Nigeria CBDC adoption spikes as fiat currency shortage grip the nation

March 22, 2023 Coin Telegraph

Africa

The acute cash shortage in Nigeria was due to the central bank’s decision to replace older bank notes with bigger denominations amid rising inflation.

Nearly 18 months after launching its in-house central bank digital currency (CBDC), eNaira, Nigeria witnessed its massive adoption as national fiat reverses face severe shortages.

The acute cash shortage in Nigeria was due to the central bank’s decision to replace older bank notes with bigger denominations amid rising inflation. While developing nations were among the first to acknowledge the importance of a CBDC in revamping fiat capabilities, the idea is yet to materialize.

However, in the case of Nigeria, the lack of physical cash forced citizens to opt for the eNaira. In a country where cash accounts for about 90% of transactions, the value of eNaira transactions increased 63% to $47.7 million (22 billion naira), revealed a Bloomberg report.

Moreover, according to Godwin Emefiele, governor of the Central Bank of Nigeria, the total number of CBDC wallets grew more than 12 times when compared to October 2022 — currently at 13 million wallets.

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The demonetization reduced the circulating cash supply from 3.2 trillion nairas to 1 trillion nairas. Compensating for this decline, Nigeria minted over 10 billion nairas in CBDC. In addition, eNaira payouts in government initiatives and social schemes also contribute to the increase in CBDC’s adoption.

For developing countries, CBDCs present a way to overcome challenges presented by the fiat economy, which includes reducing operating costs and strengthening anti-money laundering (AML) initiatives.

“The eNaira has emerged as the electronic payment channel of choice for financial inclusion and executing social interventions,” concluded Emefiele.

Amid the cash crunch, Nigerians have been presented with another option for procuring cryptocurrencies. MetaMask’s parent firm ConsenSys recently announced a new MoonPay integration, which allows Nigerians to purchase crypto via bank transfers.

*Screenshot showing option to buy crypto using fiat. Source: ConsenSys*

As shown in the above screenshot, the new feature is available within the MetaMask mobile and Portfolio DApp, significantly simplifying the process of buying crypto without using credit or debit cards in Nigeria.

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More 186 US banks well-positioned for collapse, SVB analysis reveals

March 18, 2023 Coin Telegraph

Banking

Rising interest rates, which brought down the U.S. banking system’s market value of assets by $2 trillion, combined with a large share of uninsured deposits at some U.S. banks, threatens their stability.

The perfect mix of losses, uninsured leverage and a greater loan portfolio, among other factors, resulted in the fall of Silicon Valley Bank (SVB). Comparing SVB’s situation with other players revealed that nearly 190 banks operating in the United States are at potential risk of a run.

While SVB’s collapse came as a reminder of the fragility of the traditional financial system, a recent analysis by economists showed that a large number of banks are just uninsured deposit withdrawals away from a devastating collapse. It read:

“Even if only half of uninsured depositors decide to withdraw, almost 190 banks are at a potential risk of impairment to insured depositors, with potentially $300 billion of insured deposits at risk.”

Monetary policies penned down by central banks can have a negative impact on long-term assets such as government bonds and mortgages, which can, in turn, create losses for banks. The report explains that a bank is considered insolvent if the mark-to-market value of its assets — after paying all uninsured depositors — is insufficient to repay all insured deposits.

*Largest insolvent institutions if all uninsured depositors run. Source: papers.ssrn.com*

The data in above graph represents the assets based on bank call reports as of Q1, 2022. Banks in the top right corner, alongside SVB (with assets of $218 billion), have the most severe asset losses and the largest runnable uninsured deposits to mark-to-market assets.

The recent rise in interest rates, which brought down the U.S. banking system’s market value of assets by $2 trillion, combined with a large share of uninsured deposits at some U.S. banks, threatens their stability.

“Recent declines in bank asset values significantly increased the fragility of the US banking system to uninsured depositors runs,” the study concluded.

As the federal government steps in to protect the depositors of SVB and Signature Bank, President Joe Biden assured no impact on taxpaying citizens.

Thanks to actions we've taken over the past few days to protect depositors from Silicon Valley and Signature Banks, Americans can have confidence that our system is safe.

People’s deposits will be there when they need them – at no cost to the taxpayer.
— President Biden (@POTUS) March 13, 2023

However, many pointed out to Biden on Twitter that “everything you do or touch costs the taxpayer!”

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Banking crisis: What does it mean for crypto?

March 17, 2023 Coin Telegraph

Banking

In our latest Cointelegraph Report, we broke down the main events that led to the collapse of Silvergate, SVB and Signature Bank and explain what this all could mean for crypto.

Last week’s rapid collapse of Silvergate, Silicon Vallley Bank and Signature Bank have highlighted the fragility of the traditional banking sector while depriving crypto of the main fiat on-ramp points in the U.S.

Most observers agree that the collapse of SVB, like the one of Silvergate, was largely the result of unfavourable market conditions and poor risk management.

The shutdown of Signature was more controversial. According to multiple sources, the bank was not facing insolvency and had largely stabilized its capital outflow when U.S. regulators decided take over it last Sunday. Many in the crypto industry saw it as a political decision, aimed at pushing crypto out of the U.S.

Silvergate and Signature were the two main financial institutions providing banking services to crypto companies in the US: following their shutdown, it will be far more challenging for crypto companies to interact with the dollar system.

In the meantime, The collapse of SVB seemed have caused a ripple effect across the global banking sector: Credit Suisse, the second largest Swiss financial institution, is going through a severe crisis which required the Swiss Central Bank to intervene with a $54 billion lifeline.

