Senate Banking Committee – CBDC

Senate Banking Committee and the CBDC Prospect

The Committee heard from witnesses about the possible role of a CBDC in the USA. Witnesses were both for an against and they highlighted the failure of cryptocurrencies due to high levels of price volatility and the sheltering aspect for illegal trade.

The only real consensus was that a Chinese style CBDC which would be used for suveillance would not be viable in the USA. There was some evidence about the MIT project with the Fed Reserve of Boston. 

There were views that a payment system should be competitive and hence in private hands; but the members seem to all agree the current system was too costly and slow – it needed reform.

There was also some evidence about the Digital Dollar project


Building A Stronger Financial System: Opportunities of a Central Bank Digital Currency.” The witnesses will be: Dr. Neha Narula, Director, Digital Currency Initiative, MIT; Mr. Lev Menand, Academic Fellow and Lecturer in Law, Columbia Law School; The Honorable J. Christopher Giancarlo, Senior Counsel, Willkie Farr & Gallagher; and Dr. Darrell Duffie, Adams Distinguished Professor of Management and Professor of Finance, Stanford University Graduate School of Business.




Legal Issues and CBDCs

A lawyer at the IMF presents some of the legal issues underpinning the “race” to implement CBDCs.


 “As any form of money, digital currency requires a sound legal basis. The legal treatment of Central Bank Digital Currencies depends on its design features. The distinction between account-based and token-based has significant implications.



Catalina Margulis at the IMF Legal Department presents the legal issues around two main forms of CBDCs – 

  • Account Based
  • Token Based

She also considers the legality of even issuing CBDCs despite the central banks being authorities in their respective jurisdictions.

The IMF analysed these aspects for 174 countries and 61 percent only allow the issuance of coins and notes. Of course, these laws restricting digital currency may easily be changed.

Account based CBDCs would offer normal account type of systems already widely used in banking.

Then an account holder would pay in and withdraw currency as is done commonly now for digital money (e-money). 

Under this arrangement, the central bank would have a liability when someone pays into their bank. 

The second framework discussed by the IMF is a token based one. This would involve the central bank just issuing tokens instead of notes and coins. 

These tokens would enter the economy and be traded in the same manner notes are traded.

Retailers would accept them, and then pay into a normal retail bank account. 

Under this framework, the central bank would have no account with the token holder.


IMF Video


Philippines – Digital Peso

BSP monitoring CBDCs

“We are currently preparing to undertake a study of its existing payments and settlement system vis-a-vis its digitalization agenda to assess any gaps that may be addressed by a CBDC, and its value proposition against existing payment system”

Bangko Sentral ng Pilipinas (BSP) announced it was examining CBDCs and monitoring global progress in that field. 

The announcement comes as many central banks including in Russia, Brazil, Indonesia, Turkey and more have declared clear interests in CBDCs. 


Benjamin Diokno


The BSP published an in-depth analysis of CBDCs in a long document.

Central bank digital currency (CBDC) has elicited immense interest among central banks in recent years. This is evident in the increasing number of central banks engaged in some form of work on CBDC. Many are undertaking conceptual research while some have progressed to proofof-concept experiments. A smaller number of central banks have already developed and implemented pilot tests of their CBDC. Various factors underpin the interest in CBDC. These include: i) rapid technological innovations in the financial sector; ii) emergence of new entrants into payment services and intermediation; iii) decline in the use of cash in some countries; and iv) increasing interest on privately-issued digital tokens (BIS, 2018). 

The BSP did highlight the possible lending problem with disintermediation of the financial system if CBDCs weaken the roles of retail banks. 

CBDC Index


PwC Global CBDC Index

PwC published its first index assessing CBDC progress globally. It was divided into two parts –

  • Retail CBDC (led by Bahamas)
  • Interbank CBDC (led by Thailand)

The document provides a high level overview of the work being done in CBDCs by the UK, China, Sweden and more.


“More than 60 central banks have already entered the central bank digital currency race. CBDCs will be a game-changer, providing access to alternative payment solutions for citizens and corporates, as well as reinventing financial market settlement and interbank monetary transactions.”


Digital Lira (Turkey)

The Digital Lira

The prospect of a central bank digital currency was made public in late 2020 with an expectation of pilot work in 2021.

Turkey has been tackling the rise of cryptocurrency adoption and banned bitcoin and many others in April 2021. 

Turkey has a large GDP exceeding 850 billion dollars making it within the top 20.

Turkey does have a university with a dedicated blockchain interest. 

“There is an R&D project started on digital money. At the moment, the conceptual phase of this project has been completed. We aim to start pilot tests in the second half of 2021.” Bank of Turkey 


Bank of Indonesia and the Digital Rupiah



“Payment System Innovations will be accelerated in order
to speed up digitalisation in financial sector as
well as national integration of economic and
finance digitalisation through various initiatives.”


The Digital Rupiah

In 2019, Indonesia’s central bank plans to digitize were made clear. The 5 initiative plan was announced; details provided that the following will be used – 

  • Open Banking APIs
  • Integrated Payment Interface
  • FMI (RTGS)
  • Integrated Reporting
  • SupTech and RegTech

On May 25, it was announced by the bank’s governor that a digital rupiah would be developed. 

