The BIS Innovation Hub, in collaboration with the Bank of Israel and the Hong Kong Monetary Authority, conducted a joint experiment called Project Sela. The project aimed to test a new intermediary called the Access Enabler, which reduces liquidity and settlement risks, as well as operating costs. One key finding of Project Sela is that access to a retail central bank digital currency (rCBDC) does not compromise cyber security when designed with preventative measures. The project demonstrated the feasibility of a retail CBDC ecosystem that combines accessibility, competition, and preventative cyber security, while retaining the desirable features of physical cash. The project leveraged the expertise and learnings from previous experiments on rCBDCs, such as Projects Aurum and e-Hong Kong Dollar. The goal of Project Sela was to promote an accessible, competitive, and innovative rCBDC ecosystem that can serve various use cases. It aimed to lower barriers to entry for service providers and redistribute the activities related to rCBDC accounts among public and private actors. Another important goal was to achieve a digital means of payment that preserves the desirable attributes of cash, such as being free from credit risk, widely accessible, safe, providing instant settlement, operating at a low cost, and maintaining an appropriate level of privacy for end users. The rCBDC ledger in Project Sela is operated by the central bank, with personal identifiers obfuscated to preserve end user privacy. Retail payments are settled directly on the central bank’s balance sheet, ensuring instant finality for transactions. The Access Enabler, a novel type of intermediary, handles customer-facing rCBDC services without holding end users’ funds, eliminating the need for liquidity or settlement risk. This reduces costs, complexity, and risk compared to current payment service providers. Project Sela provided valuable insights into the cyber security, technological, legal, and policy aspects of a retail CBDC implementation. While the Hong Kong Monetary Authority has not yet made a decision on introducing a retail CBDC in Hong Kong, the outcomes of Project Sela will inform their ongoing exploration of a possible e-HKD. The project’s findings are expected to benefit other central banks in their evaluations of different retail CBDC architectures.
Project sela demonstrates that retail cbdc can support access, cyber security and competition, while retaining cash features
The BIS Innovation Hub, in collaboration with the Bank of Israel and the Hong Kong Monetary Authority, conducted a joint experiment called Project Sela. The project aimed to test a new intermediary called the Access Enabler, which reduces liquidity and settlement risks, as well as operating costs. One key finding of Project Sela is that access to a retail central bank digital currency (rCBDC) does not compromise cyber security when designed with preventative measures. The project demonstrated the feasibility of a retail CBDC ecosystem that combines accessibility, competition, and preventative cyber security, while retaining the desirable features of physical cash. The project leveraged the expertise and learnings from previous experiments on rCBDCs, such as Projects Aurum and e-Hong Kong Dollar. The goal of Project Sela was to promote an accessible, competitive, and innovative rCBDC ecosystem that can serve various use cases. It aimed to lower barriers to entry for service providers and redistribute the activities related to rCBDC accounts among public and private actors. Another important goal was to achieve a digital means of payment that preserves the desirable attributes of cash, such as being free from credit risk, widely accessible, safe, providing instant settlement, operating at a low cost, and maintaining an appropriate level of privacy for end users. The rCBDC ledger in Project Sela is operated by the central bank, with personal identifiers obfuscated to preserve end user privacy. Retail payments are settled directly on the central bank’s balance sheet, ensuring instant finality for transactions. The Access Enabler, a novel type of intermediary, handles customer-facing rCBDC services without holding end users’ funds, eliminating the need for liquidity or settlement risk. This reduces costs, complexity, and risk compared to current payment service providers. Project Sela provided valuable insights into the cyber security, technological, legal, and policy aspects of a retail CBDC implementation. While the Hong Kong Monetary Authority has not yet made a decision on introducing a retail CBDC in Hong Kong, the outcomes of Project Sela will inform their ongoing exploration of a possible e-HKD. The project’s findings are expected to benefit other central banks in their evaluations of different retail CBDC architectures.
Joint Statement from the 12th UK-India Economic and Financial Dialogue
On September 11, 2023, the 12th UK-India Economic and Financial Dialogue took place in New Delhi, India. The dialogue was attended by Chancellor Jeremy Hunt from the UK and Indian Finance Minister Nirmala Sitharaman. The purpose of the meeting was to discuss economic and financial matters between the two countries. The dialogue aimed to strengthen the bilateral relationship and explore opportunities for collaboration in various sectors. Both parties expressed their commitment to deepening economic ties and promoting trade and investment between the UK and India. The meeting was seen as a positive step towards further enhancing the economic partnership between the two nations.
The 2023 G20 Summit: A deepening rift heralding an uncertain future
Blockchain technology has gained significant attention due to its applications, especially in the realm of cryptocurrencies. However, many individuals still lack a clear understanding of how it operates. This analysis offers a comprehensive overview of the uses and obstacles associated with this technology, drawing on publicly available information. Originally, blockchain emerged as a component of digital ledger technology (DLT) that was developed towards the end of the 20th century. DLT functions as a digital database that stores information, similar to a record book or ledger, which can be accessed and shared simultaneously by multiple parties.
