CBDC UPDATE! Digital Dollar HOPELESSLY behind, Digital Euro NO to programmability, Digital Yuan four new features, Digital ID TradFi & crypto collab?

1. Digital Dollar: The US is HOPELESSLY behind!

2. Digital Euro update! Yes to privacy, no to programmability!

3. Digital Yuan update! Four new features you need to know

4. Digital ID: Can TradFi and Crypto collaborate?

Wishing you all a Happy Chinese New Year! Dall-E’s interpretation of “Chinese Year of the Rabbit”. Nicely done if I do say so! I love the way Chinese characters are reenvisioned as yellow graphical elements.

1. Digital Dollar: The US is HOPELESSLY behind!

Digital Dollar UPDATE! The US is HOPELESSLY behind!

Download: Here

This whitepaper from the non-profit Digital Dollar Foundation (DDF) is an eye-opener!?I’ve said for at least four years that the US is hopelessly behind on the “digital dollar.”?It is, and it's already too late!

?? The DDF calls CBDC "imperative" but does not address the root problem that the Fed sees CBDCs as a "solution looking for a problem:"

“It is imperative that the U.S. government consider ways to maintain the use of the dollar in digital global payment systems and develop a strategy related to the use of alternative payment systems.”

And that: “In the coming CBDC future, the United States should actively lead global discussions on governance, interoperability, security, privacy, and scalability standards, rather than reacting to foreign CBDC decisions.”

?? The DDF sees the US role as setting the standard setter, a role it cannot possibly play because it simply hasn’t researched CBDCs! What standard can the US possibly set with only two years of earnest CBDC research?

“The challenges posed by the e-CNY call for the United States to lead in setting global standards for CBDC, just as it was a leader in setting standards for the first wave of the Internet.”

?? And of course as the global leader in CBDC, China, setting standards through its participation in mBridge CBDC transfers did not escape notice:

“China may be well-positioned to begin setting the global CBDC standards agenda following its large role in driving Project mBridge. The influential role of the PBOC and the clear potential for a new global financial order that sidesteps U.S.-aligned conventional banking channels makes Project mBridge among the key cross-border CBDC initiatives to follow.”

?? But the DDF puts the final nail in the digital dollar’s coffin by tying the digital dollar to US values:

“The US should continue its CBDC exploration in a way that promotes democratic values of individual liberty, freedom of speech, personal privacy, limited government, and the rule of law.”

Takeaways:

• I like the DDF and they are correct to point out the urgency for action, but they see CBDC preserving the dollar's reign, not as the start of a new multipolar currency world.
• The US is in no position to set global CBDC standards.
• The DDF fails to address whether other countries even want US standards. Clearly, the EU does not!
• By tying the digital dollar to "values", the DDF is politicizing digital dollar use at a time of sanction fatigue.
• What country wants a values-based digital dollar that can be unilaterally and immediately sanctioned?
• The problem is that this ship has sailed!

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2. Digital Euro update! Yes to privacy, no to programmability!

Digital Euro UPDATE! YES to privacy, and a BOMBSHELL NO to programmability!

Download: Here

The European Council releases a “stocktake” on the digital euro and likes what it sees, even if it drops a bombshell on programmability.

?? YES TO PRIVACY:

“The digital euro design will ensure privacy of personal data and payments...

-The ECB will not have information on people’s holdings, their transaction histories or payment patterns.

-Data are only accessible to intermediaries for regulatory compliance.

-A risk-based approach could allow more privacy for less risky transactions.

-Offline digital euro could provide a level of privacy similar to cash. “

So far, the European Council is on target with past ECB documentation on the digital euro. The council shoots down the often repeated internet meme about CBDC that falsely states, “the government will have your payment data.”

Everything that the ECB and council have written shows that the digital euro will behave very much like the cards you have now, with your bank keeping your secrets.

For low-value transactions, the digital euro will deliver EVEN BETTER PRIVACY than cards, as payments will be anonymous and retain cash-like privacy. Fair-minded readers should be pleased with this solution and wait for the details to analyze.

?? NO TO PROGRAMMABILITY:

The EU council drops a bombshell and breaks with the ECB by saying “no” to programmability!

“As money, however, the digital euro should at all times and throughout the euro area be convertible at par with other forms of the euro, such as banknotes and commercial bank deposits. The digital euro, therefore, cannot be a programmable money.”

Expanding on programmability in the footnotes: “There would, for example, be no restrictions in the types of goods and services to be purchased, or restrictions in time when a digital euro can be used.”

This is interesting! Programmability can be embedded in CBDC at multiple levels. The council's broad approach to built-in programmability could disallow both big data analysis, critical to ECB money laundering efforts, and internal smart contracts.

Still, nothing in this statement prohibits the digital euro from being carried in separate add-on smart contracts. So it would be premature to say that programmability is dead. Let’s see what they come up with.

Programmability is a key feature in our digital future. We need it. Let there be no misunderstanding that in a digital future where “machines pay,” programmability is indispensable. How we get, it is the question!

Takeaways:

• The EU Council dropped a bombshell on programmability, but much depends on how the digital euro is programmed.
• The digital euro can still attain programmability through “added-on” smart contracts rather than “built-in.”
• Digital Euro privacy protections look good!
• EU is making great progress!

