Central Bank

Australian central bank to launch ‘live pilot’ of CBDC in coming months

The use cases for the CBDC ranged from offline payments to “trusted Web3 commerce” and financial industry participants were invited to undertake a live pilot.

Australia’s central bank is set to launch a “live pilot” of a central bank digital currency  “in the coming months,” according to a joint statement from the Reserve Bank of Australia and the Digital Finance Cooperative Research Centre, an Australian financial research institute.

The RBA said on March 2 that it was collaborating with the DFCRC on a research project to “explore potential use cases and economic benefits of a central bank digital currency (CBDC) in Australia.”

The RBA said the initial stage of the research project involves the selection of several financial industry participants to demonstrate potential use cases of the CBDC.

The pilot project will commence on Mar. 31 and finish on May. 31, with a final report on the findings, including an assessment of the various use cases developed, set to be published on Jun. 30.

Use cases being piloted include offline payments, tax automation and a CBDC for “trusted Web3 commerce,” with participants of the trial ranging from banks — such as Commonwealth Bank and Australia and New Zealand (ANZ) bank — to payment providers such as Mastercard.

Selected CBDC use cases and the providers of each. Source: RBA

Brad Jones, assistant governor for financial systems at the RBA, said, “The pilot and broader research study that will be conducted in parallel will serve two ends – it will contribute to hands-on learning by industry, and it will add to policymakers’ understanding of how a CBDC could potentially benefit the Australian financial system and economy.”

David Lavecky, the co-founder and CEO of blockchain firm CANVAS — one of the firms selected as a trial participant — told Cointelegraph they were selected to explore the potential benefits of using a CBDC in the context of tokenized foreign exchange (FX) transactions.

Lavecky notes that FX and remittance markets are “enormous,” with trillions of dollars traded daily. “And the surprising part is that it moves on very legacy rails at this slow speed.”

Related: United States CBDC would ‘crowd out’ crypto ecosystem: Ex-Biden adviser

He sees CBDCs and digital currencies as having the potential to move currency much quicker and cheaper than these legacy systems, as well as allowing these markets to operate outside of normal business hours. 

“For example, when you’re sending money to New Zealand from Australia, the cut-off was like 1 or 2 pm. So a lot of that friction and capability gets put away when you start moving into digital currencies and CBDCs.”

While many people object to CBDCs from a privacy standpoint, Lavecky notes that this issue would be one of the factors considered, but highlighted that this project was much more focused on examining potential use cases and deciding if the issuance of a CBDC is worthwhile.

“There’s been no decision made about whether a CBDC would be issued and what technology it would use; this is very much just research around capabilities and what’s possible really. So understanding that privacy is a concern, that’s something there can be solutions put forward to, as part of the pilot.”

Eli Ben-Sasson, co-founder and President of blockchain scaling technology firm StarkWare, which provides with its zero knowledge (zk) rollup engine StarkEx, sees the pilot program as “an important step in the journey” to incorporate blockchain into traditional finance, adding: 

“What we very much need is a set of use cases that show people new digital currencies aren’t empty hype, but rather can do stuff we all need in our normal lives. The question is how to best do this.”

Bank of England has no tech skills to issue CBDC yet: Deputy governor

BoE deputy governor Jon Cunliffe compared a potential digital pound with Apple’s iPhone app store as it could “open a new frontier for people to improve payments.”

According to a deputy governor, the United Kingdom is not ready to issue a central bank digital currency (CBDC) just yet, as the Bank of England (BoE) doesn’t have enough expertise.

There is more than a 50% chance that the central bank of the United Kingdom would issue a CBDC, but the regulator doesn’t have the technical skills to issue a digital currency yet, BoE deputy governor Jon Cunliffe declared at the treasury select committee hearing on Feb. 28.

Cunliffe said that the BoE expects to get the necessary expertise to move forward with the CBDC development in the next phase, with the central bank planning to test a potential digital pound with private sector partners.

