Stablecoin News for the week ending Wednesday 2nd September.

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The rise of Central Bank Digital Currencies (CBDC)!

Here is our pick of the 3 most important Stablecoin news stories during the week.

This week we saw the Central Banks making significant progress on the implementation of CBDC’s. While those Central Banks in the west are largely still at the research stage and in the case of the USA FED, are just at the beginning of that phase, the People’s Bank of China (PBoC) are into advanced field testing.   

Rise of the central bank digital currencies: drivers, approaches and technologies

First, this paper from the BIS (the Central Bank for Central Bankers) provides a global round up of the state of play.  The abstract below gives you a good summary.

“Central bank digital currencies (CBDCs) are receiving more attention than ever before. Yet the motivations for issuance vary across countries, as do the policy approaches and technical designs. We investigate the economic and institutional drivers of CBDC development and take stock of design efforts. We set out a comprehensive database of technical approaches and policy stances on issuance, relying on central bank speeches and technical reports. Most projects are found in digitised economies with a high capacity for innovation. Work on retail CBDCs is more advanced where the informal economy is larger. We next take stock of the technical design options. More and more central banks are considering retail CBDC architectures in which the CBDC is a direct cash-like claim on the central bank, but where the private sector handles all customer-facing activity. We conclude with an in-depth description of three distinct CBDC approaches by the central banks of China, Sweden and Canada.”

e-RMB: China gears up for digital payment 2.0

China is soon going to roll out the world’s first state-backed digital currency. Over the next three years, the pilot program for the Central Bank Digital Currency will be carried out in several regions – north China’s Beijing-Tianjin-Hebei region, the eastern Yangtze River Delta, the southern Guangdong-Hong Kong-Macao Greater Bay Area as well as some pilot areas in central and western regions.

The digital yuan was first trialed earlier this year internally in the banks in Shenzhen, Chengdu, Suzhou and Xiongan New Area in simulated scenarios for the 2022 Beijing Winter Olympics.

Forbes.com/FED-partners-with-mit-based-digital-currency-initiative-to-explore-central-bank-digital-currency

Meanwhile in the USA, two events took place in August. One was a speech from Lael Brainard at the Federal Reserve Bank of San Francisco’s Innovation Office. The other was the publication of a paper in the FEDS notes series on “Comparing Means of Payment: What Role for a Central Bank Digital Currency?”. It is no coincidence that both events happened on the same day. The Federal Reserve Bank (FRB) wants to communicate that it takes CBDCs seriously and is engaged in efforts to research a path toward implementation.

So in summary, the Chinese are very advanced in testing, almost all Central Banks have some sort of research project underway and now the USA’s FED is starting to gear up as well.

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Alan Scott is an expert in the FX market and has been working in the domain of stablecoins for many years.  

We have a self imposed constraint of 3 news stories per week because we serve busy senior Fintech leaders who just want succinct and important information.

For context on stablecoins please read this introductory interview with Alan “How stablecoins will change our world” and read articles tagged stablecoin in our archives. 

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