Max Thake

Let’s set the scene: The year is 2030, and the Internet of Things has become ubiquitous. Sensors are everywhere, everything’s outfitted with a chip, and you’ve already interacted with twenty IoT service providers before you brushed your teeth this morning without even knowing.&nbsp;



After your morning cup of coffee, dutifully prepared for you by the smart machine that knows your taste better than you do (it also knows your daily routines and may or may not be selling this info), you head for the hairdressers. Via an app, you find and unlock the nearest shared electric vehicle and hit the road as it happily sells off more of your data to Big Tech.



An hour later, as stylish as ever, you head back for the vehicle — only to find that it rejects all of your attempts to get in. You try to hop on the bus, using your phone to pay, but the transaction doesn’t go through. Even a nearby vending machine refuses to sell you your now much-needed emotional support chocolate bar.



<h2>The pieces moving today</h2>



All of the things that you tried to do during your hypothetical day in 2030 relied on transactions involving devices. These devices were leveraging central bank digital currencies (CBDCs), controlled by that self-same central bank. And your friendly central bank was only happy to help when the local authorities, upset by your involvement in some recent protests, wanted to teach you a lesson. The rest is history.



The above scenario may feel far-fetched,&nbsp;but my humorous hyperbole reflects the worst possible future scenario imagined by CBDC critics. The number of connected devices is <a href="https://www.statista.com/statistics/1183457/iot-connected-devices-worldwide/">growing fast</a>, both in business inventories and on the consumer market. The rise of artificial intelligence — yes, that includes ChatGPT, which Twitter can’t get enough of these days — and the way the technology enables connected devices to be <a href="https://www.infoworld.com/article/3663017/how-ai-is-changing-iot.html">more efficient</a> means that more processes will be automated. And this doesn’t just go for things like smart factories: Amazon’s <a href="https://www.theguardian.com/us-news/2020/feb/25/amazon-go-grocery-supermarket-seattle-technology">autonomous shop</a> and the fully-automated <a href="https://metro.co.uk/2022/12/26/mcdonalds-opens-first-restaurant-thats-not-fully-run-by-humans-17996648/">McDonald’s in Texas</a> are both harbingers of just how much automation we will be dealing with daily. And it’s worth noting that my scare tactic of a morning routine is already more or less approaching the status quo in <a href="https://worldcrunch.com/culture-society/china-surveillance-cameras">China</a>.



The fact of the matter is, we are relying on connected devices in more daily activities. It’s not the problem, really; the real problem is the digital infrastructure that the apps — and thereby the increasingly intelligent vehicles, machines, and robots — run on. That’s why the paradigm of machine and human economic relations we are fast heading into needs to run on Web3 rails, with everyone in charge of their own data and assets. The machines are not the enemy, but our legacy methods of running them are.



The interactions between all of these internet-connected devices and the wide world out there include a transactional component. Sometimes it’s about <a href="https://www.consumerreports.org/privacy/connected-devices-share-more-data-than-needed-study-says-a7015033345/">selling your data</a>, and sometimes, it’s more direct, like when you’re using your phone to pay at the grocery store (which is becoming <a href="https://fintechmagazine.com/digital-payments/75-of-consumers-now-using-mobile-wallets-survey">ubiquitous</a>). In today’s world, most of these transactions involve a traditional banking account at a certain point, either the user’s own or an omnibus held by a specific platform for its business needs. In the future, though, these accounts could instead be virtual wallets with CBDCs, digital tokens issued and managed by central banks.



And as wonderful as that might sound, CBDCs and their inherently centralized design enable the issuer to directly control your spending behavior. Digital currencies are programmable, malleable, which makes any sort of control possible. You can set limits on how much a person can keep in their account in order to stimulate economic activity by forcing purchases and investment. You can limit their ability to purchase non-eco-friendly goods, or build carbon offsets into transactions. Oh, and only one plane flight per year. For some, all of this may still sound appealing, but this slope is oh so slippery. Why not just ban everyone you don’t like from buying food?&nbsp;&nbsp;&nbsp;



Recent years already saw cases where governments sought to hamper citizens’ ability to transact as a punitive measure, like China’s <a href="https://www.businessinsider.com/china-social-credit-system-punishments-and-rewards-explained-2018-4">social credit system</a>, for example, or Canada’s <a href="https://www.marketwatch.com/story/canadian-banks-restrict-funds-to-trucker-protest-groups-11645115277">action</a> against trucker protests. You may feel differently about the people involved, but the mechanisms at play are similar in their logic. We enact our financial freedom by choosing what we purchase and from whom. If this freedom depends on the goodwill of a third party, it’s no freedom at all, and being excluded from the real-world economy is a direct threat to one’s livelihood.&nbsp;



