.

IMF officials chose a roundtable on CBDC policy to reveal their new platform concept on June 19. At the event, held in conjunction with the central bank of Morocco, IMF director of the monetary and capital markets department Tobias Adrian said the new type of platform could benefit individual and institutional users through lower fees and faster transaction times. He said:

“Some of the 45 billion dollars paid to remittance providers every year may then go back in the pockets of the poor.”

In addition, the platform would help central banks intervene in FX markets, aggregate information on capital flows and resolve disputes, Adrian said. The platform could be adapted for domestic wholesale and retail CBDC as well, he said.

The details of platform, dubbed the XC (cross-border payment and contracting) platform, were laid out in an IMF Fintech Note coauthored by Adrian and released the same day. It described the proposal:

“XC platforms offer a trusted single ledger – a document representing property rights -- on which standardized digital representations of central bank reserves in any currency can be exchanged.”

The XC platform was designed on the model of CBDC infrastructure. There would be a settlement layer with a single ledger. Access to it would be expanded. Currently, institutions have to have a reserve account with a central bank to carry out cross-border operations, but the XC platform would allow the trading of tokenized domestic central bank reserves. Liquidity would still come from institutions with reserve accounts.

A programming layer would offer the opportunity to innovate and customize services. An information layer would contain AML details necessary to meet trust conditions and privacy protections.

Merci beaucoup cher gouverneur Jouahri for your warm hospitality & for co-hosting this CBDC conference w/ the IMF.

By working together to harness the benefits of CBDCs, we can improve financial inclusion, make payment systems more resilient & efficient.https://t.co/HJNL9cAax3 pic.twitter.com/ZXoVu6wEw8
— Kristalina Georgieva (@KGeorgieva) June 19, 2023

The XC platform would not require the use of CBDCs. The platform would provide interoperability among assets and money tokenized by the private sector, and “usefully instill standards and a safe environment with which to program financial contracts,” as settlement would be carried out in central bank money.

The publication noted that Bank for International Settlements general manager Agustín Carstens proposed a similar concept in a speech he delivered in February.

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‘Britcoin’ launch inches closer after Project Rosalind CBDC tests

June 19, 2023 Coin Telegraph

Britcoin

A major study between the Bank for International Settlements and the Bank of England found that a retail central bank digital currency could make peer-to-peer payments cheaper and easier.

The Bank of England (BoE) is a step closer to launching its central bank digital currency (CBDC) dubbed “Britcoin” following the conclusion of a trial study called Project Rosalind.

The Bank for International Settlements and the BoE launched the joint experiment in July 2022 to explore how prototypes of an application programming interface (API) could be implemented in retail CBDC transactions.

A June 16 report that summed up phase two of Project Rosalind found a CBDC could make payments between individuals cheaper and more efficient while allowing firms to create new financial products that work to reduce fraudulent financial activity.

Overall, the study developed 33 API functionalities and explored “more than 30 retail CBDC use cases.”

*Project Rosalind CBDC API summary. Source: BIS*

In addition to looking at how a CBDC would function on smartphones, retail vendors and online stores, the study also explored the concept of “programmability” — a term that refers to customizing digital money to behave in specific ways once certain conditions are met.

CBDC programmability has been met with considerable skepticism, as critics claim a CBDC could be programmed to “work against” those who use it.

Overall, the study concluded a “well-designed” API layer could enable a central bank to interact with the private sector to “safely provide” retail CBDC payments.

Project Rosalind, from the #BISInnovationHub London Centre & @bankofengland, explored how a universal and extensible #API layer could connect central bank and private sector infrastructures and facilitate retail #CBDC payments https://t.co/HL7EmI7RWx pic.twitter.com/kDeo0yhrsR
— Bank for International Settlements (@BIS_org) June 16, 2023

“The Rosalind experiment has advanced central bank innovation in two key areas: by exploring how an API layer could support a retail CBDC system and how it could facilitate safe and secure CBDC payments through a range of different use cases,” said Francesca Road, head of the BIS London Innovation Hub in a press release.