“But to move to the next stage, which would be to build a working prototype, to test in a simulated environment and then you’d be into testing in a live environment, then implementation. This next phase is designed to put us in a position to do that,” the deputy governor stated.

Cunliffe stressed that the design and structure of a potential digital pound would vary greatly, depending on the motivation of the CBDC. BoE’s basic motivation here would likely be providing digital cash, or the digital equivalent of BoE notes, for “general payment purposes,” he said, adding:

“We didn’t want a system in which there were two forms of Bank of England money circulating, remunerated and unremunerated. And also, we didn’t want a system where we would be producing something which would have the characteristics of a savings product.”

The deputy governor also highlighted some potential CBDC functions and benefits currently not present in the existing financial system.

Related: UK is ‘likely’ to need digital currency, says BoE and Treasury: Report

Comparing a potential digital pound with Apple’s iPhone app store, Cunliffe said that a CBDC is about “opening a new frontier for people to improve payments and the way in which money is used.” He mentioned micropayments as a major potential use case for a digital pound, stating:

“This will be much, much easier for you to make very, very small payments. So if you wanted to read an article in a newspaper, you wouldn’t have to subscribe to the newspaper. You could pay tiny fractions to do that.”

The news comes amid the U.K. government growing increasingly involved in the CBDC development, with the Treasury opening a position to lead the development of a digital pound in January 2023. Previously, BoE governor Andrew Bailey reportedly expressed doubts about the necessity of a CBDC in the short term, while European finance ministers once again showed support for a retail version of the digital euro.

FSB, IMF and BIS papers to set global crypto framework, says G20

A series of recommendations and papers setting standards for a global crypto regulatory framework will be released by the institutions in July and September.

The Financial Stability Board (FSB), the International Monetary Fund (IMF), and the Bank for International Settlements (BIS) will deliver papers and recommendations establishing standards for a global crypto regulatory framework, the group of the 20 biggest economies of the world — collectively known as G20 — announced on Feb. 25.

According to a document summarizing the outcomes of the meeting with finance ministers and central bank governors, the FSB will release by July recommendations on the regulation, supervision and oversight of global stablecoins, crypto assets activities and markets.

India’s finance minister, Nirmala Sitharaman, during FMCBG meeting in Bengaluru. Source: Ministry of Finance

The next guidance is expected for September, when the FSB and the IMF jointly should submit “a synthesis paper integrating the macroeconomic and regulatory perspectives of crypto assets.” In the same month, the IMF will also report on the “potential macro-financial implications of the widespread adoption” of central bank digital currencies (CBDCs). According to the G20 statement:

“We look forward to the IMF-FSB Synthesis Paper which will support a coordinated and comprehensive policy approach to crypto-assets, by considering macroeconomic and regulatory perspectives, including the full range of risks posed by crypto assets.”

The BIS will also submit a report on analytical and conceptual issues and possible risk mitigation strategies related to crypto assets. This report’s deadline is not mentioned in the document. A G20 financial task force will also look at the use of crypto assets to fund terrorist activities.

The announcement came after two days of official meetings in Bengaluru, India. In the first financial meeting under India’s presidency, the group addressed key financial stability and regulatory priorities for digital assets, Cointelegraph reported.

During the event, United States Treasury Secretary Janet Yellen said it was “critical to put in place a strong regulatory framework” for crypto-related activities. She also noted that the country is not suggesting an “outright banning of crypto activities.“ Speaking to reporters on the sidelines of the event, IMF managing director Kristalina Georgieva stated that banning crypto should be an option for G20 countries.

U.S. Treasury Janet Yellen calls for ‘strong regulatory framework’ for crypto activities

On the sidelines of the G20 meeting, U.S. Treasury Secretary Janet Yellen said the country is not pushing for an outright banning of crypto activities.

United States Treasury Secretary Janet Yellen stressed the importance of implementing a strong regulatory framework for cryptocurrencies during a G20 meeting on Feb. 25. 

Speaking to Reuters, Yellen said that it was “critical to put in place a strong regulatory framework.” She also noted that the United States is not suggesting an “outright banning of crypto activities.”