Take these trends, put them together, let them simmer for a bit, and there we are — that doomsday scenario is looking way more realistic. You may have heard about the <a href="https://www.thesocialdilemma.com/">Social Dilemma</a>, where tech experts from Silicon Valley sounded the alarm in an hour-and-a-half long informative yet dystopian documentary about the dangerous impact of social networking’s manipulative underbelly, “brought to you by Big Tech.” We’re next heading towards what you may call “the connected dilemma,” where we either leverage the Internet of Things at the cost of giving away even more intimate data about even more aspects of our lives, or keep some slither of privacy but remain in the Stone Age, comparatively speaking.&nbsp;



But IoT apps don’t have to be built on centralized Big Tech — they can be built on Web3 instead. IoT-specific decentralized applications (dapps) enable any user, whether human or machine, to securely interact and transact with others in a peer-to-peer manner. They can do so with full sovereignty and ownership over their identities and their data, meaning user surveillance becomes a thing of the past. On an even better note, if the currencies we choose to use are built on decentralized tech, the potential for monetary censorship then stays in the past too. And so, this leaves us with a choice, not a dilemma. It’s no longer a case of ‘choose privacy, but live in the Stone Age, or ‘choose the latest tech but give up your most intimate data.’ It’s a case of choosing to build and use apps which run on decentralized foundations. On Web3, not Big Tech. If we get that right, we can have our cake and eat it too.&nbsp;



<hr class="wp-block-separator has-alpha-channel-opacity"/>


<div class="wp-block-post-author-biography">Max Thake is an entrepreneur, writer, and co-founder of peaq, a blockchain network powering the Economy of Things, and EoT Labs, a software development and incubation organization supporting open-source projects focused on the Economy of Things. peaq empowers people to manage and earn from vehicles and devices as they provide goods and services to people and other machines. Max has built multiple organizations, teams and brands during his years in the blockchain space. He operates at the intersection between the humanities and sciences and enjoys explaining technological complexity in simple terms and using it to solve problems.</div>


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For the Internet of Things, It’s Either Web3 or 1984

Bessie Liu

Countries are looking to build their own central bank digital currency — though results may vary. 



Roberto Campos Neto, president of Brazil’s central bank, said at BTG Pactual’s CEO Conference on Friday that the pilot for his country’s digital currency will “start right now.”



The project is likely to be ready for its rollout by December of this year.&nbsp;



Banks have been widely cooperative with the project, according to Campos Neto, who added that central bank digital currency (<a href="https://blockworks.co/tag/cbdc" target="_blank" rel="noreferrer noopener">CBDC</a>) implementation will allow each bank to individually issue the state-sanctioned digital asset.



Alongside the development of digital currencies, the Brazil banking head referred to two other prominent projects said to shape the future of finance: PIX, a fiat payments initiative, and <a href="https://ob-public-files.s3.amazonaws.com/20221003_Biannual_Report_OFB.pdf" target="_blank" rel="noreferrer noopener">Open Finance</a> — a project founded on the principle that customers should own their own financial data.



“I think these three things can change the history of financial intermediation in Brazil, transforming our system into something efficient and today in the world there is no one so advanced,” Campos Neto said.



In Japan — which has been notoriously strict on cryptocurrencies — the country’s central bank is planning to pilot its “digital yen” in April.



Proof of concepts will be executed in March to test feasibility and basic functionality, the Bank of Japan said in a <a href="https://www.boj.or.jp/en/paym/digital/dig230217b.pdf" target="_blank" rel="noreferrer noopener">statement</a>.



Private businesses and banks — including three of Japan’s largest banks — will participate in the trial. Transactions are set to to be simulated, meaning no actual retail and consumer transactions are designed to be made during the pilot.



“Whether to issue a CBDC should be decided by discussions among the Japanese public,” the Bank of Japan said. “With a view to facilitating such discussions, the [bank] will continue to make thorough preparations to respond to changes in circumstances in an appropriate manner.” 



Other CBC programs have fared quite differently. Nigeria’s CBDC program has been called “a dark experiment…with deadly consequences.”



<figure class="wp-block-embed is-type-rich is-provider-twitter wp-block-embed-twitter"><div class="wp-block-embed__wrapper">
<blockquote class="twitter-tweet" data-width="550" data-dnt="true">A very dark experiment is under way in Nigeria, with deadly consequences. Since October 2021, 99.5% of Nigerians have refused to use the central bank&#39;s digital currency, the so-called e-Naira, preferring to continue using cash. So what did the central bank do? It doubled down.&mdash; Nick Corbishley (@NickCorbishley) <a href="https://twitter.com/NickCorbishley/status/1626183018791464962?ref_src=twsrc%5Etfw">February 16, 2023</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div></figure>



The eNaira first launched in October 2021, meeting a chilly reception from Nigerians. It <a href="https://blockworks.co/news/cbdc-project-gives-private-players-unfair-advantage">hasn’t been the only hurdle</a> CBDCs around the world have gone up against.&nbsp;



After the country’s citizens <a href="https://blockworks.co/news/nigeria-cbdc-push-limits-cash-withdrawals">balked at adopting the eNaira and continued to use cash,</a> its central bank began to replace high denomination cash bills in the economy, Nick Corbishley, a financial journalist, <a href="https://twitter.com/nickcorbishley/status/1626183018791464962?s=46&amp;t=7Yb6Crzn9zFgNAGe5mcsNg" target="_blank" rel="noreferrer noopener">tweeted</a>. 



