Posted on

Bank of Thailand Develops Cryptocurrency Pilot Based on R3 Technology

The Bank of Thailand (BoT) – the country’s central bank has announced that it has made significant progress on its cryptocurrency pilot program. The country’s apex bank’s planned completion date for phase one of the project is Q1 2019.

Project Inthanon

In a press release published on Tuesday (August 21, 2018), the BoT said that it had secured partnerships with eight Thai-based financial institutions. The purpose of these collaborative efforts, according to the bank is to facilitate the creation of Project Inthanon – a central bank digital currency (CBDC). The plan is to have the CBDC run on R3’s proprietary distributed ledger technology (DLT) platform – Corda.

According to the press release:

The outcome and insights from Project Inthanon will contribute to the design of Thailand’s future financial market infrastructure. This is in line with similar projects embarked upon by other central banks such as the Bank of Canada, the Hong Kong Monetary Authority and the Monetary Authority of Singapore. In addition to Project Inthanon, the BOT is conducting a DLT proof of concept for scripless government savings bond sale to improve operational efficiency.

The BoT plans to conclude, in tandem with its partners, the design, development, and testing of a proof-of-concept prototype for Project Inthanon. This prototype will facilitate domestic wholesale fund transfer via the CBDC. Most of the preliminary testing activities will focus on liquidity saving mechanisms, as well as risk management strategies. Phase one should be completed before the end of March 2019. Upon completion, the BoT plans to publish a detailed summary of the project.

Cryptocurrency in Thailand

While the BoT continues in its push to develop robust blockchain-based financial solutions, the cryptocurrency industry in the country continues to feel the impact of a few sweeping developments in the past few months. Beginning in June, the government released a detailed framework for cryptocurrency operations in the country covering both trading and initial coin offerings (ICOs).

The Thailand Securities and Exchange Commission (SEC) also approved seven cryptocurrencies while setting financial benchmarks for crypto exchanges and brokers as well as projects looking to carry out ICOs in the country. Earlier in August, the Commission also approved seven cryptocurrency exchanges.

What do you think about project Inthanon? Will the Thai Central Bank launch a state-issued digital currency? Keep the conversation going in the comment section below.

loading…

Posted on

Central Bank Crypto Could Bring Economic Gains: Bank of Canada Paper

Central bank-issued cryptocurrency can potentially bring economic welfare gains for Canada and the U.S., according to a central bank researcher.

In a working paper published Thursday, the Bank of Canada’s S. Mohammad R. Davoodalhosseini states that introducing a central bank digital currency (CBDC) “can lead to an increase of up to 0.64 percent in consumption for Canada and up to 1.6 percent for the US, compared with their respective economies if only cash is used.”

At the moment, Davoodalhosseini says, a key question to the “many” central banks currently mulling the option of issuing a CBDC is whether cash and a digital form of fiat currency should co-exist, and if so, how to maintain an “optimal” monetary policy.

Based on detailed modeling and mathematical calculations, the researcher argues in the paper that a country’s economic welfare – at least for Canada and the U.S. – might be better off by substituting cash with a CBDC, provided implementation is not extremely costly.

He wrote:

“Having both cash and CBDC available to agents (consumers) sometimes results in lower welfare than in cases where only cash or only CBDC is available. This fact suggests that removing cash from circulation may be a welfare-enhancing policy if the motivation to introduce CBDC is to improve monetary policy effectiveness.”

The paper further states that, by introducing a CBDC, central banks could have a higher level of flexibility in adjusting current monetary policy.

“This is because the central bank can monitor agents’ portfolios of CBDC and can cross-subsidize between different types of agents, but these actions are not possible if agents use cash,” it says.

The paper’s quantitative approach follows a previous December 2017 effort by other researchers from Canada’s central bank to gauge the value of offering a CBDC over cash – work that took a more qualitative look at the pros and cons.

CoinDesk reported at the time that the researchers argued that the potential benefits of a CBDC may vary between developed and developing economies.

Bank of Canada image via Shutterstock

The leader in blockchain news, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups.

Posted on

US Congressman Calls for Ban on Crypto Buying and Mining

A U.S. lawmaker has called for a blanket ban on cryptocurrency buying.

