cbdc

Palau advances CBDC with Ripple in phase 2 of PSC program launch

The second phase of the PSC program will prioritize the development of a digital ecosystem and increased user engagement, emphasizing adherence to regulatory compliance.

The Ministry of Finance of Palau officially launched the second phase of its Palau Stablecoin (PSC) program. Jay Hunter Anson, a cybersecurity consultant in Palau and adviser to the Ministry of Finance, confirmed the program’s second phase launch on Dec. 15 in a post on X (formerly Twitter).

Anson said that Palau aims to extend its partnership with Ripple in phase two, allowing the PSC team to leverage Ripple’s central bank digital currency (CBDC) platform and technical expertise.

PSC is a digital currency pegged to the United States dollar, which uses Ripple’s XRP Ledger.

Kazakhstan central bank reviews digital tenge pilot successes, next steps

The digital tenge has been used for everything from free school lunches to tokenizing gold, and there’s more to come.

The digital tenge, Kazakhstan’s central bank digital currency (CBDC), has been declared a success following a month-long pilot project. A host of business, regulatory and technical improvements are lined up for it in 2024.

During its pilot run, the digital tenge was used to provide schoolchildren with free lunches in Almaty through the local Onay card, which was originally designed for use in the transit system. The Kazpost postal system operator served as the intermediary for those transactions.

Plastic cards were issued to members of focus groups by four local banks in conjunction with Visa and Mastercard. The cards allowed users to make purchases in person or online and to withdraw cash from ATMs. The participating merchant had the option of accepting digital tenge or converting them to “non-cash” tenge.

Ripple issues white paper on CBDCs, reiterates belief in their potential

The white paper states that CBDCs help expand financial inclusion, streamlining cross-border payments and reinforcing monetary policy control.

Ripple has doubled down on its public support for central bank digital currencies (CBDCs) in a new white paper.

The 23-page document was released by the blockchain-based digital payments company on Dec. 14, and Ripple explains the basics of CBDCs, their attractiveness, risks and barriers to widespread adoption. The white paper claims CBDCs help expand financial inclusion, streamline cross-border payments, and reinforce monetary policy control. It also states:

Among the barriers to adoption, Ripple highlights the absence of a uniform, global regulatory framework for CBDCs. Other factors include a lack of end-user adoption, “little-to-no” consumer education, fears about privacy and security protections, digital identity verification, lack of interoperability among CBDCs and offline access to transactions. However, the authors of the white paper believe these issues “aren’t unsolvable.”

Palau’s Ripple-supported stablecoin pilot achieves positive results

The U.S. dollar-pegged Palau Stablecoin was used by 168 volunteers for $100 of retail purchases in three months.

The first phase of the Palau Stablecoin (PSC) Program has been declared a success by the country’s Ministry of Finance. More work on the United States dollar-pegged national stablecoin is planned, with the goal of introducing the PSC on a national scale, according to a report released on Dec. 7.

The three-month PSC project was carried out with the participation of Ripple and used the XRP Ledger central bank digital currency (CBDC) platform. The Finance Ministry recruited 168 volunteers from among government employees, who were able to spend 100 PSC at participating local retailers. Both the volunteers and retailers responded positively to their experience using the PSC.

Purchases were made using a phone and a QR code or by manually inputting a wallet address. Only the retailers were able to redeem the PSC for U.S. dollars, which is Palau’s legal currency. The PSC was fully collateralized by $20,000 in “a Tier 1 Federal Deposit Insurance Corporation (FDIC) United States bank.”

Taiwan central bank completes wholesale CBDC study, plans next steps

A central bank official spoke about ongoing CBDC research and other payment modernization initiatives Taiwan is exploring.

Taiwan’s central bank has completed a feasibility study of wholesale central bank digital currency (CBDC) and is continuing to consider its introduction. The central bank is seeking feedback from businesses and academics and will continue to work on platform design, Deputy Governor Mei-lie Chu said on Dec. 7.

In a lengthy speech at an event for bankers, Chu outlined what she called Banking 4.0, or “services embedded in customers’ daily lives,” including the integration of artificial intelligence and advanced mobile and digital technology into banking. She devoted about half of her presentation to CBDC.

Chu referred to Bank for International Settlements research and said she saw the advantages of CBDCs and tokenization of real-world assets. Furthermore:

Italy and South Korea central banks agree on CBDC cooperation

The central banks of Italy and South Korea announced a memorandum of understanding in the development and deployment of CBDCs.

Banca d’Italia — Italy’s central bank — announced on Dec.

According to the Italian central bank, the memorandum of understanding includes the “mutual sharing of knowledge and information” when it comes to information and communication technology (ICT) issues.