The sentiment led to businesses shuttering and angry protests, he said.



“Unless stopped in its tracks, this monetary experiment is coming to all of us, one way or another,” Corbishley tweeted.



About 114 countries <a href="https://blockworks.co/news/ukraine-bank-finds-stellar-blockchain-brings-key-advantages">have explored CBDCs</a>, according to Atlantic Council’s CBDC tracker. Eleven countries have fully implemented a digital currency, and 17 have CBDCs in the works.



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CBDCs Are Gaining Steam, Though Results May Vary

Sebastian Sinclair

<div id="highlights-block_6343ef68c5e20" class="highlights">
 <ul>
 <li>India has outlined its key motivations behind planning a CBDC pilot</li>
 <li>It’s the first time the country’s central bank has conveyed its intentions since February</li>
 </ul>
 
</div>



In India, the central bank is pushing ahead with its central bank digital currency (CBDC) in the belief it may counter perceived threats posed by cryptocurrencies to the nation’s financial stability.



The Reserve Bank of India (RBI) outlined its intentions for its digital rupee — still in a research phase — in a <a href="https://rbidocs.rbi.org.in/rdocs//PublicationReport/Pdfs/CONCEPTNOTEACB531172E0B4DFC9A6E506C2C24FFB6.PDF" target="_blank" rel="noreferrer noopener">concept note</a> on Friday.



The note extends upon the bank’s <a href="https://cms.blockworks.co/india-to-introduce-a-30-crypto-tax-push-out-cbdc-by-2022-23/" target="_blank" rel="noreferrer noopener">initial musings</a> in February, when it flagged intention to implement a CBDC sometime between 2022 and 2023. 



As per recommendations of an internal working group established by the bank in October 2020, the RBI now says it’s exploring an account-based wholesale CBDC as well as a token-based retail CBDC via a “graded approach.”



Retail CBDCs refer to electronic forms of cash while wholesale CBDCs are used for interbank transfers between financial institutions.&nbsp;



Both wholesale and retail models are designed to improve efficiency and streamline settlement while reducing operating costs and fostering financial inclusion, the RBI said.&nbsp;



RBI outlined various phases before a final CBDC pilot: building a prototype, stress testing the project under both negative and positive use cases and finally evaluating results.



The central bank added that CBDCs are sovereign currencies providing greater control over its financial fate as it attempts to counter the “rapid mushrooming of private currencies” which has challenged fundamental notions of money “as we know it.”



“In this context, it is the responsibility of [the] central bank to provide its citizens with a risk-free central bank digital money which will provide the users the same experience of dealing in currency in digital form without any risks associated with private cryptocurrencies,” the RBI said in its note.&nbsp;



Private cryptocurrencies, in this case, are considered any digital currency not issued by the state. Following a determination of the end results, India may move forward with implementation, the bank said without providing a definitive deadline.



<h3>India joins long list of CBDC research projects across the globe</h3>



Given other bank-issued digital currencies have been <a href="https://www.bankingdive.com/news/cbdc-will-take-years-not-months-to-develop-yellen-says/621829/" target="_blank" rel="noreferrer noopener">slow off the mark</a>, India’s lofty implementation plans could take years to see through to execution, if at all.



China’s digital yuan, while still in pilot phase, is the first of its kind to be tested and issued by a major economy. It has taken considerable time to develop, extending as far back as 2016 from when the country <a href="https://www.bloomberg.com/news/articles/2016-09-02/central-banks-should-lead-on-digital-currency-pboc-s-fan-says" target="_blank" rel="noreferrer noopener">first announced</a> its CBDC intentions.



In a bid to meet China’s rising ambitions, the US began exploring concepts for both retail and wholesale CBDCs beginning in 2020 and in earnest throughout 2021 under <a href="https://www.bostonfed.org/news-and-events/news/2021/02/how-did-the-feds-digital-dollar-project-get-its-name-project-hamilton.aspx" target="_blank" rel="noreferrer noopener">Project Hamilton</a>. 



Data from <a href="https://cbdctracker.org/" target="_blank" rel="noreferrer noopener">CBDC Tracker</a> shows most developed economies around the world have begun researching CBDCs, with more than 120 projects listed. Of those, just two central banks — the Bahamas and Jamaica — have fully deployed CBDCs.



Six countries including Singapore, Philippines, Denmark and Ecuador have canceled their endeavors altogether, and only nine CBDCs are currently in the proof-of-concept stage.



There are seven active CBDCs pilots around the world, including projects in Canada, Saudi Arabia and France.



