central bank digital currencies

Crypto Market to Skyrocket to $1.75 Billion by 2027, Report Reveals CBDCs Could be a Game-Changer

Fortune Business Insights reported that the cryptocurrency market will hit $1.75 billion by 2027 from $754 million previously recorded in 2019, representing a compound annual growth rate (CAGR) of 11.2%. According to the announcement shared with Blockchain.News, this growth will be spurred by blockchain technology as it makes cryptocurrency transactions effective, secure, and fast.

CBDCs as game-changers

The upward cryptocurrency trend has made digital currencies such as Litecoin and Bitcoin to be easily accepted. Moreover, it has laid the ground for the much-anticipated central bank digital currencies (CBDCs) across the globe, with nations like China, setting the ball rolling.

CBDCs are viewed as game-changers as they are digital assets that are backed by central banks and pegged to a real-world entity. The report noted that CBDC as a medium of exchange will trigger growth in the cryptocurrency market.

Major companies are also setting foot in the crypto space with notable investments. For example, in October 2018, Qtum Chain Foundation, a Singapore-based open-source blockchain application platform, joined hands with Amazon Web Services (AWS) China to offer blockchain networks on the AWS cloud. Earlier last month, the BMW Group decided to boost its blockchain pilot project with the help of Microsoft Azure and AWS.

Solid North American market

The report reveaed that the North American crypto market is speculated to proliferate in the coming years because of the increased popularity of Bitcoin in the United States. This market was valued at $250.9 million in 2019, and an uptrend is expected to be enhanced by the presence of eminent players.

Conversely, the Asia Pacific region will not be left behind because it will continue to stamp its authority in the crypto space. Key players are speculated to strike notable collaborations as witnessed by the teaming up of TaoTao and Z Corporation to form regulatory compliance in the Japanese market.

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Former US Head of Treasury Lawrence Summers Backs Cryptocurrency

In an interview between CEO of the digital currency company Circle —Jeremy Allaire and Former US head of Treasury Lawrence Summers, the latter advocated for cryptocurrency’s benefits.

He stated that what appeals to him about cryptocurrency is that it reduces payment friction. In other words, cryptocurrency increases the speed of transactions and eliminates a third-person mediator.

A little about Laurence Summers

Laurence Summers was originally the head of the US Treasury, under President Clinton. He was also the former director of the National Economic Council under Obama’s presidency.

Similarly to President Donald Trump, Summers is not entirely sold on the concept of cryptocurrency. However, he does recognize that it has its benefits.

While he recognizes cryptocurrency’s financial benefits— elimination of transaction fees and facility of use, he clarified that he does not necessarily condone the extreme implications revolving around crypto as the world’s predominant digital asset.

Benefits of switching to crypto

In his interview, Summers talked about how he is charged a transactional fee when he wants to send money to his son, who studies abroad. In his opinion, this is ineffective and could be prevented if one were to resort to using cryptocurrency. The friction that amounts from using traditional methods of payment could be improved with crypto:

“I think the case for all of this innovation will lie in the fact that there is a ridiculous degree of friction in today’s world around doing quite complex things. […] The friction isn’t just coming from the greed of the middlemen — although there is greed among the middlepeople. It’s coming from the various difficulties and challenges associated with mutual trust.”

Central bank digital currencies in the modern world

It appears as if the world will progress to adopting cryptocurrency worldwide faster than we realize.

Christopher Giancarlo, the former member of the Commodity Futures Trading Commission for President Donald Trump, finds the adoption and development of central bank digital currencies (CBDC) inevitable.

Giancarlo argues that young people everywhere and even citizens in rural communities are very comfortable with digital devices. If broadband and mobile access were more available, CBDC would be the most effective way to onramp millions of the unbanked into mainstream banking services.

How Trump feels about CBDC

Trump has, on several occasions, voiced his opinions concerning cryptocurrencies. In one of his infamous Twitter threads, he tweeted that he was not a fan of Bitcoin and other cryptocurrencies, which for him “are not money.” He has stoically said that the US dollar is essential to global trade and he will do everything in his power to maintain the status quo.

Canada’s Central Bank Digital Currency Won't Include Zero-Knowledge-Proofs

Bank of Canada researchers do not feel that the current state of zero-knowledge-proofs is mature enough to be integrated into their development plans for a Central Bank Digital Currency (CBDC).

What is zero-knowledge-proof?

In cryptography (the art of writing or solving codes), a zero-knowledge proof is a way in which a party (usually referred to as the prover) can prove to another party (the verifier) that they recognize a value, dubbed X. The only knowledge that the verifier will have access to is that the prover recognizes X.

Zero-knowledge-proofs and similar cryptographic approaches to blockchain network privacy are still very new in the modern world. Institutional banks are still currently working on revolutionizing the way things are done in order to better adapt to the modern digital age.

