Tag: cbdc

‘CBDC and Blockchain’: Mukesh Ambani’s Jio Financial Services Set to Make Web3 Foray

Mukesh Ambani, one of the world’s richest men settled in India’s financial capital, is prepared to explore the Web3 arena. The 66-year-old Indian billionaire disclosed his Web3-related plans during the 46th annual general meeting of Reliance Industries (RIL) that was held on Monday. While the Reliance chief aims to keep a distance from highly volatile crypto assets for now, he does plan to explore the fields of blockchain and centralised digital currencies — including the eRupee CBDC — which is currently in advanced trials in India.

Ambani’s Jio Financial Services (JFS) will be the brand’s point of entry into the Web3 sector. JFS is the financial investment arm of Reliance Industries that was initially named Reliance Strategic Investments and was rebranded in July this year. Through JFS, RIL will offer management services for digital assets. As part of its plan, JFS has already struck a partnership with BlackRock, which is among world’s largest investment services provider that held assets worth $100.07 billion as of August 18.

“JFS will consolidate its payment infrastructure further driving digital adoption for India. JFS products will explore pathbreaking features such as blockchain-based platforms and CBDC,” Ambani stated on Monday.

Blockchain

Blockchain is the underlaying distributed ledger technology, that provides the foundational support for all the elements of Web3 including cryptocurrencies, non-fungible tokens, CBDCs, as well as the metaverse. Blockchain-based protocols can be automated and decentralised, which could eliminate the need for any middleman or intermediary to facilitate financial transactions.

In addition, information stored on the blockchain is divided into small packages and spread across the network, which makes it more resistant to malicious changes and breaches as opposed to traditional servers.

States like Maharashtra and Telangana are already leveraging the power of blockchain to fine-tune their healthcare and agriculture initiatives.

CBDC

A central bank digital currency or CBDC, is the virtual representation of any fiat currency, supported on blockchain networks. The Reserve Bank of India (RBI) is also working on introducing its own CBDC in India.

CBDCs function like cryptocurrencies, but they are regularised and issued by the central banks. CBDCs not only smoothen online payment systems, but also reduce dependency on cash notes that could be cost efficient for the RBI.

India’s CBDC called the eRupee is already in its advanced trial stages with multiple large state-owned and private lenders participating in these trials alongside select small, medium, and big level merchants.

The Reliance connection

The businesses owned and run under Ambani’s RIL includes Jio’s network services, general stores, and petrol pumps among others. RIL’s foray into blockchain and eRupee could have many Indians engage with these new-age technologies in the months to come.

In April this year, Reliance General Insurance said it had begun accepting the eRupee CBDC for premium payments.

Earlier in February, Reliance Retail had also announced that it would begin using India’s digital rupee CBDC across its stores in Mumbai. At the time, V Subramaniam, the managing director at Reliance Retail said he believed that the CBDC would be “better than the UPI system”.

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Singapore’s Stablecoin Regulatory Framework Announced: All Details

Singapore has announced a framework for stablecoins, as the overall global crypto sector faces increased rules and regulations in different parts of the world. The Monetary Authority of Singapore (MAS) announced these rules on August 15, which now allow for stablecoins to become part of the country’s existing financial system. The government of Singapore had begun deliberations on stablecoin rules last year in October. In the ten months since, authorities invited and reviewed feedback from the public, especially since stablecoins fall under the crypto category.

Stablecoins are essentially cryptocurrencies that are pegged against reserve assets like gold or fiat currencies. Unlike regular cryptocurrencies, that are impacted by market volatility, stablecoins pose a lesser risk for investors as their underlaying assets make them less susceptible to major dips. Tether, USD Coin, and Binance USD are some examples of popular stablecoins.

The MAS’ stablecoin regulatory framework has been designed for single-currency stablecoins (SCS). Only stablecoins pegged to the Singapore dollar or other G10 currencies like Australian dollar, US dollar, and British Pound among others, will be eligible for receiving the MAS certification, the official statement from Singapore’s authorities said.