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India Central Bank Hopes CBDC Can Combat Crypto Threat

Casey Wagner

<div id="highlights-block_633df1cf263e0" class="highlights">
 <ul>
 <li>SWIFT says it is ready to take on CBDC cross border payments</li>
 <li>The development is a sign that central banks are starting to seriously think about infrastructure related to the roll out of nation-backed digital currencies</li>
 </ul>
 
</div>



Financial infrastructure company SWIFT on Wednesday said it has solved a particularly vexing problem for central bank digital currencies (CBDCs): how to transact between different blockchains. 



The development is one indicator that central banks are, at last, starting to seriously map out the massive, costly infrastructure required to roll out digital currencies backed by countries, according Kenneth Goodwin, Blockchain Intelligence Group’s director of regulatory and institutional affairs. SWIFT’s own outline has been at least eight months in the making.



Goodwin, who also works with Project Hamilton — an economic think tank that works with the Boston and New York Federal Reserves — said SWIFT’s scale adds weight to its blueprint.



“The central banks are basically saying — these governments are saying, ‘How do we have the right network infrastructure that&#8217;s going to prepare us…to actually do these executions on a digital platform that&#8217;s very secure?” Goodwin said. “And that&#8217;s where SWIFT comes into play.”



One reason the research has taken so long, according to Goodwin: the thorny choice between incorporating CBDCs with SWIFTs’ existing payment rails or competing against a crypto-native competitor such as Bitcoin’s Lightning Network.



Lightning Network, a layer-2 payment protocol built atop Bitcoin’s core blockchain, taps the <a href="https://lightning.engineering/posts/2022-9-28-taro-launch/" target="_blank" rel="noreferrer noopener">newly-created</a> Taro protocol for issuing assets such as stablecoins — and potentially CBDCs — on the blockchain, then utilizing Lightning to execute transactions. 



“SWIFT has successfully shown that Central Bank Digital Currencies (CBDCs) and tokenised assets can move seamlessly on existing financial infrastructure – a major milestone towards enabling their smooth integration into the international financial ecosystem,” SWIFT said in a statement.&nbsp;



The team conducted two separate experiments and found that digital currencies and assets can flow smoothly alongside, and interact with, their traditional financial counterparts on the network.&nbsp;



SWIFT is already being used to connect more than 11,500 banks and funds across 200 countries.



When it comes to establishing a CBDC system that works worldwide, “it all has to do with infrastructure, but it also has to do with familiarity,” Goodwin said.



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SWIFT Says It Can Resolve a Major Obstacle to CBDC Adoption

<div id="highlights-block_62f1b0aa6d69c" class="highlights">
 <ul>
 <li>The pilot project is expected to take one year and will invite industry participants to develop specific use cases</li>
 <li>Australia will join a growing list of other countries exploring CBDCs at the pilot stage following the project&#8217;s completion</li>
 </ul>
 
</div>



The Reserve Bank of Australia (RBA) said Monday it has teamed up with the Digital Finance Cooperative Research Centre (DFCRC) to begin exploring use cases for a retail central bank digital currency (CBDC).



Both parties will embark on a year-long research project encompassing the development of a &#8220;limited-scale&#8221; CBDC operating in a ring-fenced sandbox, according to a <a href="https://www.rba.gov.au/media-releases/2022/mr-22-23.html" target="_blank" rel="noreferrer noopener">statement</a>.



While extensive research has already been conducted on the viability of digital ledger technology in the country, the RBA and DFCRC said their project would further close knowledge gaps by exploring potential economic benefits.



DFCRC is a 10-year, 180 million australian dollar ($125.6 million) research program funded by the Australian Government, industry partners and universities via the country&#8217;s<a href="https://cooperativeresearch.org.au/cooperative-research/crc-program-australian-government/"> Cooperative Research Centres Program</a>.



Dr Andreas Furche, CEO of the DFCRC, said in a statement: &#8220;CBDC is no longer a question of technological feasibility. The key research questions now are what economic benefits a CBDC could enable, and how it could be designed to maximise those benefits.&#8221;



Australia&#8217;s digital dollar project, if it makes it past the research phase, would join a growing list of other countries running pilots, including France, China, Canada, South Africa and Ghana. 



Live CBDCs are rarer, with only The Bahamas&#8217; Sand Dollar and Jamaica&#8217;s JAM-DEX fully launched, according to <a href="https://cbdctracker.org/" target="_blank" rel="noreferrer noopener">CBDCTracker.org</a>.



For now, the project hopes to further understand some of the technological, legal and regulatory considerations associated with an Australian digital dollar while gauging demand.



A specific launch date for the project was not given. A spokesperson for the bank declined to comment and DFCRC did not immediately return requests for comment.



Interested industry participants will be invited to develop specific use cases showcasing how a CBDC could add value to payment and settlement services for both households and businesses, per the statement.



The RBA and the DFCRC will choose use cases to include in the potential CBDC pilot, the pair said.



The project&#8217;s findings on the viability and assessment of various use cases developed are to be compiled in a report to be published once the year is up.