Despite the positive findings yielded in Project Rosalind, BoE Deputy Governor Jon Cunliffe said a final decision on if the country would launch a CBDC is still “some years” away.

According to a June 16 Bloomberg report, Cunliffe told attendees of Politico’s Global Tech Day conference that the odds of a CBDC project going ahead currently stand at “seven out of ten.”

On the same day the findings from Project Rosalind were released, enterprise blockchain Quant Network announced its role as a vendor in the study. The announcement saw the price of Quant’s native QNT (QNT) token surge more than 20% from $96 to $117 within 12 hours.

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Ripple Partners With Colombia’s Central Bank To Explore Blockchain Use Cases and CBDCs Powered by the XRP Ledger

June 16, 2023 The Daily Hodl

Ripple partners with Colombia’s central bank to explore blockchain technology

June 15, 2023 Coin Telegraph

CBDC

The pilot program will run through 2023 with the intent of demonstrating blockchain utility to the general public.

Banco de la República, Colombia’s central bank, is partnering with Peersyst and Ripple to pilot blockchain technology on the XRP ledger.

The Ministry of Information and Communications Technologies (MinTIC) in Colombia will oversee the project, which will use Ripple’s recently launched central bank digital currency (CBDC) platform.

Ripple and @Peersyst are partnering with Colombia’s @BancoRepublica in conjunction with @Ministerio_TIC to pilot use cases that will enhance Colombia’s high-value payment system.

Learn more about the partnership: https://t.co/X9jyJ3pvDa
— Ripple (@Ripple) June 15, 2023

An announcement published on June 15 says the pilot will run through 2023 and states that its purpose is to demonstrate the technology’s utility to the public:

“The goal of the third phase of MinTIC’s experimentation of blockchain will be to educate national and territorial public entities through interactive and collaborative real-world application experiments of how blockchain technology’s unparalleled speed, scalability, and transparency can revolutionize payment systems and data management.”

The XRP ledger CBDC platform also serves as the basis for similar pilot projects in Hong Kong, Bhutan, Palau and Montenegro.

CBDC team making significant progress with the launch of the new #cbdc platform Four countries now announced Grateful to the team at @Ripple who are developing the best platform for the future of Digital Currencies Palau Bhutan Montenegro Hong Kong …
— Antony Welfare (@AntonyWelfare) May 19, 2023

Ripple’s continued growth comes amid ongoing legal challenges stemming from a Securities and Exchange Commission (SEC) suit against the company filed in 2020.

The SEC alleges that Ripple sold $1.3 billion worth of unregistered securities in the form of its XRP (XRP) token. Ripple claims that XRP isn’t a security and that the SEC never gave it any notice or warning.

As Cointelegraph recently reported, the company also claims it spent $200 million defending itself from the suit. While there’s currently no definitive answer to the question of when the trial will end, it’s widely believed that the release of the so-called “Hinman documents” could affect the remaining legal proceedings.

The Hinman documents reference internal SEC communications related to a 2018 speech given by William Hinman, the former director of the SEC’s corporate finance division. During the speech, Hinman commented that cryptocurrencies such as Bitcoin (BTC) and Ether (ETH) might start out as securities but could become commodities later once they become sufficiently decentralized.

At the time, internal SEC notes indicated that the commission was concerned Hinman’s comments could make it “difficult for the agency to take a different position on Ether in the future.”

While Himan’s speech was given before the SEC’s suit against Ripple and didn’t directly reference XRP, experts argue that it shows that even the SEC understood there was confusion surrounding the agency’s treatment of cryptocurrencies.

US Treasury Official Warns Against Privacy Abuse With Incoming CBDC

June 15, 2023 The Daily Hodl

CBDC ’human rights’ tracker revealed at Oslo Freedom Forum

June 14, 2023 Coin Telegraph

CBDC

A pro-Bitcoin nonprofit says it will flag potential civil liberty concerns as more countries are expected to develop CBDC technology.

