Tin Foil Hats, Economic Reality and the Total Perspective Vortex

[Joe King]

The BIS published guidance for central banks wanting to implement a CBDC that can facilitate offline transactions. I did not think such a thing would work. I'll have to explore this handbook when I get a chance.

BIS releases handbook for offline CBDC payments

The Bank of International Settlements has released a comprehensive handbook to help countries develop systems for offline CBDC payments.

www.kitco.com

Why would it not work?

To have cbdc's truly be able to replace cash, it would have to be able to work offline.
...just not fully offline, as in forever.

Digital dollars could be exchanged between users offline, but as soon as either wallet were back online, the transaction would register with the mother ship.
Ie: your wallet/device would need to be pre-loaded with digital dollars that you can then transfer to someone else's device offline.

 

[pmbug]

Why would it not work?
...

If a CBDC system employs the same framework as any existing cryptocurrency, transactions have to be recorded in a blockchain (distributed ledger). The whole point of consensus models (proof os work, proof of stake, etc.) is to prevent double spending issues (whether honest mistakes or dedicated network attacks).

I don't currently understand how a CBDC system can work with offline transactions and be secure against double (multiple) spending. Without transactions being recorded on the network, what is preventing an actor from spending they same balance multiple times? It might get resolved once access to the network is available, but that isn't going to help folk/merchats that accepted offline payments that wont clear.

It's possible that the brains at the BIS have thought out a clever solution to the issue, but I have not read their paper yet.

 

[Voodoo]

It's possible that the brains at the BIS have thought out a clever solution to the issue, but I have not read their paper yet.

Yeah,

 

[Joe King]

If a CBDC system employs the same framework as any existing cryptocurrency, transactions have to be recorded in a blockchain (distributed ledger). The whole point of consensus models (proof os work, proof of stake, etc.) is to prevent double spending issues (whether honest mistakes or dedicated network attacks).

I don't currently understand how a CBDC system can work with offline transactions and be secure against double (multiple) spending. Without transactions being recorded on the network, what is preventing an actor from spending they same balance multiple times? It might get resolved once access to the network is available, but that isn't going to help folk/merchats that accepted offline payments that wont clear.

It's possible that the brains at the BIS have thought out a clever solution to the issue, but I have not read their paper yet.

A cbdc is not a crypto.

Did you see the graphic in the link you posted?



Notice in each scenario it requires purse A to be pre-loaded with "value"?

That "value" would necessarily be some small piece of code (encrypted and serialized) that represents each of the digital "dollars" loaded onto the device.
....and then those bits of code could be transferred to other authorized "purses". In that way it would be similar to how you transfer dollars offline. Ie: with a serialized piece of paper that originally came from the bank via a withdrawal from someone's account.

In this case, you would withdrawal a piece of code instead of a piece of paper.


What the device or purse as they call it, will consist of, is at this point unknown. It's obviously not going to work the same as the crypto's we already know and love.

How they will prevent hackers and others from trying to manipulate that withdrawn code, is at this point also unknown.

 

[pmbug]

Bold emphasis is mine:

Countries outside the US/UK/Europe bloc are leaving the dollar-based trade community at a rate which has begun to alarm US geopolitical strategists, and neocons in particular. Announcements of large trade deals moving away from the dollar arrive more or less daily, and are typically measured in multi-billions of dollar value. De-dollarisation is in progress, but how much of a threat is it to US geopolitical hegemony?

The trend, which was quietly in train before the Ukraine War but picked up speed when the US froze Russia’s non-resident currency reserves, is now being openly acknowledged as a strategic threat by senior people in the US Administration.

Last week US Treasury Secretary Janet Yellen, interviewed on CNN, conceded that using dollar-connected sanctions could undermine “the hegemony of the dollar”. But she was not worried, going on to say that the depth and liquidity of the US Treasuries market serves to defend its status, because the world has no practical alternative to dollar reserves and dollar trade settlements. Is her confidence justified?
...
Global trade grows more or less in line with GDP, and runs at approximately 22% of GDP. Therefore when global GDP grows 2% (adding $1,800bn), world trade may be expected to expand by $390bn. With a money velocity of 3x that would create the need for an additional $130bn of circulating cash.

If the dollar kept its 84% share of trade values that would in turn create a demand for 84% of $130bn in new foreign dollar holdings – or $109bn. So if the dollar keeps it share of global trade, and if global GDP grows, the US can hope to pay for just one tenth of its trade deficit by exporting dollars to global traders.

Those “ifs” are looking a bit soft. Even before the Ukraine war the dollar’s share of global trade was slipping, and it now looks like it might slip some more. The balance is sensitive. If the dollar share of global trade slipped to 80% that would reduce dollar use by $240bn (4% of $6,000bn of circulating capital), wiping out demand up-steps from trade growth.

A similar problem lurks in reserve flows. At present global foreign currency reserves excluding the US sit at around $10,000bn, with the dollar providing about half. Those reserves amount to 15% of non-US global GDP ($70,000bn in 2021). Non-US global GDP growth of 2% per year should add GDP of $1,400bn and, ceteris paribus, generate new global reserves of 15% of that, or $210bn. In the days when the dollar accounted for 60% of reserves the US could rely on a demand for 60% of that $210bn, covering another tenth of its deficit. But the dollar’s share of reserves is falling, and its share of new reserves is probably falling even faster.

So where does that leave Ms Yellen, trying to finance a $1,000bn trade deficit using that exorbitant privilege? Somewhat uncomfortable, it seems to me.

