For all the key details of new Distributed Ledger Technology (DLT) projects in the banking world, real-world asset (RWA) tokenization, stablecoins, and central bank digital currency (CBDC) updates, the Observers 'Banking and CBDC Roundup' weekly has you covered.
With President Donald Trump's inauguration, the U.S. has seen a policy shift favoring cryptocurrencies and digital ledger technology. At the same time, the ban imposed by the executive order on a central bank-issued digital currency (CBDC) further diminished the prospects of a digital dollar. Instead, the new administration ordered "actions to promote the development and growth of lawful and legitimate dollar-backed stablecoins worldwide."
Federal Reserve Chair Jerome Powell confirmed that the central bank will not launch its own digital currency during his tenure. Regarding wholesale CBDCs, however, Powell has distinguished them from retail CBDCs, and noted that a wholesale CBDC can be implemented without new legislation because it "would look an awful lot like a bank reserve".
In recent discussions, Federal Reserve Governor Christopher Waller further clarified that the Federal Reserve has "dropped this whole language of this term 'wholesale,' because we have a central bank digital currency, wholesale, which is called bank reserves." and that changing the technology does not create a new central bank liability. Waller also confirmed that the U.S. would continue to participate in Project Agora which experiments with Unified Ledger proposed by BIS for tokenized commercial bank deposits and wholesale CBDC.
In response to U.S. President Donald Trump's initiative to promote dollar-pegged cryptocurrencies, the European Central Bank (ECB) is urging for accelerated legislative support for the digital euro.
ECB board member Piero Cipollone expressed concerns that such U.S.-backed stablecoins could attract European users, potentially diverting deposits away from EU banks. He emphasized the need for the EU's Parliament and Council to expedite digital euro legislation, aiming for completion before the summer.
"Political processes are complex and there are many things on the table," Cipollone said. "Obviously the sooner the better, but we fully understand their needs."
This would allow the ECB to finalize the framework by November, when a decision on launching the digital currency is anticipated.
The ECB is in the final months of the two-year preparation phase for the digital euro, which commenced in November 2023. This phase focuses on finalizing the digital euro scheme rulebook, selecting potential external providers for its various technical components, and conducting user surveys to align the digital currency with public needs.
In a progress update published on January 14, the Bank of England (BoE) reiterated that no decision has been made regarding the issuance of a digital pound, and any potential introduction would require parliamentary approval and primary legislation.
The report outlines the ongoing design phase for the digital pound, which includes developing a comprehensive blueprint and engaging with stakeholders.
The BoE has concluded multiple experiments exploring design options for the digital pound. Project Rosalind, in collaboration with the BIS Innovation Hub, tested APIs to facilitate retail CBDC functionality, showcasing the potential of standardized APIs to drive innovation. Offline payment capabilities were studied through proofs of concept addressing double-spending and compliance challenges. E-commerce and Point-of-sales experiments examined the feasibility of digital pound payments with common online interface and with existing POS hardware. Additionally, collaborations with MIT and Nuggets explored privacy-enhancing technologies, while sample wallet applications were developed to test end-to-end user experiences.
The progress report hasn't altered the "We haven’t made a decision on whether we will introduce a digital pound." message on the digital pound webpage.
In countries that have decided to introduce a CBDC, challenges are mounting at the implementation stage.
Sberbank, Russia's largest bank, called for a postponement of the digital ruble's launch, originally scheduled for July 1, 2025. The bank cited the need for additional time to develop the necessary infrastructure, highlighting that the CBDC platform is still under development. Sberbank suggested a more realistic timeline for the launch would be after 2026.
Previously, reports suggested that Russian banks were resisting calls to embrace the digital ruble — primarily because of how much it'll cost. According to Info24, investing in infrastructure to CBDC transactions could cost each financial institution up to $1 million — but some banks only have reserves of $3 million to begin with.
The head of the Association of Russian Banks, Anatoly Kozlachkov, was quoted as saying:
"The proportions of costs for the introduction of the digital ruble should be adjusted — or approaches should be differentiated taking into account the specifics of the players."
China continues to push e-CNY use by distributing subsidies (red envelopes) and adding new use cases in the e-CNY wallet app.
Beijing Business Daily reports new use cases in the G-end interface of the CBDC app.
China's e-CNY app differentiates between the Consumer (C-end) and the Government (G-end) interfaces.
The C-end of the application is designed for individual users, enabling them to manage personal digital yuan wallets, conduct transactions, and access various financial services tailored for the general public. The G-end of the application is intended for governmental agencies and institutions, facilitating functions such as the distribution of subsidies, collection of taxes, and other public financial management tasks.
CBDC goals and development paths are different in smaller nations. In most cases, solutions are developed from scratch rather than replacing an existing financial system. Inclusion, cost and efficiency are primary criteria for the systems considered. Also the projects in these countries are supported by international or foreign donor organizations.
In response to a request from the Bank of Namibia (BoN), an International Monetary Fund (IMF) mission provided technical assistance from January 15 to February 1, 2024, to explore the feasibility of a retail central bank digital currency (rCBDC) in Namibia. The mission assessed the potential benefits of rCBDC for enhancing payment systems and financial inclusion, comparing it with alternative solutions. The report issued by IMF, among other findings, says that "the mission did not find a strong case for issuing rCBDC at present to address the gaps in the payment systems."
Papua New Guinea had more luck with its CBDC development advisors.
On January 28 the Bank of Papua New Guinea, in collaboration with blockchain development firm Soramitsu and Japan’s Ministry of Economy, Trade and Industry (METI), marked the successful completion of the Proof of Concept (PoC) for the country’s CBDC 'Digital Kina'.
The PoC required a secure, round-the-clock payment infrastructure that supports instant settlement and cross-border transactions, tailored for the island nation's specifics.
The concept proposed and tested by the contractor leverages the technology used in SORA v3 Hub Chain, a global platform developed by Soramitsu and powered by the open-source Hyperledger Iroha 2 blockchain. As part of the tests, the Bank of Papua New Guinea and local businesses in Port Moresby conducted real-time payments and individual remittances via a user-friendly mobile app.
In the next phase, the Bank of Papua New Guinea, together with the development team, plans to optimize the platform’s speed, security, and regulatory compliance features, bringing Papua New Guinea closer to a more inclusive and resilient financial future.
Standard Chartered's Hong Kong division announced a joint venture with Animoca Brands and HKT to apply for a license from the Hong Kong Monetary Authority. This venture aims to issue a Hong Kong dollar-backed stablecoin, leveraging blockchain technology to enhance payment efficiency and explore crypto-native opportunities.
Standard Chartered is known for its bullish forecasts on the tokenization market growth and multiple technology trials with DLT industry players.
Dubai's largest property developer DAMAC Group signed a $1 billion agreement with blockchain platform Mantra to tokenize Middle Eastern assets. The plan is to convert ownership rights of physical assets into digital tokens on a blockchain, facilitating online trading and investment.
Following the announcement, Mantra's OM token has increased in price. The crypto world always receives news about initiatives with UAE-based 'off-chain' companies with excitement. Yet, in most such cases, little progress is observed after such announcements.
And finally, this January brought a new tokenization player into the spot light.
Barcelona-based startup Brickken secured €2.4 million in seed funding to expand its asset tokenization platform.
Brickken provides tokenization services on the BNB chain and collaborates with Chainlink and Circle. According to the firm, it has already tokenized over $250 million in assets across 14 countries while maintaining positive operational results in its financials.
With the new funding, the company aims to strengthen its presence in Europe and expand into North American and Asian markets. It also plans to collaborate with regulators and industry leaders to facilitate broader blockchain adoption.