The 2023 G20 Summit: Navigating a Deepening Rift and an Uncertain Future
The G20 Summit 2023, set in New Delhi, India on September 9-10, emphasizes six priorities mirroring G7 concerns: green development, inclusive growth, UN sustainable development goals, technological transformation, 21st-century multilateral institutions, and women-led development. The G20’s informal yet crucial global platform gathers leaders from major economies, fostering multilateralism. The EU utilizes this summit to advocate for global cooperation, as seen in High Representative Josep Borrell’s call to pressure Russia after withdrawing from the Black Sea Grain Deal. While recent outcomes lack unanimity, the G20 remains pivotal for managing global challenges, especially with contributions from major and rising middle powers. The absence of China and Russia in 2023, along with BRICS’ potential expansion, hints at a strategic shift.
Exploring the Potential of Central Bank Digital Currency: A Guide for Central Banks
The digitalization of the economy presents both challenges and opportunities for central banks. To ensure the achievement of their policy objectives in the digital age, central banks should have the capability to adapt. One potential solution is the implementation of central bank digital currency (CBDC). CBDCs, if designed properly, have the potential to modernize payment systems and safeguard central bank money as digitalization continues to progress. However, the decision to explore and eventually launch CBDCs should be based on the specific circumstances of each jurisdiction, taking into consideration factors such as the level of digitalization in the economy, legal and regulatory frameworks, and the internal capacity of the central bank. This paper suggests a dynamic decision-making framework that enables central banks to make informed decisions in uncertain situations. By adopting a phased and iterative approach, central banks can adjust the pace, scale, and scope of their CBDC projects in response to changes in the domestic and international environment.
Assistance Report on Fintech Regulation and Legislation in Trinidad and Tobago
The impact of fintech in Trinidad and Tobago is currently focused on the payments sector. Through discussions with fintech firms, trade bodies, and public authorities, it is evident that the influence of fintech is not yet widespread and is primarily seen in e-money and payment service providers (PSP). However, other areas such as crowdfunding, robo-advice, and crypto assets are experiencing slower integration. Although there is limited data on the impact of fintech, public information, conversations with authorities and market participants, as well as regulatory support applications, indicate that fintech remains relatively concentrated in Trinidad and Tobago.
Cracking the Oracle Dilemma: Steering through the Future of DeFi
In this scenario, two developers collaborate to create a smart contract with the purpose of facilitating the transfer of a specific amount of cryptocurrency. The smart contract is a self-executing agreement that is programmed to automatically execute the transfer once certain predetermined conditions are met. These conditions could include factors such as the completion of a specific task or the fulfillment of certain requirements. By utilizing blockchain technology, the smart contract ensures that the transfer of cryptocurrency is secure, transparent, and irreversible. This innovative approach eliminates the need for intermediaries, such as banks or financial institutions, and provides a decentralized and efficient method for conducting transactions involving cryptocurrency.
Crafting the digital future of Europe: navigating towards a digital euro
Fabio Panetta, Member of the Executive Board of the ECB, addressed the Committee on Economic and Monetary Affairs of the European Parliament to provide an update on the digital euro project. Panetta expressed gratitude for the support and contributions from the Committee throughout the project. He highlighted the progress made since the project’s launch, including the publication of reports and studies that have been made public for transparency. Panetta discussed the European Commission’s legislative proposals on the digital euro and the legal tender status of cash, welcoming them as a way to preserve monetary sovereignty and guarantee people’s freedom to choose their preferred means of payment. He emphasized the importance of close cooperation between European institutions to determine the optimal design of the digital euro. Panetta also outlined key aspects of the legislative proposal, including legal tender status, privacy, pricing objectives, and the ECB’s ability to maintain equilibrium between private and central bank money. He addressed concerns about potential dominance of private actors in the digital payments market and highlighted the advantages of a digital euro issued by public authorities. Panetta mentioned that the ECB is nearing the end of the investigation phase and will soon report the findings to the Governing Council. He emphasized that a decision to issue a digital euro would only be taken after the legislation is adopted. Panetta expressed gratitude to the European Parliament for their ongoing dialogue and support and affirmed the ECB’s commitment to continuing hearings and engaging in the democratic debate on the digital euro. He concluded by highlighting the ambition of the digital euro project and its potential to make Europe fit for the digital age, strengthen autonomy and resilience, and lead the international debate on central bank digital currency.
Staying Calm and Trusting in Banks: Understanding Panic-Driven Bank Runs and the Importance of Public Communication
Owners of cryptocurrency have shown little to no significant reaction to the SVB treatment. Despite the introduction of the treatment, which aimed to address concerns regarding the taxation and regulation of cryptocurrency, owners have not displayed any substantial changes in their behavior or attitudes towards their digital assets. The SVB treatment, which was implemented to provide clarity and guidelines for the taxation of cryptocurrency, does not seem to have had a noticeable impact on the actions or decisions of cryptocurrency owners. This lack of response suggests that the SVB treatment may not have effectively addressed the concerns and needs of cryptocurrency holders, leaving them largely unaffected by its implementation.