While the dollar appears to have shrugged off threats to its hegemony this year, future demand for reserve and trade dollars looks worryingly weak from Washington’s perspective. With the risk landscape enhanced by sanctions, demand weakening and US trade deficits likely to grow, is this the moment at which net flows into the dollar fade to a critical level?

That is certainly what China, Russia, Saudi, Iran and now Brazil appear to want. 2023 has seen a spate of announcements of bilateral trade deals to be priced and settled in yuan, Saudi riyals and rupees. Ms Yellen can take comfort that the sums involved are so far small by comparison with total world trade. Even the largest component, the China/Russia energy trade based on the ruble/yuan pair, is only $1.5bn per day, with a net working capital requirement of just $180bn. Other non-dollar currency pairs are harder to track but might take another $50bn away from the requirement for dollar-based working capital. Together those remove just 4% of demand for trade dollars – unwelcome but not intrinsically critical when seen from Washington’s perspective.

Ms Yellen’s argument is that for the rest of the world the original reasons for using the dollar, both for trade capital and for reserves, are as compelling as they have been for two generations – where else can an economy find the liquidity and scale of the dollar market? Some look to the euro, and more will do so in future, but the euro comes with the same “weaponisation” risk as the dollar, to which must be added higher regulation, a shallower market pool and weak foundations in a federation of states who are far from the best of friends. At least the dollar has one mind and one purpose.

Beyond the euro the pool of candidates thins dramatically. In theory the yuan could step up as a liquid source of reserves and working capital, but probably not any time soon with existing capital controls and Beijing’s unpleasant experience of capital flight the last time it eased those controls.

If we look at world currencies outside the Western/Nato/Japan bloc, and exclude China (for capital controls), and Russia (for high political risk) we find only around $20,000bn of GDP and $5,000bn of world trade, in economies which frequently have some form of capital controls, not inconsiderable political risks attached, and which collectively run a net trade surplus and have no need to export their currencies anyway. That landscape may explain why the core BRICS states have included discussion of a new currency – some sort of Shanghai Cooperation Currency Unit – at their forthcoming meeting in South Africa. We have been here before, when the European Commission invented the European Currency Unit (the ecu) as a precursor to the euro.

Sadly for the gold bugs, gold is not the answer, at least at any gold price this side of the stratosphere. ...

More (very long):

DON: Janet Yellen is relaxed about de-dollarisation, but is her calm justified? The numbers suggest not.

I guess we are all going to need space suits...

 

[pmbug]

...
When we say the dollar’s hegemony has peaked, we should be clear about what we mean. Hegemony is not about price, it is about the dollar’s place in the global financial and economic system. With the currency accounting for 40% of export invoicing, 45% of cross-border bank claims, 60% of FX reserves and 90% of FX transactions, it will take years before it’s dominance is seriously challenged.

Nonetheless, that process looks to have started, as following four charts demonstrate. In short, demand for the dollar is not rising as it normally would in response to the currency’s near-10% decline since October.
...

More:

Vanishing Demand Shows Why Dollar's Star Has Peaked | ZeroHedge

ZeroHedge - On a long enough timeline, the survival rate for everyone drops to zero

www.zerohedge.com

 

[searcher]

Backlash Against Weaponized Dollar Is Growing Across the World​

Fri, June 2, 2023 at 9:41 AM EDT

(Bloomberg) -- All around the world, a backlash is brewing against the hegemony of the US dollar.

Brazil and China recently struck a deal to settle trade in their local currencies, seeking to bypass the greenback in the process. India and Malaysia in April signed an accord to ramp up usage of the rupee in cross-border business. Even perennial US ally France is starting to complete transactions in yuan.

Currency experts are leery of sounding like the Cassandras who have, embarrassingly, predicted the dollar’s imminent demise on any number of occasions over the past century. And yet in observing this sudden wave of agreements aimed at sidestepping the dollar, they detect the sort of meaningful action, however small and gradual, that was typically missing in the past.

For many global leaders, their rationales for taking these measures are strikingly similar. The greenback, they say, is being weaponized, used to push America’s foreign-policy priorities — and punish those that oppose them.

Read the rest here:

Backlash Against Weaponized Dollar Is Growing Across the World

(Bloomberg) -- All around the world, a backlash is brewing against the hegemony of the US dollar.Most Read from BloombergAmazon Is in Talks to Offer Free Mobile Service to US Prime MembersChina Is Drilling a 10,000-Meter-Deep Hole Into the EarthRich Latin Americans Transform Laid-Back Madrid...

finance.yahoo.com

 

[searcher]

From the link:

In recent days, sound money champion Congressman Alex Mooney (R-WV) introduced H.R. 3712, the Digital Dollar Pilot Prevention Act – legislation that would block the Fed from unilaterally pursuing any form of central bank digital currency (CBDC) scheme.

"Congress cannot give an inch when it comes to CBDCs. CBDCs would threaten the liberties of law-abiding Americans and are being used by authoritarian countries right now to crack down on dissent," said Rep. Mooney.

H.R. 3712 is the latest in a growing backlash to central planners' designs to further centralize government control of currencies, including creating a greater ability to track all financial transactions, disallowing certain types of purchases, and even outright "turning off" a targeted individual's access to money.

Rep. Alex Mooney Aims to Block Fed's Digital Currency Scheme

In recent days, sound money champion Congressman Alex Mooney (R-WV) introduced H.R. 3712, the Digital Dollar Pilot Prevention Act – legislation that would block the Fed from unilaterally pursuing any form of central bank digital currency (CBDC) scheme.

www.soundmoneydefense.org

 

[pmbug]

...
Yet all these arrangements may soon be superseded by a new BRICS+ currency, which will be announced in Durban, South Africa, at the annual BRICS Leaders’ Summit Conference on Aug. 22–24.

