According to PANews, the Missouri Senate introduced a bill on December 1, known as SB 194, aiming to prohibit central bank digital currencies (CBDCs) from being recognized as legal tender within the state. The proposed legislation seeks to prevent public entities from accepting or using CBDCs and intends to amend the definition of 'money' in the Uniform Commercial Code to exclude these digital currencies.

Initiated by Senator Brattin, SB 194 outlines several provisions that could significantly impact Missouri's financial policies. Among these is a requirement for the state treasurer to maintain gold and silver reserves equivalent to at least 1% of the state's total funds. Additionally, the bill proposes reducing tax obligations on gold and silver by exempting state income tax on capital gains derived from the sale or exchange of these precious metals, which would otherwise be included in the taxpayer's federal adjusted gross income.

Beyond the focus on precious metals, the bill explicitly prohibits public entities from participating in any CBDC-related tests or pilot projects conducted by the Federal Reserve or other federal agencies. This stance reflects growing concerns among some state legislators about the potential implications of CBDCs on financial privacy, monetary policy, and state sovereignty.

The Missouri Senate has introduced a bill to prohibit central bank digital currencies as legal tender while encouraging the state to hold more of its reserves in gold and silver.

Known as SB 194, the legislation was filed on December 1 and is sponsored by Senator Rick Brattin.

The bill aims to block public entities from accepting or participating in CBDC programs. It also mandates that the State Treasurer hold at least 1% of state funds in physical gold and silver. An exemption on capital gains taxes further incentivizes these metals.

CBDCs are digital currencies issued by central banks, such as the Federal Reserve, and are designed to function as a digital version of a country’s currency. Unlike cryptocurrencies like Bitcoin (BTC), which are decentralized and operate without a central authority, CBDCs are tightly controlled by governments. 

Critics of CBDCs cite concerns over privacy, government surveillance, and the potential erosion of state sovereignty.

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Missouri’s legal definition of “money”

Under SB 194, CBDCs are excluded from the legal definition of “money” in Missouri’s Uniform Commercial Code, a set of laws governing commercial transactions. Public entities would also be prohibited from participating in federal pilot programs testing CBDC systems.

“The act also modifies the definition of ‘money’ for purposes of the Uniform Commercial Code to exclude central bank digital currency from its meaning,” the bill’s summary read. 

The bill also enhances the role of gold and silver in Missouri’s financial framework. It declares these metals as legal tender, meaning they can be used to settle debts at their market value. The legislation also exempts gains from the sale of gold and silver from state income taxes, aligning with existing exemptions on sales tax for these assets.

Supporters of SB 194 argue that it is a step toward preserving financial privacy and limiting centralized control over digital transactions. The requirement to store a portion of state funds in gold and silver is intended to strengthen financial stability by relying on historically stable assets.

If passed, SB 194 could position Missouri as a state prioritizing financial independence and alternatives to federally controlled digital systems.

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With its second progress report in the preparation phase, the European Central Bank (ECB) is moving on with its plans for the digital euro and offering an overview of its ongoing efforts. Discussions on holding limits, user privacy, and operational frameworks are becoming more prominent as crucial choices about the CBDC are anticipated in late 2025.

Since May 2024, we have:

Assessed user needs for the digital euro’s design
Made progress on the selection of digital euro component providers
Continued developing the digital euro rulebook

Read our latest progress report https://t.co/YA1hzZq2q1 pic.twitter.com/6TxhcJjqAb

— European Central Bank (@ecb) December 2, 2024

Developments and Obstacles during the Midway Stage

To set the stage for the possible introduction of the digital euro, the Eurosystem began a two-year preparatory phase in November 2023. This stage, which comes after previous research and design phases, is the middle of a larger endeavor to update Europe’s payment infrastructure while maintaining the financial system’s soundness.

The creation of a Digital Euro Rulebook and a number of other operational papers are important components of this phase. Standardizing regulations among member states and offering a clear implementation path are the goals of these resources. Addressing different design and operational difficulties is the responsibility of seven workstreams that involve national central banks and market players. The ECB is getting closer to making a formal decision on the CBDC’s future, and the next progress report, which is due in July 2025, will provide more details.

Despite advancements, a number of issues still exist. Among them, stakeholders have paid close attention to the arguments surrounding holding restrictions and the complexities of offline functioning.

The Argument About Setting Boundaries

The amount of digital euros that people and companies should be permitted to own is one of the most controversial topics. The conflict between systemic stability and usability is highlighted by this discussion.

Citing convenience and the necessity to serve the unbanked, consumer organizations have pushed for increased holding limits. For instance, the consumer advocacy group AGE recommended a cap of €3,200, which is around the average monthly wage in the EU. The possibility of progressively raising the restriction over time is part of their plan.