Yellen’s remarks follow earlier ones from the International Monetary Fund (IMF) Managing Director Kristalina Georgieva, stating that banning crypto should be an option:

“There has to be very strong push for regulation… if regulation fails, if you’re slow to do it, then we should not take off the table banning those assets, because they may create financial stability risk.”

In addition, Georgieva pointed out to reporters that it is necessary to differentiate central bank digital currencies (CBDCs) from stablecoins and cryptocurrencies – which are issued by private companies. 

Related: What are CBDCs? A beginner’s guide to central bank digital currencies

In an earlier conference, the first G20 Finance Ministers and Central Bank Governors (FMCBG) meeting under India’s presidency addressed key financial stability and regulatory priorities, Cointelegraph reported.

The country’s Finance Minister Nirmala Sitharaman called for a coordinated global policy to address the macro-financial implications of crypto assets. Sitharaman has historically supported working with other jurisdictions in the development of crypto regulations. For several years, India’s government has debated whether to regulate or even ban cryptocurrencies.

On Feb. 23, the IMF released an action plan on crypto assets, urging countries to abolish legal tender status for cryptocurrencies. The paper, titled “Elements of Effective Policies for Crypto Assets,” outlined a framework of nine policy principles addressing macrofinancial, legal and regulatory, and international coordination issues.

After a visit to El Salvador earlier this month, the IMF suggested the country reconsider its plans to increase exposure to Bitcoin, citing the cryptocurrency risk to El Salvador’s fiscal sustainability and consumer protection, as well as its financial integrity and stability.

Treasury Secretary Janet Yellen calls for ‘strong regulatory framework’ for crypto activities

On the sidelines of the G20 meeting, U.S. Treasury Secretary Janet Yellen said the country is not pushing for an outright banning of crypto activities.

United States Treasury Secretary Janet Yellen stressed the importance of implementing a strong regulatory framework for cryptocurrencies during a G20 meeting on Feb. 25. 

Speaking to Reuters, Yellen said it was “critical to put in place a strong regulatory framework.“ She also noted that the United States is not suggesting an “outright banning of crypto activities.“

Yellen’s remarks follow earlier ones from the International Monetary Fund (IMF) managing director Kristalina Georgieva, stating that banning crypto should be an option:

“There has to be very strong push for regulation… if regulation fails, if you’re slow to do it, then we should not take off the table banning those assets, because they may create financial stability risk.“

In addition, Georgieva pointed out to reporters that it is necessary to differentiate central bank digital currencies (CBDCs) from stablecoins and cryptocurrencies, which are issued by private companies. 

Related: What are CBDCs? A beginner’s guide to central bank digital currencies

The first G20 finance ministers and central bank governors meeting under India’s presidency addressed key financial stability and regulatory priorities, Cointelegraph reported.

The country’s Finance Minister, Nirmala Sitharaman, called for a coordinated global policy to address the macro-financial implications of crypto assets. Sitharaman has historically supported working with other jurisdictions to develop crypto regulations. India’s government has debated whether to regulate or ban cryptocurrencies for several years.

On Feb. 23, the IMF released an action plan on crypto assets, urging countries to abolish legal tender status for cryptocurrencies. The paper, titled “Elements of Effective Policies for Crypto Assets,” outlined a framework of nine policy principles addressing macrofinancial, legal and regulatory, and international coordination issues.

After a visit to El Salvador earlier this month, the IMF suggested the country reconsider its plans to increase exposure to Bitcoin, citing the cryptocurrency risk to El Salvador’s fiscal sustainability, consumer protection, and financial integrity and stability.

IMF offers Jordan’s central bank recommendations for implementing retail CBDC

The IMF mission spent three months studying conditions in the country, which is preparing to produce a feasibility report.

The Central Bank of Jordan is closer to its next step toward a retail central bank digital currency (rCBDC) with the completion of an International Monetary Fund technical report on the country’s markets. The IMF conducted a three-month mission last year to assist the bank with preparations for a CBDC feasibility report. The IMF released its report on Feb. 23.