“SCS reserve assets will be subject to requirements relating to their composition, valuation, custody, and audit to give a high degree of assurance of value stability,” the MAS said.

Web3 firms that wish to issue stablecoins in Singapore will have to ensure that they maintain minimum base capital and liquid assets. The country aims to avoid companies being exposed to the risks of collapse and insolvency.

The MAS has directed stablecoin issuers to return the value of stablecoins to holders within five business days from them submitting redemption requests.

“Issuers must provide appropriate disclosures to users, including information on the SCS’ value stabilising mechanism, rights of SCS holders, as well as the audit results of reserve assets. Only stablecoin issuers that fulfil all requirements under the framework can apply to MAS for their stablecoins to be recognised and labelled as ‘MAS-regulated stablecoins’,” the official document said.

Not all stablecoins will be regulated by MAS and if any issuer is found guilty of promoting a non-MAS certified stablecoin as one, they would be subject to penalties. The MAS will also list defaulted stablecoins on the Investor Alert List to warn potential investors.

“MAS’ stablecoin regulatory framework aims to facilitate the use of stablecoins as a credible digital medium of exchange, and as a bridge between the fiat and digital asset ecosystems,” said Ho Hern Shin, Deputy Managing Director (Financial Supervision), MAS.

In its exploration of the digital assets sector, Singapore is taking a gradual and calculated approach. Crypto and Web3 advocacy groups from India and Singapore signed a memorandum of understanding (MoU) last month. The groups, Bharat Web3 Association (BWA) and the Blockchain Association Singapore (BAS), have decided to join forces on nurturing and fostering the Web3 sector.

This MoU entails that both India and Singapore will collaborate with their expertise and resources on the growth of the blockchain sector.

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Bharat Web3 Association Notes India’s Interest in DeFi as Country Posts G20 Presidency Note on Crypto

India is making its name as a lucrative startup hub for Web3 projects with its large pool of developer talent, the Bharat Web3 Association (BWA) has said sharing an analysed observation. India’s own crypto advocacy group, the BWA, was established in November last year, aiming to bridge the communication gap between industry players and the government. In the last nine months, the BWA has observed that Indians could ramp-up experiments with DeFi because it offers almost tax-free, cheap alternatives to traditional, centralised banking services.

DeFi or Decentralised Finance lets financial products appear on a public blockchain network, which is not regulated by a central bank or intermediary. People looking to deposit their money somewhere other than a bank can consider investing in DeFi protocols.

Indians are particularly being drawn towards exploring the DeFi sector because from loans to exchanges, DeFi applications are exploding in numbers and use-cases. As per Finder.com, the value of DeFi transactions for individuals as well as retailers is highest in India. A contributing factor to this trend is the large volume of remittances that is wired back to India from its citizens working abroad, which can be sent faster and more cost-effectively through cryptocurrency.

“India is among the fastest global adopters of DeFi, which can boost financial inclusion through expanded access to credit to the MSME sector and those unable to access credit from banks. The quality of startups being founded in India is top notch,” Dilip Chenoy, Chairman, BWA told Gadgets 360.

Once the nation gets its framework of crypto laws, Chenoy notes that there will be a boom in Web3 initiatives from India.

At present, India, as the president of the G20 nations is working on a set of crypto rules that will work on a global level.

On August 1, the country posted a presidency note on crypto, giving a status update on the crypto laws work.

As per that note, the Interntional Monetary Fund (IMF) and the Financial Stability Board (FSB) are expected to be jointly presenting a synthesis paper on their crypto rules suggestions by the end of this month.

This paper will note the possible impacts of crypto on macro-financial implications while also outlining the risks of crypto to emerging markets and economies under development. In addition, the paper is also expected to highlight ways to spread awareness around crypto, so that everybody who chooses to engage with digital assets are aware of the pros and cons.