However, a far lower maximum of €500 per individual has been suggested by the European Association of Co-operative Banks (EACB). The banking industry’s stance that the digital euro should largely serve as a payment mechanism rather than a store of value is supported by this number. Additionally, banks are worried that high holding restrictions might cause the financial system to become unstable by taking deposits away from more established banks.

As a compromise, the ECB has suggested a “reverse waterfall” system. Any extra digital euros over the holding limit would be immediately transferred back into the associated fiat bank accounts via this mechanism. Although this strategy reduces the danger of excessive accumulation, consumer groups have criticized it for being too complicated and perhaps having an adverse effect on privacy.

A Key Component of the Digital Euro is Privacy

A crucial component of the architecture of the digital euro is still privacy issues. The digital euro would provide a higher degree of anonymity than current commercial payment methods, the ECB has underlined on several occasions.

Options for cash-like privacy features are being investigated. These would make it possible for consumers who have stricter privacy preferences to transact without collecting too much data. In February 2024, Piero Cipollone, a member of the ECB Executive Board, reaffirmed this promise, emphasizing how the digital euro may establish a new benchmark for privacy in the world of digital payments.

According to the research, these privacy measures would address more general worries about data abuse and spying in addition to boosting consumer trust. Yet, reaching this objective requires negotiating a challenging technological and legal landscape, especially when it comes to guaranteeing adherence to anti-money laundering and counter-terrorism funding regulations.

Strengthening Europe’s financial sovereignty is a key goal of the digital euro program. The ECB hopes to promote competition in the area and lessen reliance on non-European service providers by establishing a strong digital payment infrastructure.

According to the ECB, payment service providers (PSPs) would be able to expand and develop their services thanks to the digital euro. PSPs might provide new services that are suited to the requirements of European businesses and customers by incorporating the digital euro into the current payment systems. This strategy makes use of local infrastructure and knowledge to support the overarching objective of building a more robust and effective financial ecosystem.

The ECB has been interacting with technical service providers and industry stakeholders to help realize this ambition. Five work packages, totaling up to €1.1 billion, were available for bid in a January 2024 procurement procedure to aid in the establishment of the digital euro. The deployment of secure components on mobile devices and integration at points of sale are two important issues that these initiatives seek to address.

Offline Deals: Overcoming the Digital Gap

Another objective is to make sure that everyone in society, especially those without reliable internet access, can continue to use the digital euro. Despite its technological difficulties, offline functionality is seen as a crucial facilitator of inclusion.

Offline solution research has concentrated on creating standards for point-of-sale terminals and utilizing security features in mobile devices. In order to make the digital euro a practical substitute for underbanked and unbanked groups, this project aims to digitally duplicate the simplicity and security of cash transactions.

The ECB is committed to resolving these obstacles, as seen by its continued interaction with manufacturers and standard-setting organizations, even though specifics are still lacking. In terms of increasing the digital euro’s utility and attractiveness, achieving offline functionality may be innovative.

Legal Obstacles and Involvement of Stakeholders

The digital euro’s legislative framework is still being developed. Stefan Berger’s continued role as Rapporteur offers some stability even if the European Parliament has resumed its debates after the 2024 elections.

To facilitate the adoption of the digital euro, the ECB has underlined the importance of unified and transparent regulation. This involves discussing issues like holding limits, privacy guidelines, and the allocation of duties between national central banks and the ECB.

The ECB’s strategy continues to place a strong emphasis on stakeholder interaction and public communication. Important elements of the digital euro’s design have been influenced by attempts to get input from companies, consumers, and trade associations. 

The post Digital Euro Initiative Gains Momentum as Key Issues of Privacy and Holding Limits Spark Debate appeared first on Metaverse Post.

The European Central Bank (ECB) has released its second progress report on the development of the digital euro central bank digital currency (CBDC), with plans for prototype testing in 2025. The report emphasizes the ECB's commitment to a secure digital payment solution that complements cash and ensures monetary stability. The digital euro aims to enhance the Eurozone's financial system competitiveness and support the EU's digital economy. Significant progress has been made in addressing technical and legal considerations, as well as engaging in public consultations. The ECB plans to test prototypes in 2025, with potential launch in the following years. Stakeholder feedback will shape the project's future phases. Privacy protection, regulatory compliance, and public input are key priorities for the ECB in designing and implementing the digital euro. The article also covers various crypto industry updates and market insights from CryptoSlate. Read more AI-generated news on: https://app.chaingpt.org/news

