This week in central bank digital currencies (CDBCs), the Federal Reserve sounds a note of caution about a nationwide digital currency, while Japan and Iran show more interest. Also, Russia tests the digital ruble while its finance ministry says cryptocurrency should be regulated, not banned.
Fed Report Notes Downsides of CDBC
While there is growing support among the American financial community for the adoption of a CDBC, the Federal Reserve Bank pointed out that there are risks.
“While a CBDC could provide a safe, digital payment option for households and businesses as the payments system continues to evolve, and may result in faster payment options between countries, there may also be downsides,” the bank said in a news release. “They include how to ensure a CBDC would preserve monetary and financial stability as well as complement existing means of payment.”
Bank of Japan: Nation Must Cooperate on CBDC Standards
The head of the Bank of Japan said his country needs to work with the U.S. and Europe on putting together a global standard on the technical aspects of creating a CBDC.
As Reuters reported, the bank itself has yet to decide whether to issue its own CDBC, but Governor Haruhiko Kuroda told the country’s parliament it is experimenting on a digital currency.
Iran Close to CBDC Pilot
News reports out of Iran this week suggest the country’s central bank could be moving toward a digital currency.
As reported by TechHQ, Mehran Moharamian, the banks vice governor of IT affairs, said CBDCs could help with decentralization resources and clear up financial inconsistencies. And Abutaleb Najafi , who heads the banks information services company, said a the digital currency will be tested in a pilot phase with banks, consumers and payment services companies.
Banks Test CDBC Settlement Integration
A trio of banks — the Bank of International Settlements (BIS), Swiss National Bank and SIX Swiss Exchange (SIX) — said they’ve wrapped the second stage of Project Helvetia — testing the integration of wholesale CBDC settlement with commercial banks, the website Asset Servicing Times reported.
The project imagines a future in which financial assets are increasingly tokenized, and the testers of both phases of the project said the methods of settling tokenized assets in CBDC are feasible and legal under Swiss law.
Russia Embarks on Digital Ruble Test
A dozen Russian banks have begun a trial of testing a CDBC across a range of payment types. Among these banks is Promsvyazbank, which said it is testing consumer-to-consumer (C2C) transactions using the digital ruble. Another bank, VTB, said it has the infrastructure needed to begin its own pilot.
“Piloting includes integration with the digital ruble platform and the introduction of services, such as opening an individual’s wallet through a mobile application and digital ruble transfers between individuals,” VTB told Russia’s Tass news agency.
44% of Bank Execs Will Offer Crypto Services This Year
A recent American Banker survey has found that nearly half of the bank executives interviewed plan to offer retail clients cryptocurrency services before year’s end, double the amount from 2021, Fool.com reported.
Meanwhile, 60% of wealth management advisors who took the survey said they expect their clients to either start investing in cryptocurrency this year or increase their existing holdings. And while just 13% of wealth managers currently actively manage clients’ crypto holdings, a third of those surveyed said they expect to begin doing so this year.
Bulgaria Could Recognize Digital Currency Payments
Bulgaria’s finance minister said his country is looking at offering digital currency payment options in collaboration with industry stakeholders and the central bank.
Speaking to Bloomberg, Finance Minister and the Deputy Prime Minister for EU Funds Assen Vassilev said the country is exploring digital currency payment mechanisms “in the short to medium term.” But Vassilev ruled out the idea of Bulgaria becoming a hub for block reward mining the way other Eastern European countries have.
South Korea Wraps First Phase of CDBC Test
The Bank of Korea reported it has wrapped the first phase of its digital currency test. After successfully testing CBDC issuance and distribution, the bank will now move to a second phase, chiefly focusing on offline payments to allow CBDC transactions even if a user’s device isn’t online.
Korea’s CBDC will have a secure storage known as the “Secure Element” for storing these offline transactions. The Bank of Korea said it has no plans for a CDBC to replace its fiat currency, but rather sees the digital coins as a backup.
Thai Regulators Crack Down on Digital Asset Payments
Thailand’s three main regulators said they plan to put restrictions on the use of digital assets or cryptocurrencies.
The Bank of Thailand, the Securities and Exchange Commission (SEC) and the Ministry of Finance (MoF) issued a joint statement expressing concern about the impact these assets could have on financial stability, as well as threats such as cybertheft and money laundering.
Russia Finance Ministry Official Says Crypto Needs Regulation
Comments from a Russian finance minister this week suggest the country could be easing its stance on cryptocurrency. Ivan Chebeskov, a director in the Ministry of Finance, said an outright ban on crypto could cause Russia to lag behind other countries technologically.
“We need to give these technologies the opportunity to develop,” he said. “In this regard, the Ministry of Finance is actively involved in the development of legislative initiatives in terms of regulating this market.”
Crackdown Shutters Singapore’s Digital Currency ATM
A recent crackdown by Singapore’s central bank has led to the closure of the country’s digital currency ATMs.
The Monetary Authority of Singapore has issued guidelines barring the advertising of digital assets in public spaces and decided this week that ATMs in public spaces counted as a form of promotion of digital currencies.
“Such convenient access may mislead the public to trade in DPTs on impulse, without considering the risks of trading in DPTs,” the notice issued by the MAS read. “DPT service providers should not provide physical ATMs in public areas in Singapore to facilitate public access to their DPT services.”
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