Author: Staff

Central Banks all around the world are paying intense attention to the concept of Central Bank Digital Currencies (CBDCs). Although there are ongoing crypto restrictions in the country, the Bank of Russia recently declared that it prefers a digital Ruble above a proprietary stablecoin. 

Banque de France is now also looking toward a fully operational wholesale digital asset by the beginning of 2023.

François Villeroy de Galhau, Governor of the France Central Bank, stated that the Government has already granted a go-ahead on the second phase of experimentation with a wholesale CBDC.

At the 2022 Paris Europlace International Financial Forum, Galhau mentioned,

“We want to get closer to a viable prototype, testing it in practice with more private actors and more foreign central banks in the second half of 2022 and in 2023. This work ensures that we stand ready to bring central bank money as a settlement asset as early as 2023.”

In contrast to a conventional retail CBDC, a wholesale CBDC is only used by financial organizations to trade fiat currencies.

It does not involve public use as a medium of exchange for goods and services. Hence, right now, it is only moving towards an institutional CBDC. However, the Central Bank has mentioned that they are also exploring a retail CBDC in the future. 

The Governor added that retail CBDCs will be launched with the assistance of private banks. 

“The Eurosystem should entrust banks with the distribution of digital euros to final users while setting technical, functional and commercial rules – for example, the branding, logo and fee structure,” he said.

The primary goal of the CBDCs is to streamline international and domestic banking transactions. The first stage of the experiment took place in December 2021 and involved the blockchain-based issuance of a digital bond and CBDC settlement.

With decentralized digital assets losing popularity amongst policy markers, Central Banks are doubling their efforts in building their own digital currency. In fact, the Deputy Governor of the Reserve Bank of India went as far as to state that CBDC would mark the end of other crypto assets. While it is too early to confirm such an assumption, only time will tell if CBDCs can impact the potential of the existing digital currencies.

European Union policymakers have reached an agreement on what will become the first major regulatory framework for the cryptocurrency industry.

This comes after the Council’s presidency and the European Parliament reached a provisional agreement on the Markets in Crypto-Assets (MiCA) proposal which covers issuers of unbacked crypto-assets and stablecoins as well as the trading venues and the wallets where crypto-assets are held. 

According to CNBC, under the new regulations, stablecoin issuers such as Tether and Circle will be required to maintain reserves to meet any mass redemption requests. They could also face limits of 200 million Euros in daily transactions.

The regulatory framework also aims to bring more clarity to the European Union (EU), as some member states already have national legislation for crypto-assets, but there has not yet been a specific regulatory framework at the EU level. It also aims to protect investors and maintain financial stability while allowing innovation and fostering the attractiveness of the crypto-asset sector.

Furthermore, European Parliament policymaker Stefan Berger labeled the industry the ‘Wild West’ vowing to clean it up.

He said, “We put an order in the Wild West of crypto assets and set clear rules for a harmonized market that will provide legal certainty for crypto asset issuers, guarantee equal rights for service providers and ensure high standards for consumers and investors.”

Some of the new rules include:

1. Crypto-asset service providers will have to respect strong requirements to protect consumers’ wallets and become liable in case they lose investors’ crypto-assets. MiCA will also cover any type of market abuse related to any type of transaction or service, notably for market manipulation and insider dealing.
2. Actors in the crypto-assets market will be required to declare information on their environmental and climate footprint.
3. MiCA requires that the European Banking Authority (EBA) will be tasked with maintaining a public register of non-compliant crypto-asset service providers.
4. Crypto-asset service providers, whose parent company is located in countries listed on the EU list of third countries considered at high risk for anti-money laundering activities, as well as on the EU list of non-cooperative jurisdictions for tax purposes will be required to implement enhanced checks in line with the EU AML framework.

There will also be environmental regulations, with crypto firms having to disclose their energy consumption. Additionally, they will have to detail how tokens impact the environment, which is unlikely to bode well for proof-of-work cryptocurrencies. A previous proposal to ban PoW mining in the EU was voted down in March.

Regulators were also concerned about anonymity and privacy-focused crypto assets, agreeing to reduce anonymity for such transactions. 

Additionally, there will be a 1,000 Euro limit for transactions between exchanges and individual un-hosted wallets; anything above this must be reported to the authorities.

According to Deputy Governor Kuben Naidoo, the South African Reserve Bank (SARB) is prepared to establish new regulations regarding cryptocurrency trading in the country within the next 12 to 18 months.

Speaking in PSG’s most recent Suppose Large webinar, Naidoo said that South Africa was largely on par with different international locations in relation to cryptocurrency regulation, with the preliminary hype around digital currencies and the know-how dying down in the latest instances.

He added that almost all central banks all over the world at the moment are centered on regulating the broader crypto surroundings instead of studying it and seeing how it may be used. Furthermore, it is necessary to separate the real technological developments and the potential enhancements to the funds’ system from the hype.

He said, “We’re not intent on regulating it as foreign money as you may not actually stroll into a store and use it to purchase one thing. As a substitute, our view has modified to regulating (cryptocurrencies) as a monetary asset. There’s a want to manage it and convey it into the mainstream, however in a manner that balances the hype and with the investor safety that must be there.”

Naidoo also stated that the first step is to ensure that cryptocurrencies are declared as monetary products so that they may be monitored for cash laundering, tax evasion, and terrorist financing activities and come under the jurisdiction of the Monetary Intelligence Centre.

The SARB also intends to create a regulatory framework for South African exchanges that will support cryptocurrency itemizing. This framework will include traditional banking laws including Know Your Buyer (KYC) regulations and alternative management laws.