Congressman Brad Sherman is no stranger to controversial statements on the subject – back in March he called cryptocurrencies “a crock” – and during the Wednesday hearing of a subcommittee for the House of Representatives Financial Services Committee, he went so far as to advocate keeping Americans out of the market entirely.

“We should prohibit U.S. persons from buying or mining cryptocurrencies,” the California Democrat declared. He added that, beyond cryptocurrencies being potentially used as a form of money in the future, it can currently be used by tax evaders and rogue states seeking to bypass U.S. sanctions.

One of the panelists, Norbert Michel, director for the Center for Data Analysis at the Heritage Foundation, pushed back against the idea that criminal use should define cryptocurrencies as a whole.

Michel told the subcommittee:

“Yes it is true that criminals have used bitcoin, but it’s also true that criminals have used airplanes, computers and automobiles. We shouldn’t criminalize any of those instruments simply because criminals used them.”

“Those components I believe are the main barriers to widespread adoption in the U.S,” he added.

No love for CBDCs

Though much of the hearing revolved around general monetary policy and history, the crypto-specific portions revealed a general opposition to the idea of a central bank digital currency (CBDC).

To quickly recap: a number of central banks around the world have been investigating the idea of using some of the technology concepts behind bitcoin and other cryptocurrencies as part of new, wholly digital money systems. The idea is that the tech can boost transparency and efficiency.

But some of those looking into the subject have warned that it could amplify the risk of bank runs, and several institutions have sworn off the idea entirely following their research.

Alex Pollock, a senior fellow at the R Street Institute, blasted the concept during Wednesday’s hearing, declaring it “a terrible idea – one of the worst financial ideas of recent times.”

Other committee members couldn’t help but agree that the idea, at the very least, raised more fundamental questions about how blockchain and cryptocurrencies actually work.

Congressman Bill Foster asked about blockchain immutability, saying “the promise of blockchain is a non-falsifiable ledger … [what] remains an unsolved problem in the digital world is how do you authenticate yourself?”

Payments boon

On a more positive note, Dr. Eswar Prasad, senior professor of Trade Policy at Cornell University, argued that the existence of cryptocurrencies had the potential to impact the financial services system, particularly the payments system, in positive ways.

According to Prasad, cryptocurrencies could “make transactions much easier … and bring down the cost,” but the benefits are limited at the moment.

Michel himself noted:

“It is certainly difficult to imagine a cryptocurrency replacing the U.S. dollar as long as the Federal Reserve acts as a moderately good steward of the national currency, but it is for this very reason that Congress should eliminate barriers that impede people from using their preferred medium of exchange.”

Ultimately, the hearing was cut short in order to make way for a House vote.

However, just prior to dispersing the attendees, chairman Andy Barr noted that cryptocurrencies will “continue to have a greater and greater impact on our financial system,” making it a topic the committee would likely have to “revisit” once again.

You can follow CoinDesk’s live coverage of the hearing on Twitter.

Image via House Financial Services Committee 

The leader in blockchain news, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups.

Posted on

Lawmakers to Discuss If Crypto Is 'The Future of Money' Next Week

Cryptocurrencies will take center stage once again on Capitol Hill next week.

The U.S. House of Representatives Financial Services Committee announced Thursday that it would host a hearing titled “The Future of Money: Digital Currency” on Wednesday, July 18.

Though the Committee, headed by Chairman Jeb Hensarling, has yet to announce a full list of participating witnesses, CoinDesk confirmed that the event will be livestreamed on its website.

Past hearings by the Committee have seen lawmakers discuss cryptocurrencies through the lenses of terrorism financing and fraudulent investments, as previously reported by CoinDesk.

That being said, it seems the topic of next week’s hearing is more geared towards debating the utility of cryptocurrencies as a form of money.

It is a timely topic in light of an increasing interest in cryptocurrencies as a potentially useful monetary tool for governments and more specifically, central banks, around the world. In March, the Bank of International Settlements, what some consider as the central bank to central banks, argued cryptocurrencies backed by central banks could in fact fuel faster bank runs during periods of financial instability.

Other countries including Canada, Finland and South Korea have weighed in on the matter, though responses have been mixed with trepidation.

Capitol Hill flags image via Shutterstock

The leader in blockchain news, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups.

