BitOoda Regulatory and Geopolitical Analysis, 5/18/2020: Racing Toward CBDC Retail Use

We have written previously about the growing momentum behind the Digital Dollar and policy actions we would like to see the U.S. pursue. This week, as part of our continuing efforts to look at the factors shaping the advancement of the digital asset ecosystem and broader societal adoption of crypto, we would like to focus on recent developments related to the use of CBDCs for retail payments:

  • The U.S. Office of the Comptroller of the Currency (OCC) floated the idea of allowing crypto companies to be licensed as federal financial institutions if they provide payment services, given that in his view “it looks a lot like crypto is banking for the 21st century.”
  • Visa filed a patent for a system that would allow central banks to create “digital fiat currency” on a blockchain, showing that firms in the electronic payments sphere are actively looking at digital currencies — both privately-issued and potentially managed by a central bank — as part of the overall evolution of money.
  • The launch of China’s CBDC pilot program has already been widely covered (including previous BitOoda assessments), and the early involvement of retail giants such as Alipay is a clear indication of the intended use of the system for retail and peer-to-peer transactions.
  • The European Central Bank is working on a “retail central bank digital currency.” What is interesting (and relevant to our arguments in this piece) about the ECB’s recent statements is that it contrasts a retail-focused CBDC with a “wholesale” CBDC, which it said would largely be “business as usual.”
  • The Digital Dollar Project continues to advocate for a tokenized U.S. dollar for use by the broader population, and the Bank of International Settlements also is discussing the potential “demise of cash” and “the value of having access to diverse means of payments.”

As digital asset markets continue to evolve, institutional participants and governments will look to regulated firms and platforms to partner in the continued digitization of economic activity in the U.S. and abroad. We are excited to be driving the development of the digital economic landscape through the introduction of new products, infrastructure, and market standards that will offer our clients the strategies they need to take advantage of this growing global adoption of digital assets.

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