Canada: Zero-knowledge-proofs and its impacts

In Canada, zero-knowledge-proofs and similar cryptographic approaches to the blockchain network have yet to be improved. As mentioned in a recent report by the Bank of Canada, privacy is not the sole concern of blockchain development.

Therefore, there need to be consultation methods put into place by a third-party entity. In cases like these, external banks are usually third-party entities. The next step after approval from the different institutional banks is then consensus. From there on, we can move forward.

Project Jasper: Future of Distributed Ledger Technology in Canada

According to the Bank of Canada’s recent announcement, Canada is ahead of other countries in terms of Research and Development for CBDC prototypes. Between 2016 and 2018, Canada came up with “Project Jasper,” which is an initiative aimed at understanding distributed ledger technology (DLT), and how it could transform the future of digital transactions across Canada. Entities that are part of the Project Jasper include Payments Canada, Bank of Canada, and other market participants.

COVID-19: How CBDC Will Help

During an open hearing by the House Committee on Financial Services yesterday, the honorable Christopher Giancarlo advocated for the use of CBDC as a viable solution to distribute COVID19 stimulus packages to citizens. Seeing as COVID19 is negatively impacting global economies worldwide, Giancarlo thinks that CBDC may be an effective measure in order to stimulate the economy.

Takeaway

That’s one conclusion in a new staff analytical note published by Canada’s central bank. The Bank of Canada has been a leader in the research and development of CBDC prototypes. Between 2016 and 2018, as part of an initiative called Project Jasper, the bank explored the use of distributed ledger technology (DLT) for clearing and settling of bank-to-bank payments as well as securities transactions.

At least 70% of Global Finance Leaders Believe CBDCs Will Spur Financial Inclusion – Ripple Study

Central bank digital currencies (CBDCs) have triggered overwhelming consensus among global finance leaders, according to a survey by Ripple, a leader in enterprise crypto and blockchain solutions.

The study called “New Value Report” interviewed 1,600 worldwide finance leaders and found a heavy inclination towards CBDCs. Ripple stated:

“More than 70% of respondents surveyed across five global regions believe CBDCs stand to deliver major social change within the next five years, with the Asia Pacific ranking the highest at 89%.”

Most finance leaders acknowledged that CBDCs would be a stepping stone toward more financial inclusion. The report highlighted:

“Four out of five regions see financial inclusion or greater access to credit as the largest potential breakthrough to be driven by CBDCs.”

Once rolled out, CBDCs are expected to drive the financial inclusion of nearly 1.7 billion people left out of the banking system, given that they are pegged to a real-world asset and backed by central banks.

Ripple acknowledged that CBDCs were gaining traction based on the benefits accrued. For instance, their digital nature can enhance underserved communities’ accessibility to loans and other financial services.

The study stated:

“Consensus on the potential for CBDCs to bring about more inclusive financial systems is clear. While much work remains to be done, many expect the transformation to be timely and that we will begin to see the fruits of this transition before the turn of the decade.”

On the other hand, the survey highlighted that some hurdles to implementation included security protections, privacy, offline access, identity verification, and consumer education.

Meanwhile, Bank Indonesia recently conducted a CBDC feasibility study by offering a white paper concerning establishing the digital Rupiah.

BIS Survey: 93% of Central Banks Engaged in CBDCs, 15 Retail and 9 Wholesale CBDCs Expected by 2030

The Bank for International Settlements (BIS) has released a survey revealing that 93% of central banks are now engaged in some form of Central Bank Digital Currency (CBDC) work, with retail CBDCs taking the lead over wholesale CBDCs.

The survey, which gathered responses from 86 central banks, shows that over half of these institutions are not just exploring CBDCs but are conducting concrete experiments or working on pilots. The progress in retail CBDCs is more advanced, with almost a quarter of central banks piloting a retail CBDC.

The BIS survey also highlights the perceived value of CBDCs. More than 80% of central banks see potential benefits in having both a retail CBDC and a fast payment system (FPS). The unique properties and additional features that a retail CBDC can offer are seen as key advantages.

The emergence of cryptoassets and stablecoins has been a significant influence, accelerating CBDC work for nearly 60% of the respondent central banks. However, the survey also notes that stablecoins and other cryptoassets are rarely used for payments outside the crypto ecosystem.

The survey suggests that by 2030, we could see 15 retail and nine wholesale CBDCs in public circulation. This projection reflects the growing interest in digital currencies by central banks worldwide.

In terms of motivation, central banks in emerging market and developing economies (EMDEs) are more likely to be driven by financial inclusion-related motivations in their CBDC work. On the other hand, the desire to enhance cross-border payments primarily drives the work on wholesale CBDCs.