India has also submitted a similar note with its ideas, suggestions, and concerns around crypto to the G20 group as its president, Ajay Seth, a senior official of the Indian Finance Ministry had said last month.

“The very nature of virtual digital assets (VDAs) being cross-jurisdictional, has made the case for a coordinated regulatory mechanism for such assets rather than individual countries adopting different stances. The regulatory landscape for virtual digital assets is continuously evolving,” Chenoy said.

He further added that despite India not having a concrete regulation to oversee Web3, the sector has been explicitly brought within the ambit certain provisions.

These include income tax framework for VDAs, the Indian Computer Emergency Response Team (CERT-IN) guidelines to ensure compliance of VDA service providers, the ASCI guidelines for responsible advertising and the latest inclusion of VDA service providers in the Prevention of Money Laundering Act (PMLA) recognising them as reporting entities.

“These developments can signal India moving in the right direction, wherein regulators understand the risks associated,” Chenoy added.

India’s presidency of the G20 will conclude in December this year, which is also around when the first draft of global crypto rules is expected by.

Meanwhile, Chenoy said, Web3 elements like asset tokenisation and the eRupee CBDC are likely to make Indians more comfortable with dabbling in the Web3 sector via real estate, art, supply chain, and gaming among other avenues in the times to come.

Recently, the Telangana government in India announced the launch of its Asset Tokenisation Standard Framework, providing a common set of rules and guidelines for the tokenisation of assets.

After having analysed India’s internal response to making the VDA sector safer, the BWA chief has said under its leadership, the G20 nations could just get the crypto rules detailed and right.

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RBI Assigns CBDC Expansion Targets to Banks, Aims for 1 Million Daily Transactions by December: Report

The Reserve Bank of India (RBI) is aiming to clock one million transactions in India’s under-trial CBDC, the eRupee, daily by December. In order to accelerate number of CBDC transactions, the RBI is reportedly giving targets to banks to facilitate a minimum number of transactions in the form of the eRupee. India has been working on its CBDC initiative for at least two years now. Last year, the country’s first ever national digital currency was launched into its pilot mode for trials.

Indian banks have reportedly maintained the opinion that the eRupee CBDC could have only limited use cases because online payments are already facilitated digitally by the widely used UPI system in the country. Under RBI’s directions, however, banks will now do their bit to ensure that select users get to process eRupee tractions for daily purchases, a report by the Mint claimed on Monday.

At present, multiple large state-owned and private lenders, including State Bank of India, Bank of Baroda, ICICI Bank, HDFC Bank, Kotak Mahindra Bank and Yes Bank, are participating with the RBI in the ongoing CBDC trials.

Once the banks meet their assigned targets, they would be liable for rewards approved by the government.

Gadgets 360 has reached out to the RBI for details on the development.

CBDCs function like cryptocurrencies, but they are regularised and issued by the central banks. Digital currencies not only smoothen online payment systems, but also reduces the dependency on cash notes.

As part of its ongoing trials, the eRupee CBDC is being loaded with the capability to interact with existing UPI QR codes in India. This would allow its test users to process payments via this digital currency by simply scanning already in-use QR codes.

CBDC transactions were processed by 1.3 million customers and 0.3 million merchants as of June 2023, RBI deputy governor T Rabi Sankar had said earlier this month.

Nearly two dozen central banks across emerging and advanced economies are expected to have digital currencies in circulation by the end of the decade, the Bank for International Settlements (BIS) had found in a survey earlier this year.

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RBI to Deploy eRupee CBDC Payments via UPI QR Codes Soon: All Details

India may take the next big leap in its eRupee central bank digital currency (CBDC) venture any day now. The Reserve Bank of India (RBI) could soon facilitate CBDC payments via existing UPI QR codes. The deployment of this interoperability element to the eRupee CBDC has been in the pipeline for a while now. Since UPI scanners are already widely used around the country for instant online payments, their acceptance of CBDC payments would bring an ease to using India’s national digital currency.

