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Crypto Interest Plummets In Latvia, Central Bank Reports

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The Latvian central bank, known as Latvijas Banka, rece­ntly disclosed a significant decrease­ in the number of individuals purchasing crypto asse­ts within the country, according to their “Financial Stability Re­port” for 2023.

According to the report, only 4% of the population acquired crypto assets in Fe­bruary 2023, compared to 8% in the previous ye­ar. Additionally, this drop can be­ attributed to various factors, including concerns about fraud, insolvency, mone­y laundering, and regulatory risks.

The report, which analyzed payme­nt card usage data, reveale­d interesting insights about Latvians’ digital wallet transfe­rs. In 2022, they sent 51.8 million e­uros ($57 million) to these wallets. Howe­ver, this figure dramatically dropped to just 10.7 million e­uros ($11.8 million) in the first quarter of 2023.

Most of these­ transactions were directe­d towards companies in other European countrie­s that boast a more advanced crypto ecosyste­m, such as Lithuania, Estonia, Malta, and Ireland. 

Unfortunately for Latvia, it ranked re­latively low in terms of crypto adoption according to Chainalysis’s “2022 Geography of Cryptocurre­ncy Report,” where it se­cured the 92nd position out of 148 countries surve­yed. 

In contrast, its neighbor Lithuania fared slightly be­tter at the 102nd spot. Moreove­r, the report emphasize­d that Latvia’s nonbank financial sector holds less significance compare­d to other European nations due to the­ population’s limited long-term savings.

Retail Crypto Payments Still Popular

The report re­vealed that 44% of retail payme­nts made using crypto were value­d at 60 euros ($66) or less, and a staggering 97.5% of the­m were for amounts under 1,000 e­uros ($1,100). Surprisingly, the monetary value of the­se payments was not specifie­d in the report.

Furthermore­, it highlighted that certain Latvian banks have starte­d offering services re­lated to digital assets such as custody and exchange­. Nonetheless, cautionary words we­re also shared concerning pote­ntial risks to financial stability and consumer protection if these­ services are not e­ffectively supervise­d and regulated. 

The Latvian central bank has adopted a cautious stance­ towards digital assets, issuing multiple warnings to the public re­garding their associated risks and challenge­s. In 2022, it unequivocally stated that cryptocurrencie­s are not considered le­gal tender due to the­ir highly volatile and unpredictable price­s. 

The central bank also advised consume­rs to exercise caution whe­n engaging with crypto-related companie­s and emphasized the importance­ of verifying licenses and re­putations. However, amidst this cautious approach, the ce­ntral bank recognized the pote­ntial benefits of crypto technologie­s. 

It actively supported innovation and deve­lopment in the sector by launching a re­gulatory sandbox exclusively for fintech companie­s utilizing blockchain and other emerging te­chnologies. Furthermore, it collaborate­d with other central banks and the Bank for Inte­rnational Settlements on a cross-borde­r digital currency project. 

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Digital Rupiah: Indonesia’s Central Bank Plans To Accelerate Payment System By 2023

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The Central Bank of Indonesia plans to accelerate the digitalization of the payment system by creating the Digital Rupiah currency, as well as expanding international payment systems, in 2023.

In his speech at Bank Indonesia Annual Meeting, the Governor of Bank Indonesia discusses the economic accomplishments of the last year as well as their plans for the future, summarized in a report through six different sections.

The report was titled “Synergy and Innovation Strengthening Resilience and Economic Revival Towards Advanced Indonesia.” The report claims that the “direction of payment system policy remains based on the implementation of Indonesia Payment System Blueprint (BSPI) 2025.”  

Source: Bank Indonesia

According to the first vision of the BSPI 2025, the payment system policy in 2023 will continue to accelerate and strengthen the integration of the national economic-financial digital ecosystem. Additionally, it will strive to be stronger and more able to compete in international collaboration based on national interests under the fifth vision.

However, the report highlighted that the payment system policy will be implemented in 2023 using five main strategies to integrate the national economic-financial digital ecosystem.

