central bank digital currency

Australian ‘Big Four’ bank ANZ halts cash withdrawals from many branches

The move comes as Australians continue to reduce their usage of cash and bank branches, but has sparked fears that the death of cash is near.

ANZ, one of Australia’s “Big Four” banks, will cease facilitating withdrawals and deposits from a number of its Australian branches as it looks to push its customers toward using an ever-dwindling number of ATMs and deposit machines.

The decision has received pushback, with critics such as Patricia Sparrow, CEO of the Council on the Ageing, telling The Australian that the change could disproportionately affect older people who are less capable of going digital. Others have suggested it would make fiat users more susceptible to technical issues. The move has also renewed fears of a push to eliminate cash and that cash could soon be replaced by central bank digital currencies (CBDCs).

The end of cash is near.

They are trying to go all digital, and then bring in the Central Bank Digital Currency (CBDC) to be programable so they can control how you spend your money.

Eventually they will be able to make your CBDC money expire or disallow certain products. pic.twitter.com/8O27nn4iYe

— Wall Street Silver (@WallStreetSilv) March 29, 2023

In response to questions from Cointelegraph, an ANZ spokesperson said that the affected branches are all metropolitan branches that have ATMs and deposit machines nearby and that the move was partially prompted by in-branch transactions decreasing by more than 50% over the past four years.

The development comes as Australia gradually transitions to a cashless society, with the percentage of retail payments made with cash falling from 59% in 2007, to just 27% in 2019, according to a March 16 bulletin from the Reserve Bank of Australia (RBA).

The RBA noted that the results from its 2022 survey will be available later this year, but added that the COVID-19 pandemic had only accelerated the trend, with businesses also contributing to the shift:

“Furthermore, a substantial share of merchants indicated plans to discourage cash payments at some point in the future.”

The RBA also pointed to a reduction in ATMs and bank branches around the nation, with the number of bank branches falling by 30% since 2017 while ATMs numbers fell by 25% since 2016.

One of the major concerns with CBDCs replacing cash is how they might affect individual freedom and privacy, as cash transactions offer anonymity and the ability to make transactions without leaving a record.

A CBDC pilot program is currently underway in Australia, with an update expected around the middle of 2023, and one of the ramifications identified by the RBA was that it could displace the cash Australian dollar.

In an emailed response to questions from Cointelegraph, a spokesperson for another of the Big Four banks, NAB, allayed these fears somewhat, saying:

“NAB still handles cash at our branches and we have no plans to change. Cash will continue to play an important part in Australian society for as long as our customers want it to.”

The other two banks in the Big Four, CBA and Westpac, did not respond to questions from Cointelegraph by the time of publication, but Westpac told The Australian that it also had no plans to wind back access to cash through its branches. A CBA spokesperson was slightly more ambiguous in their response, however.

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The world could be facing a dark future thanks to CBDCs

From forcing people to spend their money to making them save it, central banks around the world could soon use CBDCs to create a dystopian nightmare.

During the financial crisis of 2007–2008, many people lost trust in traditional financial institutions and turned to alternative forms of currency, such as cryptocurrencies. It was a way for people to maintain their financial freedom and privacy in a system that had let them down. However, the rise of central bank digital currencies (CBDCs) raises serious concerns about privacy and freedom.

One of the most significant concerns with CBDCs is the death of anonymity. Currently, cash transactions offer the secrecy and anonymity needed for financial freedom. People can use cash to make transactions without leaving a paper trail, which is a fundamental right in a democratic society. However, the introduction of CBDCs could change this.

CBDCs would be fully traceable, meaning that every transaction would be recorded and monitored by the central bank. This would allow central banks to surveil and control financial transactions in ways that were previously impossible. While this may sound like a positive development, it raises serious concerns about privacy and civil liberties.

CBDCs’ potential negative consequences can also be understood by examining the government’s response to the global financial crisis. For instance, in the aftermath of the crisis, governments all over the world established policies to stop the financing of terrorism and combat money laundering. Unfortunately, these regulations frequently came at the expense of people’s freedom and privacy.

For example, the Russian government has shrewdly used the Anti-Money Laundering framework to further goals unrelated to the fight against terrorism and organized crime. However, the research has revealed that the AML regime has been used by the Russian government to expand its strategic influence over domestic politics and business, as well as to try to restructure the banking system. The regime’s overall legitimacy is weakened by the inefficiency of AML rules and their use for covert purposes.

The 2001 Patriot Act led to abuses of power and violations of civil liberties in the United States. The Federal Bureau of Investigation’s Office of General Counsel found 13 cases of alleged FBI misconduct during intelligence operations between 2002 and 2004 alone, according to the Electronic Privacy Information Center.