The European Central Bank (ECB) has released its second progress report on the development of the digital euro central bank digital currency (CBDC), with plans for prototype testing in 2025. The report emphasizes the ECB's commitment to a secure digital payment solution that complements cash and ensures monetary stability. The digital euro aims to enhance the Eurozone's financial system competitiveness and support the EU's digital economy. Significant progress has been made in addressing technical and legal considerations, as well as engaging in public consultations. The ECB plans to test prototypes in 2025, with potential launch in the following years. Stakeholder feedback will shape the project's future phases. Privacy protection, regulatory compliance, and public input are key priorities for the ECB in designing and implementing the digital euro. The article also covers various crypto industry updates and market insights from CryptoSlate. Read more AI-generated news on: https://app.chaingpt.org/news

China's digital yuan has encountered significant obstacles since 2019, with the launch of the country's CBDC. Despite lacking a substantial price advantage and facing tough competition from established mobile payment giants like Alipay and WeChat Pay, the state-backed currency has struggled to gain traction. Adoption challenges stem from the dominance of platforms like Alipay and WeChat Pay, making it difficult for the digital yuan to compete. The PBOC has been working to expand the digital yuan program despite these hurdles, with pilot projects underway in various regions. However, concerns about user reluctance, privacy issues, and competition from global digital currencies continue to hinder widespread adoption. The government's ability to address these challenges will determine the future success of the digital yuan in the evolving digital payments landscape. Read more AI-generated news on: https://app.chaingpt.org/news

The European Central Bank released a second update report describing the progress made on the planned release of its digital Euro. Despite being progressive, the report highlighted some challenges facing the process. These challenges include holding limits for Central Bank Digital Currency (CBDC), privacy, and law harmonization.

The progress report highlights the first half of the preparatory phase, following the investigative and design phase. The digital Euro scheme’s Rule Development Group (RDG) has been instrumental in driving the review process and taking actions based on the review. Some actions include launching the seven new RDG work streams with market participants and central banks in May 2024.

The RDG is shaping the rulebook for the digital Euro

The rule book focused on critical areas, including minimum user experience standards, risk management, and implementation specifications. The RDG is working on the next phase of the rulebook, which should be finalized during the digital euro preparation phase. Comments from the RDG interim review should be included. The rulebook is critical for authenticating Digital Euros. It lays the basis for Digital Euros to be accepted throughout Europe, just like cash payments. Their report is anticipated in July 2025.

More research is needed on user profiles to establish the likely needs of users. The researchers are eager to establish the preferred holding limits for users. An area they will decide after results from technical research conducted with National Banks.

The report stressed:

“Comprehensive user research and technical experimentation activities are being conducted to gather actionable insights into user preferences and to develop innovative use cases for the digital euro.”

~ ECB’s digital Euro progress report

The project team tackles holding limits and provider selection for the digital Euro

Earlier, there were reports that holding limits created a standoff between the national and European central banks. One practical solution under review for maintaining an upper holding limit is a “reverse waterfall.” The plan is to see any excess digital Euros automatically transferred to fiat in a linked bank account. The report also added that a team is working on a solution for offline transactions without giving details.

The report foresees fierce competition between European and non-European service providers and emphasizes the quest for more technical services, including wallets.

The project team has developed steps for the sourcing procedures for picking potential providers for the Digital Euro Service Platform. A call for tender on external components is running, and assessments are ongoing. The Eurosystem national central banks are invited to make offers on internal components.

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China's digital yuan has encountered significant obstacles since 2019, with the launch of the country's CBDC. Despite lacking a substantial price advantage and facing tough competition from established mobile payment giants like Alipay and WeChat Pay, the state-backed currency has struggled to gain traction. Adoption challenges stem from the dominance of platforms like Alipay and WeChat Pay, making it difficult for the digital yuan to compete. The PBOC has been working to expand the digital yuan program despite these hurdles, with pilot projects underway in various regions. However, concerns about user reluctance, privacy issues, and competition from global digital currencies continue to hinder widespread adoption. The government's ability to address these challenges will determine the future success of the digital yuan in the evolving digital payments landscape. Read more AI-generated news on: https://app.chaingpt.org/news

The European Central Bank (ECB) has released its second progress report on the preparatory stage of digital euro issuance. Holding limits for the central bank digital currency (CBDC) and harmonization of laws were some of the questions addressed in the report.

Sticking points at the halfway mark

The ECB report represents a halfway point in the preparatory phase, which follows the investigative and design phases.

After a review of the developing digital euro rulebook, the Rulebook Development Group launched seven workstreams manned by market participants and central banks that will continue its development.

The rulebook strives to harmonize national laws to guarantee universal standards. A report on its progress was released in September, and another report will be released in July 2025.