A separate report is expected to be published in the &#8220;next few months&#8221; detailing the project&#8217;s objectives and approach in greater detail with further information on how industry participants will be able to engage, the pair said.



This article was updated at 4:31 am, ET with context throughout.



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RBA to Explore CBDC Use Cases in Australia via Research Pilot

<div id="highlights-block_62e033e960473" class="highlights">
 <ul>
 <li>According to Wolfgang Bardorf, group treasurer at Checkout.com, when it comes to the nature of CBDCs, central banks most likely “don’t want to deal with the retail universe&#8221;</li>
 <li>Depending on the direction of regulation, stablecoin issuers may fill the retail gap</li>
 </ul>
 
</div>



The competing motivations behind CBDCs and stablecoins make deciphering the future of digital currency incredibly complex.&nbsp;&nbsp;



Whether rooted in a desire to surveil citizens, provide financial inclusion or create interbank efficiency, we have yet to see the &#8216;killer app&#8217; of a CBDC (central bank digital currency).



In a recent <a href="https://cms.blockworks.co/webinars/will-stablecoins-transform-the-business-of-banking/?source=bc" target="_blank" rel="noreferrer noopener">webinar</a> asking if stablecoins can transform banking, experts from Checkout.com, Fireblocks and Gemini discussed how incoming stablecoin regulation may impact the trajectory of their government-issued peers — CBCDs.



<h3>Stablecoins vs. CBDCs review</h3>



First, it is important to highlight the main differences between stablecoins and CBDCs. Traditional stablecoins such as USD Coin and Tether are digital tokens that offer price stability through a 1:1 backing to fiat currency. They manage this backing through various reserve holdings of real-world assets. CBDCs on the other hand, are issued directly by governing authorities and do not have reserve requirements.&nbsp;&nbsp;



<h3>Stablecoin regulation recap</h3>



In June, Sens. Cynthia Lummis, R-Wyo., and Kirsten Gillibrand, D-NY, introduced a <a href="https://cms.blockworks.co/bipartisan-crypto-bill-hits-congress-with-focus-on-cftc-jurisdiction-taxes/" target="_blank" rel="noreferrer noopener">bipartisan bill</a> that proposes a comprehensive framework for the regulation of digital assets (including stablecoins) in the United States.&nbsp;



In the same month, the European Central Bank (ECB) produced its <a href="https://www.ecb.europa.eu/pub/financial-stability/macroprudential-bulletin/html/ecb.mpbu202207_2~836f682ed7.en.html">report</a> on stablecoins, citing an urgent need to regulate based on their increasing threat to financial stability. The Bank for International Settlements (BIS) issued its <a href="https://cms.blockworks.co/stablecoin-regulation-ramps-up-across-the-globe-with-new-bis-guidance/" target="_blank" rel="noreferrer noopener">final guidance</a> on stablecoins earlier this month, calling for stablecoins to follow the same settlement rules as traditional finance.



<h3>CBDCs update</h3>



Meanwhile, a recent BIS survey shows that 90% of central banks are seriously exploring CBDCs. Half have moved beyond the initial research stage, with 65% of central banks expecting to issue a retail CBDC in the foreseeable future.&nbsp;



<h3>The difference between retail and wholesale CBDCs</h3>



CBDC types can vary, but bankers group them into a wholesale or retail category. The main difference is the intended adopters. Wholesale CBDCs are only provided to financial institutions with central bank reserves — and retail CBDCs are offered directly to consumers and businesses. Both are government-backed digital currencies designed to eliminate risk and deliver efficiency.



This choice between the two is critical to how a CBDC affects a stablecoin operation and purpose.



<h3>Competing central bank motives</h3>



In the <a href="https://bit.ly/3b30Bje" target="_blank" rel="noreferrer noopener">Checkout.com</a>-sponsored <a href="https://cms.blockworks.co/webinars/will-stablecoins-transform-the-business-of-banking/?source=bc" target="_blank" rel="noreferrer noopener">webinar</a>, Adam Levine, vice president of corporate strategy at crypto infrastructure company Fireblocks, suggested that the extent of this impact depends upon the outcome a government is looking to achieve.



Levine believes some countries may want greater financial inclusion or a cashless society, while others may be looking to leverage CBDCs to further authoritarian objectives.



Levine leans toward a wholesale vision for CBDCs rather than a retail one. 



&#8220;I think that many of the leading economies over time are going to have a wholesale solution because of all of the benefits of a digitized currency as compared to traditional tech,&#8221; he said.



Stefan Sabo, head of research at crypto platform Gemini, suggested that the development of CBDCs has introduced a complex set of challenges, particularly from the legal system&#8217;s perspective. In terms of the US and Europe, he believes it will be a long path toward implementation.



