It may be too late for resolutions and too early for Lent, but in the absence of any discrete opportunity, I would like to give up political news from the United States for a while, or at least for the duration of one decoded law.
Fortunately, in the spirit of going international and exiting the frenzied US election cycle, blockchain technology and stablecoins play an important role in the latest developments in cross-border payments and settlements. It has long been one of the most talked about uses of blockchain technology.
Diplomatic scheming shows up in payments made by ordinary people in the form of higher fees between countries in conflict. However, the question of how money crosses borders through traditional alleyways is so deeply rooted that they are invisible to the average end user. This happens because, although national payment systems have been streamlined with new technologies, they largely involve large commercial banks that rely on networks and systems set up by their respective central banks. Many of these systems are clumsily attached to each other between central banks.
The rise of stablecoins has inspired many major banks, otherwise turned off by crypto asset volatility, to rethink these systems. JPM Coin is perhaps the most famous – until central banks joined, of course.
This week there has been big news in commercial and central bank stablecoins, as well as the financial sinews linking them together. Unfortunately for the average user, these will remain the most permitted blockchains for the foreseeable future. However, the retail central bank’s digital currency is also moving forward.
Russia is getting ready for Sberbucks
Sberbank is the largest retail bank in Russia intends to launch its own Sbercoin by this spring.
Details about Sbercoin remain limited. In many ways, it is similar to JPM Coin, with the aim of streamlining the payment rails for Sberbank’s major corporate clients. Ultimately, it could be part of his interactions with the Central Bank of Russia.
Sberbank, coming from an order from Nikolai I, ultimately remains the property of the Russian government, with the Ministry of Finance buying a controlling share of the Central Bank of Russia. Sberbank’s leader, Herman Gref, joined the bank from the Ministry of Economic Affairs. The bank therefore has a privileged relationship with the Central Bank of Russia.
With the new Russian law “On Digital Financial Assets” coming into effect in the new year, the country has set the stage for a major boost in the development of its blockchain industry. According to a long tradition, expect that development to take place largely from above, like here.
BIS means business when it comes to wholesale CBDCs
The Bank for International Settlements’ network of labs has CBDCs at the top of the agenda before 2021.
Under the BIS charter to facilitate the functioning of central banks, the focus is mainly on wholesale CBDCs. Exciting, however, are the plans for pilots that would allow CBDCs on new platforms to immediately settle payments between central banks and their respective currencies. In addition, they are working on mechanisms to distribute retail CBDCs, although those seem to depend on commercial banks and perhaps even completely private stablecoins just backed by various CBDCs.
The BIS innovation hubs are themselves a relatively new initiative, starting at the end of 2019 in Switzerland, Singapore and Hong Kong. This year, too, we are working on the expansion of new hubs worldwide. These hubs are connected to economies and banking authorities that are themselves famously international, and may reflect some of the locations for the first interoperable CBDCs.
The curious case of China
China’s efforts to internationalize its currency predate any conversation about CBDCs for years. While China survived 2020 much better than most major economies, yuan use abroad has hit many roadblocks. However, the CBDC is leading the way domestically and is already owned (or cell phones) by many citizens.
The future of the digital yuan remains uncertain. Domestically, how much traction does it get? How quickly will it spread throughout the Chinese economy? And crucial to China’s international ambitions, when will it leave the mainland?
Streamlining domestic payments is all well and good, and will certainly leave the Chinese government more free to align the homegrown tech industry. But there is little doubt that long-term goals include bypassing existing (largely Western) international payment systems. But with a Joe Biden administration looking to maintain much of Donald Trump’s hostility to China while being better able to get allies like the European Union on board, digitization will then be enough to break out abroad ? And if so, when?
Writing for Vox, Aja Romano states that deplatforming is not a violation of freedom of expression.
Lawyers for Sheppard Mullin Richter & Hampton to write on competition concerns in the use of blockchain, especially under new EU legislation.
Karen Yeung of the South China Morning Post talk the first use of the digital yuan in exchange between mainland China and Hong Kong.