Round-Up of CBDC News

CBDC Transactions on Galaxy Smartphones

The Bank of Korea is investigating adjustments needed in the payment system if CBDCs are launched. The Kakao consortium and two tech affiliates of the Samsung Group are to run a pilot programme for issuing and distributing CBDCs and looking at transferring money and remittances between countries. The pilot will monitor how they work in the virtual world.

Samsung Electronics will test the functionality of CBDCs with its Galaxy smartphone. Samsung said it will explore if it is ‘possible to conduct payments via mobile phones using the digital currency with no internet availability, or to send CBDC remittances to other mobile phones or to other connected bank accounts’.

Jamaica Mints its First CBDC

The Bank of Jamaica (BOJ) has now minted its first CBDC ready for issue to deposit-taking institutions and authorised payment service providers. This starts in December when its CBDC pilot stage begins. A legislative amendment relating to CBDCs is promised before the end of the fiscal year. 

J$230 million has been minted, with the BOJ working with eCurrency on the project. A public competition for a new name, logo, image and ‘tagline’ for the currency has been run as part of generating awareness and acceptance of the CBDC. The result will be announced soon.

The stated goals of Jamaica’s CBDC are to increase financial inclusion and to provide an additional easy access, efficient and secure payment option. For deposit-taking institutions and the BOJ, a CBDC should allow improved cash management processes and lower costs.

Bakong Makes Swift Progress Since its Launch 

The National Bank of Cambodia (NBC) launched its Bakong project in October 2020. The NBC reports that by the end of June 2021 the Bakong’s electronic wallet reached 200,000 users, doubling from three month earlier. An app is needed for money transfer. In the first half of 2021 NBC says it recorded 1.4 million transactions, including those member banks’ mobile apps.

The Bakong provides a payment and money transfer system for Cambodian citizens denominated in either riel or US dollars. It does not allow people to exchange riel for dollars or vice versa. The NBC notes that use of the riel has significantly increased since the launch of the Bakong. However, the Wall Street Journal estimates 90% of Cambodia’s transactions are in dollars, so there is some way to go.

The NBC does not describe the Bakong as a CBDC. It is, though, exploring using it for cross-border transactions, working with Thailand’s central bank and Malaysia’s largest bank, Maybank.

The Bakong is based on distributed ledger technology and has been developed with Japan’s Soramitsu company.

Bank of Ghana Teams with G+D on CBDC Pilot

The Bank of Ghana’s e-Cedi project is preparing to enter its pilot phase and it has chosen Giesecke+Devrient (G+D) to supply the underlying technology and to develop the solution which will be tested by banks, payment service providers, merchants, the public and other relevant stakeholders.

The project is part of the 'Digital Ghana Agenda', which involves the digitisation of the country of 30 million people and its government services. The e-Cedi is intended to circulate alongside cash, acting as a digital alternative. The solution aims to allow people to make payments without a bank account, contract, or smartphone because this offers the best chance of boosting the use of digital services and financial inclusion amongst all demographic groups.

The project has been planned in three phases: design, implementation and pilot. In the design phase, all framework parameters for the CBDC pilot will be specified and defined. These include economic, regulatory and technical requirements, as well as the definition of the parameters for the test phase. In the second phase G+D will amend its CBDC solution to meet these requirements.

Finally, the pilot will explore the effectiveness of different payment routes such as apps and smart cards, with a group of users chosen to represent a diverse set of demographics and socio-economic backgrounds. This will allow the user’s experience to be evaluated alongside the IT security of the infrastructure, the impact of the project on monetary policy and payment system, and the legal implications.

Insights from pilot user experiences will provide Bank of Ghana and G+D with valuable lessons for a nationwide rollout of the e-Cedi, say the two organisations.

Blockchain CBDC Trial Handles High Transaction Volumes 

Cryptocurrencies are based on blockchain but their set-up means transaction speeds are slow, too slow for them to operate at the speed of current electronic payments.

The central banks of Estonia, Spain, Germany, Italy, Greece, Ireland, Latvia and the Netherlands, along with the ECB, have been conducting trials of a version of a digital euro based on an innovative blockchain solution.

Estonia already uses blockchain as the basis for its e-state, and this project has explored the number of payments, the number of money-holders and the energy consumed this technology could deliver.

It also looked at how digital identities could be linked with privacy maintained. The trial involved payments between people with digital identities in Estonia, Latvia, Lithuania and Spain.

The test processed 300,000 payments a second with money reaching payees in under two seconds. Eesti Pank says the system could handle ‘the entire supply of euros in circulation and more, and there are no limits on the number of moneyholders or on the number of payments made simultaneously.’

In addition, the carbon footprint was estimated to be smaller than current card payment systems.