Corporate news : December 2023 - Nicolas de SEZE
November was marked by the CNMP's continuing work on instant transfers, the digital euro and the 2025-2030 strategy; the consultation launched by UK regulators on the regulation of cryptoactives; the continuing worldwide debate on retail central bank digital currencies (CBDCs); the publication of two reports by the BIS; and the Swiss National Bank's launch of phase III of its "Helvetia" project on wholesale CBDCs.
➡️ Work of the National Committee for Means of Payment (CNMP)
The CNMP's GTA ("European integration") met on November 27 for in-depth discussions on three topics:
- Instant transfer: DG Treasury representatives presented an update on the political agreement reached by the Council and Parliament on November 7, and on the provisional timetable for implementing the regulation (see European dossiers).
- The digital euro: the exchange of views focused on the application of legal tender, with a series of questions to which working group members were invited to respond in writing.
- The 2025-2030 strategy: on the question "How can European issues be integrated into the new 2025-2030 strategy?", discussions focused in particular on support for the EPI project and follow-up to the euro-digital project.
➡️ UK cryptoasset regulation project
The three UK regulators (the Bank of England, the Financial Conduct Authority and the Prudential Regulation Authority) jointly launched a consultation on November 6 on a draft regulation of cryptoactives.
As the Financial Times points out
The proposals are the latest step in the UK's bid to establish itself as a hub for digital assets amid concerns that Brexit threatens London's dominance as Europe's leading financial center.
The roadmap (cross-authority roadmap) published by the three regulators to summarize the purpose of this consultation explains that
New, privately issued forms of digital money and money-like instruments, in use or in prospect, include e-money, stablecoins and tokenised deposits. As this innovation gathers pace, it is important that there is clarity about the regulatory frameworks that will apply to each form of money and money-like instrument, and the payment systems that transfer it.
In terms of timetable, the roadmap specifies that, following consultation (open until February 6, 2024), the draft regulations should be finalized in the second half of 2024, for entry into force during 2025.
Documents published by regulators
- Bank of England Regulatory regime for systemic payment systems using stablecoins and related service providers: discussion paper
- Financial Conduct Authority Regulating cryptoassets Phase 1: Stablecoins
- Prudential Regulation Authority Innovations in the use by deposit-takers of deposits, e-money and regulated stablecoins
- The three regulators Cross-authority roadmap on innovation in payments
Press review
UK sets out proposals to bring stablecoins into real economy (ft.com)
UK rule makers set out roadmap for regulating stablecoins (finextra.com)
UK opens the stablecoin door (ft.com)
➡️ Central bank digital currencies (CBDCs)
The MNBC debate continues around the world. To take just a few examples:
IMF Managing Director Kristalina Georgevia, speaking at the Singapore Fintech Festival on November 15, spoke of " The CBDC voyage "around the following ideas:
(1)The benefits of CBDCs will stem from what happens in the payments environment; (2) the success of CBDCs will rely on policy decisions and how the private sector responds; (3) the benefits of CBDCs will depend on how technologies evolve; (4) countries should continue exploring CBDCs.
On this occasion, she announced the publication by the IMF of a CBDC virtual handbook In response to the needs expressed by monetary authorities in many countries, this handbook is presented as follows:
A reference guide for policymakers and experts at central banks and ministries of finance. The CBDC Virtual Handbook aims to collect and share knowledge, lessons, empirical findings, and frameworks to address policymakers' most frequently asked questions on CBDCs.
In the United Kingdom , the House of Commons published a report on December 2 entitled The digital pound: still a solution in search of a problem?. As the press release points out Development of a Bank of England retail digital pound should 'proceed with caution', MPs warnthe report warns the Bank of England and the UK Treasury of the risks of a digital pound, particularly in terms of financial stability, data protection and costs:
Financial stability
The UK economy may be more susceptible to bank runs if people are able to switch large amounts of bank deposits into digital pounds quickly in times of market turmoil, increasing the risk of bank failures. To mitigate these risks, members suggest a smaller limit on the value of retail digital pounds each individual is initially allowed to hold than the £10,000-£20,000 limit currently mooted by the Bank of England and Treasury in their consultation.
Data protection
MPs urge the government to alleviate privacy concerns that organisations or the Government could misuse personal data generated by the introduction of a retail digital pound, for example to monitor or control how users spend their money. These concerns could be mitigated through robust regulation and legislated protections related to the ability of any future government to access people's data.
Costs
The next stage of work on a retail digital pound could incur significant costs. [MPs] urge both the Bank of England and Treasury to be transparent about these costs.