The currency will be pegged to a basket of commodities for use in trade among members. Initially, the BRICS+ commodity basket would include oil, wheat, copper and other essential goods traded globally in specified quantities.

In all likelihood, the new BRICS+ currency would not be available in the form of paper notes for use in everyday transactions. It would be a digital currency on a permissioned ledger maintained by a new BRICS+ financial institution with encrypted message traffic to record payments due or owing by participating parties. (This is not a cryptocurrency because it is not decentralized, not maintained on a blockchain and not open to all parties without approval.)

The latest information from the BRICS working groups is that this basket valuation methodology is encountering the same problems that John Maynard Keynes encountered at the Bretton Woods meetings in 1944.

Keynes initially suggested a basket of commodities approach for a world currency he called the bancor. The difficulty is that global commodities included in any basket are not entirely fungible (there are over 70 grades of crude oil distinguished by viscosity and sulfur content among other attributes).

In the end, Keynes saw that a basket of commodities is not necessary and that a single commodity — gold — would better serve the purpose of anchoring a currency for reasons of convenience and uniformity.

Based on the impracticality of commodity baskets as uniform stores of value, it appears likely that the new BRICS+ currency will be linked to a weight of gold.
...
... the BRICS+ currency offers the opportunity to leapfrog the Treasury market and create a deep, liquid bond market that could challenge Treasuries on the world stage almost from thin air.

The key is to create a BRICS+ currency bond market in 20 or more countries at once, relying on retail investors in each country to buy the bonds.

The BRICS+ bonds would be offered through banks and postal offices and other retail outlets. They would be denominated in BRICS+ currency but investors could purchase them in local currency at market-based exchange rates.

Since the currency is gold backed it would offer an attractive store of value compared with inflation- or default-prone local instruments in countries like Brazil or Argentina. The Chinese in particular would find such investments attractive since they are largely banned from foreign markets and are overinvested in real estate and domestic stocks.

It will take time for such a market to appeal to institutional investors, but the sheer volume of retail investing in BRICS+-denominated instruments in India, China, Brazil and Russia and other countries at the same time could absorb surpluses generated through world trade in the BRICS+ currency.

In short, the way to create an instant reserve currency is to create an instant bond market using your own citizens as willing buyers.

The U.S. did something similar in 1917. From 1790–1917, the U.S. bond market was for professionals only. There was no retail market. That changed during World War I when Woodrow Wilson authorized Liberty Bonds to help finance the war.

There were bond rallies and Liberty Bond parades in every major city. It became a patriotic duty to buy Liberty Bonds. The effort worked, and it also transformed finance. It was the beginning of a world where everyday Americans began to buy stocks, bonds and securities as retail investors.

If the BRICS+ use a kind of Liberty Bond patriotic model, they may well be able to create international reserve assets denominated in the BRICS+ currency even in the absence of developed market support.

This entire turn of events — introduction of a new gold-backed currency, rapid adoption as a payment currency and gradual use as a reserve asset currency — will begin on Aug. 22, 2023, after years of development.
...

Rickards Drops Bombshell - Daily Reckoning

Why Aug. 22 Could Change Everything

dailyreckoning.com

h/t @Lancers32 - https://www.pmbug.com/threads/the-lunatic-fringe-market-and-trade-chat.4019/post-72560

It was my understanding that the August BRICS meeting was going to discuss the BRICS currency as more of an effort to lay the groundwork of agreement in how it should be designed/implemented. Rickards is saying that those details are being worked out right now and the August meeting will announce the result. I'm not sure if he's basing this on solid info or speculation. It does not mesh with the reports that I have read on the subject.

 

[Chigg]

Do you believe BRICS+ bonds will be be available for purchase in the good ol' USA? If so would you buy them?

 

[pmbug]

Jan Nieuwenhuijs' latest:

This article is a primer on the Chinese gold market, more specifically the Shanghai International Gold Exchange (SGEI). The SGEI facilitates “offshore” gold trading in renminbi and can play a crucial role in de-dollarization, as it allows countries to use renminbi as a trade currency that can be converted into gold without affecting China’s balance of payments. De-dollarization can be accomplished by using yuan to settle international trade and store surpluses in gold through the SGEI.
...
Conclusion

As demonstrated, gold trading in renminbi on the SGEI can be compared to offshore gold trading in the London Bullion Market with US dollars. As such, the SGEI is part of China’s ambitions to internationalize the renminbi to the detriment of the dollar.

Many commentators in the financial blogosphere state China’s closed capital account is holding back the offshore renminbi market from competing with the Eurodollar (offshore dollar) market. True, though PBoC swap lines promote the international use of renminbi, and as Zoltan Pozsar noted in the In Gold We Trust 2023 report: “China has a swap line with everybody.” With which he meant thirty-two counterparties.
...

More (long):

The Shanghai International Gold Exchange and Its Role in De-Dollarization

This article is a primer on the Chinese gold market and the Shanghai International Gold Exchange (SGEI). De-dollarization by using yuan to settle international trade and store surpluses in gold through the SGEI is discussed.

www.gainesvillecoins.com

 

[pmbug]

South Africa may abandon its role as host of this year’s Brics summit in an attempt to avoid international pressure to arrest the Russian president, Vladimir Putin, who is wanted by the international criminal court on charges of war crimes.

