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Israeli Central Bank Official Embraces CBDC Competition with Banks for Economic Growth

Israeli central bank official, Andrew Abir, sees the introduction of the digital shekel as a catalyst for technological advancements that will drive competition in the banking sector. He acknowledges the ongoing efforts to increase competition in the Israeli banking industry and states that there is still a long way to go. Abir notes that public sentiment towards commercial banks in Israel is not always favorable, and part of the discontent stems from the need to improve competition in certain segments of the industry.

The digital shekel, currently in the planning stages, is designed to include an option for paying interest. Abir assures the public that the digital shekel will be developed by the Bank of Israel, a trusted institution that stands behind the traditional cash system. He emphasizes that the digital shekel will not be created by an anonymous entity like Satoshi Nakamoto, the pseudonymous creator of Bitcoin, but rather by a transparent and accountable central bank.

Abir highlights the advantages of introducing a digital shekel for the Bank of Israel as well. It would provide the central bank with greater accessibility to central bank money, facilitating its use in digital payments. This would counteract the declining trend in central bank money usage resulting from advancements in the private sector. Additionally, the digital shekel could incentivize commercial banks to offer higher interest rates to customers, as the option to hold digital shekels would increase competition.

The digital shekel has garnered strong support among the Israeli public, indicating a positive reception for the potential benefits it offers. The introduction of a CBDC like the digital shekel is seen as a step towards enhancing competition in the financial system, driving innovation, and ultimately benefiting the Israeli economy.

As the Bank of Israel continues to develop the digital shekel, it aims to create a trusted and efficient digital currency that aligns with the country’s financial goals. With the support of central bank officials like Andrew Abir, the digital shekel has the potential to revolutionize the Israeli banking industry and pave the way for a more competitive and technologically advanced financial system.

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The Fate of Cryptocurrencies in a Fast-Changing Financial Ecosystem

As the financial media outlets are pushing Bitcoins with all her energy, a Harvard University Professor of Economics and Public Policy Kenneth Rogoff ascribed as a crypto Evangelists and has released some publications in the field of cryptocurrency opines that, with the massive push cryptos are getting, there would be a comprehensive market takeover where cryptocurrencies could explode over the next five years, rising to $5-10 [trillion].”

He believes the usual volatile nature of the asset is not enough reason to panic.

”Bitcoin as digital gold, starting its long-term value will more likely move from $100 to $100,000”, he said.

Professor Rogoff, on the other hand, disagrees, saying that unlike physical gold, “Bitcoin’s use is limited to transactions, which makes it more vulnerable to a bubble-like collapse.

In his thoughts, he only feels the cryptocurrency’s energy-intensive verification process is “vastly less efficient” than systems that rely on “a trusted central authority like a central bank.”

Cryptocurrency being a digital currency, created and managed through the use of advanced encryption techniques known as cryptography has been gradually modifying the world of finance as well as other sectors such as e-commerce and since its creation in 2009. It irked significant investor and media attention in April 2013 when it clocked a record of $266 per bitcoin after declining by 10 times that figure in its previous two months. Cryptocurrencies are now generally gaining way into the mainstream media through the facebook owned coin Libra.

Many will not forget in a rush the wave which pulled through when bitcoin in August 2017 almost hit the $20,000 mark.

According to CoinMarketCap, Bitcoin had hit a market value of over $2 billion at its peak, but a 50% drop shortly, sparked a strong opinion poll on the future of cryptocurrencies in general especially Bitcoin. The argument now became, will these altcoins eventually takeover conventional currencies and become a world-matching currency just like the dollars and euros one day? Or are cryptocurrencies a passing phase that will not stand the test of time?

G20 Agency Warns Countries of Systemic Risks Posed by Global Stablecoins

The Financial Stability Board (FSB), the G20 body that advises on ways to improve the global financial system, has published a study on the challenges, which stablecoins pose for the global economy. The FSB stated that regulatory frameworks have already covered several activities associated with stablecoins, although there are other risks that many national regulators could be left unprepared for.

Stablecoins a threat to the global financial system

The study acknowledges that stablecoins have significant potential to contribute to the development of the global financial system. Digital assets could give millions of people without bank accounts access to the international financial system and provide consumers across the globe greater freedom for low-cost transactions. However, the study also presents that such benefits make stablecoins much riskier for the global economy and financial system.

The FSB warns national regulators to review standards and fix any potential disruptions caused by global stablecoins such as the Facebook-led Libra project. The agency stated that much of the mechanisms and technology used in stablecoins were mostly untested. This implies that functioning stablecoins may have hidden vulnerabilities that emerge when they are ready for mainstream application. Large-scale flows of funds into and out of a global stablecoin could test not only the ability of the financial conditions of the broader financial system but also the supporting infrastructure to handle high transaction volumes.

To respond to the potential threats posed by stablecoins, the watchdog suggests to authorities that if they cannot regulate and control fully decentralized stablecoins, then they should consider banning them. The FSB mentioned that national regulators should monitor the fast pace of innovation within the digital asset space to attempt and recognize any weaknesses or regulatory loopholes before they take effect. All G20 member countries should come together to clarity regulatory powers and fix potential gaps within their national frameworks to sufficiently address risks posed by global stablecoins.

Since stablecoins work across borders, the watchdog urges member countries to consider creating a flexible cross-border framework to enable stablecoins not to find a gap over the differences between each jurisdiction. The FSB also proposes the creation of high interagency cooperation between international partner agencies.