Currently, four central banks have issued a live retail CBDC: The Bahamas, the Eastern Caribbean, Jamaica, and Nigeria. This development marks a significant milestone in the global adoption of CBDCs.

The BIS survey provides a comprehensive overview of the current state of CBDC development and offers valuable insights into the future trajectory of digital currencies. As the exploration and experimentation with CBDCs continue, their role in the global financial system is set to become increasingly significant.

Financial Stability Board Finalizes Global Crypto Asset Regulatory Framework

The Financial Stability Board (FSB) has finalized a global regulatory framework for crypto-asset activities, aiming to promote comprehensive and internationally consistent regulatory and supervisory approaches. The announcement was made on July 17, 2023, and the framework is based on the principle of ‘same activity, same risk, same regulation.’

The FSB’s framework incorporates insights from the past year’s events in crypto-asset markets and feedback received during the FSB’s public consultation. It provides a robust basis for ensuring that crypto-asset activities and so-called stablecoins are subject to consistent and comprehensive regulation, commensurate to the risks they pose.

The framework consists of two distinct sets of recommendations. The first set includes high-level recommendations for the regulation, supervision, and oversight of crypto-asset activities and markets. The second set comprises revised high-level recommendations for the regulation, supervision, and oversight of “global stablecoin” arrangements.

The final recommendations draw on the implementation experiences of jurisdictions and build on the principles that informed the consultative framework. These principles include ‘same activity, same risk, same regulation’; high-level and flexible; and technology neutral.

The FSB has strengthened both sets of high-level recommendations in three areas: ensuring adequate safeguarding of client assets, addressing risks associated with conflicts of interest, and strengthening cross-border cooperation.

The FSB and standard-setting bodies will continue to coordinate in promoting globally consistent regulation by considering the need for further guidance or standards and monitoring implementation status at the jurisdictional level.

The recommendations focus on addressing risks to financial stability and do not comprehensively cover all specific risk categories related to crypto-asset activities. Central Bank Digital Currencies (CBDCs), envisaged as digitalized central bank liabilities, are not subject to these recommendations.

The FSB has been collaborating closely with sectoral standard-setting bodies (SSBs) and international organizations to ensure a coordinated, mutually supportive, and complementary approach to monitoring and regulating crypto-asset activities and markets.

This global framework includes a shared workplan that the FSB and SSBs have developed for 2023 and beyond.

Mastercard Unveils Interoperable CBDC in Australia

Mastercard, in collaboration with the Reserve Bank of Australia (RBA) and the Digital Finance Cooperative Research Centre (DFCRC), has unveiled a pioneering solution that fosters the interoperability of Central Bank Digital Currencies (CBDCs) across diverse blockchain networks, aiming to bolster Web3 commerce both within Australia and globally.

The venture represents a significant stride towards the harmonization of CBDCs with various blockchain ecosystems, ensuring their utilization by authorized entities in a secure manner. The technology demonstrated by Mastercard allows CBDCs to be tokenized, or “wrapped,” onto different blockchains, thereby expanding consumers’ ability to engage in commerce across multiple blockchain platforms securely and effortlessly. This initiative is part of a broader RBA and DFCRC project to explore the possible applications of a CBDC in Australia.

A notable aspect of this endeavor was a live demonstration where a holder of a pilot CBDC could purchase a Non-Fungible Token (NFT) listed on the Ethereum public blockchain. The process entailed the “locking” of the requisite amount of the pilot CBDC on the RBA’s pilot CBDC platform, followed by the minting of an equivalent amount of wrapped pilot CBDC tokens on Ethereum. It was imperative that the Ethereum wallets of both the buyer and seller, along with the NFT marketplace smart contract, were ‘allow-listed’ within the platform, showcasing the platform’s capacity to enforce controls, even on public blockchains.

The pilot leverages Mastercard’s Multi Token Network, introduced in June 2023, which provides a set of fundamental capabilities aimed at enabling more efficient payment and commerce applications using blockchain technology. By facilitating easy on-demand movement of digital currencies via Mastercard’s trusted network, more consumers could partake in crypto ecosystems using reliable forms of money, while reaping the benefits such as programmability and transparency that these currencies offer.

Notably, the interoperability between blockchains as demonstrated in this project could unlock new avenues of collaboration between public and private networks, thereby driving impactful advancements in the digital currency domain. Furthermore, the broader utilization of blockchain technology across various payments use cases aligns with Mastercard’s strategy to extend the functionality available in digital assets to regulated entities.

The participation of entities like Mintable and Cuscal in this pilot, alongside Mastercard, signals a progressive stance towards exploring innovative digital currency applications, potentially revolutionizing commerce, fraud prevention, and documentation processes