Regarding central bank digital currencies: They might work, and they might be launched — but, depending on which country is weighing in, they might not be necessary. The debate over CBDCs continues, with some nations questioning their utility, and other nations embracing them wholeheartedly.
And in some cases, the continued regulator crackdown on what might be termed traditional cryptos — those, like bitcoin, that are not pegged to an asset backing or central bank efforts — continues, paving the way for CBDC issuance on a wider scale.
In Switzerland, as noted in this space last week, Carlos Lenz, chief economist of the Swiss National Bank, has said the central bank sees no need for a digital franc — though studies into its feasibility are ongoing.
“The current payment system works well,” he said, according to a Google Translate treatment of a German-language article in the Swiss publication. The Handelszeitung report went on to quote another Swiss banking executive who said the country eventually will use a digital franc in at least some instances — the only question is when.
In a bit of insight into just where the efforts may focus in launching CBDCs, banking officials in Switzerland and France are working jointly on “Project Jura,” to see if CBDCs are applicable for wholesale transactions.
In France, as noted in an announcement from the country’s central bank, CBDC issuance has been used for wholesale payments.
Tightening The Reins On Crypto
But beyond the various explorations of the CBDCs, warnings and bans tied to the crypto space where the digital offerings are not backed by assets or by fiat (such as bitcoin), seem to be picking up speed.
And in further caution against digital currencies overall, in Norway, the financial industry regulator, the Financial Supervisory Authority of Norway, Finanstilsynet, has warned that “most cryptocurrencies are subject to extreme price fluctuations. The risk of loss is high … Price formation is in many cases not transparent … Scammers use spam, computer viruses, fake drawings and a variety of other techniques to deceive consumers,” according to the warning.
And in the U.K., the country’s Financial Conduct Authority (FCA) has prohibited Binance Markets Limited from undertaking any regulated activity in that country.
As reported by CNBC, FCA spokespersons have noted that the scope of the ban has been limited (in part, we note, because the exchange itself is not U.K.-based). “Though Binance Markets Limited is banned from offering regulated services in Britain, non-registered firms can still interact with U.K. consumers. That means Binance could still offer Brits crypto trading through its website,” the site reported.
The moves come, of course, after China shuttered crypto mining operations.
Separately, here in the States, there’s been an increasing exploration of the challenges of decentralized finance, which of course would include CBDCs. As reported by the Financial Times, a series of private video calls had crypto startups interacting with financial regulators — including the Commodity Futures Trading Commission and the Securities and Exchange Commission. In at least one hint of the concerns regulators have over the space, the FT noted that Dan Berkovitz, the CFTC commissioner, has stated that some DeFi programs related to derivatives might violate the Commodities Exchange Act (and there’s the contention that DeFi would be regulated).
“I’m totally open to having certain applications that can be done more efficiently without intermediaries,” Berkovitz said in an interview, as quoted by the FT. “But the intermediaries in many respects do serve an important function, and we can hold them accountable.”
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