The nonprofit Human Rights Foundation (HRF) has launched a central bank digital currency (CBDC) tracker, the organization announced at the same Oslo Freedom Forum event it hosts. The online tracker has published educational materials and a tip line. It is expected to become fully functional by year-end.

The tracker came out of an eight-month fellowship at the HRF that was announced in January. The fellowship was awarded to Cato Institute policy analyst Nick Anthony, researcher Janine Romer and podcaster Matthew Mezinskis. The Cato Institute is an ardent opponent of CBDCs.

HRF chief strategy officer Alex Gladstein said in a promotional video about the tracker:

“It’s going to be an online resource that describes the progress of central bank digital currencies around the world, especially in authoritarian countries, and the civil liberties red flags and risks that come along with this.”

Because a CBDC is a central bank liability, it “creates a direct link between citizens and the central bank,” which “opens the door to so many human rights concerns when it comes to the adoption of CBDCs,” according to the CBDC tracker on the HRF website.

The first phase of the @HRF CBDC Tracker is now live!

Just announced at the Oslo Freedom Forum, the full resource will be unveiled at the end of the year.

For now, check out the landing page (phase 1) here: https://t.co/OrZ2fNfy7l pic.twitter.com/FHB9DWXDqs
— Nick Anthony (@EconWithNick) June 13, 2023

The HRF is an active supporter of Bitcoin (BTC). Gladstein has told Cointelegraph in the past that Bitcoin “fixes democracy” and could disincentivize wars.

According to the unrelated, open-source CBDC Tracker website, the vast majority of the world’s central banks are at some stage of CBDC research, but only three CBDCs have been launched so far. Those are the Bahamas’ Sand Dollar, the Jamaican Jam-Dex and the eNaira in Nigeria. The website also lists 14 pilot projects, including China’s digital yuan. According to HRF, the digital yuan already has 300 million users.

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Privacy should be considered in ‘potential retail CBDC’ — Treasury official

June 14, 2023 Coin Telegraph

CBDC

U.S. Treasury official Graham Steele told an audience at a Texas payments conference that a future CBDC in America should consider anonymity.

Privacy and the ability to transact anonymously should be considerations in the design of a digital dollar, a United States Treasury official has said.

On June 13 the Treasury Department’s Assistant Secretary for Financial Institutions Graham Steele spoke at a payments-focused conference in Texas about the Federal Reserve’s controversial FedNow system and central bank digital currencies (CBDCs).

Steele said one challenge of a retail CBDC is minimizing illegal transactions while maintaining user privacy. He said considerations should still be made about how to protect user anonymity:

“It is important that we consider the extent to which privacy and anonymity might be preserved and explore the technologies and methods available, including Privacy Enhancing Technologies, to enable such protections in the design of any potential retail CBDC.”

In his remarks, Steele weighed the benefits and risks of a possible CBDC saying it could promote a “competitive payment environment.”

On the other hand, a retail CBDC would be directly backed by the Fed and could provide a safer option for consumers during bank runs which could “destabilize private sector lending” according to Steele.

He pointed to the recent banking crisis and said the “access to non-deposit alternatives outside of the banking system may have changed the nature and speed of bank runs.”

He added the U.S. “has not yet determined whether it will pursue a CBDC” but a Treasury-led group is evaluating the implications of a potential CBDC in the country.

Steele said the evaluation includes looking over “policy objectives related to global financial leadership, national security, and privacy, illicit finance and financial inclusion.”

On the Fed’s FedNow instant payments system, Steele thinks having multiple options for payment operations “promotes choice and competition in payments” which he believes will encourage the “development of new payment services and features” along with enhancing payments system resilience.

FedNow has witnessed political pushback. Presidential hopefuls Robert F. Kennedy Jr. and Ron DeSantis are against the system claiming it would pave the way for a CBDC which both claim will hand the government too much control.

In April, Federal Reserve Board governor Michelle Bowman said it was "difficult to imagine" that a CBDC could be justified beyond use in "interbank and wholesale transactions."

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