During a G20 event last week, representatives from the RBI had said that the ability to facilitate CBDC payments via UPI QR codes will be deployed at the end of the month, Doordarshan had reported at the time.

As per the report, an announcement on CBDC payments via UPI is expected around the end of July and could arrive in the coming days. Once the service is live, retailers accepting India’s CBDC as a payment option, would just have to extend their existing QR codes to their customers and let them scan them for payments to go through.

At present, multiple large state-owned and private lenders, including State Bank of India, Bank of Baroda, ICICI Bank, HDFC Bank, Kotak Mahindra Bank and Yes Bank, are participating with the RBI in the ongoing CBDC trials.

Select small, medium, and big level merchants are also helping the RBI test how smooth CBDC transactions could be in a real-life retail setting. Indian billionaire Mukesh Ambani’s chain of retail stores are also accepting CBDC payments in Mumbai since February this year.

CBDCs function like cryptocurrencies, but they are regularised and issued by the central banks. Digital currencies not only smoothen online payment systems, but also reduce dependency on cash notes.

The pilot for the retail digital rupee was launched in Mumbai, New Delhi, Bengaluru and Bhubaneswar on December 1, 2022.

Amid ongoing eRupee trials, RBI governor Shaktikanta Das recently said that CBDCs will bring a fundamental change in the currency system we are accustomed to today.

Das has reportedly predicted that CBDCs would become popular globally, just like UPI is popular in India.

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Bank of Japan Initiates Discussion With 60 Firms on Pilot Programme for Digital Yen

The Bank of Japan on Thursday kicked off a series of discussions with 60 companies on a pilot programme for developing a digital yen, joining peers around the globe ramping up efforts towards issuing digital versions of their currencies for retail use.

The discussions will touch on various themes including the business and technological features of retail settlements using a central bank digital currency (CBDC), the central bank said in a statement.

The BOJ has said no decision has been made yet on whether Japan will actually issue a digital yen, which must be made by the government and parliament.

But many big Japanese companies were included in the list of 60 firms selected to join the discussions, a sign Japan is moving steadily toward such a launch.

Aside from megabanks and regional lenders, the group included electronics giant Sony, convenience store operator Lawson, the financial arm of auto giant Toyota as well as East Japan Railway.

Central banks around the globe have been studying and working on digital versions of their currencies for retail use to avoid leaving digital payments to the private sector amid an accelerating decline in the use of cash.

Some two dozen central banks across emerging and advanced economies are expected to have digital currencies in circulation by the end of the decade, the Bank for International Settlements (BIS) found in a survey published earlier this month.

© Thomson Reuters 2023

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Reserve Bank of India Calls on More Lenders to Take Part in Pilot for Retail Digital Rupee: Report

The Reserve Bank of India (RBI) has called on a wider set of lenders to take part in pilot programmes using the central bank digital currency (CBDC) as it tries to increase transactions, three bankers told Reuters on Wednesday.

Nearly two dozen central banks across emerging and advanced economies are expected to have digital currencies in circulation by the end of the decade, the Bank for International Settlements (BIS) found in a survey, published on Monday.

Last year, the RBI began trials using CBDCs, termed e-rupees, in both the wholesale and retail markets.

Currently, large state-owned and private lenders, including State Bank of India, Bank of Baroda, ICICI Bank, HDFC Bank, Kotak Mahindra Bank and Yes Bank, are among those participating in the pilot project.

“The RBI has asked smaller banks to either tie up with fintech players or develop their systems to start CBDC pilots this year,” said the technology head of a state-owned bank, who attended the meeting with RBI officials on Tuesday.

“We will now have to float tenders to get interested fintech partners on board and evaluate the costs involved. This process is expected to take about four-five months.”

The bankers did not wish to be named as they were not authorised to speak to the media.

The RBI aims to reach a target of one million CBDC transactions per day by the end of this year, RBI deputy governor T Rabi Sankar said on Tuesday.