Research is continuing on a digital euro user profile to identify the needs of likely users. That input will include user preferences on holding limits, which will be considered in technical research conducted with national central banks.

Politico reported in October that holding limits has become a point of contention between the ECB and national central banks.

One solution under consideration for maintaining an upper holding limit is a “reverse waterfall” that would automatically transfer excess digital euros to fiat in a linked bank account.

A solution for offline transactions is still being investigated, the report said, without adding many details.

Source: European Central Bank

Keeping the euro European

A major topic in the report was competition in the financial market between European and non-European service providers and the need for more technical services, such as wallets. The report emphasized:

“Payment service providers (PSPs) would be able to use the digital euro infrastructure to create new payment services. […] A digital euro would also help regional and domestic European schemes to scale up the provision of their payment […] using the digital euro acceptance network.” 

The report also indicated a “possibility of making a few improvements to the user experience of the digital euro, so that citizens with a stronger privacy preference can benefit from cash-like privacy.”

In February, ECB executive board member Piero Cipollone promised that the digital euro will have a standard of privacy “higher in fact than what commercial solutions currently offer.”

The latest digital euro launch timeline. Source: European Central Bank

Selection of technical service providers will continue, as will communications with the public and other stakeholders. The ECB will release the next digital euro progress report in the second quarter of 2025. The ECB Governing Council may make a decision on the launch of the European CBDC in October 2025.

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The allure of central bank digital currencies (CBDCs) as a solution for improving cross-border payments is fading, according to the Future of Payments 2024 survey by the Official Monetary and Financial Institutions Forum (OMFIF).

Interest in CBDC networks has dwindled, with only 13% of respondents considering them the most promising approach, down from 31% last year. Instead, Instant Payment Systems (IPS) are emerging as the preferred alternative.

CBDCs Face Growing Skepticism

One of the primary challenges central banks aim to tackle with CBDCs is the high cost of cross-border transactions. However, central banks appear increasingly divided on the effectiveness of CBDCs as a solution. The survey highlights governance and operational hurdles as persistent concerns, particularly for multi-currency CBDC platforms like Project mBridge.

Launched as a collaborative effort to streamline cross-border payments, mBridge achieved a minimum viable product stage in mid-2024. Yet, liquidity management and governance remain barriers to adoption. Additionally, the platform’s reliance on Chinese-developed technology has raised concerns about centralization and potential misuse for evading sanctions.

The Bank for International Settlements (BIS) distanced itself from the project, with General Manager Agustín Carstens emphasizing that mBridge is not intended to serve the needs of BRICS nations or facilitate sanctions evasion. Still, skepticism remains. “Even the perception that mBridge could aid such ambitions is enough for Western stakeholders to withdraw support,” remarked Josh Lipsky of the Atlantic Council.

Instant Payment Systems Gain Traction

In contrast, IPS models are gaining momentum, supported by 47% of central banks surveyed. The scalability and proven effectiveness of IPS in domestic markets, especially in regions like Southeast Asia, make it an attractive option for cross-border integration. Notably, five Southeast Asian countries recently piloted Project Nexus, showcasing the potential of IPS to interconnect existing systems seamlessly.

While IPS holds promise, challenges remain. The report identifies governance structures and regulatory frameworks as critical factors requiring attention. Despite these hurdles, IPS is being hailed as the more pragmatic and scalable choice for global payments infrastructure.

As enthusiasm for multi-currency CBDCs wanes, the shift toward IPS underscores a growing consensus among central banks. The focus is increasingly on systems that can deliver immediate, cost-effective solutions without the complexities associated with CBDCs.

The post Central Banks Shifting to Instant Payment Systems Over CBDCs: Survey appeared first on TheCoinrise.com.

A new report suggests the low rate of non-USD-backed stablecoins is affecting wider digital asset adoption. Global trade has been a recurring bison for the crypto market but has performed poorly over the years due to regulatory and industry-related factors. 

The report, “From Digital Currency to Legal Tender: The Role of Regulated Stablecoins in Driving Real-World Payments,” drafted by Quinlan & Associates and IDA, shows limitations in present stablecoin utility, a possible pathway to asset adoption, and regulations. 

Per the release, stablecoins can transform cross-border payments and domestic trade through speed and security. Another major factor for stablecoin adoption is the ability to process transactions within 24 hours and make it more efficient. Several countries have also tried to make their stablecoin replica in the form of Central Bank Digital Currencies (CBDCs) backed with local assets. 