Five Stages For Deployment Of Digital Rupiah 

The first step is the joint creation of national standards for “One Language” payment system services between Bank Indonesia and the sector, followed by acceptance campaigns and public usage by customers. 

Secondly, in order to create strong, inventive, and competitive Indonesian unicorns that can compete both domestically and globally and who will eventually be able to act as a “wholesaler” in the issue and circulation of the Digital Rupiah, legislative change must be accelerated.

Additionally, the future development of One Homeland as a payment system infrastructure with 3i will accelerate the integration of an interconnected national economic-financial digital ecosystem and eventually be one prerequisite for issuing Digital Rupiah.

The fourth phase is to implement pricing policies and market practices that are secure, fair, and efficient to promote national interests, consumers, and industry competitiveness on a national and international scale. 

The final and important step is the further development of Digital Rupees as a legal Central Bank Digital Currency (CBDC) in Indonesia, which will involve finalizing the conceptual design, business modeling, and preparation for technological platform requirements.

The Governor said:

we are launching the Digital Rupiah “white paper”, which we named “Project Garuda”, as a step to preserve the sovereignty of the Rupiah in digital ecosystem. This “white paper” contains the fundamental premise and roadmap to be taken.

Source: Bank Indonesia

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Uganda’s Central Bank Invites Firms To Discuss Crypto

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The Bank of Uganda (BAU) has invited members of the Blockchain Association of Uganda (BAU) to share their knowledge with the central bank as it considers allowing cryptocurrency businesses to participate in its Regulatory Sandbox.

The bank cited a meeting between the two parties in early May in a letter to Kwame Rungunda, the BAU’s chairperson, dated June 1. Before moving on to technical conversations, the central bank recommended the country’s crypto advocacy group brush up on the sandbox regulations.

Uganda’s central bank launched a regulatory framework last year

The bank created a regulatory sandbox framework in June 2021, allowing financial technology (FinTech) firms to test “innovative financial solutions” in a regulated environment in the hopes of increasing the country’s adoption of electronic payments and other digital financial services.

The Bank of Uganda’s recent letter appears to be a U-turn in its stance on bitcoin.

The bank issued a warning on cryptocurrencies in late April, notifying all payment service providers in the country that permitting crypto transactions would expose the country to money laundering and scams.

Any provider, such as a bank or fintech company found to be aiding the trade of cryptocurrency would have their financial license revoked, according to the statement.

Cryptocurrencies are not prohibited in Uganda, and they can be bought, kept, and exchanged. Cryptocurrencies, on the other hand, remain unregulated, and no company has yet been granted a digital asset license to operate in the country.

Crypto adoption in Africa is gaining traction, attracting the attention of several venture capital firms and crypto firms. Crypto usage in Africa surged by approximately 1,200 percent between 2020 and 2021, with nearly 2% of Ugandans using it.

Other African countries are following suit, with the Central African Republic being the first African country to embrace Bitcoin (BTC) as legal tender and just the second country in the world to do so.

90% Of the Central Banks Are Eyeing CBDCs as per Reports

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The Bank for International Settlements (BIS) assessed 81 central banks to reveal their interest in CBDCs, finding that 60% of them are working on proofs-of-concept and 26% are undertaking pilots. In 2022 alone, the number of institutions announcing a CBDC review nearly doubled.

The majority of banks seek to collaborate with the private sector, and these CBDCs are focused on both wholesale and retail. This two-tiered design is becoming increasingly popular among central banks.

More than half of the banks think there is a significant probability they will issue CBDCs when it comes to a more detailed projection on how they would turn out.

Source: BIS

The survey includes stablecoins, with over 70% of institutions reporting to be investigating the potential impact of stablecoins on financial stability. Over time, this percentage has actually declined.

CBDCs have gotten a lot of attention and have grown quickly in the last 18 months, owing to the rise of stablecoins and DeFi.

The latter two have caught the attention of regulators, who are concerned that they may erode the dominance of national currencies and existing financial institutions.

Governments and central banks are beginning to see the advantages of blockchain-based currencies, including faster transaction times, cheaper transaction costs, and more security.

Nigeria updates its CBDC

Even after a UN study said that limitations on digital currencies are suffocating the country’s fintech sector, Nigeria’s central bank has improved its eNaira to steer the country away from crypto.