Specifically, it mentions ICT issues related to real-time settlement systems and central bank digital currencies (CBDCs).

The announcement said the meeting was attended by the general manager of the Banca d’Italia, Luigi Federico Signorini, who signed off on the agreement.

Throughout the last year, both countries have been exploring CBDCs, though with different approaches.

In Italy, the central bank has mainly been focusing on interoperability in its solutions for settling distributed ledger technology (DLT)-based transactions via hash-linked contracts rather than a wholesale CBDC approach, as is the case with other European countries.

Meanwhile, South Korea started piloting its CBDC infrastructure technology in October.

UK House of Commons recommends further CBDC tests on viability, risks

A U.K. parliamentary committee fears an official launch would demand significant investment and that the benefits may not outweigh the risks.

A United Kingdom parliamentary committee in the House of Commons has asked the Bank of England and Treasury to conduct further consultative work to determine the benefits of launching a digital pound.

The groundwork and tests related to the launch of a central bank digital currency (CBDC) incurred significant costs for the Bank of England and Treasury, according to a House of Commons Treasury Committee report. It recommended greater transparency around the expenses incurred around CBDC initiatives by having a separate line item in its annual report and accounts from 2024 onwards:

“It is important that the Bank of England and Treasury keep control of these costs to avoid spending more than necessary on a digital pound that might not proceed to being built.”

The ongoing tests of a British CBDC highlighted numerous benefits concerning issuance, distribution and privacy, among others.

The committee asked England’s central bank to avoid speculating that “a digital pound can fix problems it can’t” and to ensure that a digital pound does not worsen the financial exclusion precedent set by the fiat economy.

While the Bank of England and HM Treasury see the need for a digital pound in the future, committing to build the infrastructure for one requires further preparatory work.

UK Legislators urge caution in retail digital pound rollout

The committee’s report recommends imposing lower initial limits on the value of retail digital pounds to alleviate the risk of potential bank runs amid market instability.

British legislators are urging a careful stance regarding implementing a retail digital pound.

Members of the Treasury Select Committee have expressed reservations regarding the possible launch of a retail digital pound, underscoring the need for thoughtful examination before execution.

In the interim, the committee’s report recommends imposing lower initial limits on the value of retail digital pounds to alleviate the risk of potential bank runs amid market instability.

*Screenshot of the Treasury Committee report Source: UK Parliament*

The report addressed privacy concerns, recommending that any legislation introducing a digital pound should strictly limit the use of data by the government or the BoE.

The report proposes that in the event of legislation for the introduction of a digital pound, it should expressly limit the Government and Bank of England from utilizing data acquired through the digital pound for purposes beyond those already sanctioned for law enforcement.

Committee chair Harriett Baldwin stressed the need for compelling evidence before contemplating the introduction of a retail digital pound.

Solomon Islands, Soramitsu team up for Bokolo Cash CBDC proof-of-concept

The Solomons join tiny island nations worldwide at the forefront of CBDC development.

The Central Bank of Solomon Islands has launched a proof-of-concept for a central bank digital currency (CBDC) called Bokolo Cash, with Japanese blockchain companySoramitsu providing support.

Bokolo Cash will be worth one Solomon Islands dollar.

Wholesale transfers between commercial banks and simulated cross-border payments and remittances will also be tested. Users will undergo “two-tier” Know Your Customer verification, according to Soramitsu.

Bokolo Cash will operate locally on a tailor-made blockchain based on Hyperledger’s Iroha.

The project was initiated on Nov. Solomon Islands Prime Minister Manasseh Sogavare said:

Digital Canadian dollar fails to impress despite high awareness

People who were aware of CBDCs were more reluctant to adopt the technology when compared with those who didn’t know about it.

A recent public consultation on Canada’s central bank digital currency (CBDC) initiative revealed an overall negative sentiment from Canadians, confirming the Bank of Canada’s concerns around its country-wide adoption.

Through the “Digital Canadian Dollar Public Consultation Report,” the Canadian central bank intended to identify a place for CBDCs in a world dominated by digital fiat payments and credit cards. However, in a survey that amassed 89,423 responses, Canadians demanded regulations requiring merchants to accept cash as payment.

*Awareness of a digital Canadian dollar. Source: bankofcanada.ca*

The Bank of Canada’s report shows that nearly 95% of the respondents either heard or were familiar with the concept of a digital Canadian dollar.

*Canadians demand regulation for cash acceptance if CBDCs were to be introduced. Source: bankofcanada.ca*

Of the respondents, 93% primarily make paper cash payments daily but also use credit and debit cards and other modes of online payments.