In a flurry of diplomatic activity around Ukraine, South Africa with five other African states is trying to garner support for a new peace plan. South Africa’s president, Cyril Ramaphosa, on Saturday briefed Chinese leader, Xi Jinping, on the upcoming visit by African leaders to Russia and Ukraine in an attempt to end hostilities. China has its own peace mission under way, and it is not clear what the Africa mission might add.

Ramaphosa has recruited Zambia, Senegal, Republic of Congo, Uganda, and Egypt to join his peace delegation.

As a party to the Rome statute, the treaty underpinning the court, Pretoria would be required to arrest Putin and then send him to The Hague for trial.

But China and India, if they hosted the summit, would not face the same obligation, leading some South African officials to suggest handing the summit to Beijing. Brazil, the fifth member of Brics (Brazil, Russia, India, China and South Africa) is also a party to the court, so faces the same dilemma as South Africa.
...

South Africa may seek way out of hosting Brics summit over Putin arrest

Pretoria would be required to arrest Putin if he attended and send him to The Hague for trial on war crimes charges

www.theguardian.com

Maybe the August BRICS meeting doesn't happen at all?

 

[pmbug]

Paying interest on or surcharges for using a digital euro would be banned under a draft law seen by CoinDesk, and set to be proposed by the European Commission on June 28.

The proposed central bank digital currency (CBDC) would have to be available for cash-style offline payments from day one, and users shouldn’t be able to program it to limit onward use, the leaked bill said.

“The digital euro shall be available for both online and offline digital euro payment transactions as of the first issuance of the digital euro,” said the text viewed by CoinDesk. The level of privacy for offline, face-to-face use should be “comparable” to withdrawing banknotes at an ATM, it said.

For offline transactions, “neither the European Central Bank nor the payment services providers will gain access to personal transaction data,” though banks who distribute the currency can send financial crime authorities details of how accounts are funded if they suspect money laundering.

Privacy emerged as the number one area of public concern in a 2021 ECB survey, with precedents from China leading many to worry a CBDC could lead to large-scale state snooping.

The EU is one of several jurisdictions worldwide, including the U.S. and U.K., considering whether to issue fiat currency in digital form. After a long period of investigation, the ECB is set to take a decision on whether to press ahead with the CBDC later this year, though executive board member Fabio Panetta has said a decision on proceeding should be a political one rather than for central bankers alone.

Any legislation needed to underpin the CBDC would have to be agreed by the European Parliament, where lawmakers have proved somewhat skeptical, and governments who meet in a body called the Council, who seem unlikely to nix the project all together.

“The Council will not decide or formulate a joint opinion on whether a digital euro should be introduced, at least not in any near future,” a senior EU official, speaking on condition of anonymity, said ahead of talks that are set to continue Thursday. “I would not expect the ECB to go forward against a very skeptical bunch of ministers.”
...
A version of the draft seen by CoinDesk is set to be approved by the commission at a June 28 meeting, alongside a proposal on the legal status of cash, according to a schedule published by the EU’s executive branch.

More:

EU’s Leaked Digital Euro Bill Outlaws Interest, Large Holdings, Programmability

The central bank digital currency must be usable offline from day 1 to safeguard privacy, the draft law says.

www.coindesk.com

 

[searcher]

RABAT, June 19 (Reuters) - The International Monetary Fund (IMF) is working on a platform for central bank digital currencies (CDBCs) to enable transactions between countries, IMF Managing Director Kristalina Georgieva said on Monday.

"CBDCs should not be fragmented national propositions... To have more efficient and fairer transactions we need systems that connect countries: we need interoperability," Georgieva told a conference attended by African central banks in Rabat, Morocco.

IMF working on global central bank digital currency platform

The International Monetary Fund (IMF) is working on a platform for central bank digital currencies (CDBCs) to enable transactions between countries, IMF Managing Director Kristalina Georgieva said on Monday.

www.reuters.com

 

[pmbug]

The IMF isn't the only one working on that. SWIFT, BIS, et al all want to be the world's crypto SWIFT system. It occurs to me that if there are several global CBDC clearing systems, it will be hard for any one entity to hold the world hostage over economic sanctions like the SWIFT system does with dollar clearing presently.

 

[pmbug]

From hawkish pauses to rate hikes and dovish tones, the world's biggest central banks last week struck very different tones on monetary policy.
...
Taking all these different approaches together shows that not only seems there to be a new divergence on the right approach for monetary policy but it also illustrates that the global economy is no longer synchronized but rather a collection of very different cycles," Carsten Brzeski, global head of macro at ING Germany, told CNBC via email.
...

Rate cuts, hikes and pauses: The world's central banks just made very different decisions

Major central banks are taking very different approaches to monetary policy, as the global economy "is no longer synchronized," an expert said.

www.cnbc.com

The world's central banks had more or less worked in synchronized fashion since 2007 or so. Looks like that coordinated dance might be ending?

 

[pmbug]

BIS builds out "game-changing" blueprint for the future monetary and financial system​

Press release | 20 June 2023

• Programmable central bank money could knit together tokenised commercial bank money and assets on a single platform to enable transactions and contracts in real time.
• New financial infrastructure would be a game-changer, making possible new types of economic arrangement that could revolutionise the monetary and financial system.
• Eventual benefits would go beyond faster speeds and lower costs, to enable entirely new types of transaction, limited only by the ingenuity of public and private innovators.