Working between July and September 2022, the IMF gave the country’s existing retail payment market a largely positive review, calling it well integrated. Two non-bank payment service providers (PSPs) have “generally accessible and appropriate product” and the country has high smartphone penetration, the report noted.

Nonetheless, an rCBDC would enhance financial inclusion by providing services to residents without smartphones. An rCBDC could also improve the domestic payment system by making its infrastructure available to PSPs and lowering the cost of cross-border transfers.

The IMF warned to avoid disintermediation in the Jordanian financial system, as it could contribute to instability in times of stress. The Jordanian financial sector has good information security governance and management practices, the IMF found, but an rCBDC could increase cybersecurity risks as an attractive target. “Sound legal underpinnings for an rCBDC should also be created,” the report said. It concluded:

“RCBDC may offer some benefits, but it does not necessarily address pain points. On the other hand, a cross-border rCBDC could add value, particularly if the authorities coordinate with other countries in the region.”

Low financial literacy and a persistent cash culture are among the pain points an rCBDC would not address.

Related: IMF exec board endorses crypto policy framework, including no crypto as legal tender

The Jordanian central bank announced it was researching a CBDC in February 2022. Cryptocurrency trading is illegal in Jordan. A central bank proposal to introduce crypto trading met with resistance in the parliament.

Bitcoin must leverage $1T central bank liquidity to beat sellers — Research

BTC price action is all but guaranteed to benefit from extra central bank liquidity, but the journey higher is fraught with difficulty, says QCP Capital.

Bitcoin (BTC) hodlers need to watch the central banks of China and Japan as well as the United States as BTC/USD battles “huge” resistance.

That was the opinion of trading firm QCP Capital, which in its latest crypto market research piece, “The Crypto Circular,” warned that Bitcoin faces risks far beyond the Federal Reserve.

Bitcoin “most direct global liquidity proxy”

Having survived the latest flood of macroeconomic data from the U.S., Bitcoin is nonetheless flagging right below $25,000 as bulls run out of momentum.

For QCP Capital, there is now reason to believe that risk factors for price performance will come not just from the Fed — but China and Japan.

Market participants must now contend with such issues as China’s Consumer Price Index (CPI) as well as the U.S. equivalent, along with Japanese central bank policy changes.

“While the jury is out on BTC’s value as an inflation hedge, it cannot be denied that it is the most direct global liquidity proxy, as it is not tied to any one central bank or nation,” the research argues.

Bitcoin is sensitive to global liquidity, and when central banks inject it, this marks an incentive for growth in and of itself. That argument is already popular, with others also eyeing how “liquidity junkie” Bitcoin will navigate changes in central bank liquidity this year.

“And while we were focused on USD liquidity — from the Fed’s QT and Reserve balance, we’ve missed the massive liquidity injection by the Bank of Japan (BOJ) and People’s Bank of China (PBOC) over the past 3 months,” QCP continues.

“Contrary to consensus, central banks have net added $1 trillion of liquidity since the market’s bottom in October 2022, with the PBOC and BOJ the largest contributors.”

QCP refers to the dichotomy between U.S. policy and China and Japan — quantitative tightening (QT) versus quantitative easing (QE). Regardless of what the Fed does, extra liquidity in one place is all but guaranteed to trickle into risk assets such as crypto.

“Hence, such a large injection of liquidity will no doubt find its way to crypto, even despite what appears to be the current US administration’s best efforts to prevent that,” it says.

Versus net $1 trillion of liquidity injections, the Fed has reduced its balance sheet to its lowest levels since September 2021.

“What this means is that apart from US data and Fed guidance now, which ultimately still holds the highest beta for market moves, we also have to be conscious of BOJ and PBOC liquidity injections,” QCP writes.

“Any reversal of liquidity from these 2 sources would remove the underlying support that BTC has seen this past month.”