There were 1.3 million customers and 0.3 million merchants, who used CBDC as of June 2023, he said.

“By getting more banks to participate in the pilots, the RBI wants to see if there are any glitches in implementation and conduct pilots on a large user base,” said another banker with a state-owned bank.

“We are in the advanced stage of submitting a CBDC pilot request to the RBI. We expect the approval to come in the next one-two months.”

The central bank has also asked smaller banks to seek feedback from those currently conducting the pilots, the bankers said.

The RBI did not immediately respond to a Reuters’ email seeking comment.

© Thomson Reuters 2023

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Existing UPI QR Codes Could Begin Processing Transactions in eRupee CBDC: RBI’s T Rabi Sankar

India is planning to introducing its own blockchain-based eRupee CBDC for commercial use. The country is mulling more ways to make this process simple for adoption. On Thursday, May 8, RBI Deputy Governor T Rabi Sankar hinted that existing UPI QR codes could become interoperable with the Indian CBDC in the months to come. At this point, the RBI is considering if existing QR codes must act like a gateway for CBDC transactions. It, however, remains unclear by when would the RBI take a concrete decision on the subject.

Sankar was addressing a press conference on Thursday when he announced this update to the media.

“We are planning to make the UPI QR code interoperable [with the eRupee],” media reports quoted Sankar as saying.

Given that the UPI QR codes reportedly help over 300 million Indians facilitate online payments, their use for CBDC payments could aid more people adopt the payment means.

CBDC — central bank digital currency — is the virtual representation of a fiat currency on a blockchain network. Similar to cryptocurrency in functionality but controlled by central banks, CBDCs are capable of storing permanent transactional records on the blockchain, while also reducing the national dependency on cash notes.

India, at present, is on an advanced stage of trials for its eRupee CBDC.

Currently, eRupee worth over Rs. 130 crore are in circulation as part of the going trials. The detail was revealed by Indian Finance Minister Nirmala Sitharaman earlier in March.

Over 50,000 testers, 5,000 selected merchants and multiple banks are involved in the trial runs of the eRupee CBDC, which is being accepted at select Reliance stores in Mumbai.

India and UAE have also joined forces in agreeing to take the trials of their respective CBDCs to a cross-country level. The central banks of both the nations will collectively be testing how their CBDCs operate from the other country.

By the end of June, India aims to onboard a million users to its CBDC ecosystem, Sankar reportedly said in today’s press conference.

As of now, the government has not disclosed any special date on which this digital currency would be rolled out to the masses for daily use.

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Hong Kong Commences CBDC Pilot; Multiple Fintech Players Onboarded for Trial of e-HKD

The introduction of central bank digital currency (CBDC) by central banks in different parts of the world has emerged among the top banking tweaks to be recorded as major banking innovations. Hong Kong has now become the latest nation to join the list of countries like India, China, Japan, and Nigeria among others that are conducting advanced studies and trials of their respective CBDCs. The e-HKD CBDC of Hong Kong is being launched into its pilot phase this week so that its use cases could be accessed and tested thoroughly before its commercial roll out.

Created on blockchains, CBDCs are the digital representations of fiat currencies that eliminate the need for paper-based physical notes while also recording the details of all transactions in an unchangeable format on the blockchain.

This week, the Hong Kong Monetary Authority (HKMA) officially announced the commencement of the pilot programme of the e-HKD CBDC.

In the coming months, the financial authorities of Hong Kong will work with industry leaders to explore the potential use cases of its CBDC broadly in six categories — full-fledged payments, programmable payments, offline payments, tokenised deposits, settlement of Web3 transactions as well as settlement of tokenised assets.

“Through this iterative process, the outcomes and insights gained from each pilot would help enrich the HKMA’s perspective and refine the HKMA’s approach to the possible implementation of e-HKD. The HKMA is not yet at a point where a firm decision can be made to introduce e-HKD,” said an official blog post by the HKMA.