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3. Digital Yuan update! Four new features you need to know about

Digital Yuan update! Four things you need to know as PBOC's slow and steady roll-out continues.

Link to full article with my interview quotes: Here

Thanks to Timmy Shen from Forkast.News for this great opportunity to comment on the digital yuan and deal with speculation as to why the digital yuan isn’t a smash hit.

Why isn’t the digital yuan a SMASH hit?

I still can’t use it at my local coffee shop. Why? Simple, the digital yuan is in trials, and frankly, no one, including the PBOC, is in a hurry, nor should they be.

“Still, Turrin said the best way for the central bank to increase digital yuan adoption is to “ensure that the banks roll out to their commercial or retail customers the ability to accept digital yuan on their point of sale systems.” “That hasn’t happened yet and that’s the primary reason why I don’t feel the PBOC is in any particular rush or feels any great pressure to push digital yuan use,” Turrin added.

WeChat Pay and Alipay integration is key:

“It is very clear that the digital yuan must be usable on both WeChat Pay and Alipay,” Turrin told Forkast. “WeChat Pay is the dominant social network, so if you want to be able to send money to people, you have to be on WeChat. Alipay is probably marginally less important than WeChat, but because of its use in e-commerce, it is also an important place to be able to use the digital yuan.”

The digital yuan does not seek to replace WeChat Pay or Alipay, Turrin said, adding: “What it does strive to do is to give people a third payment option.”

The digital yuan’s four key new features:

1?? The PBoC has, for the first time, included the digital yuan in its official cash reports. There are 13.61 bn yuan (roughly $2 bn) in circulation, which represents roughly 0.13% of the 10.5 tn yuan in circulation.

2?? The digital yuan was just used to purchase securities for the first time! Soochow Securities enabled e-CNY payments on its mobile application, marking the first use case of the CBDC in securities market trade. Others are following. These are high-value transactions that do not overlap with Alipay or WeChat. A new market.

3?? The digital yuan app for android rolled out offline usage AND use with a dead battery! So you can still pay even with a dead battery or no signal!

4?? New trials include Hong Kong, the Guangxi pilot free trade zone, and a new project focused on ASEAN nations. Details on the ASEAN project are scarce.

Takeaways:

• Trial means just that. Acceptance is optional. I still can’t buy coffee with mine, so be patient.
• Bringing the digital yuan to ASEAN nations is huge! Details to follow.
• The PBOC is not under a lot of pressure to get the usage volume up.
• The PBOC is under pressure to avoid mistakes! The eyes of the world are on them and they know any error will be seized upon.

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4. Digital ID: Can TradFi and Crypto collaborate?

Digital IDs are coming and are the ONE area where TradFi and Crypto need to work together despite their enmity!

Download: Here

This brief report by JP Morgan’s Onyx is a solid read on the challenges facing Digital ID or "DID." The author’s concluding line is perhaps prophetic:

“[DID] standards will allow interoperability across a wide range of centralized and decentralized services. This ability to exist in both the old web space and the new one is key. Both usage models must coexist with each other in an environment as large, complex, and diverse as the web.”

Note the word "coexist." The DID solutions we need have to transcend Web 3, crypto, banks, and CBDC to perform for all of these different scenarios. This is why it is IMPERATIVE that crypto and TradFi work together on a solution.

While I don’t expect the collaboration between TradFi and crypto to be a happy one, I do expect it to be productive.

Now for the controversial part. With crypto’s massive failures in 2022 and regulators coming in for the kill, I would expect that the DIDs required for crypto will look a lot more like those required by TradFi than they may want!

Sorry crypto, but that’s just the reality of the situation!

Three key DID properties:

1?? Sovereignty

"In a Web3 environment, people control their own identity information. They decide who sees

it. They can grant that access at a more granular level, revealing facts about themselves on a need-to-know basis."

2?? Security

"When using the old model, you could not be certain how an organization stored your identity credentials or who it shared them with. This led to countless privacy breaches. Decentralization puts you in full control of your identity credentials and makes it accessible on your terms. It also means there are no single points of failure."

If you weren’t convinced you need a DID, you should be after reading this!

3?? Immutable and irrefutable

Encrypted records of digital identity signatures stored on the blockchain make it impractical for a malicious party to tamper with identity information, making it highly trustworthy.

Takeaways:

• We need DIDs yesterday, not just for CBDCs and a “cashless” future but to protect our data.
• DID will be controversial. Many of the same people up in arms over digital intrusion will also protest DIDs, the very tool we all need to regain control of our data!
• DIDs represent the best area for collaboration between TradFi and crypto.
• Crypto has no cards to play in the current regulatory environment; it must collaborate or have solutions imposed on it!

See how deep the “cashless” rabbit hole goes! (Rabbit holes and rabbit year are a nice touch, don't you think?)

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Rich Turrin is the international best-selling author of "Cashless - China's Digital Currency Revolution" and "Innovation Lab Excellence." He is number 4 on Onalytica's prestigious Top 50 Fintech Influencer list and an award-winning executive previously heading fintech teams at IBM following a twenty-year career in investment banking. Living in Shanghai for the last decade, Rich experienced China going cashless first-hand. Rich is an independent consultant whose views on China's astounding fintech developments are widely sought by international media and private clients.

Please check out my books on Amazon:

Cashless: HERE

Innovation Lab Excellence: HERE