In the United StatesThink Tank Atlantic Council published an article on November 16 entitled CBDCs will further fragment the global economy-and could threaten the dollar. In a section entitledUSA: stablecoins, not CBDC"the author recalls the shift in American political debate away from the digital dollar and in favor of stablecoins:
The Federal Reserve is now deeply cautious if not ambivalent, consistently resisting calls for it to issue a digital dollar. In parallel, many Members of Congress, especially Republicans in the House of Representatives, remain hostile to CBDC issuance. Concerns center on the risk that private financial transactions could become the subject of federal government monitoring.
A crypto bill has passed the House Finance Services Committee seeking to constrain regulatory discretion regarding cryptocurrencies in general and stablecoins in particular. The bill seeks to foster private stablecoin issuance, effectively creating an alternative to a digital dollar because the vast majority of stablecoins are backed by the US dollar.
On November 29, the Bank of Canada published a summary of the responses to the consultation on a digital Canadian dollar, from which four concerns emerge:
- Preserve the population's access to banknotes,
- Fear that the advent of a digital dollar will compromise the right to privacy,
- The digital dollar should be easily accessible
- The digital dollar should not increase risks to financial stability
And one conclusion: "It remains to be seen if and when Canada will need a digital version of the Canadian dollar. Ultimately, it's the people - through their representatives in Parliament - who will decide whether to issue one.
Other examples of the current MNBC debate include:
- An article by American economist Barry Eichengreen published in the Financial Times on December 5 under the title " CBDCs still have not found their raison d'être - Any problem on payments is better solved through more practical alternatives". He takes the example of India:
Countries such as India have shown that there are more practical ways to do this. Provide residents with a unique digital identifier, mandate the banks to provide low-cost, no-frills accounts, and install a system to facilitate interbank transactions through cell phones. Voilà: problem solved.
- An article in the November 18 Journal du coin Mastercard believes that MNBCs will be poorly received by the public , which quotes Mastercard's head of blockchain for Asia-Pacific using Singapore as an example:
There is no reason to have a retail MNBC [in Singapore], but there is a reason to have a wholesale MNBC for interbank settlements. (...) But if it's a country where the domestic payment network isn't as robust, it may make sense to have an MNBC."
MNBC press review
General
PwC Global CBDC Index and Stablecoin Overview 2023
Global Trends in Central Bank Digital Currencies by Hari Prasad Josyula :: SSRN
United States
US dollar dominance is facing a crypto-yuan hostile takeover (ft.com)
China
China Mulls Digital Yuan Settlements for Commodities - Bitcoin News
Korea
Korea to pilot digital currency with 100,000 citizens next year - The Korea Times
South Korea preps 100,000 person-strong CBDC pilot (finextra.com)
➡️ Two reports published by BIS
On November 8, the BIS published a CPMI report on stablecoins ("Will the real stablecoin please stand up?Will the real stablecoin please stand up? "), which examines the evolution of the stablecoin market over the decade and concludes that "The stablecoins in circulation today do not meet the key criteria for being a safe store of value and a trustworthy means of payment in the real economy ".
Press review
How stable are stablecoins? Not very says the BIS (finextra.com)
On November 29, BIS published a report on the Whirlpool (" Exploring privacy, security and scalability for CBDCs "), led by the BIS Innovation Hub and the Swiss National Bank.
As stated in the BIS press release of November 29:
Privacy is a key requirement for a retail CBDC. But it cannot be the only one: security and scalability are also crucial to how payments are handled. In Tourbillon, we looked at these requirements through the lens of how to protect privacy and how fast can we process payments.
Note that the report makes no mention of the offline mode, except to say that it could be addressed in a later phase.
Further work is needed to explore how an eCash-based design could be implemented. This includes considering additional use cases - such as offline payments - and exploring economic viability with a sustainable business model
Press review
LinkedIn post by Joris HUYNH (IBM) on the Tourbillon project (in which IBM collaborated)
Tourbillon" project: bankers promise confidentiality for MNBCs (BIS) - Journal du Coin
➡️ MNBC wholesale: Swiss National Bank launches phase III of its Helvetia project
On December1, the Swiss National Bank issued a press release announcing the pilot operation of an MNBC for financial institutions:
As part of this pilot project, entitled "Helvetia phase III", the SNB will, for the first time, issue a genuine wholesale Swiss franc MNBC on a financial market infrastructure based on distributed ledger technology (DRT). The work carried out to date in test environments will thus move into a productive phase. The wholesale MNBC provided by the SNB will enable real bond transactions to be settled by participating banks via the TRD platform.
