The exchange rates of cryptocurrencies are known for their high volatility, which can be influenced by various factors such as announcements by large investors, celebrity endorsements, or financial crises. This paper aims to explain the reasons behind this volatility.The main contribution of this paper is the development of the concept of a “crypto multiplier.” This multiplier measures the response of a cryptocurrency’s market capitalization to the aggregate inflows and outflows of investors’ funds. By building on the quantity equation, the authors derive the value of the crypto multiplier. It is found that the multiplier is likely to be larger than one, meaning that an inflow or outflow of one dollar of investors’ funds can have a greater impact on the market capitalization of a cryptocurrency.
Securing the Financial System: Project Leap into Quantum-Proofing
Project Leap, launched by the BIS Innovation Hub’s Eurosystem Centre, the Bank of France, and Deutsche Bundesbank, aims to prepare central banks and the global financial system for the transition to post-quantum cryptography. Quantum computers pose a significant cyber threat to financial data as they have the potential to break current encryption schemes. This threat exposes financial transactions and stored data to potential attacks. The financial sector needs to implement robust quantum communication and data protection technologies to mitigate these risks. The first phase of Project Leap tested the implementation of post-quantum cryptographic protocols between two central banks to advance knowledge in this area. The project report describes the functional findings and deployment challenges of implementing quantum-resistant IT environments for the financial system. The second phase of the project will explore additional central bank use cases to contribute to quantum-proofing the financial system. Implementing quantum-resistant communication is feasible, but understanding the impact on central bank operations is crucial.
Utilizing Data, Technology, and Collaboration to Fight Money Laundering Across Various Sectors: The Aurora Initiative
Virtual assets, such as cryptocurrencies, can be exchanged, held, safeguarded, sold, converted, or transferred by individuals or legal entities. These virtual assets have gained significant popularity in recent years, leading to a growing number of individuals and businesses engaging in transactions involving them. Cryptocurrencies, being a form of virtual asset, are decentralized digital currencies that utilize cryptography for security. They provide a means of conducting peer-to-peer transactions without the need for intermediaries like banks. As a result, individuals and legal entities have become actively involved in activities related to virtual assets, including trading, storing, and transferring cryptocurrencies.
Project Aurora Successfully Completed by BIS: Innovative Collaboration Using Data and Technology to Fight Cross-Border Money Laundering
The BIS Innovation Hub’s Nordic Centre has completed Project Aurora, a proof of concept that aims to combat money laundering through the use of payments data, privacy-enhancing technologies, artificial intelligence (AI), and enhanced cooperation across institutions and borders. The project recognizes the limitations faced by financial institutions in detecting suspicious networks and transactions due to fragmented data and systems. The costs of anti-money laundering (AML) efforts have surged in recent years, reaching approximately $274 billion, while authorities only manage to recover 1% of the estimated amount of money laundered globally. Project Aurora leveraged synthetic data and advanced analytics to detect patterns associated with money laundering activities. The project demonstrated the effectiveness of advanced analytics and behavioral-based analysis in detecting money laundering networks. The project was delivered in partnership with Lucinity, an AI software-as-a-service company in the field of financial crime compliance.
Feasibility of technical solutions and user interfaces for a digital euro validated through market research and prototyping exercise
Today, the European Central Bank (ECB) has released two reports on its market research and prototyping exercise for the digital euro project. The market research aimed to understand the industry-specific knowledge and experience of building potential technical solutions for a digital euro. The research revealed that there are enough European providers capable of developing digital euro solutions and various architectural and technological design options available for building a technical solution.
Exclusive Interview with Les Echos
Fabio Panetta, Member of the Executive Board of the ECB, discussed the progress of the digital euro project in an interview with Karl de Meyer. The ECB is currently studying the design, distribution, and impact of the digital euro, with a team of around 50 people working on the project. The European Commission is expected to present a legislative proposal in June, which will provide the regulatory framework for the digital euro. The Governing Council will then decide in October whether to launch a preparation phase, which could last two or three years. If approved, the digital euro could be launched in three or four years.
Nigeria’s Enaira: A Year Later
This paper examines the performance of the eNaira, the first Central Bank Digital Currency (CBDC) in Africa, during its first year of operation. Despite operating smoothly without any disruptions, the adoption of the eNaira has been limited. To overcome this, a coordinated policy effort is needed to encourage wider adoption. Additionally, the eNaira has the potential to enhance financial inclusion, but it is crucial to establish a strategic relationship with mobile money services, as they can either complement or substitute each other. Furthermore, integrating the CBDC into the remittance process can lead to significant cost savings.
The Significance of Money: Insights on Intent and Reliability – Address by Carolyn Wilkins
The impact of climate change on our planet is becoming increasingly evident. Rising temperatures, melting ice caps, and extreme weather events are just some of the signs that our climate is changing rapidly. These changes have far-reaching consequences for both the environment and human society. Ecosystems are being disrupted, leading to the loss of biodiversity and the extinction of species. Agriculture and food production are also being affected, with changing weather patterns and increased pests and diseases posing challenges to farmers. Furthermore, the rise in sea levels threatens coastal communities and infrastructure, while extreme weather events such as hurricanes and droughts can cause widespread destruction and displacement of people. It is clear that urgent action is needed to mitigate and adapt to the impacts of climate change.
Invitation for applicants to join the digital euro identity and verification project
The European Central Bank (ECB) is seeking experts to contribute to the identification and authentication workstream for the development of the digital euro scheme rulebook. The objective of this workstream is to propose identification and authentication requirements for the digital euro, with a focus on providing an excellent user experience and ensuring security. The workstream will analyze existing identification and authentication approaches and their impact. It will contribute to the “Functional and operational model” section of the digital euro rulebook, including end-to-end flows and data requirements. The workstream will consist of market participants and Eurosystem representatives who are experienced in strong customer authentication (SCA) and identification, preferably with knowledge of related regulatory technical standards and customer identity and access management (CIAM) solutions. Proficiency in English is required. The workstream will hold remote meetings over a two-month period starting in May 2023. Interested candidates should submit their CV, along with written answers to specific questions regarding the user experience, existing standards, potential adaptations, and the link between digital euro identification/authentication and digital identity initiatives. Applicants are also encouraged to provide a letter of consent from their employer and a nomination letter from a relevant stakeholder association or the Rulebook Development Group. The application deadline is 22 May 2023, and successful candidates will be publicly announced. Participation in the workstream is voluntary and unpaid, with all intellectual property rights belonging to the ECB. The ECB promotes diversity and encourages individuals from all backgrounds to apply.
Invitation for Applicants to Join the Digital Euro Project’s Infrastructure Requirements Team
The European Central Bank (ECB) is seeking experts in payments and infrastructure to contribute to the development of the digital euro scheme rulebook. Specifically, the ECB is forming a workstream dedicated to infrastructure-related requirements for the rulebook. The objective of this workstream is to propose technical and non-functional requirements for the rulebook, focusing on the relationships between intermediaries and end users. This includes areas such as IT security, connectivity, functional and technical architecture, and reconciliation.