The Central Bank of Nigeria (CBN) is moving on with plans to expand the usage of the country’s central bank digital currency (CBDC) to a wider variety of products and services. It also maintains severe crypto regulations that have hampered the country’s fintech industry.

According to a report from Vanguard, CBN branch controller Bariboloka Koyor spoke at a market in the country’s most populated metropolis of Lagos on Monday as part of a push to “sensitize” companies to the eNaira.

The naira has lost almost 209% of its value in the last six years, prompting Nigerians to flock to cryptocurrency. According to a survey released in April by the KuCoin crypto exchange, around 33.4 million Nigerians owned or exchanged cryptocurrencies in the previous six months.

Following the introduction of the eNaira in October 2021, the country’s crypto trading restrictions were strengthened.

In February of that year, the CBN barred banks from providing crypto exchanges. Still, serious enforcement came in November 2021, when the CBN ordered the accounts of two crypto dealers to be frozen.

Central Bank of Argentina Asks Banks to Stop Crypto Offerings

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Just days after Argentina’s two banks announced that they had opened up crypto trading to their customers, Argentina’s central bank (BCRA) announced that financial institutions cannot allow their clients to conduct transactions using digital assets.

Banco Galicia, a significant private bank, and Brubank, an all-digital bank, both stated on May 2 that users would be able to trade cryptocurrency through their investing portals on their websites.

However, because crypto assets are not regulated, the central bank has stated that financial institutions in the nation cannot offer this type of service.

“A digital representation of value or rights that is exchanged and stored electronically using Distributed Ledger Technologies (DLT) or other comparable technology,” according to Argentina’s central bank.

Argentina’s banks recently opened up crypto offerings

The central bank statement adds, “The action imposed by the BCRA Board of Directors strives to limit the risks connected with activities with these assets that might be produced for consumers of financial services, and for the financial system as a whole.”

Some Argentines have adopted crypto as a tool to more easily preserve money while dealing with the country’s high inflation rate, as well as the currency restrictions reintroduced by its current president, Alberto Fernández, in 2019.

However, as part of a roughly $45 billion debt restructuring arrangement with the International Monetary Fund, Argentina’s government said in March that it would prohibit the usage of cryptocurrencies (IMF).

The government said in a March 3 memorandum that it would “discourage the use of cryptocurrencies with a view to avoiding money laundering, informality, and disintermediation,” among other actions aimed at bolstering the country’s financial resilience.

The shift in focus from last May might be linked to the International Monetary Fund’s (IMF) $44 billion extended loan plan, which included a condition requiring Argentina to “discourage the usage of cryptocurrencies.”

The central bank’s statement contradicts the plans of the mayor of Argentina’s metropolis, Buenos Aires. Mayor Horacio Rodrguez Larreta revealed plans to digitize the city in late April, including proposals to enable inhabitants to pay their taxes in cryptocurrency and other blockchain initiatives.

Botswana government all set to present virtual asset bill to parliament for cryptocurrency regulation

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Botswana’s administration plans to introduce a “Virtual Asset Bill” to the country’s parliament, which may make it one of the first African countries to pass legislation governing cryptocurrencies.

According to a recent official gazette, a Botswana government draft bill that seeks to control new and emerging virtual asset enterprises and offer a regulatory body with its tasks and powers is slated to be presented to its parliament.

Press release by Bank of Botswana (November 10, 2021)

An earlier press release by the Bank of Botswana stated the participation and regulation of crypto assets. The Bank indicated that they have been watching and monitoring trends in the growing trade of crypto assets, particularly Bitcoin, both internationally and locally, including involvement by residents and other domestic entities in regional and global trading platforms. Moreover, the Bank admits receiving and responding to public and media inquiries on the issue, including legality in Botswana, authorities’ approval, and the presence of any regulatory framework for the licensing, regulation, and protection of “investors/consumers.”