Sabo sees a pretty different implementation and outcome in the case of China. China has already deployed its e-CNY digital currency on a limited basis. The currency is a type of retail CBDC, and given the authoritarian nature of the government in China, it raises concerns surrounding privacy and surveillance. The Lummis-Gillibrand Responsible Financial Innovation Bill <a href="https://www.gillibrand.senate.gov/imo/media/doc/Lummis-Gillibrand%20Responsible%20Financial%20Innovation%20Act%20%5bFinal%5d.pdf" target="_blank" rel="noreferrer noopener">calls</a> for implementing security measures relative to the use of the digital yuan.



When considering CBDC deployment from a privacy perspective, Sabo doesn&#8217;t think that most central banks would be interested in managing retail client accounts in terms of compliance — know-your-customer and anti-money laundering provisions. &#8220;Those things are serious, massive operations at commercial banks — that seems like quite a challenge&#8221;, he stated. In most cases, central banks are exploring a model where they issue CBDCs, and traditional institutions manage distribution.



<h3>Bank vs. non-bank stablecoin issuance</h3>



Wolfgang Bardorf, group treasurer at <a href="https://bit.ly/3b30Bje" target="_blank" rel="noreferrer noopener">Checkout.com</a>, brought up a critical question that has yet to be answered: “Are CBDCs going to be another digital representation of a centrally backed currency — much like USDC, or will it be a parallel central bank backed currency?”



He goes on to explain that the answer to that question will determine how central banks use USDC in relation to the banking sector. He states that ultimately, that relationship is about injecting and removing liquidity from the system.&nbsp;&nbsp;&nbsp;



But when it comes to managing money supply generally, Bardorf believes &#8220;central banks wouldn&#8217;t want to deal with the whole retail universe.&#8221; He thinks that they would want to rely on bigger players. The question is whether this would have to be banks or not — something that, in his view, is too early to gauge.



Jeremy Allaire, the founder of Circle — the company behind the USDC stablecoin — has <a href="https://finance.yahoo.com/news/stablecoin-central-bank-digital-currency-171938235.html" target="_blank" rel="noreferrer noopener">long maintained</a> that private sector products such as stablecoin USDC can fulfill the role of a CBDC but both could co-exist if necessary.&nbsp;



Circle just <a href="https://www.circle.com/blog/payment-stablecoin-policy-principles" target="_blank" rel="noreferrer noopener">published</a> its suggested policy principles relative to stablecoins and digital assets. In it, the company calls to enshrine privacy as a design principle in the issuance and circulation of digital dollar currencies.&nbsp;



Furthermore, it calls for preserving bank and non-bank dollar digital currency issuance as a mechanism to promote competition and level the playing field. The document also points out that CBDCs and stablecoins provide different functionality, and on that basis, they can co-exist.



Some US regulators want banks to have exclusive rights to dollar digital currency issuance. However, Democrats on the House Financial Services Committee have been <a href="https://www.coindesk.com/policy/2022/07/18/stablecoin-bill-wont-force-all-issuers-to-be-banks-congressman-says/" target="_blank" rel="noreferrer noopener">working on a bill</a> to accommodate options for both banks and non-banks.



In a recent <a href="https://www.protocol.com/fintech/lummis-crypto-interview" target="_blank" rel="noreferrer noopener">interview</a>, Cynthia Lummis seemed to be coming down in favor of a wholesale CBDC. She expressed that a CBDC should be kept within the central bank and that she wouldn&#8217;t want to see a CBDC cut out financial institutions or be a means of citizen surveillance.



Due to the landscape, some think a wholesale CBDC or no CBDC issuance are the most likely outcomes in the US. That would be more in keeping with the innovation-first ethos the US has established with new technology and, in this case, with stablecoins. Not all governments and regulatory approaches are equal in sharing that ethos. So we are likely to see a variety of implementations worldwide when it comes to CBDC design and the overall regulation of these digital assets.



You can <a href="https://cms.blockworks.co/webinars/will-stablecoins-transform-the-business-of-banking/" target="_blank" rel="noreferrer noopener">watch the full recording</a> of the <a href="https://bit.ly/3b30Bje" target="_blank" rel="noreferrer noopener">Checkout.com</a>-sponsored webinar for more insights into stablecoin regulation and its impacts on the banking sector.



This content is sponsored by <a href="https://bit.ly/3b30Bje" target="_blank" rel="noreferrer noopener">Checkout.com</a>.



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The Future of CBDC and Stablecoin Coexistence

<div id="highlights-block_6205fbaa84437" class="highlights">
 <ul>
 <li>Kenya&#8217;s central bank is requesting public feedback on the applicability of a potential digital Kenyan shilling</li>
 <li>The bank said CBDCs were receiving &#8220;more attention than ever before&#8221;</li>
 </ul>
 
</div>



The Central Bank of Kenya (CBK) is seeking feedback from the public on the applicability of a potential central bank digital currency (CBDC), according to a <a href="https://www.centralbank.go.ke/uploads/press_releases/1985544394_Press%20Release%20-%20Issuance%20of%20Discussion%20Paper%20on%20on%20Central%20Bank%20Digital%20Currency%20for%20Public%20Comments.pdf" target="_blank" rel="noreferrer noopener">press release</a> on Friday.