A total of sixteen entities from the sectors of finance, technology, and payment processing have been onboarded by Hong Kong to participate in its CBDC trials.

The leaders of these sixteen organisations were present at the event where the HKMA announced the launch of the e-HKD and they all revealed their plans to test the CBDC as part of its trial process.

“We are excited to kick-start the e-HKD Pilot Programme. By fostering government-industry-academia collaboration in CBDC research, we aim to ensure the relevance of our research and development efforts, and enable the translation of such outcomes into viable business opportunities,” Eddie Yue, the Chief Executive of the HKMA, said in the blog post.

In the months to come, the HKMA is looking to increase the participation of the government in the CBDC trials. A CBDC Expert Group will also be established by the HKMA, comprising of academicians and researchers from local universities.

Hong Kong has left it to the banks to discuss and decide if they wish to keep the e-HKD either centralised — under their control, or decentralised — where the CBDC would be distributed away from a central, authoritative location in small fractions.

Unlike the UK and the US, that have taken a rather democratic approach and invited suggestions on CBDCs from their nationals, Hong Kong wishes to keep the process more in the hands of the authorities.

Given the growing interest in crypto among its citizens, the country has also amended its Anti-Money Laundering (AML) and Counter-Terrorist Financing (Amendment) Bill 2022, to now include crypto transactions as well.

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China’s CBDC e-CNY to Become a Salary Mode for Civil Servants in Changshu City: Details

China is among the largest nations in the world, that is experimenting extensively with its CBDC initiative. In a fresh development, China’s Changshu city has reportedly decided to compensate all civil servants within its jurisdiction in the form of the e-CNY CBDC. This marks the first time that the Chinese CBDC has been recognised as a salary payment mode by a region there. A CBDC or a Central Bank Digital Currency is just a virtual representation of any nation’s fiat currency on the blockchain. China’s e-CNY is, hence, the digital version of the country’s Yuan currency.

Starting May, government staffers in the Changshu city of China will receive their monthly salaries in the form of the e-CNY CBDC, local publications reported from the Asian nation.

The decision has reportedly been finalised by the financial authorities that govern the city of over a million people in population.

The e-CNY CBDC will become a salary mode for people working in Changshu’s public service, public institutions and state-owned units at all levels.

Despite banning all crypto-related activities in 2021, China did not stop its research around the usecases of the blockchain technology that provides the underlaying support for crypto and Web3.

Between 2020 and 2022, China launched its e-CNY app to facilitate payments through its CBDC.

The reason why China kept a positive approach towards the CBDC initiative is because transactions via the digital currency are recorded permanently on the blockchain, making financial history transparent and credible on the records. In addition, the use of CBDCs for daily payments would also eliminate the need for central banks to invest heavily in managing and maintaining cash notes.

Around April 2022, China made its CBDC trials available in 23 cities including Shanghai, Beijing, and Shenzhen. Residents of this city were allowed, in fact encouraged to pay for goods and services with the e-CNY, China-Briefing had said at the time.

President Xi Jinping’s government is trying out different ways to advertise the uses of the e-CNY CBDC.

In December last year, the Chinese government allowed existing CBDC users to gift CBDCs instead of cash gifts to each other around the New Years celebration.

China is not the only country that is accelerating its CBDC efforts. India has also entered into an advanced phase of testing its e-Rupee digital currency wherein select banks and retailers are helping testers facilitate payments. In the coming days, India will expand CBDC uses in more cities.

After India and China, Pakistan and Hong Kong are also pacing towards launching their respective CBDCs.

Pakistan plans to release its digital currency by 2025, the country’s central bank, the State Bank of Pakistan (SBP) had decided to select and licence electronic money institutions (EMIs) to issue e-money to facilitate digital payments.

The administration of Hong Kong is currently working on the roadmap to introduce the e-HKD CBDC to its estimated population of over 7.5 million in the coming months.

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