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BIS wraps exploration project on retail CBDC payment system

March 6, 2023 Coin Telegraph

BIS

The bank concluded that a ‘hub-and-spoke’ model between CBDC domestic systems could “reduce settlement and counterparty risk" and complete cross-border transactions in seconds.

The Bank for International Settlements, or BIS, has reported it has concluded a project exploring international retail and remittance payments use cases for central bank digital currencies, or CBDCs, with the central banks of Israel, Norway and Sweden.

In a March 6 report, the BIS said it had finished Project Icebreaker, an initiative involving the bank’s Innovation Hub Nordic Centre testing key functions and the technological feasibility of interlinking domestic CBDC systems through the Central Bank of Norway, the Bank of Israel, and Sveriges Riksbank. According to the report, the BIS concluded that a ‘hub-and-spoke’ model between domestic systems could “reduce settlement and counterparty risk by using coordinated payments in central bank money and complete cross-border transactions within seconds”.

“Without a hub-and-spoke approach, each [retail CBDC, or rCBDC] system would need to make individual specific network and infrastructure configurations to communicate with other rCBDC systems,” said the report. “Communication between these rCBDC systems may not be standardised via a common interface and would instead be a bespoke integration between each pair of rCBDC systems. This would be not only complex to support and maintain but could also introduce cyber security risks.”

The #BISInnovationHub Nordic Centre and the central banks of Israel, Norway and Sweden have concluded Project Icebreaker, which studied the potential benefits and challenges of using retail #CBDC in international payments @riksbanken @NorgesBank https://t.co/2OfFYaPbr6 pic.twitter.com/jPFjrCXDlT
— Bank for International Settlements (@BIS_org) March 6, 2023

The report could provide the groundwork for a cross-border payment system should the central banks of Israel, Norway and Sweden move forward with issuing a digital shekel, digital krone, and digital krona, respectively. In October 2022, the bank reported that a CBDC pilot involving the central banks of Hong Kong, Thailand, China and the United Arab Emirates was “successful” after a month-long test facilitating $22 million worth of cross-border transactions.

In 2020, the Central Bank of the Bahamas became the first in the world to make a central bank-issued CBDC called the Sand Dollar available to all residents of the island nation. Other countries have been moving forward on large-scale trials of digital currencies, including China — the nation’s central bank reportedly distributed millions of digital yuan over the Lunar New Year holidays.

Iran completes pre-pilot phase of central bank digital currency

March 6, 2023 Coin Telegraph

CBDC

The Central Bank of Iran progresses with CBDC development in anticipation of the Bank of Russia’s governor Elvira Nabiullina’s visit.

Iran is moving forward with its central bank digital currency (CBDC) plans, completing preliminary research for the launch of a potential digital rial.

The Central Bank of Iran (CBI) has successfully completed a pre-pilot phase in the development of Iran’s CBDC, according to an official statement by CBI’s research arm, the Monetary and Banking Research Institute (MBRI).

Mohammad Reza Mani Yekta, head of the CBI office for supervising payment systems, announced the news at the ninth annual conference on electronic banking and payment systems on Feb. 20. He noted that Iran’s central bank plans to increase the scope of the CBDC pilot in the country’s payment system, but doesn’t want to rush its implementation.

“The pre-pilot phase ended successfully with valuable achievements. The project will soon be launched in other ecosystems and will be used by more users,” Mani Yekta stated.

The executive pointed out that the rules governing a potential digital rial will be in line with the rules established for rial banknotes. Mani Yekta also noted that a digital rial is planned to be distributed among individuals and banks, with the CBDC infrastructure recreating some blockchain features.

Mani Yekta reportedly said that ten banks in Iran have applied to join the digital rial project, while banks like Bank Melli, Bank Mellat and Bank Tejarat were involved in the experimental phase. All banks and credit institutions in Iran are reportedly expected to start offering electronic wallets for using the upcoming digital currency.

As previously reported, CBI started planning to launch a CBDC pilot in January 2022, following years of initial research since 2017. The regulator reportedly started rolling out a CBDC pilot in September 2022, aiming to improve financial inclusion and compete with global stablecoins.

