The U.S. Federal Reserve listed a central bank digital currency (CBDC) as one of its “key duties” in a document presented to members of Congress. House Majority Whip Tom Emmer, a Republican from Minnesota, says Fed officials handed his staff a document earlier in the Congressional session titled “Key Duties of the Fed – Payment […]
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Central bank digital currencies (CBDCs) are the ultimate trojan horse for citizens around the world, according to Peter Goettler, president of the Cato institute. Goettler, who has been president and CEO of the libertarian think since 2015, says CBDCs are a direct response to rise of cryptocurrencies. “Cryptocurrencies also provide the ability to transact outside […]
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Multiple Chinese city governments have given away millions worth of e-CNY to try to promote consumption around the holiday season.
Millions of dollars worth of China’s Central Bank Digital Currency (CBDC) has been handed out across the country over the Lunar New Year period in a bid to boost its takeup.
According to a Feb. 6 report in the Global Times, an English-language outlet of the state-ran People’s Daily newspaper, around 200 “activities” for the e-CNY were launched across the country during the holiday period.
These "activities" were made to “promote consumption” — the first of such since the government recently relaxed COVID-19 restrictions.
Multiple cities reportedly gave away over $26.5 million, or 180 million yuan worth of the CBDC in programs such as subsidies and consumption coupons.
One example provided by the outlet included the Shenzhen local government handing out over $14.7 million (100 million yuan) worth of e-CNY to subsidize the catering industry in the city.
A Feb. 1 China Daily report said Hangzhou issued each resident a $12 (80 yuan) e-CNY voucher on Jan. 16 with the total giveaway costing the city around $590,000, or 4 million yuan.
Some of these initiatives proved to be very popular among residents.
Citing data from the e-commerce platform Meituan, the Global Times rreport stated that e-CNY given away by the Hangzhou city government for the New Year celebrations was taken up by residents within nine seconds.
Related: Bank of China ex-advisor calls Beijing to reconsider crypto ban
The last few months has seen the government enacti other targets and features to boost the usage of the CBDC.
On Feb. 1, senior ruling party officials in Suzhou city set a tentative key performance indicator for the end of 2023 to have $300 billion (2 trillion yuan) worth of e-CNY transactions in the city.
The target is ambitious considering cumulative e-CNY transactions had crossed $14 billion (100 billion yuan) in October 2022, two years after the CBDC’s launch.
In late December last year, in a bid to attract new users the e-CNY wallet app introduced the ability to send “red packets,” called hongbao in China, which is used for gifting money around the holidays.
The wallet app received an update in early January allowing users to make contactless payments using Android phones — even if their device is without internet or power.
In December, a former Chinese central banker called the results of the e-CNY trials “not ideal,” and admitted, “usage has been low, highly inactive.”
The South African Reserve Bank stated further work would be undertaken to study the findings from the project and used to inform policy and regulatory responses to DLT and CBDCs.
South Africa has taken another step closer to implementing its central bank digital currency (CBDC) as the South African Reserve Bank (SARB) concludes a technical proof-of-concept for the project.
The project, titled Project Khokha 2 (PK2), is the second phase of SARB’s Project Khokha (PK1), launched in 2018. It experimented with distributed ledger technology (DLT) for interbank payments' settlement, successfully replicating the banks’ “SAMOS” real-time gross settlement system.
This second phase, PK2 was launched in February 2021 and tested DLT with clearing, trading and settlement within the proof-of-concept environment with industry participants Absa, FirstRand, JSE Limited, Nedbank and Standard Bank who form the Intergovernmental Fintech Working Group (IFWG).
Using the technology, SARB tested the issuance of debt instruments and enabled two payment options for settlement, a wholesale central bank digital currency (wCBDC) and a wholesale settlement token (wToken), a commercial bank issued form of private money.
The proof-of-concept developed two DLT platforms, one which served as a decentralized trading platform and the other which managed the CBDC.
A bidirectional bridge similar to those used in DeFi when sending cryptocurrencies across different blockchains was also built, allowing portability of the CBDC between the two platforms.
The results of the project highlighted the regulatory, business, and operational implications that DLT would have in the market. A statement by SARB summarized that the technology would streamline functions carried out by separate infrastructures onto a single platform, potentially reducing cost and complexity.
Related: Sweden’s central bank completes second phase of e-krona testing
In the report, SARB does point out that the new DLT platforms will need to be integrated with legacy systems, with the costs of implementing the new platform placed on the banks.
New standards, updated best practices and new support systems would need to be established for the DLT infrastructure, according to SARB. The reserve bank mentioned that legacy and DLT systems might always have to run side-by-side, stating:
“A transition to a DLT-based system requires careful planning and execution and may involve running a DLT-based system in parallel to the existing system for a while, perhaps indefinitely.”
Technical risks related to the reliability and security of the software bridge between platforms were also noted, and the use of the CBDC on networks outside of the two used in the proof-of-concept was also flagged as topics for further consideration.
SARB says further work will be undertaken to study the findings from this phase of the project and the legal status of the wCBDC, which will be used to inform policy and regulatory responses to DLT and CBDCs in the financial markets.
It also hinted that another phase of Project Khokha may be started to “build on the work of PK2, performing live transactions in a sandbox environment in a different use case”.
Since May 2021, South Africa has also been engaged in a preliminary study on a retail CBDC focused on its “desirability and appropriateness” no exact date is set for the conclusion of the study, but SARB says it will be sometime in 2022.