Central bank digital currency (CBDC): Government control your money.

Bitcoin: You control your money. pic.twitter.com/KnUBuR7CE8

— Pan ₿ (@satstackerMY) December 30, 2022

Additionally, some policies implemented in response to the crisis led to restrictions on individual financial activities. For instance, some countries imposed capital controls in an attempt to limit the flow of money across borders and stabilize their financial systems. For example, as a November 2022 report by the Bank for International Settlements notes, “individual and merchant wallets of the eNaira” — Nigeria’s CBDC — “have different caps on daily transaction limits and the amount of eNaira that can be held in them, depending on their customer due diligence tier.”

The ability to impose limits on people’s daily financial holdings and expenditures could serve to significantly erode privacy and freedom and have a chilling effect on free speech and political dissent.

Moreover, central banks could use CBDCs to implement negative interest rates, which would incentivize people to spend their money rather than save it. This could lead to a surge in consumption and inflation, which could destabilize the economy. This would also lead to a number of technical challenges. For instance, a cap on individual CBDC holdings could restrict the number or quantity of payments because it would be necessary to know the recipients’ CBDC holdings to complete the payment.

In addition to these concerns, CBDCs could also exacerbate existing inequalities. For instance, those without access to the internet or digital gadgets would be shut out of the financial system. This could apply to underrepresented groups like the elderly, the poor and residents of rural areas. CBDCs may potentially lead to new types of financial exclusion since central banks may decline to do business with those regarded as high-risk.

For instance, the Bahamas implemented the Sand Dollar to address the fundamental problem of financial exclusion. However, Sand Dollar balances increased by less than $300,000 between January 2021 and June 2022, whereas the value of notes increased by $42 million — indicating that the Sand Dollar hardly qualifies as a means of payment.

Central banks should carefully consider the implications of CBDCs for privacy, freedom and financial stability. To make sure that CBDCs are created in a way that respects individual rights and freedom, they must also consider frequent consultations with stakeholders like corporations, civil society organizations and individuals.

Ultimately, the rise of CBDCs could be a double-edged sword. Government-backed digital currencies may result in speedier, less expensive, more secure transactions, but they also bring up important issues related to freedom, privacy and financial stability. The goal of financial stability could come at a significant cost in terms of personal freedom and privacy, as we saw in the global financial crisis. The defense of individual liberties and rights should be a top priority for central banks as they consider their approach to CBDCs.

Guneet Kaur joined Cointelegraph as an editor in 2021. She holds a master of science in financial technology from the University of Stirling and an MBA from India’s Guru Nanak Dev University.

This article is for general information purposes and is not intended to be and should not be taken as legal or investment advice. The views, thoughts and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.

China’s digital yuan gets smart contract functionality alongside new use cases

China’s central bank digital currency (CBDC) has seen new use cases in recent days, including buying securities and making offline payments.

China’s central bank digital currency (CBDC) — the digital yuan, or eCNY — has received upgrades giving it smart contract functionality alongside a series of newly unveiled use cases.

The smart contract function was launched on the Meituan app, a Chinese app offering retail and food delivery services, according to a Jan. 17 report by local cryptocurrency media outlet 8btc.

When Meituan users place an order and pay with their e-CNY wallet, a smart contract triggers and searches for keywords and purchased items in their order. If a user buys something on the list of keywords for the day, they go in the draw to win part of a prize.

The prize is a share of a “red envelope” known locally as hongbao containing 8,888 yuan, worth a little over $1,300.

Hongbao are small packets traditionally used for gifting money around Chinese New Year as a gesture of good luck.

*A user prepares to send a digital red packet on the messaging app WeChat. Image: YouTube*

In December, the e-CNY wallet app introduced a feature for users to send digital red envelopes in a bid to boost adoption before the Chinese New Year on Jan. 22.

Digital yuan sees new avenues for use

Alongside the latest development, new uses for the e-CNY have also been added over the last few days.

A Jan. 16 report from the China Securities Journal said e-CNY was used to buy securities for the first time. Investors can also use the CBDC to buy securities with the mobile app for Soochow Securities, a local brokerage firm.

The digital yuan wallet app also received an update with users now able to make contactless payments using Android phones even if their device is without internet or power, according to a Jan. 11 Yicai Global report.

The new uses for the digital yuan come as China has been struggling with the adoption rate of its CBDC.

A former official from the People’s Bank of China (PBOC), the country’s central bank, even made a rare public admission in December that the digital yuan’s “usage has been low” and “highly inactive,” adding “the results are not ideal.”