Iran’s digital rial project, referred to as “crypto rial,” is pegged to the national currency, the Iranian rial, at a 1:1 ratio. The digital currency reportedly runs on a platform known as Borna, which was developed using Hyperledger Fabric, the open-source enterprise blockchain platform established by United States technology giant IBM.

The news comes amid the Iranian authorities preparing to hold an official meeting with the Bank of Russia’s governor Elvira Nabiullina, who is expected to visit Iran in the near future. Russia and Iran have reportedly been working together to create a gold-backed stablecoin that would serve as a payment method in foreign trade.

Pakistan banks agree on blockchain-based KYC system development

March 6, 2023 Coin Telegraph

Banks

The blockchain-based national eKYC banking platform is aimed at strengthening anti-money laundering (AML) capabilities while countering terror financing.

Pakistan Banks’ Association (PBA) — a group of 31 traditional banks operating in Pakistan — signed off on the development of a blockchain-based platform for Know Your Customer (KYC) initiatives.

On March 2, PBA signed the project contract for developing Pakistan’s first blockchain-based national eKYC (electronic Know Your Customer) banking platform, reported Daily Times. The move was aimed at strengthening anti-money laundering (AML) capabilities while countering terror financing — an initiative led by the State Bank of Pakistan (SBP).

The member banks include international establishments such as the Industrial and Commercial Bank of China, Citi bank and Deutsche Bank. Moreover, the blockchain platform will improve operational efficiencies — primarily aimed at improving customer experience during the onboarding process.

A momentous occasion!

Pakistan Banks’ Association (PBA) and Avanza Group signed the Project Contract for Pakistan’s first Blockchain based National Banking Platform in Karachi on 2nd March 2023.#AvanzaGroup #AvanzaInnovations #AvanzaSolutions #demystifyingthefuture #PBAeKYC pic.twitter.com/2XMcxHoanL
— Avanza Group (@avanzagrp) March 3, 2023

Avanza Group has been tasked to develop the blockchain-based eKYC platform named ‘Consonance,’ which will be used by member banks to standardize and exchange customer data via a decentralized and self-regulated network. However, the customer details will be shared based on consent — allowing banks to assess existing and new customers.

Joining other countries in the race for an in-house central bank digital currency (CBDC), Pakistan recently signed new laws to ensure the launch of a CBDC by 2025.

*Global CBDC initiatives overview. Source: Atlantic Council*

The state bank, SBP, will issue licenses to EMIs for CBDC issuance. “These landmark regulations are a testament to the SBP’s commitment toward openness, adoption of technology and digitization of our financial system,” said Deputy Governor of SBP Jameel Ahmad in this regard.

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India explores offline functionality of CBDCs — RBI executive director

March 4, 2023 Coin Telegraph

CBDC

In addition to offline functionality, RBI is gauging CBDC’s potential for cross-border transactions and linkage with legacy systems of other countries.

India’s recently launched in-house central bank digital currency (CBDC) — the digital rupee — is now being tested for offline functionality, revealed Ajay Kumar Choudhary, executive director of the Reserve Bank of India (RBI).

The RBI — India’s central bank and regulatory body — launched the wholesale segment pilot for the digital rupee on Nov. 1, 2022, onboarding 50,000 users and 5,000 merchants for real-world testing. As of Feb. 25, around $134 million and 800,000 transactions have been completed via wholesale CBDCs.

Building on this progress, Choudhary said the RBI is looking at the CBDC’s offline functionality. Speaking to CNBC TV18, he stated the RBI is gauging the CBDC’s potential for cross-border transactions and linkage with legacy systems in other countries. He added:

“We are eagerly looking forward to private sector and fintechs’ participation in CBDC. We will see their contribution, especially on offline and cross-border CBDC transactions.”

Moreover, speaking on behalf of the RBI, Choudhary said the CBDC would soon become the medium of exchange and needs all features of physical currency, including anonymity.

India’s motivation for launching the CBDC was to improve regional financial inclusion and spearhead the digital economy. Choudhary also told CNBC TV18 that CBDC would eventually act as a replacement for cryptocurrencies.

On Feb. 21, India’s national payment network, the unified payments interface (UPI), expanded its services to Singapore.

UPI goes Global!