Fed balance sheet chart (screenshot). Source: Federal Reserve

Research reiterates “double top” warning 

Going forward, however, liquidity fans face formidable resistance when it comes to Bitcoin, with order books showing sellers lying in wait en masse closer to $30,000.

Related: Can Bitcoin price hold $24K as stocks correlation hits lowest since 2021?

$25,000 is already causing enough problems, QCP warned, acknowledging that rejection at that level would mean that resistance from mid-2022 remains in control.

As Cointelegraph reported, that issue is also being watched by popular trader and analyst, Rekt Capital.

“BTC — A potential double top is forming against the August 2022 correction high, and May 2022 reaction is low at 25,300. Above that we have the huge 28,800–30,000 resistance which is the Head and Shoulders neckline,” the research confirms.

BTC/USD traded at around $23,700 at the time of writing, near one-week lows, according to data from Cointelegraph Markets Pro and TradingView. 

BTC/USD 1-hour candle chart (Bitstamp). Source: TradingView

The views, thoughts and opinions expressed here are the authors’ alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.

BIS head claims fiat won battle with crypto, Bitcoin community disagrees

BIS general manager Agustín Carstens reckons the war between fiat and crypto has been won by fiat. The community disagrees.

The Bank for International Settlements (BIS) has long taken a cautious approach to Bitcoin (BTC) and cryptocurrencies. However, there is no need for caution anymore as the “battle has been won” between fiat and crypto, according to BIS.

BIS general manager Agustín Carstens, who made the claim, highlighted that “technology doesn’t make for trusted money,” among further criticisms of crypto in an interview with Bloomberg.

As the central bank for central banks, the BIS has emphasized the need for regulation and risk management in the crypto space, but claiming the crypto vs. fiat battle has been won sparked outrage, satire and corrections among the Bitcoin and crypto community.

Ray Youssef, CEO of Paxful and vocal Bitcoin maximalist, told Cointelegraph that it’s “easy to get sucked into these battles but is all a distraction with no ROI.“ He continued, “We must focus on the battles in the global south and fight for every inch and every eyeball. What is happening in Nigeria now is vital for us all.“

“Want to p*ss the clowns off? Ignore their FUD bait and focus all in on the global south and what is happening on the streets of nigeria.“ 

Saifedean Ammous, the author of The Bitcoin Standard, brought Carsten’s statement to his followers’ attention, provoking condemnation and concern in the comments. Florida-based Bitcoin advocate SVN (not his real name), whose frozen bank account prompted a switch to go all in on Bitcoin, told Cointelegraph, “these people are clowns.”

Meanwhile, Lady Anarki, a Bitcoin advocate who recently closed a Bitcoin Security Education company, explained that “fiat and crypto are essentially the same exact scam.”

“For fiat, it is nefarious elite oligarchs creating a rigged game system to enrich themselves while making everyone else poorer. Bitcoin is a technology designed with incentives and sound economic principles that enriches anyone who brings value to the world.”

Bitcoin losing the “war” for money, as Carstens explained, is another reference to the fact that Bitcoin has been declared dead, dead and dead again. The 2022 and 2023 bear market is no different, and Bitcoin advocates on Twitter seized the opportunity to mock financial experts dancing on the imaginary grave of the decentralized currency. 

Nonetheless, Bitcoin is up over 40% from its 2022 lows, and Lightning Network adoption flourishes while the community appears increasingly vocal.

What Bitcoin Did, the popular podcast hosted by Peter McCormack, tweeted some handy statistics to correct another inflammatory statement published by the BIS this week. Notably, from August 2015 to December 2022, the BIS explained that “nearly all economies made losses on their Bitcoin holdings.”

As shown, the Bitcoin price continues to trend higher despite the BIS’ best efforts to the contrary.

The BIS has been a vocal critic of cryptocurrencies, citing concerns about their volatility, scalability and energy consumption. However, the BIS has researched stablecoins and spearheads the development of central bank digital currencies in partnership with several countries, juxtaposing Carsten’s comment in the Bloomberg interview that tech “doesn’t make for trusted money.”