Concerns on regulating stablecoins

This is not the first time when global regulator like the G20 regulatory watchdog is calling for the world’s leading economies to plug gaps in their regulatory frameworks to avoid stablecoins from undermining financial stability. Last year, the European Central Bank raised concerns regarding the lack of governance framework and regulation of stablecoins. The European Central Bank expressed uncertainties concerning the regulatory treatment and governance of stablecoins. Besides Facebook’s Libra stablecoin, several other stablecoins exist. But governments, central banks, and global regulators have appeared not to like the idea of private entities ‘creating money’ pegged to fiat currencies. It is clear that the G20 watchdog also has similar concerns over stablecoins.

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Majority of American Adults Believe Financial System Favors Powerful Interests, 20% Own Cryptocurrency

A recent survey conducted by Morning Consult and commissioned by Coinbase has revealed that the majority of American adults believe that the global financial system unfairly favors powerful interests. The online survey, which was conducted in February 2023 and included responses from over 2,000 American adults, found that 80% of respondents felt that the financial system is not fair to all, and that it favors those with powerful interests.

The survey also found that 67% of respondents called for a major overhaul or major changes to the current financial system. The findings suggest that many Americans are dissatisfied with the current system, and believe that it needs to be reformed in order to better serve the needs of ordinary citizens.

Interestingly, despite recent negative news about cryptocurrency and the crypto market, the survey found that 20% of respondents own cryptocurrency, and nearly a third plan to buy, sell or trade cryptocurrency in the next year. These numbers have remained consistent over the past year, indicating that recent market turmoil may not have shaken retail investor confidence in crypto in America.

The survey provides important insights into the perception of the global financial system and how it is viewed by United States adults and crypto investors. It highlights the need for major changes to the financial system in order to address concerns about fairness and equality, and suggests that the crypto market is still viewed as a viable investment option by many Americans.

It is worth noting that the survey was commissioned by Coinbase, a leading crypto exchange, which may have influenced the results. However, the findings are consistent with other surveys and studies that have shown a growing dissatisfaction with the current financial system and a growing interest in cryptocurrency as an alternative investment option.

Overall, the survey provides valuable insights into the current state of the financial system and the crypto market, and suggests that major changes are needed in order to address the concerns of ordinary citizens and ensure a more equitable and fair system for all.

OKX Global Ad Campaign Argues for a Decentralized Future

Crypto exchange OKX has launched a global ad campaign that calls for a decentralized future, arguing that the centralized financial system is outdated and needs a complete rewrite. The campaign takes aim at the “broken ways” of traditional finance and positions OKX as a leader in the crypto space.

Produced in collaboration with OKX’s advertising agency, BBDO New York, the campaign doesn’t mention Coinbase directly, but seems to take a subtle dig at the exchange’s “update the system” campaign launched in March. OKX argues that the system doesn’t need an update, it needs a complete overhaul to embrace the decentralized nature of Web3.

Haider Rafique, Chief Marketing Officer of OKX, explained that the campaign is a nod to those who believe in the need to rewrite the system into Web3. OKX’s vision is for a decentralized future, where consumers don’t need centralized players and can transact directly with each other.

The global ad campaign is part of OKX’s effort to expand its crypto services to Australia, which it sees as a key growth market. The exchange has signaled its intention to bring its crypto services to Australian consumers, highlighting the importance of the market as a growth opportunity.

As the crypto industry continues to evolve and expand, exchanges such as OKX and Coinbase are positioning themselves as leaders in the space. While Coinbase’s “It’s time to update the system” campaign proposed that crypto is the answer to the outdated ways of traditional finance, OKX argues that the decentralized nature of Web3 removes the need for centralized players altogether.

As the financial landscape continues to shift, the crypto industry is poised to play a significant role in shaping the future of finance. OKX’s global ad campaign is just one example of how the industry is pushing for change and innovation, positioning itself as a viable alternative to traditional finance.

BIS Conference Addresses Cybersecurity in Central Bank Digital Currencies (CBDC)

The BIS Innovation Hub and the Cyber Resilience Coordination Centre (CRCC) hosted a conference on November 8, 2023, focused on “Securing the future monetary system: cyber security for central bank digital currencies“. General Manager Agustín Carstens opened the event with a clear message: the advent of CBDCs is inevitable, and their security is paramount to the future financial system.

As the financial landscape is on the verge of substantial change, Carstens pointed out that central banks are tasked with not only keeping up with the digital evolution but leading the way. This leadership is embodied in the development of CBDCs, which are poised to be at the heart of the financial system. Whether they take on a wholesale or retail form, their design needs to be versatile and their legal frameworks robust to gain public trust.

The integrity of central bank money is a cornerstone of the public’s confidence in the financial system. CBDCs introduce new levels of security challenges, with cyber risks being a significant concern. Carstens cited the vulnerabilities exposed in the crypto universe as a cautionary tale for CBDCs, which carry much higher stakes. Addressing these risks is critical, necessitating a flexible design that can adapt to future technological advancements, including the potential impact of quantum computing and generative AI.

While focusing on security, Carstens didn’t overlook the importance of privacy in CBDC design, considering it essential for public acceptance, especially for retail CBDCs.

The BIS is firmly committed to aiding central banks in their journey towards a digital future. The Innovation Hub has been at the forefront, exploring solutions for secure and functional retail CBDCs, integrating quantum-resistant cryptography, and ensuring offline cyber resilience. Concurrently, the CRCC is enhancing collaboration and operational readiness among central banks through tools and exercises.

Carstens also recognized the vital role of the private sector, particularly in customer-facing services, and stressed the importance of shared cybersecurity and resilience as public goods among connected institutions.

The conference sets the stage for critical discussions on cybersecurity strategies for CBDCs, governance, risk management, and technical challenges, including the quantum computing threat. Carstens concluded with anticipation for the insights that the conference’s discussions will yield, reflecting the BIS’s readiness to guide and support central banks in securing the monetary system’s future.