A novel type of financial infrastructure could radically enhance the global financial system, argues a new report by the Bank for International Settlements (BIS). It would combine tokenised money and assets on a programmable platform, expanding the universe of economic arrangements to enhance the capabilities of monetary and financial infrastructures.

The special chapter of the Annual Economic Report 2023 details a blueprint for the future by rethinking the existing pillars of the current monetary system. A unified ledger would combine tokenised forms of central bank digital currency (CBDC) with tokenised bank deposits and other tokenised claims, opening up a new era in the joint development of the monetary system and the economy.

We are at the cusp of another major leap in the monetary and financial system, which will have far-reaching consequences for the economy and society at large. Bringing together central bank money, commercial money, and different assets on the same platform, all tokenised and interacting, opens up a whole new range of possibilities. This would be a game-changer in how we think about money and how transactions take place.

The chapter highlights how the future monetary and financial system will improve on the old and enable the new. Examples of possible innovations include:

• New methods for securities settlements that combine all the individual steps into one seamless transaction.
• Tokenised deposits with built-in regulatory checks that simultaneously settle in wholesale CBDC.
• Smart contract-enabled credit that reduces the cost of trade finance for smaller companies, improving global supply chains.
• Enhanced sharing of data on potential borrowers, using privacy-protecting technology, to expand access to credit for disadvantaged segments of the population.

The benefits would be limited only by the ingenuity of the public and private partners who innovate on the platform. The gains are not just incremental improvements. They address in a more fundamental way the incentive and informational problems that have stood in the way of better economic arrangements.

Central banks are working together, with other public authorities and the private sector to extend the possibilities offered by the monetary system and improve cross-border integration. The BIS is supporting these efforts with research and experimentation, fulfilling its role as a forum for international cooperation and innovation among central banks.

BIS builds out "game-changing" blueprint for the future monetary and financial system

Programmable central bank money could knit together tokenised commercial bank money and assets on a single platform to enable transactions and contracts in real time. New financial infrastructure would be a game-changer, making possible new types of economic arrangement that could revolutionise...

www.bis.org

The BIS has apparently discovered the use case for Avalanche (AVAX) and Ethereum (ETH) and wants to build their own centrally controlled version of it. I guess they will be competing with JP Morgan in that sense.

It's a really big pie...

... Bernstein said in a research report on Tuesday.

Tokenization is the process by which real-world assets are converted into blockchain-based tokens.

Bernstein estimates that the size of the tokenization opportunity could be as much as $5 trillion over the next five years, led by stablecoins and central bank digital currencies (CBDC), private market funds, securities and real estate.

Currency tokenization, via stablecoins and central bank digital currencies, will see application in on-chain deposits and payments, the report said, with about 2% of global money supply to be tokenized over the next five years, which is about $3 trillion, the report added.
...

Tokenization Could Be a $5T Opportunity Led by Stablecoins and CBDCs: Bernstein

About 2% of global money supply, via stablecoins and CBDCs, could be tokenized over the next five years, which is about $3 trillion, the report said.

www.coindesk.com

 

[pmbug]

Rickards at it again with definitive statements that read like massive speculation to me:

The Biggest Monetary Shock in 52 Years - Daily Reckoning

Circle This Date

dailyreckoning.com

tl;dr - BRICS+ will roll out a BRICS+ currency linked to gold by weight (unpegged). BRICS+ will drive the price of gold up to tank the dollar.

 

[searcher]

De-dollarisation would upend the global economy – Council on Geostrategy

George Magnus argues that the US dollar will remain the world’s dominant currency for the foreseeable future

www.geostrategy.org.uk

 

[pmbug]

The Fed keeps publicly dismissing the idea of developing a CBDC, but that isn't stopping them from actually exploring such developments.

New York Fed publishes results of proof-of-concept for wCBDC with major U.S. banks

(Kitco News) - The Federal Reserve Bank of New York's New York Innovation Center (NYIC) published the findings of a 12-week proof of concept (PoC) that explored the use of a digital dollar for interbank settlements.

www.kitco.com

 

[pmbug]

...
Friday, according to state-run RT, the Russian government has confirmed that Brazil, Russia, India, China and South Africa, also known as BRICS nations, will introduce a new trading currency backed by gold. The official announcement is expected to be made during the BRICS summit in August in South Africa.
...

Russia confirms BRICS will create a gold-backed currency

Kitco News' general-interest stories takes a look at what is making headlines in the marketplace and how that is impacting precious metals prices

www.kitco.com

 

[Goldhedge]

 

[pmbug]

Jan says the reports of BRICS backing new currency with gold aren't supported by any credible evidence:

Will BRICS Implement a Gold Backed Currency in August?

Although it’s likely BRICS nations are discussing creating a new currency, no agreement has been reached. Policy makers are denying the gold-backed currency is soon to be launched.

www.gainesvillecoins.com

This is in line with what I've been saying. I think some folks are putting the cart before the horse. I suspect the BRICS will announce very little real news on this next month. They are like to announce intentions or the formation of a working group to develop a plan.

 

[pmbug]

Zoltan Posner talks about the big picture. Mostly stuff everyone here likely knows already, but worth listening to as a lot of people listen when he speaks.



ZH summary of the interview here:

Zoltan Poszar On The Global Financial System's "Monetary Divorce" From Dollar Hegemony | ZeroHedge

ZeroHedge - On a long enough timeline, the survival rate for everyone drops to zero

www.zerohedge.com

 

[pmbug]

A BRICS currency will not be on the agenda of the bloc's summit in South Africa next month, but Brazil, Russia, India, China and South Africa will continue to switch away from the U.S. dollar, South Africa's senior BRICS diplomat said on Thursday.