Posted on

PBoC Filings Reveal Big Picture for Planned Digital Currency

The Digital Currency Research Lab at the People’s Bank of China has filed more than 40 patent applications so far – all as part of an aim to create a digital currency combining the core features of cryptocurrency and the existing monetary system.

Data from China’s State Intellectual Property Office (SIPO) revealed two new patent applications on Friday, pushing the total number submitted by the lab to 41 over the 12 months since its launch.

Each of the 41 patent applications focuses on a certain aspect of a digital currency system, and, when combined, would create a technology that issues a digital currency, as well as provides a wallet that stores and transacts the asset in an “end-to-end” fashion.

For instance, the most recently revealed patent application explains how the envisioned digital wallet would allow users to check any transactions made through the service, while earlier documents offered details on how the wallet can facilitate transactions.

The ultimate goal, according to PBoC’s patents, is to “break the silo between blockchain-based cryptocurrency and the existing monetary system” so that the digital currency can sport cryptocurrency-like features, while being widely used in the existing financial structure.

Last week’s patents further explain that the envisioned wallet would not be limited, like a typical cryptocurrency wallet, to merely storing the private key to a certain asset. Nor would it be like another mobile payment service that only reflects a number on an application’s front-end interface without users actually holding the assets in a peer-to-peer manner.

Instead, the patents indicates the wallet would store a digital currency issued by the central bank or any authorized central entity that is encrypted like a cryptocurrency with private keys, offers multi-signature security and is held by users in a decentralized way.

The research lab said in  one of the documents that it believes it is building a mechanism that makes a crypto-featured digital currency more applicable in the financial world.

The hybrid approach is also in line with opinions shared by the PBoC’s vice governor Fan Yifei and Yao Qian, the head of the research lab, who have both argued for a balance between the two polars of centralization and decentralization.

Overall, the patent applications filed so far signal the continuous efforts made by China’s central bank to develop its own central bank digital currency, as well as to potentially widen the application’s role among other central institutions.

The lab notably commented in a patent application released in November 2017:

“The virtual currencies issued by private entities are fundamental flaws given their volatility, low public trust, and limited useable scope. … Therefore, it’s inevitable for the central bank to launch its own digital currency to upscale the existing circulation of the fiat currency.”

Read one of the most recent patent applications below:

PBoC Digital Currency Research Lab by CoinDesk on Scribd

Chinese yuan image via Shutterstock

The leader in blockchain news, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups.

Posted on

The Fed Should 'Get Serious' About Crypto, Says Former FDIC Chair

The Federal Reserve should seriously consider its own crypto, the former head of the U.S. government’s deposit insurance corporation wrote in an op-ed last week.

In a piece published Friday by Yahoo Finance, Sheila Bair, the former chair of the US Federal Deposit Insurance Corporation (FDIC), emphasized the pressing need for the Federal Reserve Bank to seriously consider the prospects of a central bank issued digital currency (CBDC).

She warned:

“If it does not stay ahead of this technology, not only could banking be disrupted — but the Fed itself could also be at risk.”

A CBDC, in theory, would not have the same kind of culpability to large fluctuations in value given proper oversight and management by a centralized authority. Beyond this, Bair points out that centralized digital currencies would be “much more effective tools for conducting monetary policy to address economic cycles.”

Currently, the status quo allows the government to stimulate and slow economic activity in periods of recession and boom, respectively, through government-sponsored securities sales directed towards domestic banks.

But what if the “FedCoin” – a digital currency issued and backed by the Federal Reserve Bank, was held by all consumers? Then, changes to interest rates encouraging savings and in other times, spending, would be felt by consumers directly rather than through the policy changes of domestic banks.

Bair counters such a perceived benefit to centralized digital currencies by offering a potential downside. Credit availability. Consumers wanting to hold all of their wealth in CBDCs would naturally cause credit deficits if parameters are not put in place ensuring banks and other financial businesses remain competitive against a hypothetical “FedCoin”.

Bair’s comments on the viable use of CBDCs by the central bank are timely as government officials around the world are also chiming into the conversation considering the merits of cryptocurrencies like bitcoin in structure but state-controlled in vision.

Digital dollar concept image via Shutterstock

The leader in blockchain news, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups.

Posted on

R3 Researcher: Central Bank Blockchain Could Go Live In 2018

A form of central bank digital currency (CBDC) may go live in 2018.