CBK has issued its <a href="https://www.centralbank.go.ke/uploads/discussion_papers/CentralBankDigitalCurrency.pdf" target="_blank" rel="noreferrer noopener">discussion paper</a> outlining the possible variations of a digital Kenyan shilling as well as the feasibility and risks involved. The paper also examined other payment types including stablecoins and electronic money.



<blockquote class="wp-block-quote">&#8220;It is quite apparent that CBDCs are receiving more attention than ever before,&#8221; the bank said in its release. &#8220;However, a key point to note is that despite the traction in attention, the motivations for the issuance of CBDCs vary across countries, as do the policy approaches and technical designs.&#8221;</blockquote>



It said the benefit of a Kenyan CBDC remains unclear and further research on the specific design was needed to shore up confidence in the country&#8217;s domestic markets before it would consider developing a digital form of the nation&#8217;s currency built atop blockchain tech.



&#8220;Naturally, the balance of risks and benefits of CBDCs will vary from one economy to another,&#8221; the bank said.



Consideration of public opinion follows the bank&#8217;s governor, Patrick Njoroge, last year reiterating <a href="https://www.centralbank.go.ke/images/docs/media/Public_Notice_on_virtual_currencies_such_as_Bitcoin.pdf" target="_blank" rel="noreferrer noopener">CBK&#8217;s stance</a> that crypto, such as bitcoin, are not legal tender and are unregulated. The bank initially urged Kenyans to &#8220;desist from transacting&#8221; via the nascent asset back in 2015.



&#8220;To comprehensively evaluate the potential applicability of CBDC in Kenya, CBK requests for public comments on a number of questions,&#8221; the bank said. It is seeking feedback no later than May 2022.



Kenya currently ranks 5th in the 2021 <a href="https://blog.chainalysis.com/reports/2021-global-crypto-adoption-index/" target="_blank" rel="noreferrer noopener">Global Crypto Adoption Index</a>, according to Chainalysis research. Meanwhile, around 87 countries, representing&nbsp;over 90%&nbsp;of global GDP, are currently in the exploration phase of CBDCs.



A further nine countries have launched their own form of CBDC. Nigeria became the latest country to launch its digital naira, the first outside the Caribbean nations, according to research by <a href="https://www.atlanticcouncil.org/cbdctracker/" target="_blank" rel="noreferrer noopener">Atlantic Council</a>.



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Kenya Seeks Public Opinion on Potential CBDC

<div id="highlights-block_61ef3161af8e2" class="highlights">
 <ul>
 <li>South Korea&#8217;s central bank is now in the second phase of testing its CBDC following a successful test which began in December</li>
 <li>The basic functions of the bank&#8217;s CBDC are &#8220;operating normally&#8221; under the rigors of a cloud testing environment</li>
 </ul>
 
</div>



The Bank of Korea said Monday the first phase of its central bank digital currency (CBDC) simulation research project, which began in December, had concluded and was now in its second testing phase.



&#8220;The basic functions of [the] CBDC &#8230; are operating normally,&#8221; the central bank said in a <a href="https://www.bok.or.kr/viewer/skin/doc.html?fn=202201240938308670.pdf&amp;rs=/webview/result/P0000559/202201" target="_blank" rel="noreferrer noopener">statement</a>. The first phase saw the creation of a simulated environment implemented in the cloud where tests were conducted to determine the veracity of the CBDC&#8217;s basic functions including manufacturing, issuance and distribution.



The project has now moved into its second phase where various additional functions including offline payments and &#8220;personal information protection enhancement technology&#8221; will be tested for the possibility of implementation and application, the bank said.



Read also: <a href="https://cms.blockworks.co/fed-opens-debate-on-cbdc-takes-no-policy-stance/" target="_blank" rel="noreferrer noopener">Fed Opens Debate on CBDC, Takes No Policy Stance</a>



Once the second phase of the project is concluded in June of this year, the bank said it plans to expand CBDC usability experiments and technology verification in cooperation with financial institutions, bringing it one step closer to a live product.



While the experiment is by no means an endorsement that the bank will pursue and introduce a wholesale CBDC into its national economy, it does echo similar tests being conducted by financial institutions worldwide.



Over 40 countries are currently researching either wholesale or retail CBDCs while an additional 16 are in current development. Another 14 are currently in the pilot stage while nine nations, including The Bahamas and Nigeria, have launched a hybrid version.



Meanwhile, in the US, The Bank of America has said a digital dollar issuance would likely hit the world stage sometime around 2025-2030, calling it &#8220;inevitable,&#8221; according to a <a href="https://www.bloomberg.com/news/articles/2022-01-24/digital-dollar-looks-inevitable-bofa-strategists-say" target="_blank" rel="noreferrer noopener">report by Bloomberg</a> on Monday.