"There's never been talk of a BRICS currency, it's not on the agenda," Anil Sooklal, South Africa's Ambassador at Large: Asia and BRICS, told a media briefing.

"What we have said and we continue to deepen is trading in local currencies and settlement in local currencies."

Brazil's President Luiz Inacio Lula da Silva and Russian foreign minister Sergei Lavrov are among BRICS leaders that touted the idea of a common currency as the bloc aims to challenge the western dominance of global finance amid Russia's sanctions-imposed exile after it invaded Ukraine last year.

This has pushed countries to find alternatives to the dollar, especially among non-U.S. allies.

However, India's foreign minister said earlier this month that currencies would remain "very much a national issue for a long time to come", while South Africa's central bank governor has pointed out that a common currency requires a banking union, a fiscal union and macroeconomic convergence.

"BRICS started a process that has been expedited as a result of the conflict, as a result of unilateral sanctions," Sooklal said. "The days of a dollar centric world is over, that's a reality. We have a multipolar global trading system today."

BRICS currency not on August summit agenda, South African official says

A BRICS currency will not be on the agenda of the bloc's summit in South Africa next month, but Brazil, Russia, India, China and South Africa will continue to switch away from the U.S. dollar, South Africa's senior BRICS diplomat said on Thursday.

www.reuters.com

Reports based upon rhetoric coming from Russia should be taken with a grain of salt apparently.

 

[Joe King]

BRICS currency not on August summit agenda, South African official says

A BRICS currency will not be on the agenda of the bloc's summit in South Africa next month, but Brazil, Russia, India, China and South Africa will continue to switch away from the U.S. dollar, South Africa's senior BRICS diplomat said on Thursday.

www.reuters.com

Reports based upon rhetoric coming from Russia should be taken with a grain of salt apparently.

And apparently Brazil too.

"Brazil's President Luiz Inacio Lula da Silva and Russian foreign minister Sergei Lavrov are among BRICS leaders that touted the idea of a common currency"

 

[searcher]

Aug 17, 2023

• Chinese officials told state-run banks to intervene in currency markets this week to limit yuan volatility, per Bloomberg.
• Banks are swapping dollars for yuan, while officials are also weighing tools to prevent depreciation of the currency.
• The yuan is down about 2.4% against the dollar this month, and 6% in 2023.

China's state-run banks are swapping dollars for yuan as officials tell them to intervene in currency markets

Chinese authorities reportedly told state-run banks to intervene in currency markets this week to limit volatility.

markets.businessinsider.com

 

[searcher]

BRICS expansion and what it means for the US dollar​

17 August 2023

The BRICS grouping of major emerging economies, Brazil, India, China, South Africa and Russia, is holding its fifteenth summit later this month. Up for discussion: an expansion of the bloc, greater use of local currencies and the possibility of a BRICS currency which may have the potential to challenge the dominance of the US dollar.

Any expansion of the BRICS grouping could determine the speed with which the bloc adopts commercial and financial systems outside of the dollar sphere. Speculation is rife as to how many countries, if any, will join the club – for the first expansion in a decade. In order to evaluate how the political ambitions correlate with underlying economic trends, we take a closer look at the overall evolution of the US dollar’s role in the various areas of the global economy and markets. Here are the observations so far:

https://think.ing.com/articles/brics-expansion-and-what-it-means-for-the-us-dollar/#anchor-in-this-entry

Link to full report: https://think.ing.com/uploads/reports/Dedollarization_THINK_August_2023_-_FINAL_(RB)_1.pdf

 

[searcher]

(Kitco News) - Credit card giant Mastercard has created a new partnership program to explore the benefits and limitations of central bank digital currencies (CBDCs) with seven prominent crypto and FinTech firms, it announced on Aug. 17.

Mastercard said that while 93% of the world’s central banks are working on CBDCs, but “their efforts haven’t captured the public’s attention — for better or, more recently, for worse — like cryptocurrencies have.” But the payment giant said that CBDCs are gaining momentum and have “the potential to have an even bigger impact on our everyday lives.”

Mastercard launches CBDC partner program including Ripple, Consensys, Fireblocks

(Kitco News) - Credit card giant Mastercard has created a new partnership program to explore the benefits and limitations of central bank digital currencies (CBDCs) with seven prominent crypto and FinTech firms, it announced on Aug. 17.

www.kitco.com

 

[pmbug]

Looks like the effects of China's economic issues are starting to ripple out a bit more (affecting their monetary policy). I would imagine that is going to be a setback or headwind for any potential BRICS currency plan.

 

[pmbug]

BRICS summit has begun and it looks like there is a lot of (unofficial) mixed messages regarding the BRICS currency idea. Bottom line AFAICT - it doesn't look to be something they are rolling out any time soon.

As the 15th BRICS summit gets underway in Johannesburg, South Africa today, the prospect of a common currency for the bloc continues to generate interest both inside and outside the bloc, even as key voices attempt to redirect the conversation towards trade and bond issuances in local currencies.

On Tuesday, Brazil's President Lula da Silva reignited talk about a BRICS currency when he defended the idea, saying on a livestream that the currency would not be aimed at "rejecting" the U.S. dollar, but would instead be used to facilitate trade between the emerging nations.