“In the case of domestic payments, users can leverage programmable features to set self-executed scheduled top-ups, conditioned payments, and instant settlements. For cross-border payments, stablecoins can support faster, cheaper, and more transparent user experiences. In these two realms, stablecoins will play a critical role in supporting Hong Kong’s ambition to become a leading global Web3 hub.”

Non-USD Stablecoin Can Raise Adoption 

At the moment, stablecoins account for 0.02% of global trades, a low figure compared to the level projected by maker participants. Two major reasons for this are regulation and the absence of non-USD stablecoins. According to the report, 83% of countries globally are not using USD as their main or substitute currency. 

Although USD remains the most popular asset, about 40% of global trade is in non-USD currencies creating a need for similar stablecoins. The absence of this creates scarcity in the market that could easily be filled boosting the total industry’s numbers.

Lack of Regulation Stalls Adoption 

The stablecoin market cap stands at $200 billion, with USD-based assets making up the majority. Another factor responsible for the slow adoption is regulation. At the moment, some countries have yet to pass comprehensive crypto laws, creating a vacuum. 

This leads to regulatory uncertainty, plunging investor sentiments as they avoid such markets. The report states that 81% of global merchants cite the lack of proper regulations as a major barrier to the adoption of stablecoins. 

Adding to the complexities are frequent lawsuits filed by regulators due to an absence of rules. A notable example is the United States Securities and Exchange Commission’s (SEC) approach in the last two years.

According to Cointelegraph, the European Central Bank (ECB) has published its second progress report on the preparatory phase for the issuance of a digital euro. The report addresses key issues such as holding limits for the central bank digital currency (CBDC) and the harmonization of laws across member states.The report marks the midpoint of the preparatory phase, which follows the investigative and design stages. The ECB has reviewed the developing digital euro rulebook, leading to the establishment of seven workstreams involving market participants and central banks to further its development. The rulebook aims to harmonize national laws to ensure universal standards, with a progress report released in September and another expected in July 2025.Research is ongoing to develop a digital euro user profile, focusing on identifying the needs of potential users. This includes user preferences on holding limits, which will be considered in technical research conducted with national central banks. Politico reported in October that holding limits have become a contentious issue between the ECB and national central banks. One proposed solution is a "reverse waterfall" mechanism that would automatically transfer excess digital euros to fiat currency in a linked bank account. The report also mentions ongoing investigations into solutions for offline transactions, though details remain sparse.A significant topic in the report is the competition in the financial market between European and non-European service providers and the need for enhanced technical services, such as digital wallets. The report highlights that payment service providers (PSPs) could leverage the digital euro infrastructure to develop new payment services. Additionally, a digital euro could assist regional and domestic European schemes in scaling up their payment offerings using the digital euro acceptance network.The report also suggests potential improvements to the user experience of the digital euro, allowing citizens with a strong preference for privacy to enjoy cash-like privacy features. In February, ECB executive board member Piero Cipollone assured that the digital euro would offer a higher standard of privacy than current commercial solutions.The selection of technical service providers will continue, alongside ongoing communications with the public and other stakeholders. The ECB plans to release the next digital euro progress report in the second quarter of 2025, with the ECB Governing Council potentially deciding on the launch of the European CBDC in October 2025.

Interest in central bank digital currencies for enhancing cross-border payments is fading among central banks.

Instant payment systems are emerging as the preferred solution, according to the OMFIF Future of Payments 2024 survey.

Only 13% of respondents now see CBDC networks as the most promising approach, a sharp drop from 31% last year.

The report notes, “High costs are the primary challenge that central banks want to overcome, but there is a remarkable diversity of views when it comes to selecting the best method for doing so.”

mBridge enthusiasm wanes

Project mBridge, currently the most advanced multi-currency CBDC platform, has encountered challenges despite reaching the minimum viable product stage in June 2024.

Liquidity and governance issues are the biggest obstacles limiting its widespread adoption.

One interviewee noted, “mBridge offers a completely new architecture on how to transmit across borders, one that is faster and cheaper,” but the platform’s dependency on Chinese-developed technology raises concerns about decentralisation.

Sanctions evasion has also come under scrutiny as the Bank for International Settlements announced its withdrawal from the project.

BIS General Manager Agustín Carstens stressed, “mBridge is not the BRICS bridge... mBridge was not created to cater to the needs of BRICS,” rejecting the idea that it could aid countries like Russia in bypassing international sanctions.

However, Josh Lipsky of the Atlantic Council remarked, “If there’s even a possibility that mBridge could be helpful to those ambitions, the West wants no part of it.”

Despite assurances, mBridge’s association with China and BRICS nations has amplified Western concerns about its potential to challenge sanctions regimes and financial systems.