If you want to know more about the ongoing banking crisis and how it is affecting cryptocurrencies, check out ourr latest Cointelegraph Report and don’t forget to subscribe to our YouTube channel!

CBDCs could provide smooth cross-border payments, says Bank of Israel official

March 15, 2023 Coin Telegraph

CBDC

Yoav Soffer, the advisor to the deputy governor and CBDC project manager, spoke at Tel Aviv FinTech Week, explaining how a recent CBDC experiment proved efficient in cross-border transactions.

At Tel Aviv FinTech Week 2023, Yoav Soffer, the advisor to the deputy governor at the Bank of Israel, touched on the topic of central bank digital currencies (CBDCs) as an efficient cross-border payment option.

The talk comes after the Bank for International Settlements (BIS) concluded its research on international retail and remittance payments via CBDCs between the central banks of Israel, Norway and Sweden. The BIS project is called “Project Icebreaker.”

Soffer, who is also the project manager for the CBDC program for the Central Bank of Israel, said that while domestic payments in Israel have become “very easy, convenient and cheap,” the same is not true for payments outside of the country.

“Cross-border payments are often perceived to face challenges of high costs, low speed, limited access and insufficient transparency according to the financial stability board.”

Soffer touched on the result of an example transaction that took less than two minutes. Moreover, he stressed that this model would significantly reduce the costs of sending funds internationally and is “much more competitive in terms of the foreign exchange transaction."

*Yoav Soffer speaking at Tel Aviv FinTech Week 2023. Source: Cointelegraph*

He continued to say that the technological requirements for countries to join the model are very limited and once a prototype is built, onboarding should essentially be a domino effect.

“Once you build it for three countries, you could build it for 180 countries. Therefore, it's also very scalable.”

However, he did say that in employing such a program, ways to provide liquidity for CBDC providers would need to be considered, as well as the integration of policies. Soffer said privacy is another major consideration that the BIS team was aware of during the project.

Despite over a hundred countries looking into the possibilities of CBDCs, the sentiment around these centralized digital currencies is mixed. They have useful capabilities, such as efficient cross-border transactions, though some say they could threaten consumers’ future.

Former CFTC Chair Christopher Giancarlo recently stressed that CBDCs should protect privacy and not be a surveillance tool as many fear. A congressman in the United States, Tom Emmer, also commented that they could be ‘easily weaponized’ to spy on U.S. citizens.

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Banks collapsing; stablecoins depegging — What is happening? Watch The Market Report live

March 14, 2023 Coin Telegraph

Banking

On this week’s episode of The Market Report, Cointelegraph’s resident experts explain what is going on with banks collapsing, stablecoins depegging and what you should do to stay safe.

This week on The Market Report, the resident experts at Cointelegraph discuss all the details regarding the latest bank collapse and the USD Coin (USDC) depeg.

We kick things off with this week’s top stories

Silicon Valley Bank collapse: Everything that’s happened until now

The sudden collapse of Silicon Valley Bank (SVB) has quickly unfolded over the last week, depegging stablecoins, leading regulators in the United States and the United Kingdom to prepare emergency plans and raising fears among small businesses, venture capitalists and other depositors with funds stuck at the California tech bank. Our experts here at Cointelegraph Markets & Research break down everything that has happened so far, so you’re up to date with all the latest developments.

‘Nobody left to bank crypto companies’ — Crypto Twitter reacts

Crypto companies could find it harder to access traditional banking partners with the loss of two major crypto-friendly banks in less than a week, according to some in the crypto community. These banks were seen as important banking pillars for the crypto industry. According to insurance documents, Signature Bank had $88.6 billion in deposits as of Dec. 31. Crypto Twitter believes that there is no one left to bank crypto companies in the U.S., but is that really the case? Are there no other banks willing to work with crypto companies? Our experts break it down for you.

Bitcoin price nears $25K as analysts place bets on CPI impact

Data from Cointelegraph Markets Pro and TradingView showed BTC/USD making monthly highs of $24,917 on Bitstamp overnight. The pair remained buoyant after the impact of multiple U.S. bank closures sent crypto markets skyrocketing . Now, all eyes were temporarily on the Consumer Price Index (CPI) print for February when it came to short-term BTC price action. A classic crypto volatility catalyst in itself, last month, CPI showed an unwelcome slowdown in inflation abating; this, in turn, gave rise to fears that the Federal Reserve would keep interest rates higher for longer. However, as the banking crisis has overshadowed the inflation debate, expectations are starting to pivot to the Fed abandoning rate hikes altogether. How will Bitcoin (BTC) and the crypto market as a whole react if that were to happen?

Our experts cover these and other developing stories, so make sure you tune in to stay up-to-date on the latest in the world of crypto.

Lastly, we’ve got insights from Cointelegraph Markets Pro, a platform for crypto traders who want to stay one step ahead of the market. Our analysts use Cointelegraph Markets Pro to identify two altcoins that stood out this week, so make sure to tune in to find out which ones made the cut.

Do you have a question about a coin or topic not covered here? Don’t worry — join the YouTube chat room and write your questions there. The person with the most interesting comment or question will have a chance to win a one-month subscription to Markets Pro worth $100.

The Market Report streams live every Tuesday at 12:00 pm ET (5:00 pm UTC), so be sure to head on over to the Cointelegraph Markets & Research YouTube page and smash those Like and Subscribe buttons for all our future videos and updates.

Bank of Russia Registers Another Digital Asset Issuer

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Central Bank

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