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Korea’s Central Bank Completes First Phase of CBDC Simulation Test Run

On this episode of Blockworks&#8217; podcast &#8220;<a href="https://youtu.be/1j5mDQnA4i4" target="_blank" rel="noreferrer noopener">On the </a><a href="https://youtu.be/YXrLkb343xQ" target="_blank" rel="noreferrer noopener">Margin</a>,&#8221; Michael Ippolito, co-founder, is joined by Mike Green of Simplify Asset Management &amp; Alex Gladstein of the Human Rights Foundation. 



Mike &amp; Alex sit down to debate the role of Bitcoin from opposing angles, discussing whether a Bitcoin standard would benefit the U.S, what is the role of Bitcoin for those living under authoritarian regimes, government response to Bitcoin, the war on cash, &amp; the role of sound money in society.



They also covered: 



<ul><li>CBDCs</li><li>Stablecoins</li><li>If Bitcoin should be taxed</li><li>and more!</li></ul>



Watch the full episode down below! 👇



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<iframe loading="lazy" title="Bitcoin&#039;s Role in the War on Cash | Mike Green &amp; Alex Gladstein" width="1024" height="576" src="https://www.youtube.com/embed/YXrLkb343xQ?feature=oembed" frameborder="0" allow="accelerometer; autoplay; clipboard-write; encrypted-media; gyroscope; picture-in-picture" allowfullscreen></iframe>
</div></figure>



&#8220;On the Margin&#8221; is a two-part show.&nbsp;Once a week, Mike interviews industry experts, and then at the end of the week he is joined by a co-host where they break down the top crypto and macro stories. Episodes go live every Wednesday and Saturday morning.



Subscribe to &#8220;On the Margin&#8221; today on <a href="https://podcasts.apple.com/us/podcast/lyn-alden-explains-connection-between-inflation-bitcoin/id1558223079?i=1000513411286" target="_blank" rel="noreferrer noopener">Apple</a> or <a href="https://spoti.fi/3bTa9uw" target="_blank" rel="noreferrer noopener">Spotify</a>, or watch episodes on <a href="https://youtube.com/playlist?list=PLvER9nHSRN3xVs_p-dl7L7K_ZgL6lSudu" target="_blank" rel="noreferrer noopener">YouTube</a>.



Are you a UK or EU reader that can&#8217;t get enough investor-focused content on digital assets? <a target="_blank" href="https://cms.blockworks.co/events/das-london/" rel="noreferrer noopener">Join us</a>&nbsp;in London on November 15th and 16th for the Digital Asset Summit (DAS) London. Use code ARTICLE for £75 off your ticket.&nbsp;<a target="_blank" href="https://cms.blockworks.co/events/das-london/" rel="noreferrer noopener">Buy it now</a>.

Podcast: Bitcoin’s Role in the War on Cash | Mike Green & Alex Gladstein

Morgan Chittum

In the latest episode of Blockworks’ podcast “<a href="https://www.youtube.com/watch?v=md4XiS4XhCk" target="_blank" rel="noreferrer noopener">Empire</a>,” Jason Yanowitz, co-founder of Blockworks, <meta charset="utf-8">is joined by Roy Capital Advisors managing partner Avik Roy to talk about CBDCs versus stable coins, the private sector&#8217;s role within the economy and more.



Avik is the president of the Foundation for Research on Equal Opportunity, the policy editor at Forbes and previously served as an analyst and portfolio manager at JPMorgan, Bain Capital and other firms.&nbsp;



Jason and Avik talk about:



<ul><li>Bitcoin versus CBDCs</li><li>Avik&#8217;s thesis on bitcoin </li><li>&#8220;The fiscal and entitlement crisis&#8221;</li></ul>



Check out what they had to say in the video below. 👇



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<iframe loading="lazy" title="Hedge fund manager talks CBDCs | Avik Roy" width="1024" height="576" src="https://www.youtube.com/embed/md4XiS4XhCk?feature=oembed" frameborder="0" allow="accelerometer; autoplay; clipboard-write; encrypted-media; gyroscope; picture-in-picture" allowfullscreen></iframe>
</div></figure>



On &#8220;Empire,&#8221; once a week, Jason interviews individuals that have built the crypto industry to talk about their struggles, bold moves and tough decisions. For any NPR or Guy Raz fans out there, you can think of &#8220;Empire&#8221; like a “How I Built This” for the bitcoin and crypto industry.



Episodes are released every Thursday morning.&nbsp;



Subscribe to Empire today on&nbsp;<a href="https://apple.co/389JSpL" target="_blank" rel="noreferrer noopener">Apple</a>&nbsp;or&nbsp;<a href="https://spoti.fi/3uVnxpC" target="_blank" rel="noreferrer noopener">Spotify</a>. Watch episodes on&nbsp;<a href="https://www.youtube.com/playlist?list=PLvER9nHSRN3wPkrDGTT5_8VC4Hjcq0f9U" target="_blank" rel="noreferrer noopener">YouTube</a>.

cbdcs