The Bank also observed no specific legal or regulatory framework on or proscribing investment in cryptocurrencies like bitcoin in Botswana. In context, trading in bitcoin or other decentralized technologies, commonly known as “cryptocurrency,” is analogous to investing in any other intangible asset, with risks such as total loss of value or possible exploitation of the technology to the harm of investors. These operations put the investor’s money at risk, and they rely on the investor’s confidence and thorough understanding of the nature and scope of the risks connected with these sorts of firms.

The idea of presenting the Virtual Asset Bill with other proposals such as the Financial Intelligence Bill came barely over two months after Botswana’s central Bank cautioned people engaging in cryptocurrency trading that the country lacked a regulatory framework to control such trade.

Nonetheless, according to the draft published in the Extraordinary Government Gazette on December 23, Botswana authorities intend to include “provisions for managing, mitigating, and preventing money laundering and financing of terrorism” in the proposed law. The document also aims to restrict the growth of virtual assets as well as new developing business practices and technology.

In the meantime, some cryptocurrency enthusiasts believe Botswana’s intention to change its financial regulations is tied to its removal from the Financial Action Task Force’s (FATF) graylist in October 2021. The FATF has previously flagged the nation due to shortcomings in its anti-money laundering (AML) and counter-terrorist financing (CTF) regimes.

Bank of Lithuania Debuts World’s First Digital Collector Coin, LBCOIN

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The Bank of Lithuania became the first nation in the Euro region and the world to officially issue its digital collector coin, LBCOIN, on 23 July. Each issue of LBCOIN is a hallmark of one of the signatories of the Independence Act since it was issued in honor of the 1918 Nation’s Independence Act and its 20 signatories. As reported by TWJ earlier this month, the Bank of Lithuania was set to issue the first cryptocurrency backed by a central bank in the eurozone.

Notably, the state-of-the-art digital collector coin is based on the NEM Blockchain and contains six digital tokens for each physical collector coin. Of the 4,000 LBCOINs disbursed, there are almost 24,000 virtual tokens and 4,000 silver collector coins. Although the Bank of Lithuania stipulates that LBCOIN is not a CBDC, the Bank proposed that it could lead to the realization of a digital currency issued by the State.

By buying an LBCOIN, the collector will obtain a random assortment of digital tokens that can be exchanged for a physical coin; which can be stored in the LBCOIN e-shop, sent as gifts, or even exchanged or transferred to other collectors via the NEM blockchain infrastructure.

The 4,000 silver collector coins, on the other hand, were minted at the Lithuanian Mint. The coins are similar to the standard credit card, both in shape and size. The Lithuanian flag and the national anthem are also included in the binary code. The country coat of arms (Vytis) on the other side of the card is bound by the QR code that connects the coin to the LBCOIN e-shop. The value of each LBCOIN package is 99 EUR (about $115).

Digital collector coin is not a CBDC

Although there were some rumors, the announcement shed light that the LBCOIN is not a central bank digital currency, which can serve as a digital legal tender. Alternatively, the project is geared towards luring collectors;  its goal is to demonstrate how technology can be used to digitize the world. 

The chairman of the country’s central bank board, Vitas Vasiliauska, outlined that the LBCOIN project illustrates Lithuania’s swift technological progress. In conclusion, he also noted that the project could lead the authority on a; “firm path towards financial and payment innovation.”

The Central Bank of France Enlists Eight Financial Firms Services In Its Digital Euro Trials

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The Central Bank of France has enlisted eight major financial sector firms to collaborate on its bid to pilot test the digital Euro. The partnership includes the digital currency testing as well as the interbank settlements of the central bank.

The financial authority named firms includes Accenture, Euroclear, HSBC, LiquidShare, ProsperUS, SEBABank, and Societte Generale. Previous reports also say that France’s central bank has already conducted tests with one of the firms, Societte Generale. The tests were carried out in a real-world form of transaction, and besides that, with the aforementioned eight companies they intend to even extend the tests further.

Digital Euro trials to focus on key areas

In a statement released on July 20, France’s central bank revealed the planned tests would focus more on the three key areas. Core areas include devising new ways of trading financial instruments for central bank funds; evaluating digital currency regulation to boost the execution of international payments by making favorable conditions for these transactions, and updating the forms in which CBDCs are made available to the public.