Related: Coinbase staking ‘fundamentally different’ to Kraken’s — chief lawyer

Willem Middelkoop, author and Bitcoin advocate, highlighted that the war between fiat and crypto is far from over. A cursory scroll through the comments on the original tweet from Bloomberg Crypto would suggest that the war is just heating up.

eNaira is ‘crippled‘: Nigeria in talks with NY-based company for revamp

After multiple attempts to create an efficient digital currency, the Central Bank of Nigeria is turning to a New York tech firm to revamp the underlying technology.

The Central Bank of Nigeria (CBN) continues to develop its central bank digital currency (CBDC), the eNaira, but this time it’s calling for backup.

According to a Feb. 21 Bloomberg report, the CBN is in talks with new “technology partners” to develop a new and improved system to manage the eNaira.

According to sources close to the matter, the Nigerian financial authority has discussed these plans with the New York-based technology firm R3.

New software for the eNaria will be created to allow the CBN to have complete control over the initiative; however, the unnamed source said the matter is confidential.

The effort to create the eNaira began in 2021 with the help of the financial software company, Bitt. According to the report, the new partner won’t immediately take Bitt’s role but will help phase in total control for the Nigerian central bank.

In a statement, Bitt said it is aware that the CBN works with various partners for its technological innovations. It confirmed that it still works closely with the CBN and is “currently developing additional features and enhancements.”

Related: Nigerian crypto exchange Roqqu receives European virtual currency license

Although it is one of the first countries to have launched a CBDC, Nigeria’s eNaira got off to a sluggish start, with low adoption. According to some reports, the ambitious project is “crippled,“ with only 0.5% of Nigerians using the CBDC.

In January, a Nigerian innovator launched the country’s first active Bitcoin Lightning node. Shortly before that, the government announced its plan to create a legal framework for stablecoins and Initial coin offerings.

Nigeria is one of more than 90 countries exploring the use of CBDCs. Others include Russia and Japan, both of which have plans to roll out their currencies before the summer. The city of San Francisco is also looking into the possibility of developing a CBDC system.

However, there is active pushback against CBDCs from activists who call them “surveillance” tools.

Russia to roll out CBDC pilot with real consumers in April

Russia’s central bank is preparing to launch the first consumer pilot for the digital ruble in collaboration with 13 local banks.

The Bank of Russia is preparing to roll out the first consumer pilot for the nation’s central bank digital currency (CBDC) on April 1, 2023.

Russia’s central bank is set to soon debut the first real-world digital ruble transactions involving 13 local banks and several merchants, first deputy governor Olga Skorobogatova said.

The official noted that the upcoming CBDC pilot will involve real operations and real consumers in Russia but will be limited to a certain number of transactions and customers, the local news agency TASS reported.

“We plan to launch the digital ruble project on April 1, with transactions involving individual transfers as well as payments in trade and service enterprises,” Skorobogatova stated at the Ural Forum Cybersecurity in Finance. She added that the banks participating in the pilot have technically confirmed their readiness to start testing the digital ruble.

The deputy governor clarified that general customers would not be able to participate in the pilot in the first stage, as the banks will enter the pilot with chosen customers. Following the first pilot stage, the Bank of Russia plans to determine how to scale the digital ruble further, Skorobogatova stated.

Bank of Russia’s first deputy governor Olga Skorobogatova. Source: Bank of Russia

The latest announcement by Skorobogatova follows the roadmap for the digital ruble rollout that the central bank officially introduced in June 2022. Initially scheduled for 2024, the consumer CBDC pilot was moved to an earlier date as the Russian central bank was looking for an alternative to the SWIFT payments system amid Western economic sanctions against Russia.

Related: Iran and Russia want to issue new stablecoin backed by gold

The news comes amid some Russian officials claiming that the Bank of Russia is considering a potential gold-backed token targeting cross-border transactions. Bank of Russia’s first deputy governor Vladimir Chistyukhin believes that such a “golden token” will help Russia create a new attractive investment product and build a demanded payment method in international settlement.