On Jan. 10, the PBOC included e-CNY in currency circulation reports for the first time, revealing the CBDC represented roughly 0.13% of the 10.47 trillion yuan ($1.54 trillion) in circulation at the end of 2022.

Tanzania ‘cautious’ on CBDC adoption after initial research

The Bank of Tanzania is waiting for the conclusion of its research into CBDCs before making a final decision on adoption.

Tanzania’s central bank says it is still considering the introduction of a central bank digital currency (CBDC) but will be a taking “phased, cautious and risk-based approach” after identifying several challenges that could impact its implementation.

According to a Jan. 14 public notice from The Bank of Tanzania, since its 2021 announcement about a possible CBDC rollout, the East African country formed a multidisciplinary technical team to explore the risks and benefits of CBDCs.

The bank revealed its team has conducted research looking into different types of CBDCs, models for issuance and management, and whether its CBDC should be token-based or account-based.

“The outcome of the research at this point revealed that more than 100 countries in the world are at different stages of the CBDC adoption journey with 88 at research, 20 proof of concept, 13 pilot and 3 at launch,” the bank said.

The central bank noted that at least four countries — Denmark, Japan, Ecuador and Finland — have publicly canceled CBDC adoption plans, while another six have moved away from digital currencies due to structural and technological challenges in the implementation phase.

Some of these challenges were high implementation costs, the dominance of cash, inefficient payment systems and the risk of disrupting the existing ecosystem, the bank said.

A key area being looked at by the team is also the risks and controls associated with the issuance, distribution, counterfeiting and usage of currencies.

“Analysis of these findings indicate that majority of central bankers across the world have taken a cautionary approach in the CBDC implementation roadmap, in order to avoid any potential risks that can disrupt financial stability of their economies,” it added.

At this stage, the bank has not given a clear timeline for when it will make a decision on CBDCs in Tanzania, but says it will “continue to monitor, research and collaborate with stakeholders, including other central banks, in the efforts to arrive at a suitable and appropriate use and technology for issuance of Tanzanian shillings in digital form.”

Following neighboring countries’ efforts to introduce CBDCs, Bank of Tanzania Governor Florens Luoga made a Nov. 26, 2021, announcement that plans were underway in Tanzania to expand research into digital currencies and strengthen the capacity of central bank officials.

Cryptocurrencies are largely banned in Tanzania following a November 2019 directive from the Bank of Tanzania saying the digital assets were not recognized by local law.

Russia to begin work on CBDC settlement system as sanctions endure

The country’s central bank will begin studying two possible cross-border CBDC settlement models this quarter.

Russia’s central bank is reportedly set to begin developing a cross-border settlement system using a central bank digital currency (CBDC) amid ongoing sanctions in response to its invasion of Ukraine.

The plans to move forward with Russia’s digital ruble are expected to come in the first quarter of 2023 and will see Russia’s central bank study two possible cross-border settlement models, according to a Jan. 9 report by local media outlet Kommersant.

The first proposed model sees various countries entering into separate bilateral agreements with Russia to integrate their CBDC systems.

Each agreement would be made to ensure the conversion and transfer of assets between the countries are in accordance with the rules of the agreements.

The second, more complicated model proposes a single hub-like platform for Russia to interact with other countries, sharing common protocols and standards to facilitate payments between the connected countries.

Roman Prokhorov, the head of the board of the Financial Innovations Association (AFI) opined that the first model was more simple to implement but less promising for bilateral interactions between countries.

The other option was more “advanced” and he considered an initial two-way system may be implemented, with China as the most likely partner given its “technological and political readiness.”

Reports in September claimed that Russia was planning to use its digital ruble for settlements with China by sometime in 2023.

Still, others believe Russia’s CBDC play won’t be hamstrung by technology, but rather by politics.

The vice president of the Association of Banks of Russia, Alexey Voylukov, said that introducing a digital ruble won’t change or improve Russia’s global political situation, and trials for the CBDC platform can only be undertaken with countries that are friendly withthe Russian government and technologically ready.

Previously, the Bank of Russia said it was looking to roll out its digital ruble by 2024, with all banks and credit institutions connected to the CBDC’s platform.

Russia has faced mounting financial and trade sanctions since its escalation of the Russo-Ukrainian war when it launched a full-scale invasion of Ukraine in late February 2022.

It’s since tried and pondered ways to skirt the sanctions, such as the central bank considering the use of cryptocurrencies in the country “only to support foreign trade.”

The Bank of Russia and the Ministry of Finance came to an agreement in September on a rule allowing Russians to send cross-border payments using crypto.

Russia to begin work on CBDC settlement system in Q1 as sanctions endure: Report