CBDC Round-Up

SICPA Partners in the CBDC Arena

SICPA has entered into a strategic partnership with the INX Digital Company (INX) with the aim of helping governments develop innovative and sovereign Central Bank Digital Currency (CBDC) ecosystems.

INX is a broker-dealer and inter-dealer broker. It has created the first Security Exchange Commission (SEC) regulated digital asset trading platform for cryptocurrencies and security tokens.

The Swiss-based joint venture brings together blockchain based infrastructure and digital cash technologies in order to offer central banks the key ingredients needed for a CBDC, whether wholesale or retail.

SICPA’s digital team will work with INX’s CBDC and blockchain technologists to solve key problems around compliance, scalability, programmability and cross- border transactions.

Project Hamilton Concludes

Project Hamilton was a joint venture project between the Federal Reserve Bank of Boston and MIT to research the technical feasibility of a potential digital dollar.

The project was always a fact finding programme exploring the different technologies that might be used. It researched a transaction processor addressing the challenge of enabling a CBDC to manage high transaction volumes. The processor was developed as open-source research software, OpenCBDC, with the aim of getting global collaboration.

OpenCBDC created a codebase supporting 1.84 million transactions per second and settlement. The focus was on speed but also security, performance, scalability and flexibility. Programmability and audit have also now been added to OpenCBDC.

The project team see the initiative as having created an effective framework for policy and technology decisions for the future.

Successful Start to Turkey’s CBDC Pilot

The Central Bank of the Republic of Türkiye (CBRT) has now run its first test transactions of a Turkish lira CBDC as part of a series of limited, closecircuit pilot tests run in conjunction with technology stakeholders.

The initial pilot phase will run through the first quarter of 2023, after which it will be evaluated. The aim through 2023 is to understand the economic and legal framework alongside the technological requirements. The work will involve banks and technology companies, with the aim of integrating distributed ledger technologies integrated with instant payment systems.

BSP Wholesale CBDC Pilot Starts

The Bangko Sentral ng Pilipinas (PSP) has started its wholesale CBDC pilot. It has prioritised a wholesale CBDC to help with cross border transfers, settlement risk exposure from using commercial bank money in equities and operating an intraday liquidity facility.

The project, CBDCPh, is cross-functional, looking at policy, regulations, technology infrastructure, governance, organisational requirements, legal matters, payment and settlement models, reconciliation procedures and risk management. The aim is to build organisational capacity and knowledge.

No Date for Mexico’s CBDC

In December 2021, the Mexican government set the goal of having a CBDC ready by 2024. In April 2022, the Governor said the development cycle would last about three years, but the Bank of Mexico has now says that no date for its launch has been set.

It is still in its initial stages of development with the requirements for its issues still to be determined. $500,000 was spent in 2022 on the project.

Slow Progress with the E-Naira

The E-Naira was launched 14 months ago in October 2021. Its usage is reported to be low, one in 200 people. Bloomberg reports the government is offering 5% discounts on payments in the country’s most widely used transportation system, Keke Napep, in an attempt to increase usage.

BoT Public Notice on CBDCs

The Bank of Tanzania (BoT) issued a public notice summarising its position on CBDCs on 14 January.

It started researching the possible issuance of a CBDC by forming a multidisciplinary technical team. In 2021 it organised the 20th Conference of Financial Institutions in Tanzania, with CBDCs and crypto assets the key themes. It has worked with a range of other central banks and associations including the IMF AFRITAC, the Association of African Central Banks, the Monetary Affairs Committee of the EAC Secretariat and the Committee of Central Bank Governors of the SADC Secretariat. BoT has also worked with international private firms on technical infrastructure and solutions.

Having done this work and having reviewed the worldwide activity on CBDCs, the BoT has adopted a phased, cautious and risk based approach to adoption of CBDC. It is monitoring, researching and continuing to collaborate with stakeholders, including other central banks, to arrive at a suitable and appropriate use and technology for issuance of a possible Tanzanian shilling in digital form.

When the BoT’s research phase is complete, it will inform the general public on the way forward, which may include a roadmap for transition to adoption of CBDC.

Digital Yuan App has Offline Functionality

China’s digital yuan app now has a ‘tap to pay’ function which works even when a phone signal is not available. It works by activating the smartphone hardware, such as the near-field communication, so that the phone becomes what is, in effect, a hard wallet. This works when the phone is offline or even when there is not any battery power left on the phone.

The maximum payment limit is 500 RMB and the maximum number of transactions is ten payments. At the moment this functionality is only possible on android devices, in limited places and limited payment scenarios. This function can also be suspended by logging into the app from another device.

Five more cities have been added to the pilot. The new cities are very different from those previously involved in the trial. For example, Kumming is in Yunnan province and has a more traditional economy based on tobacco production, agriculture, mining and tourism. Nanning and Fangchenggang are in in the Guangxi Zhuang Autonomous Region, which borders Vietnam. Guangxi is famous for its mineral reserves and rice production. The city of Jinan, which is in Shandong Province, is a major rail hub and the province has a growing industrial centre. It is also a popular tourist destination.

As part of the expansion, PBoC is offering residents in the new pilot areas a consumer gift package worth 80 yuan for anyone that completes registration with the designated app. A former PBoC research director has, unusually, recently commented that the cumulative e-CNY transactions had only crossed $14 billion in October, two years after launch. He described usage as low. 261 million users have set up the e-CNY wallet compared with 903.6 million users of China’s other mobile payment wallets.