"We want BRICS to be a multilateral institution, not an exclusive club," Lula said, adding that the bloc should not be seen as a challenger to the existing power structure. "We do not want to be a counterpoint to the G7, G20 or the United States," Lula said. "We just want to organize ourselves."
...
But other BRICS members are resisting the common currency narrative. On Monday, Indian Foreign Secretary Vinay Mohan Kwatra delivered a special briefing to the media in which he downplayed the prospect of the BRICS countries developing a common currency to rival the U.S. dollar.

“The substantive part of trade and economic exchanges and discussions that have been a part of BRICS discussions, have so far, in a major way, focused on how to increase trade in respective national currencies,”Kwatra said, adding that this “is considerably different from a common currency concept.”

Kwatra added that “common currency discussions have several prerequisites,” which would need to be met before discussions about a common currency framework could even begin. “The discussion framework in BRICS and the substance of that discussion framework in BRICS have focused principally on trade within national currencies," he said.
...

BRICS kicks off as common currency, de-dollarization steal the spotlight

(Kitco News) - As the 15th BRICS summit gets underway in Johannesburg, South Africa today, the prospect of a common currency continues to generate interest both inside and outside the bloc, even as key voices attempt to redirect the conversation towards trade and bond issuances in local currencies.

www.kitco.com

 

[<SLV>]

BRICS summit has begun and it looks like there is a lot of (unofficial) mixed messages regarding the BRICS currency idea. Bottom line AFAICT - it doesn't look to be something they are rolling out any time soon.

BRICS kicks off as common currency, de-dollarization steal the spotlight

(Kitco News) - As the 15th BRICS summit gets underway in Johannesburg, South Africa today, the prospect of a common currency continues to generate interest both inside and outside the bloc, even as key voices attempt to redirect the conversation towards trade and bond issuances in local currencies.

www.kitco.com

How embarrassing for Rickards.

 

[TheRealZed]

BRICS summit has begun and it looks like there is a lot of (unofficial) mixed messages regarding the BRICS currency idea. Bottom line AFAICT - it doesn't look to be something they are rolling out any time soon.

BRICS kicks off as common currency, de-dollarization steal the spotlight

(Kitco News) - As the 15th BRICS summit gets underway in Johannesburg, South Africa today, the prospect of a common currency continues to generate interest both inside and outside the bloc, even as key voices attempt to redirect the conversation towards trade and bond issuances in local currencies.

www.kitco.com

The goldbug world got worked up over a self generated meme... well, dang, that has never happened before. What is the world coming to?

Just sitting back and watching the show down here... the writing is getting better, but the tropes remain the same.

 

[TheRealZed]

Re BRIC's settlement currency.

When/if it comes, almost no one will see the move coming. The most you will get is some odd unsatisfactorily explained trading in say the USD or gold, much like options in airlines pre 911... someone always knows!

 

[pmbug]

...
The BRICS alliance — which is composed of Brazil, Russia, India, China and South Africa — is set to invite Argentina, Egypt, Ethiopia, Iran, Saudi Arabia and the United Arab Emirates to join, Ramaphosa said in a speech published on the X social media platform, previously known as Twitter.

Their membership would take effect from Jan. 1, 2024.
...
A combined 23 countries have formally applied for BRICS membership, including the six that Ramaphosa said were hereby invited. Other major African players, such as Nigeria and Ghana, have expressed informal interest.
...

Emerging economies group BRICS invites 6 new members, including Saudi Arabia and Iran

The BRICS economic coalition of emerging markets has decided to extend membership invitations to six nations.

www.cnbc.com

 

[pmbug]

...
“No one has tabled the issue of a BRICS currency, not even in informal meetings,” South African finance minister Enoch Godongwana said in an interview on Thursday. “Setting up a common currency presupposes setting up a central bank, and that presupposes losing independence on monetary policies, and I don’t think any country is ready for that.”

The bloc's leaders did announce that their finance ministers would be tasked with exploring the issues of local currencies, payment instruments and platforms, and will report back in a year.

“It’s not an alternative to SWIFT,” Godongwana said of the potential BRICS payment platform. “It is a payment system which facilitates a deepening of the use of local currencies.”
...

BRICS picks winners and losers as Russia looks to make its mark

(Kitco News) - The world and the markets continued to digest the implications of the latest BRICS summit in Johannesburg, South Africa, which concluded on Thursday with the announcement that it had accepted six new members into the fold, while Russia wasted no time pushing its allies and...

www.kitco.com

Seems like speculation on a BRICS currency has been premature.

 

[Joe King]

Seems like speculation on a BRICS currency has been premature

They were the ones who first said anything about it. The speculation was only started due to their statements.

 

[pmbug]

...
When the Fed giveth by means of zero rates and money creation (QE), it floods the international system with cheap funding and sets off destabilising credit booms.

When the Fed taketh by driving real rates through the roof and destroying money (QT), it drains global liquidity and tortures dollar debtors everywhere. It overwhelms other central banks trying to navigate the reefs – even in Europe or China – and imposes a de facto monetary policy on countries whether they want it or not.

The effects can be violently pro-cyclical and malign. Ultimately it “blows back” into the US economy. That is the risk we face now as the Fed pushes half the world into a credit crunch by the most aggressive monetary tightening in 40 years.

We badly need other currencies to step up to the plate. None is fit for purpose. As the saying goes, Europe is a museum; Japan is a nursing home; and China is a prison.
...
The painful lessons of the half-formed euro seem to have been entirely forgotten or never learned. Few Brics ideologues recognise what it takes to forge a monetary union and – much harder – to make it work.

