US Not Hurried on Digital Dollar as ECB Targets Tech Infrastructure

Negotiations on a stablecoin regulatory bill last week indicated that the congressional sense of urgency on a U.S. central bank digital currency (CBDC) isn’t very strong.

Reports said that negotiations between House Financial Services Committee Chairwoman Maxine Waters (D-Calif.) and its ranking minority member, Patrick McHenry (R-N.C.), declined to include a provision formally authorizing the Federal Reserve to begin studying a U.S. digital dollar, instead ordering yet another study of the subject.

Learn more: House Bill Would Ban Algorithmic Stablecoins for 2 Years

The Fed has said it won’t begin without some formal approval from Congress. As for what it will focus on, the concerns raised by the banking industry about a CBDC’s potential to disintermediate them and upend their entire business model would be a logical topic of study.

ECB Looking at DLT

The European Central Bank (ECB) is looking at the distributed ledger technology (DLT) that underpins blockchains for a wholesale CBDC, ECB Executive Board Member Fabio Panetta said in a speech Monday (Sept. 26).

Noting that the ECB’s ongoing engagement with “market players that are active in payments and securities settlement, such as banks and financial market infrastructures,” Panetta said that many “are already experimenting with DLT” and expect it “to experience a significant uptake in the financial industry.”

Related: ECB’s Panetta: Digital Euro Could Launch Within Four Years

Adding that the Eurosystem is looking at ways DLT adopters could interact with its existing TARGET Services “to settle the euro cash leg of their transactions in central bank money,” Panetta said the ECB was looking at two options.

The first is “creating a bridge between market DLT platforms and central bank infrastructures,” he said. “This would allow a securities transfer on a DLT platform to trigger settlement in central bank money,” and it would likely be created faster than a new DLT-based system.

The second would be to create “a new DLT-based wholesale settlement service with DLT-based central bank money.”

This would let Eurosystem either launch its own DLT platform for settlement in central bank currency, or “make central bank money available on DLT platforms operated by market stakeholders, allowing both cash and assets to be transferred there.”

Around the World

Meanwhile, the Reserve Bank of Australia released a white paper Monday, issuing a call for financial institutions, public agencies, established businesses, FinTechs, startups and technology providers to propose wholesale or retail use cases for a CBDC pilot program.

It plans to have the program completed by mid-2023, and the white paper identified the digital currency as the eAUD.

Additionally, the Hong Kong Monetary Authority (HKMA) plans to launch a pilot trial of its CBDC project, the e-HKD, with the South China Morning News saying it “marks the city’s latest effort to catch up with other central banks that are launching virtual currencies.”

That came the same day that the HKMA launched a position paper setting out its next steps in its “‘Fintech 2025’ strategy to future-proof Hong Kong in terms of CBDC readiness,” the authority said in a release.

In other news, the central bank of the Philippines (BSP) may be pushing ahead with a wholesale CBDC project it hopes to launch by the end of the year, but it is also looking toward stablecoins to revolutionize retail payments.

Mhel Plabasan, director of technology risk and innovation supervision department at the BSP, said stablecoins have “the potential to revolutionize both domestic and cross-border payment [and make them] more affordable, faster, and even the possibility of using stablecoins to make cross-border remittance efficient,” during a panel on CBDCs and stablecoins last week, Forkast News reported.

“It’s important for us to constantly engage the private sector [and] we learn together,” Plabasan said. “We are part of the journey to get to improving digital payments using stablecoins.”

In addition, Iran announced the launch of a pilot program for its CBDC, the crypto-rial, on Sept. 22, Cointelegraph reported. The Iranian Chamber of Commerce has said it is intended “to help improve financial inclusion and function as a powerful tool for the [Central Bank of Iran] to compete with other stablecoins globally.”

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