IPS gains ground

In contrast, interlinking Instant Payment Systems garnered support from 47% of central banks surveyed, maintaining its position as the top choice for cross-border payments.

This model’s appeal lies in its scalability and growing relevance in domestic markets, particularly in Southeast Asia, where five countries recently trialled Project Nexus.

However, survey respondents cited “governance and developing a regulatory framework” as significant obstacles.

The report notes, “The interoperability models of CBDC design will be a key consideration for global payments going forward,” but enthusiasm has waned.

With only 10% of respondents actively working on multi-currency CBDCs, IPS appears to be the more pragmatic path forward for central banks.

Crypto market movers

Bitcoin is down 0.5% over the past 24 hours to trade at $96,458.

Ethereum is even on the day at $3,704.

What we’re reading

Why Texas’ anti-crypto queen just quit her ‘Sisyphean’ quest to ban Bitcoin mining — DL News

Could there be a Dogecoin ETF in 2025? ‘Today’s satire is tomorrow’s ETF’ says expert — The Block

Bitcoin Price Makes Another Run at $100K as U.S. Traders Return After Thanksgiving — CoinDesk

Ether Gains 19% Against Bitcoin in a Week After Months of Underperformance — Unchained

The wacky world of memecoins is getting pretty grim — DL News

Kyle Baird is DL News’ Weekend Editor. Got a tip? Email at kbaird@dlnews.com.

According to Odaily, the Bank for International Settlements (BIS) and several central banks have recently published a paper addressing legal issues and the design of Central Bank Digital Currency (CBDC) systems. The participating central banks include the Bank of Canada, the Bank of England, the Bank of Japan, the European Central Bank, the Federal Reserve Board, the Swedish Riksbank, and the Swiss National Bank.

One of the key debates highlighted in the paper is whether CBDC systems should adopt a centralized or decentralized model. In a two-tier system, one option is the hub-and-spoke model, where updates are controlled by the central bank, but data ownership is decentralized. Alternatively, a peer-to-peer design could be implemented, allowing shared update permissions. The paper notes that centralized systems tend to have weaker resilience due to single points of failure, which could become bottlenecks. However, the authors do not consider it appropriate to decentralize the core settlement authority of CBDC systems. In a modular design, core settlement can remain centralized, while other aspects, such as identity, can be decentralized.

Privacy is another significant issue facing CBDCs. While existing technologies can achieve privacy, newer privacy-enhancing technologies (PETs), such as Secure Multi-Party Computation (SMPC) or Zero-Knowledge Proofs (ZKP), offer greater flexibility. However, based on the experiences of two central banks and the BIS Innovation Hub, there is skepticism about whether PETs are ready for real-time execution, given concerns about their complexity and reliability.

The paper also explores other topics, including cybersecurity, offline CBDC functionality, and compatibility with existing point-of-sale systems. These discussions are crucial as central banks worldwide continue to explore the potential implementation of CBDCs, balancing innovation with security and privacy considerations.

According to Odaily, a recent annual survey by the Official Monetary and Financial Institutions Forum (OMFIF) reveals a significant decline in the popularity of Central Bank Digital Currencies (CBDCs) as a tool for enhancing cross-border payments. The 2024 survey indicates that only 13% of respondents support CBDCs as a solution, a sharp decrease from 31% in 2023. In contrast, nearly half (47%) of the surveyed central bank governors favor interconnected instant payment systems, such as the United States' FedNow service, as the preferred future pathway.

The survey also highlights that stablecoins have received zero support for the second consecutive year, reflecting central bank governors' lack of confidence in their ability to enhance global financial infrastructure. The waning interest in CBDCs coincides with the Bank for International Settlements (BIS) withdrawing from the mBridge project. Although BIS denies any political motivations, this move underscores the global tensions surrounding CBDC adoption.

Additionally, the survey emphasizes the enduring dominance of the US dollar, with only 11% of central banks reporting a reduction in its usage. This trend is primarily driven by geopolitical uncertainties that have increased demand for the dollar as a safe haven. The survey also points out the challenges faced by the correspondent banking system, which has long facilitated international settlements but is increasingly viewed as outdated and costly due to complex Know Your Customer (KYC) and Anti-Money Laundering (AML) requirements.

The delayed adoption of the ISO 20022 messaging standard may exacerbate this decline, prompting central banks to explore alternative solutions such as tokenization. Over 40% of central banks in developed markets consider tokenization a promising innovation and plan to begin research in this area within the next three to five years.