Since UPI was introduced as a payment system in India, it has revolutionised the lives of Indians, but in fact, India’s digital payment system is steadily becoming globally attractive & is being adopted by other countries.#indiafirst #IndiaSingaporeRelations pic.twitter.com/55sGh5bzbZ
— MyGovIndia (@mygovindia) February 21, 2023

The UPI PayNow integration allows citizens from India and Singapore to send money across borders quickly.

Initially, four major Indian banks — the State Bank of India, Indian Overseas Bank, Indian Bank and ICICI Bank — will facilitate outgoing remittances. Axis Bank and DBS Bank India will facilitate incoming remittances. Singapore’s DBS Bank and Liquid Group will provide the service to users in the region.

Australian central bank to launch ‘live pilot’ of CBDC in coming months

March 1, 2023 Coin Telegraph

Australia

The use cases for the CBDC ranged from offline payments to "trusted Web3 commerce" and financial industry participants were invited to undertake a live pilot.

Australia's central bank is set to launch a "live pilot" of a Central Bank Digital Currency (CBDC) "in the coming months," according to a joint statement from the Reserve Bank of Australia (RBA) and Digital Finance CRC (DFCRC), an Australian financial research institute.

The RBA said on Mar. 2 local time said it was collaborating with the DFCRC on a research project to "explore potential use cases and economic benefits of a central bank digital currency (CBDC) in Australia."

The RBA announced the initial stage of the research project involved the selection of several financial industry participants to demonstrate potential use cases of the CBDC, which will provide possible benefits of a CBDC.

This will involve a"live pilot," which the RBA says will take place over the coming months.

Use cases being piloted will include offline payments, tax automation and a CBDC for "trusted Web3 commerce," while participants of the trial range from banks, such as Commonwealth Bank and Australia and New Zealand (ANZ) bank to payment providers such as Mastercard.

*Selected CBDC use cases and the providers of each. Source: RBA*

Brad Jones, Assistant Governor (Financial System) at the RBA said, "The pilot and broader research study that will be conducted in parallel will serve two ends – it will contribute to hands-on learning by industry, and it will add to policy makers’ understanding of how a CBDC could potentially benefit the Australian financial system and economy.”

This is a developing story, and further information will be added as it becomes available.

FSB, IMF and BIS papers to set global crypto framework, says G20

February 26, 2023 Coin Telegraph

Central Bank

A series of recommendations and papers setting standards for a global crypto regulatory framework will be released by the institutions in July and September.

The Financial Stability Board (FSB), the International Monetary Fund (IMF), and the Bank for International Settlements (BIS) will deliver papers and recommendations establishing standards for a global crypto regulatory framework, announced on Feb. 25 the group of the 20 biggest economies of the world, collectively known as G20.

According to a document summarizing the outcomes of the meeting with finance ministers and central bank governors, the FSB will release by July 2023 recommendations on the regulation, supervision and oversight of global stablecoins, crypto assets activities and markets.

*India’s Finance Minister Nirmala Sitharaman during FMCBG meeting in Bengaluru. Source: Ministry of Finance.*

The next guidance is expected for September 2023, when the FSB and the IMF jointly should submit "a synthesis paper integrating the macroeconomic and regulatory perspectives of crypto assets." In the same month, the IMF will also release a report on the "potential macro-financial implications of the widespread adoption" of central bank digital currencies (CBDCs). According to the G20 statement:

"We look forward to the IMF-FSB Synthesis Paper which will support a coordinated and comprehensive policy approach to crypto-assets, by considering macroeconomic and regulatory perspectives, including the full range of risks posed by crypto assets."

The BIS will also submit a report on analytical and conceptual issues and possible risk mitigation strategies related to crypto assets. This report's deadline is not mentioned in the document. A G20's financial task force will also look at the use of crypto assets to fund terrorist activities.

The announcement came after two days of official meetings in Bengaluru, India. In the first financial meeting under India's presidency, the group addressed key financial stability and regulatory priorities for digital assets, Cointelegraph reported.

During the event, United States Treasury Secretary Janet Yellen said it was “critical to put in place a strong regulatory framework" for crypto-related activities. She also noted that the country is not suggesting an “outright banning of crypto activities.“ Speaking to reporters on the sidelines of the event, IMF managing director Kristalina Georgieva stated that banning crypto should be an option for G20 countries.

Central Bank

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