🟩 On the UK's Digital Pound: Time to Make Cents, It's 'When', Not 'If'
also: From Russia with Yuan: Pakistan eyes long-term oil deal in Chinese currency, Yuan CBDC loses hype, and Tether's wild success
The New Money Brief covers the global rise of digital currencies and how they are disrupting the world of payments, and much else.
Delivered several times a week. Created and edited by Marc Andrew.
A group of firms including Goldman Sachs, Microsoft , Deloitte and Cboe, are joining a new blockchain system aimed at linking disparate institutional applications, potentially encouraging broader adoption of distributed ledger technology in financial markets.
Participants in the Canton Network, which will start testing some features in July, say the system offers better privacy and controls than currently available. At the same time, it will achieve a scale and standard appropriate for financial institutions, according to a statement released by the companies on Tuesday.
Other firms participating include Digital Asset, ASX, BNP Paribas, Broadridge, Deutsche Börse Group, Cumberland, Moody’s, Paxos, and SBI Digital Asset Holdings. The network will bind together blockchain apps that were created using Daml — a smart-contract language created by Digital Asset, the blockchain startup formerly led by ex JPMorgan senior executive Blythe Masters and backed by some of the world’s largest financial institutions.
Source: Bloomberg
Britain must not get left behind in rapid financial innovation and it was getting closer to deciding "when, rather than if" it would issue a digital version of sterling, its financial services minister said on Wednesday.
The finance ministry and Bank of England launched a public consultation in February on preparing the ground for a possible digital pound that was likely to enter into circulation in the second half of this decade.
Although no final decision has been taken, Britain's financial services minister Andrew Griffith said on Wednesday that Britain needed to embrace changes in payments and not hold back the tide.
"We would not commit the time to the consultation if we didn't think we are getting closer, we are not there today, but we are getting closer to the point that if becomes a when and not and if," Griffith told an event held by OMFIF think tank.
Britain must not be left behind global innovation in payments with non-cash forms of payments already accounting for 85% of payments and still growing, Griffith said.
Source: Reuters
Director of the Number 10 Policy Unit Andrew Griffith walks outside Downing Street after a COBR meeting, in London, Britain February 22, 2022. REUTERS/Henry Nicholls
Pakistan has placed an order for a single cargo of Russian oil, but is keen for a long-term deal to buy the crude in Chinese currency, according to the country’s power minister.
The payment for the first shipment has been made in US dollars but Pakistan would like further purchases to be in made in yuan, given the nation has a currency swap arrangement with China, Minister Khurram Dastgir Khan said in an interview late last week.
“We hope that if this becomes a long-term arrangement, it’ll become a rupee and Chinese currency transaction,” he said. “And perhaps that currency swap needs to become larger in order for us to take advantage of other opportunities that might arise.”
Such a deal would dovetail with Russia’s desire to move away from using the dollar or euros for its exports and China’s ambitions to take the yuan global to chip away at the greenback’s dominance. It would also offer some relief to Pakistan, which is heavily reliant on energy imports and is trying to revive a stalled $6.5 billion bailout package with the International Monetary Fund to avoid a default.
Source: Bloomberg
As part of Project Polaris, the BIS Innovation Hub Nordic Centre yesterday published a comprehensive handbook exploring key aspects of how central bank digital currencies (CBDCs) could work for offline payments.
The ability to make payments offline means being able to use a CBDC without being connected to the internet, either temporarily or because of coverage limitations. Central banks considering the potential implementation of CBDCs with offline functionality must take into account a complex matrix of issues including security, privacy, likely risks, the types of solution, their maturity and applicability, and operational factors.
The handbook, compiled in partnership with Consult Hyperion, addresses these issues as well as objectives for resilience, inclusion, cash resemblance, accessibility and other desired attributes.
The degree to which CBDCs will be provided or used offline will vary significantly by country, region, demographics and specific contexts, which will also influence the solutions chosen.
Source: BIS
Xapo Bank, a fully licensed private bank that combines traditional banking with access to Bitcoin and stablecoins, has become the first licensed bank in the world to integrate Tether payment rails for retail customers.
Beginning with a phased rollout, the asset-backed cryptocurrency stablecoin Tether payment rails will become fully available to all members by the end of May. Building on its existing USDC rails (launched in March), Xapo Bank is now enabling members to leverage the world’s most widely adopted stablecoin for payments as an alternative to more costly SWIFT rails.
Xapo Bank has seen a strong appetite for the efficiency of stablecoin deposits and withdrawals amongst its members, many of whom are based in emerging markets. Since enabling USDC deposits in November it has received $48million in USDC deposits and enabled $4.5million in USDC withdrawals since the function went live in March. It has also experienced a 19 per cent increase in member onboarding requests since the USDC withdrawal function went live in March.
With a market cap of $82billion, USDT is currently the world’s most-used stablecoin. It is also one of the most traded cryptocurrencies by volume, having pioneered the ‘digital dollar‘ concept. USDT empowers growing ventures and innovation throughout the blockchain space, providing a quicker and more efficient way for millions of people across the globe to send and receive money for remittances and other payments. The stablecoin has also proved to be particularly popular in emerging markets that are suffering from hyperinflation and economic uncertainty.
Source: The Fintech Times
Stablecoin issuer Tether reported $1.48 billion in net profit for the first quarter of the year, double the previous quarter’s result, according to its latest attestation published Wednesday.
