Digital Dollar Project completes CBDC retail remittance pilot with Western Union

August 3, 2023 Coin Telegraph

CBDC

The project simulated transfers to customers of BDO Unibank in the Philippines with improved settlement time, cost and transparency.

The Digital Dollar Project (DDP) announced the completion of a pilot study of remittance payments to the Philippines using a simulated retail central bank digital currency (rCBDC). Western Union and BDO Unibank were partners in the project.

The project used a version of the DDP’s Champion Model. In it, a simulated central bank issued CBDCs to an intermediary bank, which provided access to it to Western Union (WU) for remittance to a BDO Unibank customer in the Philippines. WU used a decentralized exchange (DEX) to trade a dollar CBDC for a Philippine peso CBDC at a real-time rate set by a third-party oracle. WU received payment confirmation and transferred the amount to the bank customer’s account.

*Remittance transfer scheme. Source: The Digital Dollar Project*

The transaction used central bank money, as opposed to commercial bank money, for the entirety of the transaction, in contrast to current practice. The DEX was a primary feature of the study. The authors noted that the development of such an exchange could have the advantages of creating competition and increasing transparency. They noted, however, that most remittances to the Philippines take place when trading is closed in Manila, so that leg remains problematic.

Privacy issues were not addressed in the study, though the report noted that distributed ledger technology helps preserve privacy “by allowing for granular control over the level of consumer data sharing.”

By using distributed ledger technology, the transfer of the message and transfer of value took place simultaneously and within seconds. With current technology, value transfer takes longer than message transfer, introducing counterparty and credit risk. The authors concluded:

“The pilot demonstrated that rather than displacing the service offerings of Western Union and BDO Unibank, CBDCs present an opportunity to modernize processes and promote efficiencies for private sector companies and their customers."

Remittances are typically valued at $200-$300 per transaction. They had a total value of $626 billion in 2022, according to research cited in the report. In 2021, $74 billion in remittances were sent from the United States. Seven percent of U.S. households sent remittance abroad.

PUBLICATION: Findings of our latest whitepaper delve into the benefits and considerations of utilizing a potential U.S. #CBDC in cross-border payments. Pilot study with @WesternUnion, BDO Unibank, and @Accenture shows a CBDC could expedite payments in https://t.co/vR2Z8wRNaR pic.twitter.com/X7HRCcshnc
— The Digital Dollar Project (@Digital_Dollar_) August 3, 2023

Remittances from the U.S. to the Philippines usually cost 4.4% on a total transaction of $200, with bank transfers costing 7.98% on average. The simulated process would save time and money, as well as increase transparency.

The DDP, co-founded by former Commodity Futures Trading Commission Chair Christopher Giancarlo, launched its technical sandbox in September. Accenture also provided support for the project.

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Ron DeSantis vows to ban CDBCs in the US if elected president

July 15, 2023 Coin Telegraph

CBDC

Speaking at the Family Leadership Summit on July 14, DeSantis promised to ban CBDCs in the United States if he is elected president.

United States presidential candidate Ron DeSantis once again criticized central bank digital currencies (CBDCs), arguing against the possibility of a digital dollar in the country.

Speaking at the Family Leadership Summit on July 14, DeSantis promised to ban CBDCs in the U.S. if he is elected president. "If I am the president, on day one, we will nix central bank digital currency. Done. Dead. Not happening in this country," he said during the event in Iowa, which featured six other Republican candidates.

DeSantis is a vocal opponent of a digital dollar in the United States. In May, he passed a bill in Florida that prohibits the use of federal CBDCs as money, along with banning the use of foreign CBDCs, claiming it would lead to a "massive transfer of power from consumers to a central authority.”

*Tucker Carlson and Ron DeSantis during the Family Leadership Summit. Source: NBC News.*

A central bank digital currency isn’t too different from a traditional currency issued by a central bank. It can be defined as a digital version of fiat currency, bringing with it the conveniences of digital assets.

However, it has long been a source of controversy in the crypto community, with opponents claiming CBDCs threatens citizens' privacy and could lead to absolute government control, while others see it as a tool to boost adoption as well as a global use case for blockchain technology.

According to Cointelegraph's CBDC database, CBDC projects have grown significantly in recent years, with over 100 countries exploring the topic and at least 39 nations that have either a CBDC pilot, proof-of-concept or other related initiatives underway.

The US Federal Reserve has reportedly no plans to issue a digital dollar soon, but this may change after next year's election, as more candidates are discussing crypto-related topics during their early campaigns. Robert F. Kennedy Jr. has been promoting Bitcoin since May as part of his campaign for the Democratic nomination for president. He recently disclosed up to $250,000 worth of Bitcoin investments.

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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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Canada’s central bank asks citizens what they want in a digital dollar

May 9, 2023 Coin Telegraph

Bank of Canada

Canadians are being asked what features they wish to see in a digital Canadian dollar even though there are no plans yet to issue one.

