The payments landscape continues to evolve and this blog shares some of the topics that caught my attention during the last month. If you think I’ve missed anything important, do please send an email to technical@treasurers.com.
Central Bank Digital Currencies (CBDCs) and other digital currencies
It is becoming increasingly difficult to keep up with all of the announcements from a raft of central banks and think tanks but here are some that caught my attention:
- The Digital Dollar Project (DDP) - a partnership between Accenture and the Digital Dollar Foundation was established in 2020 to advance exploration of a United States Central Bank Digital Currency (CBDC). The purpose of the Project is to encourage research and public discussion on the potential advantages of a digital dollar and propose possible models to support the public sector. In May the DDP announced it would launch at least five pilot programs over the next 12 months with interested stakeholders and DDP participants to measure the value of and inform the future design of a U.S. central bank digital currency (CBDC), or “digital dollar.”
- The Bank of England and HM Treasury announced the joint creation of a Central Bank Digital Currency (CBDC) Taskforce to coordinate the exploration of a potential UK CBDC. As a follow up to this announcement, the Bank has posted job ads for four analyst roles, two architect roles and one senior management position – all related to CBDCs.
- JP Morgan has created a new company to tackle cross-border payments using blockchain technology with Singapore state-backed fund Temasek and DBS. Partior was developed with the Monetary Authority of Singapore and the investment bank’s blockchain unit Onyx under Project Ubin. JP Morgan said the venture could be used to assist central bank digital currency pilots. Partior will develop a blockchain-based, open industry platform for digital clearing and settlement solutions for payments, trade and foreign exchange transactions to help commercial banks money settle at “atomic” or instantaneous speeds in future, using smart contracts to address current friction points in transactions.
- R3’s CBDC Working Group has published a new taxonomy and augmented set of definitions for digital currency and potential design options. The paper provides a common language for understanding the considerations and decisions relevant to the building of a CBDC and highlight areas where certain features may complement or cause friction with one another.
- In a recent interview with Bloomberg, the President of the ECB said that if policy makers give the digital currency project the green light this summer, then the digital currency will be rolled out within four years.
- The ECB published analysis of its public consultation on a digital euro which had over 8,000 responses. The analysis shows that the most important factors of public and professionals want from a digital currency is:
- privacy (43%),
- security (18%),
- the ability to pay across the euro area (11%),
- no additional costs (9%) and
- offline usability (8%).
Announcements
- Visa announced it had become the first major payments network to settle transactions in USD Coin (USDC) using the crypto.com platform.
- The Diem Association announced plans to move its primary operations from Switzerland to the US and enter into a partnership with Silvergate Bank, a California state-chartered bank, which will become the exclusive issuer of the Diem USD stablecoin. It intends to register as a money services business with the US Department of the Treasury's Financial Crimes Enforcement Network.
- In recent interview, the chair or the European Payments Initiative revealed that €30m had already been invested in a unified payment systems for merchants and consumers across Europe that would compete with Mastercard and Visa.
UK payments landscape
- The Payment Systems Regulator (PSR) published a notice in relation to monitoring the EU Interchange Fee Regulation
- The PSR issued a consultation on the Interchange Fee Regulation following the UK’s withdrawal from the EU
Naresh Aggarwal