According to Odaily, the Russian Ministry of Industry and Trade has proposed extending the timeline for the launch of the digital ruble by two years, aligning it with the schedule provided to smaller retailers. In October, the Central Bank of Russia revealed its timeline for the digital ruble's introduction as part of a bill submitted to the State Duma. The large-scale rollout is set for July 1, 2025, by which time the largest banks and retailers are required to support the central bank digital currency (CBDC). This deadline applies to retailers with a turnover exceeding 30 million rubles (approximately $274,000). Retailers with revenues between 20 million and 30 million rubles are granted an additional year, while smaller companies receive an extra two years.

The ministry highlighted that there are currently no established rules for the operation and functioning of the digital ruble, leaving retailers insufficient time to prepare and adjust their point-of-sale software. This sentiment is echoed by trade organizations. The Retail Companies Association (ACORT) expressed in a letter, "We believe it is necessary to avoid setting specific deadlines through legislation for the system's introduction at the trade level and to provide at least a two-year transition period during which companies can undertake the necessary work."

Despite the steady increase in research activity, central bankers are showing rapidly decreasing enthusiasm for central bank digital currency (CBDC), the Official Monetary and Financial Institutions Forum (OMFIF) think tank has found in its annual Future of Payments survey.

CBDCs only look good to some central banks

Interlinking instant payment systems, such as the comparatively new US FedNow, is by far the most popular solution among central banks for improving cross-border payments. Almost half (47%) of respondents chose this option, which is only a tiny increment above last year’s results. Stablecoins received a 0% vote, just as last year.

CBDCs fell in this ranking from 31% in 2023 to 13% in 2024. This may reflect a reaction to greater interest in CBDC in certain central banks.

When the Bank for International Settlements (BIS) pulled out of Project mBridge in October, the move was widely interpreted as a reaction to the threat it poses to international sanctions because of the dominance in the project of China and other countries not closely aligned with the West.

The BIS denied that its decision on Project mBridge was political. The US dollar will continue to be the preferred settlement currency, the report concluded. Only 11% of central banks said they were reducing their use of the dollar:

“For now, many players searching for a safe haven in the face of geopolitical tensions will increase holdings of the dollar, reinforcing the dominance of incumbent payments systems.”

Source: Digital Money Institute

Tokenization and TradFi are looking better

The correspondent banking system, in which large international banks provide international settlement services for small local banks, has been in decline for years. The process is becoming more expensive as Know Your Customer/Anti-Money Laundering measures become more complex.

Its decline will only speed up if the new ISO 20022 messaging standard is not implemented on schedule. The survey finds that a significant lag in the new standard’s adoption is likely.

Correspondent banking activity over since 2011. Source: OMFIF

That may explain the lively interest among central banks in tokenization, which could streamline compliance checks. Over 40% of central banks in developed markets “think it is promising and expect to begin work on it in the next three to five years.”

The BIS’s Project Agora, in which the central banks of France, Japan, South Korea, Mexico, Switzerland and the United Kingdom, along with the United States Federal Reserve Banks are participating, is one of many projects blazing the trail toward tokenized transfers. It crucially depends on the use of wholesale CBDCs.

Nonetheless, given the preference for legacy instant payment systems, it seems clear that cross-border payments will remain off the blockchain. The BIS is prepared for that option too. Its Project Nexus, which also depends on the ISO 20022 standard, is developing a common platform for instant payment systems.

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According to Foresight News, the Financial Action Task Force (FATF) participated in a seminar on innovative finance organized by the Eurasian Group (EAG) and the Asia/Pacific Group on Money Laundering (APG) this week. The seminar focused on implementing FATF standards related to virtual assets and virtual asset service providers.The seminar's discussions highlighted strategies to accelerate the adoption of FATF Recommendation 15. Key topics included transforming financial services through innovative payment solutions and the design of Central Bank Digital Currencies (CBDCs). The seminar also emphasized the importance of promoting financial inclusion by bridging gaps in access to financial services through innovative digital solutions. Additionally, it addressed the anti-money laundering risks in the rapidly evolving fintech industry.The seminar underscored the need for a strategic approach to adopting FATF standards, particularly in the context of virtual assets. Participants discussed how innovative financial technologies could be leveraged to enhance financial services while ensuring compliance with anti-money laundering regulations. The event served as a platform for exchanging ideas and best practices among experts and stakeholders in the financial sector.

The Central Bank of Iran (CBI) has taken steps to introduce the Digital Rial, its central bank digital currency (CBDC). At the 11th Annual Conference on Modern Banking and Payment Systems, Governor Mohammad Reza Farzin made these announcements.

Modernizing the Financial Environment in Iran

Governor Farzin stressed how important it is to keep up a contemporary financial system that complies with international norms. Since 2018, the Digital Rial has been in development. Research has advanced through several phases, including a pre-pilot phase in which major Iranian banks participated.