Canadians are being asked to submit what features they want to be included in a potential digital Canadian dollar, with the country’s central bank opening a consultation to the public.

On May 8, the Bank of Canada (BoC) launched a public consultation that will run until June 19, noting it’s exploring a virtual loonie as “the world becomes increasingly digital.”

The BoC’s senior deputy governor Carolyn Rogers said in a statement the bank wants to hear what Canadians “value most in the design of a digital dollar” to help it make choices relating to its security and reliability along with ensuring it “meets the needs of Canadians.”

Hey Canada, we need your input!

Our public consultation on a potential #DigitalCanadianDollar is now LIVE. #HaveYourSay by June 19: https://t.co/p8BdG3tQ9h pic.twitter.com/vKRoBfAngu
— Bank of Canada (@bankofcanada) May 8, 2023

The bank was quick to state that it's not starting work on a central bank digital currency (CBDC) and wasn’t looking to replace cash if it does.

“At this time, a digital Canadian dollar is not needed. And any decision to issue one rests with Parliament and the Government of Canada.”

“Cash isn’t going anywhere,” the BoC added. It said, however, that many Canadians could be excluded from the economy in the future if the use of banknotes falls.

If a CBDC was issued, physical notes would still be provided “for those who want them” the bank said.

The BoC also outlined the possibility that cryptocurrencies or foreign CBDCs “could become widely used in Canada.”

It claimed this scenario could compromise the Canadian dollar and “pose a risk to the stability of our financial system.”

The consultation’s questionnaire asks Canadians a wide range of questions including the payment methods they’ve used in the last month, how often they would potentially use a Canadian CBDC and what design features they wish to see.

It also specifically asks if the survey taker uses or holds cryptocurrencies and features a range of demographic questions about gender, age, education and income.

Canadians are asked as part of the digital dollar consultation if they use or hold crypto. Source: BoC

The BoC said it will publish a report summarizing the consultation “later this year.”

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‘Nothing is a coincidence with the government,’ claims US lawmaker on Operation Choke Point 2.0

April 13, 2023 Coin Telegraph

Coin Telegraph

Speaking at the NFT.NYC 2023, United States congressman Byron Donalds hurled criticism at recent crypto regulatory initiatives.

United States Congressman Byron Donalds criticized the country's regulatory agencies on April 12 at the NFT.NYC 2023 conference in New York. According to Donalds, agencies like the Securities and Exchange Commission (SEC), the Commodity Futures Trading Commission (CFTC) and others are being used to activate "Operation Choke Point 2.0" by limiting crypto business access to banking services.

Operation Choke Point 2.0 describes the U.S. government's alleged coordinated effort to discourage banks from working with crypto firms under the guise of ensuring safety and stability. Crypto industry commentators believe government attempts to restrict access to the crypto sector have ramped up in 2023.

"What I've seen in my short time in Congress is that nothing is a coincidence with the government agency," the legislator said during a keynote speech, referring to the U.S. government's recent crackdown on crypto. "They are talking across lines a lot more than they ever used to. They are finding various ways to squeeze an outcome that they want."

Along with efforts to limit the banking system's exposure to crypto, Donalds believes the Federal Reserve is "laying the foundation for a CBDC," or central bank digital currency, with recent enforcement actions being part of plans for a digital dollar.

*U.S. congressman Byron Donalds and Marc Beckman at the NFT.NYC 2023*

The Floridan congressman also noted that the U.S. government doesn't have enough knowledge about the crypto industry to regulate it properly, and through its agencies, is relying on a "legacy framework of 100 years" to create rules and regulations for today's needs. "To bring us into lay terms, [...] This will be like asking a sixth-grade basketball player to ref the NBA finals," he said before urging an updated regulatory environment for digital assets.

Donalds also labeled SEC chair Gary Gensler as "a very arrogant individual," claiming that "He believes he is the smartest person in every room." Donalds continued:

"Old Washington, which is basically Washington today, loves having the alphabet soup agencies [...] They're all relics of a time when you had to fax in before fax machines. This is when the regulatory agencies were built. Old Washington, like anybody else, doesn't like moving off the thing that they created."

Helping regulators understand the nuances of digital assets, blockchain and crypto more generally are necessary for a better crypto environment in the country, according to the congressman.

United States authorities appear to have resurrected past enforcement tactics to impose restrictions on cryptocurrency firms and banks serving them. The alleged strategy consists of isolating the traditional financial system from the crypto market by relying on “multiple agencies to discourage banks from dealing with crypto firms,” with the goal of leading crypto businesses to become “completely unbanked,” sources told Cointelegraph in early February.

Recent reports reveal that the U.S. arm of global crypto exchange Binance has faced challenges in establishing a new bank partner to serve as a fiat on-ramp and off-ramp for its clients in the country. The recent failures of Silvergate and Signature Bank left Binance.US without banking services, depending on middleman banks to store funds on its behalf.

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