Digital Currency News

Visa Programmable CBDC Prototype Helps Brazilian Farmers

The Banco Central do Brasil has asked businesses to identify user cases for a CBDC, its 'Lift Challenge Real Digital'. Visa was one of nine companies selected having submitted a proposal for a programmable finance platform for farmers using a CBDC. Visa worked with Microsoft, Agrotoken and Sinqia.

The programmable finance platform is designed to provide local farmers with more timely and greater access to a global pool of investors for financing, allowing them to get the best price discovery for their goods.

It should be possible, for example, for a soybean farmer to create and globally auction a tokenized contract on a permissioned version of the Ethereum blockchain, while utilizing different forms of money and interoperating between themselves and the buyer.

Lessons Learnt From Ghana’s eCedi Pilot

The Bank of Ghana recently briefed the Payments Canada Summit on its CBDC work, the eCedi.

Ghana has a programme of digitisation to boost financial inclusion and economic growth. Even though the unbanked population has fallen dramatically, a third of the population remains without a formal bank account. Internet coverage is also not universal across the country. As a result, the eCedi project is pursuing a token-based system distributed via commercial players – one mobile money provider, two banks and two Payment Service Providers (PSPs).

Two of the three pilot sites are online, and one offline. The online pilots use existing banking apps and involved person-to-person (P2P), wallet-to-bank, and merchant and bill payments. In the offline experiment the eCedi is distributed via smart card. It concentrated on merchant payments and was run purely by the Bank without commercial players. The reason for the focus on merchant payments, according to the Bank of Ghana, is that, as of 2017, 99% of these transactions were still carried out in cash.

The Bank of Ghana is testing three things:

• Can the currency work for consecutive offline payments?
• Will the target users be able to use it?
• Will they want to use it?

Survey results of those who have used it so far have been positive. The likelihood of merchants wanting to use it rose from 45% before the pilot to 65%, and for consumers from 48% to 67%.

In terms of lessons learnt, the Bank of Ghana noted that central banks must remember that the CBDC is a currency first and foremost, not a wallet or channel; that you must have a human-centred design; that you must design for your country's context; and must be aware that the process is resource intensive.

Public Consultation on a Canadian CBDC

The Bank of Canada (BOC) has launched its first public consultation on a possible CBDC. It is asking the public how they might use a CBDC and what security and privacy features it should have. Ultimately the decision to launch a possible CBDC lies with the federal government, but the BOC is doing the research to inform that decision. There is no current plan to issue a Canadian CBDC.

In its press release, the BOC refers both to a future decline in the use of cash for day-to-day transactions and the possibility that private cryptocurrencies or central bank digital currencies issued by other countries could become widely used in the future. The BOC sees such a development as compromising the role of an official, centrally issued currency and posing a risk to the stability of the financial system.

The consultation closes on 19 June and the BOC will publish a report on its consultations later this year.

European Parliament Sceptical About a Digital Euro

The Economic Governance and EMU Scrutiny Unit has issued a report on the digital euro at the request of the European Parliament’s Committee on Economic and Monetary Affairs. The report finds that, 'at the present time, the risks and imponderables of this enterprise are stronger than the arguments in favour of it'. Unless new elements emerge, the European Central Bank (ECB) should not issue a digital euro.

One issue is that a digital euro would compete directly with banks and other payment service providers. The report’s issue seems to be the chance of success rather than competition itself, ‘it is not clear that there is a market niche for a potential digital euro (PDE), nor that a PDE would have a good chance of establishing itself in today’s highly diversified, competitive, innovative, and fast moving retail payment industry'.

The risk of a digital euro accelerating a bank run during a crisis was highlighted. Finally, the report was sceptical that a digital euro would increase financial inclusion in the eurozone, although it may help reduce the high costs and delays of cross-border workers' remittances.