The company for the first time broke out bitcoin (BTC) and gold holdings detail in its consolidated reserves report. As of March 31, Tether held $1.5 billion of bitcoin on its balance sheet – or about 2% of roughly $80 billion in reserves – and $3.4 billion of gold, or about 4% of reserves.
This quarter’s attestation comes after a turbulent period for the $131 billion stablecoin market, when several tokens lost their dollar pegs in a knock-on effect as the U.S. banking crisis hit Circle’s USDC, the second largest dollar-pegged stablecoin. The New York Department of Financial Services also forced fintech firm Paxos to stop issuing the third-largest stablecoin, Binance USD (BUSD), in February, while the U.S. Securities and Exchange Commission (SEC) was reportedly probing the firm for issuing BUSD as unregistered security.
Source: Coindesk Finance
E-commerce payments company Payoneer is “intently focused” on merger and acquisition opportunities as private company valuations decline, CFO Bea Ordonez said Tuesday.
The company is considering product-driven acquisition opportunities that will help fuel revenue growth “and grow the moat around our emerging markets infrastructure,” CEO John Caplan told analysts Tuesday during the company’s first-quarter earnings conference call. “We believe M&A will play a meaningful role in our growth strategy and are actively evaluating opportunities.”
The firm is assessing acquisition targets “through the lens of product extensions where we can leverage our existing reach and customer base,” Caplan said. The company is also considering acquisitions that would help Payoneer deepen its regional footprint in high-growth markets such as Latin America, or extend its existing licensing framework and infrastructure, Caplan added.
Source: Payments Dive
Yesterday, Standard Chartered and global payments platform Tazapay announced a partnership to deliver payments and commerce-enabling services as part of the bank’s broader initiative to provide curated financial services on B2B platforms.
This builds on the momentum from the pilot launch of the digital Escrow-as-a-Service (EaaS) on Proxtera, a Singapore-based cross-border marketplace, in addition to successfully collaborating with select B2B marketplace clients as pilot engagements.
Driven by growing customer expectations and opportunities to develop new business models, an increasing number of corporates from manufacturing to the service industries are expected to embrace marketplace platforms.
In fact, B2B marketplaces are the fastest-growing channel in B2B e-commerce, with sales doubling from $56 billion in 2021 to $112 billion last year. This rapid growth translates to a need for innovative marketplace-specific financial services.
Standard Chartered and Tazapay’s purpose-built proposition allows global marketplaces and e-commerce merchants to accept payments from buyers locally in more than 70 markets based on their preferred payment method via a single application programming interface(API), offering a cost-effective and frictionless checkout (Tazapay Checkout) experience when settling commercial cross-border transactions.
Source: Trade Finance Global
The Central Bank of Brazil has announced that it will allow 10 commercial banks to participate in its CBDC pilot.
The second stage of the central bank digital currency pilot will involve up to 20 participating institutions that will be selected based on their previous experiences with distributed ledger technology (DLT). It’s also worth noting that only institutions included in the National Financial System Network will be considered for participation.
The central bank also revealed that it will cast a wide net when selecting these participating entities even though commercial banks could be prioritised over other types of financial institutions. Payment providers and established fintech firms could be considered for participation as long as they meet the bank’s stipulated requirements.
Specifically, the central bank of Brazil will pay close attention to the size and the international reach of these applying institutions. The central bank will also look into the nature of transactions expected to be simulated in the pilot.
The participating entities will bear any expenses and costs associated with the corresponding responsibilities assumed voluntarily. Without prejudice to the coordination of work by the central bank, each selected participant will designate a technical representative to manage their technical team and conduct the necessary understandings for the development of the pilot CBDC with the central bank and the other participants.
Source: The Paypers
Since China unveiled the digital renminbi several years ago, it has been hyped as a juggernaut that would dethrone the dollar in the international financial system while relegating China’s domestic e-payments duopoly of Alipay and Tenpay to supporting roles. The digital yuan’s biggest boosters – usually not Chinese policymakers – made such predictions without offering compelling evidence to support their arguments.
With CBDC fever subsiding, the digital yuan no longer looks like such a game-changer. To be sure, it is being adopted domestically, but tellingly, more so in areas where the government has full control – like the salaries of civil service workers.
As a wholesale CBDC, the e-CNY may have a cross-border future – but that idea remains theoretical for now. The m-Bridge project that involves the PBOC, Hong Kong Monetary Authority, Bank of Thailand and the UAE central bank is a pilot. Whether it would work as a feasible alternative to traditional correspondent banking remains to be seen.
Source: Forbes
Temenos yestoday announced that it has proven integration of its leading banking platform with multiple DLT-based Central Bank Digital Currency (CBDC) technology stacks, successfully executing end-to-end retail CBDC use cases for commercial bank touch points. These included central bank token issuance to commercial bank wallets, customer non-custodial wallet creation, CBDC conversion through orchestration of deposit account updates with on-chain transactions and providing wallet access points for user-to-user transfers on-chain.
Jeremy Boot, Product Strategist, Temenos, said: “Temenos is leading the way in CBDC innovation. By actively innovating and driving commercial bank use cases across multiple different technology stacks, Temenos has proven how its open and flexible banking platform can readily adapt to the digital currency future.”