No specific details about timelines, technologies, or specific goals were stated in the Governor’s announcement about Indonesia’s planned CBDC.

Indonesia ranks at 16th in the world for its GBP which exceeds a trillion dollars. GDP per capita is at 99 in the world. It is the 4th most populous nation in the world, and is in the G20. 

Indonesia’s 20 year economic development started in 2005 and by 2025 the 5 initiatives should have been implememented. 

Indonesia’s RTGS became operational in 2000.  It is part of the FMI in Indonesia which has – 

  • Central Counterparty (CCP)
  • Central Securities Deposities (CSD)
  • Electronic Trading Platform (ETP)
  • Securities Settlement System (SSS)
  • Trade Repository (TR)


Indonesia uses a retail based payment system called QRIS. This allows in-store QR scans to purchase goods. This allows international payments too, and real-time payments.

QRIS is part of the 5 initiatives and the payment systems infrastructure to be rolled out  by 2025.

Indonesia has the world’s largest Muslim population, and payments for zakat, infaq, alms (ZIA) were reported as 13 percent in 2019 of payments. QRIS may be used to enable these payments.

These raft of developments and ambitious plans for digitalization are especially relevant in Indonesia due to the large unbanked population and the dominance of cash. It is second to only India in cash dominance. 

A handful of wallets are dominating the e-wallets vertical in Indonesia – 

Perry Warjiyo paid references to the growing digitalization of Indonesian payments in his address to the 14th Bulletin of Monetary Economics and Banking. 

He also referred to financial deepening, which refers to the wider provision of financial services and liquid money. 

He also stated that digital currency must always be controlled by the central bank and not allowed to be in the private sector.

5 Initiatives


Bank of Mauritius and the Digital Rupee



Bank of Mauritius

Harvesh Seegolam, the Governor of the Bank of Mauritius, stated the schedule for the digital rupee – 

  • Initial discussions were in 2020 which revealed a huge potential
  • Now discussions with the IMF are taking place
  • By the end of 2021, there will be a pilot

He also explained cross-border playments and local payments were motivators with financial inclusion being large factor.

2020 Annual Report

Bank of Ghana plans the e-Cedi

Bank of Ghana to Pilot the e-Cedi

Dr Ernst Addison, announced a four stage program to delivering the e-Cedi: 1) Design, 2) Implementation, 3) Pilot, 4) Feasibility. He said the design was “quite far” to completion and the implementation was being be examined. 


Monetary Policy Committee

In 2019, the BoG announced the planned sandbox for the e-Cedi. In 2015 the Payments Oversight document was published describing flows via the Ghana interbank settlement system.

Ghana is a progressive nation, often ranked within the top three African nations for freedom of speech. 20 percent of the world’s coca is produced in Ghana. 

Payments Oversight

  • GIS
  • CCC
  • GACH
  • e-zwich
  • gh-link
  • mobile money
  • FMI
  • BIS

World Bank Payments


The Planned e-Cedi

“In an increasingly digitized environment, the Bank of Ghana has evaluated its role in a digital
economy. The Central Bank is in discussion with key stakeholders to explore a pilot project (in a
sandbox environment) on central bank digital currency with the possibility of issuing the e-cedi in
the near future.”

Sandbox | Press Release

Rolling Out the Digital Ruble

Digital Ruble Concept

In April 2021, the Bank of Russia published a target model for a digital ruble and courted responses.


Digital Ruble Concept



  • 75% Approval Now
  • 9% Later Approval
  • Move towards digitalization
  • Cost Reduction
  • Time Improvements

“It should be accepted everywhere, ensure high speed of transactions,
safety and a high degree of protection against fraud.”

Bank of Russia

Press Announcement


Brazil embraces Digitization


The Digital Real

Brazil salutes new payment innovation

Brazil enjoys being  in the top ten world economies by GDP. 

However devastating impact of Covid-19 has battered the economy driving Brazilians into poverty. 

Fsical policies became uncertain as the Brazilian Government financed a 156 billion dollars rescue package. 


To address global and national changes, the BCB announced on 24 May 2021 new guidelines for a digital Real.


The 2020 Study Group


The Brazilian Payment System (SPB) is being progressively digitized dated to replace the paper and coin based Real.


To address digitizing the Real, the BCB formed a study group in 2020.

Several key areas were of interest – 

  • Financial Inclusion
  • Economic Growth
  • Technical Innovation
  • Efficiency

Strategic Planning  Financial Citizenship; and the BCB’s BC# Agenda were all motivating factors –

  • Inclusion
  • Competitiveness
  • Transparency
  • Education
  • Sustainability


the 2021 Guideline

The BCB’s latest announcement will further address its BC# Agenda –

  • Dynamic Technological Evolution
  • Efficiency in Retail Payment Systems
  • New Business Models
  • Cross-border Transactions

The BCB welcomes private sector involvement.

The digital Real could use smart contracts, IoT systems, and programmable money.









2021 Press Release

The future

The BCB will extend the success of PIX (payment method), and the development of Open Banking to deliver CBDC solutions.

These changes will impact the FMI of Brazil.