Russia’s Central Bank Joins the CBDC Bandwagon; Issues Consultative Paper on Digital Ruble Consideration

Russia’s Central Bank is the latest monetary authority to issue a CBDC consultative paper amidst the ongoing craze; the bank confirmed its interest in issuing a digital ruble, noting that it can operate alongside cash or non-cash forms of money that already exist in the country. This development comes barely a week since the BIS and 7 major central banks published a report highlighting the key principles that should guide CBDCs at least for now.

According to the consultative paper released on Oct 3, a digital ruble will require Russia’s central bank to develop advanced payment ecosystems. Consequently, the bank intends this digital asset to carry along the properties of money, given its prospective fundamentals as part of the state-backed legal tender in circulation. The paper further notes that the digital ruble will be instrumental in making payments seamless based on its underlying architecture.

In terms of a macroeconomic and political outlook, the bank also plans to curb capital outflow with its prospectus digital ruble,

“The national digital currency will also limit the risk of reallocation of funds into foreign digital currencies, contributing to macroeconomic and financial stability.”

Notably, the digital ruble will be accessible to all Russian economy agents, including government agencies, businesses, financial market stakeholders, and private citizens. These digital assets will be storable on mobile devices and e-wallets, with the holders having an option to use their CBDC tokens both online and offline. The digital ruble’s main functions, as per the paper, will include a medium of exchange, a unit of account, and a store of value.

Given the ongoing CBDC momentum, Russia’s debut at the party further suggests that monetary authorities are taking more interest in the evolving digital currency space. China is currently the most progressive jurisdiction; the digital yuan pilot has been ongoing for some months with scaling recently done to prominent cities. The EU also filed for a ‘digital euro’ trademark as it gears up to join the CBDC bandwagon in preparation for the paradigm shift to digital ecosystems.

The post Russia’s Central Bank Joins the CBDC Bandwagon; Issues Consultative Paper on Digital Ruble Consideration first appeared on BitcoinExchangeGuide.

Seven Major Central Banks Collaborate to Release First CBDC Report, Highlighting Key Principles

The Bank of International Settlements (BIS), along with seven other prominent central banks, has published a report on the feasibility of issuing CBDCs to complement monetary policy. According to the 26-page document, CBDC’s should be based on foundational principles and core features that will enable the prospectus digital currencies to function effectively.

The report, which is dubbed ‘Central Bank Digital Currencies: Foundational Principles And Core Features,’ is a collaborative effort between the following:

  • Bank of Canada
  • Bank of England
  • Bank of Japan
  • European Central Bank
  • Federal Reserve
  • Sveriges Riksbank
  • Swiss National Bank
  • Bank for International Settlements (BIS)

It was published on October 9 and will mark the first of its series, given that the BIS is expected to advance the CBDC research in collaboration with central banks.

CBDC Foundational Principles & Core Features

According to the report, a functional CBDC will need to meet some criteria when it comes to the underlying principles and core features. It highlighted three principles which include;

  • Coexistence: CBDCs should co-exist with other types of money that already run today’s markets.
  • Innovation and Efficiency: Features should focus on promoting efficiency and innovation.
  • Do No Harm: CBDC introduction should not compromise the current financial or monetary ecosystems but complement them instead.

The 14 core features were, in turn, derived from these principles; some of the notable recommendations that were made include;

  • Secure and Resilient; To uphold the operational integrity of CBDC ecosystems.
  • Convenient; To enable seamless interaction with existing fiat currencies.
  • Value additional; To include the private sector and create a competitive environment for innovation.

The BIS co-chair and head of innovation hub, Benoît Cœuré, said that the newly released report would provide an opportunity to further delve into CBDC’s,

“A design that delivers these features can promote more resilient, efficient, inclusive, and innovative payments.

Although there will be no ‘one size fits all’ CBDC due to national priorities and circumstances, our report provides a springboard for further development of workable CBDCs.”

The Rise in CBDC Interest

Recent months have seen a growing interest in the CBDC space; China, which piloted its digital yuan back in Q2, is now boasting close to $162 million e-RMB transactions. This initiative has particularly fueled the CBDC craze as other giant economies look to get a cutting edge.

South Korea announced this week that it will also pilot it’s ‘digital won’ in 2021, although they are yet to settle on whether a CBDC will be necessary. Likewise, the latest BIS CBDC report’s contributing members did not signal that their respective jurisdictions will be launching CBDCs.

The post Seven Major Central Banks Collaborate to Release First CBDC Report, Highlighting Key Principles first appeared on BitcoinExchangeGuide.

Chinese Govt Advisor Proposes a Cross-Border Stablecoin Backed by Yen, Won, HKD, and Yuan

In a recent proposal, Top Chinese officials have suggested the creation of a regional digital currency. This initiative would be backed by four main Asian currencies which include the Yuan, Hong Kong dollar, Korean Won and Japanese Yen. Should it be accepted, the PBoC will be tasked with steering the project.

Co-signed by nine top advisers, the proposal was presented to Chinese regulators on May 21 in the ongoing annual political gathering. This submission was done by Sequoia’s China Managing partner, Neil Shen, during the premier session of the Chinese People’s Political Consultative Conference (PCC). Basically, this is the level which independent entities and organizations in China get an opportunity to advice the government prior to the National People’s Congress (NPC).

The Digital Currency Structure Proposal

The proposal describes this joint digital currency as a ‘stable coin’; mainly because it will be pegged on a varied basket of ‘stable’ currencies. It goes on to highlight that the weight of these four Asian currencies will be based on an IMF model dubbed ‘special drawing rights‘ (SDR). Ideally, all the four fiat currencies will be assigned a weight based on the underlying value of their supporting economies. This is pretty similar to what Libra had earlier proposed before an update of its whitepaper this year.

Some of the benefits that were outlined in favor of the coin include facilitation of regional trade amongst the four countries. Most especially in the clearance and settlement of cross-border payments. The proposal notes that PBoC and Hong Kong Monetary Authority could work together in creating a regulatory framework for this ecosystem. Also suggested was the creation of a regulatory sandbox and the ramping up of Hong Kong’s system in order to boost the efficiency in cross-border payments.

In summary, this stablecoin is set to present an opportunity for private entities to seamlessly trade through digital assets. Furthermore, they can move the digital currency within the existing financial ecosystem through custodians or banks. Currently, emphasis appears to be on Hong Kong which acts as the main financial gateway in the region. The city is estimated to process over 70% of Yuan cross-border payments.

China’s Digital Yuan

Could this be another strategy to empower the recently piloted digital Yuan? Back in April, the Asian giant rolled out its much-anticipated digital currency sparking conversations around CBDC’s development. The new regional digital currency proposal now suggests there could be an opportunity to integrate the digital Yuan should China and peer authorities give a go ahead. It still, however, too early to tell as the proposal is set to be reviewed in the coming weeks as the NPC session kicks off in China.