The key eurozone states are all democracies. They are broadly aligned on foreign policy, and all are Nato members. They have a shared legal and commercial Acquis, drafted by a shared parliament and a shared executive, under a shared supreme court, in a union with collective institutions dating back to 1957. Member states have no veto over swathes of policy.

Yet even this level of integration proved too little for a functional currency.

One-size-fits-all interest rates for economies with moderately different structures and trend growth rates led to massive intra-EMU trade and capital imbalances. The bloc lurched from one crisis to another, dividing Europe into hostile camps of creditor and debtor nations, all ending in an investment collapse and an economic lost decade.

The Brics have infinitely less in common.

Some are commodity importers, some are exporters. Some are democracies, some are dictatorships at daggers drawn with democracy. China and India are on opposite sides of Asia’s strategic divide. None is willing to submit to joint laws, joint courts and anything like a joint executive, all sine qua non for the management of a currency.
...

More:

The Brics currency ignores all the traumatic lessons of the half-baked euro

Few of the group’s ideologues recognise what it takes to forge a monetary union – and make it work

www.telegraph.co.uk

tl;dr: BRICS currency appears to be a fantasy. That's a view that I largely held when the subject first appeared on my radar. However, the kiss and play nice measures between Iran and Saudi Arabia indicate to me that there is some real political will to work on the project, It's obviously not imminent, but I also don't think it is dead or impossible.

 

[pmbug]

Follow up to the SWIFT/Chainlink story:

Brussels, 31 August, 2023 – Swift today released results from a new series of experiments that show its infrastructure can seamlessly facilitate the transfer of tokenised value across multiple public and private blockchains. The findings have potential to remove significant friction slowing the growth of tokenised asset markets and enable them to scale globally as they mature.

While tokenisation is in its infancy, 97% of institutional investors believe it will revolutionise asset management and be a positive force in the industry[1], not least because of its potential to increase efficiency, reduce costs and, by enabling fractional ownership, open up opportunities to more investors.

One issue challenging investors and institutions, however, is that tokenised assets are managed on different blockchains, each with its own functionality and liquidity profile. Interoperability between these blockchains is crucial, otherwise financial institutions must build connections to each platform, creating significant operational challenges and cost.

Working with more than a dozen major financial institutions and market infrastructures and Chainlink, a leading Web3 services platform, Swift has successfully demonstrated that it can provide a single point of access to multiple networks using existing, secure infrastructure, thereby significantly reducing operational challenges and investment required for institutions to support the development of tokenised assets.

The experiments are part of Swift’s wider strategy to ensure secure, global interoperability as new technologies and platforms emerge. They build on work over the past few years to show how Swift infrastructure could support the financial community in interconnecting Central Bank Digital Currencies (CBDCs) and other digital assets with new and existing payments systems.

Tom Zschach, Chief Innovation Officer at Swift, said: “Interoperability is at the heart of everything we are doing at Swift to facilitate the seamless flow of value across the world in the face of increasing fragmentation. For tokenisation to reach its potential, institutions will need to be able to seamlessly connect with the whole financial ecosystem. Our experiments have demonstrated clearly that existing secure and trusted Swift infrastructure can provide that central point of connectivity, removing a huge hurdle in the development of tokenisation and unlocking its potential.”

About the experiments

Swift collaborated with several major financial institutions on the experiments, including Australia and New Zealand Banking Group Limited (ANZ), BNP Paribas, BNY Mellon, Citi, Clearstream, Euroclear, Lloyds Banking Group, SIX Digital Exchange (SDX) and The Depository Trust & Clearing Corporation. Chainlink was used as an enterprise abstraction layer to securely connect the Swift network to the Ethereum Sepolia network, while Chainlink’s Cross-Chain Interoperability Protocol (CCIP) enabled complete interoperability between the source and destination blockchains.

In addition to demonstrating that existing Swift infrastructure can provide a secure, scalable way for financial institutions to connect to multiple types of blockchain, they advanced understanding around the technical and business requirements for interacting with business and public blockchains. The experiments also explored the value of a blockchain interoperability protocol for securely transferring data between existing systems and a potentially unlimited number of blockchains.

The experiments looked at the design and technical development of a solution and considerations around data privacy and governance, operational risk, and legal liability. Transfers of simulated tokenised assets took place – between two wallets on the same public Distributed Ledger Technology network; between two wallets on different public blockchains; and between a public and private blockchain network.

Swift will continue to work with the financial community to understand the most concrete use cases for tokenised asset adoption and will prioritise its efforts accordingly. It is anticipated that the most compelling case, in the near term, will be in the secondary trading of non-listed assets and private markets.

The full report can be found here.

Download resource file | Swift

Swift

www.swift.com

Swift unlocks potential of tokenisation with successful blockchain experiments | Swift

Cooperative demonstrates secure and scalable way to connect multiple blockchains for movement of tokenised assets around the world Swift can provide single point of entry for financial institutions moving tokenised assets while leveraging existing secure infrastructure Experiments are part of...

www.swift.com

According to that press release, the experiment was not limited to CBDCs. It actually tested transactions across an Ethereum blockchain.

 

[pmbug]

...
Russia will be assuming the BRICS chairmanship on Jan. 1, and the bloc finance ministers’ new mandate would seem to set Russian President Vladimir Putin up for a major currency announcement when his country hosts the next BRICS summit in October of 2024.
...

BRICS nations may be stockpiling gold to support new currency - DailyFX.com

(Kitco News) - China and Russia may be setting aside some of their massive gold production to support a new currency to rival the U.S. dollar, according to Daniel McCarthy, Strategist at DailyFX.com.

www.kitco.com