Iran’s current digital banking infrastructure, according to Farzin, provides a solid starting point for this shift. One of the best examples of the nation’s effective financial systems is the Shetab payment network, which can execute transactions in less than two seconds. Iran’s larger goal to incorporate modern technologies into its banking operations is reflected in its digital-first strategy.

The Digital Rial’s Function in Domestic Finance

The primary purpose of the Digital Rial is to operate inside Iran’s own economy. Its pilot program, which was carried out on Kish Island, a well-known free trade area with a sizable tourism industry, gave important information about its possible applications. The Digital Rial functions in a non-intermediated manner, which streamlines transactions and improves user accessibility in contrast to traditional banking systems.

The Central Bank of Iran (CBI) plans to introduce its digital currency, the Digital Rial, as part of a broader initiative to modernize the country’s banking infrastructure and enhance international financial collaboration.
Mohammadreza Farzin, the governor of the CBI, broke in… https://t.co/B2Fr3Q2Ft1 pic.twitter.com/KJCKSAPX84

— Iran Daily (@IranDailyWeb) November 26, 2024

Iran hopes to solve financial system inefficiencies and lessen reliance on cash with its CBDC project. Additionally, by increasing trust in digital transactions, these initiatives may help modernize the nation’s consumer behavior.

Handling the Difficulties of Global Sanctions

The ongoing problem of international sanctions is one of the biggest obstacles facing Iran’s banking industry. Iran has been forced to look for alternate options as a result of these limitations, which have restricted the nation’s access to international financial networks like SWIFT.

Governor Farzin emphasized how the ACU-MIR system and other alternative financial networks are being established. This platform was created in partnership with Asian financial institutions and has grown to be an essential instrument for doing business internationally with countries like Pakistan and India. Iran has shown that it can work around sanctions and promote regional financial cooperation by putting this system into action in October 2023.

Developing International and Regional Partnerships

Another key component of Iran’s foreign policy has been its alliance with BRICS, a grouping of significant rising countries that includes Brazil, Russia, India, China, and South Africa. By encouraging the use of local currencies in international commerce, the BRICS nations are actively working to lessen their need for the US dollar. This offers Iran a chance to join a developing financial system that supports its geopolitical objectives.

Farzin emphasized that continuing initiatives have already achieved major advances in the direction of settling transactions in BRICS currencies, especially those of China and Russia. This program supports Iran’s overarching goal of broadening its financial alliances and lessening its susceptibility to Western sanctions.

Beyond currency-based commerce, Iran and Russia have expanded their cooperation to encompass payment system integration. An important turning point in this cooperation is the link between Russia’s MIR system and Iran’s Shetab network. It is anticipated that this integration would improve financial exchanges connected to tourism and facilitate easier cross-border transactions.

By 2025, Farzin said, this network would be expanded to enable Russian visitors to access Iran’s point-of-sale systems and vice versa. Such actions foster new prospects for regional financial connectivity in addition to fortifying bilateral economic connections.

Using Fintech to Boost Financial Stability

Iran’s plan to mitigate the impact of sanctions also heavily relies on the larger fintech industry. The Central Bank hopes to build a robust financial system that can function without the assistance of conventional international banking networks by investing in new technologies.

Iran has investigated a range of digital financial instruments, such as cryptocurrency-based solutions, for international commerce, according to Farzin. Although regulatory restrictions have made these initiatives difficult, they demonstrate the nation’s will to use fintech to boost economic resilience.

A Vision for the Future

The introduction of the Digital Rial is a declaration of purpose rather than merely the acceptance of a new financial tool. Iran is establishing itself as a forward-thinking player in the global financial scene by adopting contemporary banking methods and encouraging international collaboration through alternative systems.

This strategy is in line with a larger trend among nations looking to innovate their way past difficult geopolitical obstacles. The creation of a CBDC is a symbolic and pragmatic move for Iran toward a more independent and interconnected financial future.

The success of the Digital Rial will depend on a number of important aspects as Iran approaches the formal debut. These include promoting public trust, increasing the CBDC’s usage in cross-border transactions, and smoothly integrating it with current financial systems.

Strategic alliances in the area and the CBI’s dedication to modernizing the banking industry point to a concerted effort to meet these objectives. Although there are still obstacles to overcome, especially in light of sanctions, Iran’s innovative strategy provides a model for other countries dealing with comparable limitations.

The success of the Digital Rial and other projects in the upcoming years may demonstrate how technology could transform the way that geopolitical and economic barriers are overcome. Iran’s experience might teach the international banking world important lessons as it continues to negotiate this challenging environment.

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