At least that’s according to Antony Lewis, research director at global banking consortium and distributed ledger software startup R3, who issued the prediction during a panel discussion at the Deconomy event in Seoul, South Korea, on Wednesday.

“For wholesale use (of CBDC), I think we are looking at this year. We have had conversations with central banks who have mandates to fix certain payment problems, and one solution they look to is a blockchain type of platform,” Lewis said.

Yet, Lewis clarified that this does not mean consumers will have a new payment choice, per se. In fact, Lewis projected that such a cryptocurrency would be used only by select financial institutions to start.

In this way, Lewis argued such a system would likely even only be used in certain specific situations, such as in instances of disaster recovery due to their current limitations.

He argued:

“Don’t make your secondary (decentralized) system look like your primary (centralized) system. Otherwise If a primary system goes down in an attack, then all the attackers need to do is just to play the same trick. Then it’s not resilience, it’s just another IP address to attack.”

Other panelists weren’t as optimistic as Lewis in their projects, though they agreed on points.

Stanley Yong, global CBDC lead at IBM and a former CBDC researcher at Singapore’s central bank, for instance, said he believes that a blockchain system will be best applied to commercial banking.

“What central bank manages is the account of commercial banks. If it issues cryptocurrency to millions and billions of citizens, it will have to hold all these individual accounts, which inherently increases the market and credit risks,” Yong said.

Taking a different angle, Ian Grigg, a financial cryptographer, said it may not even be the fundamental role of central banks to issue a retail CBDC. Citing the Bank of England as an example, Grigg explained that the policy of the institution is to support the deposit of commercial banks.

As such, directly issuing a cryptocurrency to the public could undermine the deposit base of existing commercial banks, which subsequently will affect the loan market, Grigg said.

The view echoed past comments from the Bank of International Settlements, which in a previous report stated that a CBDC could give rise to “higher instability of commercial bank deposit funding.”

Still, while projections varied, there was an optimism that decentralized blockchain systems would replace existing banking systems, with Yong going so far as to state such systems are “due for retirement.”

Image via Wolfie Zhao for CoinDesk

The leader in blockchain news, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups.

Posted on

PBoC's Yao: Chinese Digital Currency Should Be Crypto-Inspired

A central bank-issued digital currency (CBDC) released by the People’s Bank of China should incorporate elements of cryptocurrencies, according to Yao Qian, who spearheads the central bank’s research in this area.

In his latest opinion piece, published by China business media outlet Yicai on Tuesday, Yao – who is director of the central bank’s Digital Currency Research Lab – further explained his vision regarding a technological approach towards the development of a CBDC.

Such features – including possible steps to boost privacy in transactions – would help give a future currency more of a competitive edge, he wrote, while acknowledging that the PBoC would likely centralize its issuance.

Yao argued:

“At the current phase, CBDC may mainly focus on digitalizing the fiat currency. But it’s inevitable for CBDC to integrate more features in the future. An approach that just rigidly mimics and digitalizes the fiat currency may undermine the competitive edge of CBDC in the long term.”

The lab director’s comments offer a new window into the thinking within China’s central bank on this issue. His commentary follows a January op-ed by Fan Yifei, the vice governor of the PBoC, which specifically distinguished CBDC from decentralized cryptocurrencies.

And yet Yao argues in his opinion that, in the long-run, a Chinese CBDC should nonetheless include some key features of cryptocurrency.

For example, he outlines a scenario in which a cryptocurrency wallet would be introduced to customer accounts among existing commercial banks which would utilize a dual-key mechanism maintained by both customers and banks – similar to the concept of public and private keys used in most cryptocurrencies.

In addition, Yao also said that a certain degree of anonymity can be adopted by a Chinese CBDC, arguing that the central bank should consider the advantage of a more private transaction environment for better user experience and privacy protection.

“[An] anonymous front-end with [a] real name back-end,” Yao wrote.

That line of thinking is perhaps shared by Fan, who previously argued in his op-ed that while a CBDC can be anonymous from the perspective of consumer-to-consumer payments, transparency would be vital within the central bank’s issuance system.

Yuan and bitcoin image via Shutterstock

The leader in blockchain news, CoinDesk is an independent media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. Have breaking news or a story tip to send to our journalists? Contact us at news@coindesk.com.