Monetary authorities across the world working on CBDC

Following the devastating effects of COVID-19, more and more people have moved to embrace digital currencies. This has forced central banks around the world to step up their efforts to create a digital currency as people are now actively avoiding contact fiat currency. As a result, this action has prompted Central Banks to increase their efforts on CBDC in a bid to curb the virus’ spread.

More central banks around the world are expected to launch their digital currencies, with nations like China poised to become the first nation to issue its very own digital currency. For the last 5-6 years, the Chinese central bank has been working on their digital yuan. A  recent study by the Bank of International Settlements (BIS) shows that central banks are more likely to issue CBDCs in developing nations than in developed nations.

DCEP: China’s Biggest Food Delivery App to Trial Digital Yuan

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People’s Bank of China (PBoC) is planning to trial its digital yuan with food delivery giants backed by Tencent Holdings Ltd. According to a report published by Bloomberg on 15 July, the PBoC is set to boost its National Digital Currency Electronic Payment (DCEP) adoption by testing it on Meituan Dianping-controlled platforms, including Tencent’s food delivery application.

Digital yuan adoption

PBoC is currently testing its central bank’s digital currency in four Chinese cities and is closing its doors to the public. Meituan has been involved in a dialog with China’s Central Bank ‘s research arm on digital legal tender applications in the real world, based on sources that are close to the matter.

Indeed Meituan is now joining the Chinese ride-sharing startup Didi Chuxing, which has recently joined the trial program for researching digital yuan applications. Like Didi, Meituan is involved in billions of dollars of transactions every day in its food delivery business and online travel solutions. Its inclusion in the testing phase would certainly boost the mass adoption of state-issued digital currencies.

China to make history as the first country to issue a CBDC?

According to the Blomberg report, the PBoC is deliberating with Bilibili Inc, another online video streaming service supported by Tencent. The two companies that provide a range of online services in the form of food delivery to e-commerce; seem to be the perfect prospects to help DCEP win its share of China’s $27 trillion payment industry. In addition, digital yuan could sustain the government’s grasp of the world’s second-largest economy.

For about six years now, China’s central bank has been working on the digital yuan, and it’s closer than ever to make use of that to the public. Several other central banks are also testing and researching CBDCs around the world. In conclusion, it is assumed that the Facebook Libra project is the chief catalyst to why central banks worldwide have intensified their efforts to develop a state-issued digital currency.

Thai Central Bank Developing Payments Systems Prototype Using CBDC

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Thai central bank has become the latest financial watchdog to join the Central Bank Digital Currency (CBDC) bandwagon. The Bank of Thailand (BoT) announced its project to build a decentralized payments system prototype for commercial use.

According to the announcement, the CBDC prototype will be hosted by the Inthanon Project, the blockchain infrastructure inaugurated by the Bank of Thailand. This will be achieved through a partnership with the country ‘s eight leading financial institutions.

The entire project involves carrying out a feasibility study and creating a procedure for linking Central Bank Digital Currency to the Business Payments System, as per the Thai Central Bank. The prototype project is set to start in July and will continue until the end of the year. The findings of the scheme will then be outlined by the Thai central bank to the public.

Thai Central Bank making a step forward in driving CBDC adoption

The Bank of Thailand sees the project as a significant step forward in expanding the CBDC ‘s realm and driving its adoption to a broader audience, starting with big corporations. The payment system will be linked to the procurement and financial management systems of Siam Cement Public Company and its stockists,

The Thai central bank anticipates that the CBDC prototype will facilitate coherent and more flexible transactions or a faster and more flexible settlement between suppliers. In addition , the Bank of Thai also noted that proof of concept for local wholesale revenue; was finalized in January alongside the cross-border transfer prototype; developed in partnership with the Hong Kong Monetary Authority (HKMA).

Development of CBDC’s worldwide

Different central financial authorities are keenly exploring the development of CBDC’s around the world. For instance, the Bank of Korea (BoK) recently established a legal advisory panel for the development of digital currencies.

Furthermore, the Bank of France has partnered with local private banks to run a pilot test for state-issued cryptocurrencies in Europe.