Bank Indonesia (BI) continues to study CBDCs, insisting on the regulation of the cryptocurrency market. The Banque de France (BDF) enters the second phase of testing a wholesale digital euro, and the Bank of Korea (BOK) begins testing a CBDC together with commercial banks.
Several global financial institutions continue to test and experiment with the central bank digital currency (CBDC).
Indonesia Keeps Studying CBDCs and Insists on Crypto Regulation
Doni Primanto Joewono, Deputy Governor at Bank Indonesia, said that cryptocurrencies pose several risks to the country’s financial system stability, but may also improve its efficiency and financial inclusion. This was reported by local media, citing Joewono’s speech at the G20 event in Bali.
Earlier this year, the largest non-governmental Islamic organizations in Indonesia issued a fatwa declaring the use of cryptocurrencies for devout Muslims haram, an action contrary to Sharia. Responding to such statements from the religious community, Bank Indonesia offered to begin developing a central bank digital currency (CBDC). The central bank and the Ministry of Finance intend to consult with the Majelis Ulama Indonesia (MUI) on the “piety” of the digital rupiah. Bank Indonesia plans to issue the regulatory and technical framework for launching the digital rupiah later this year.
The head of the Central Bank also claims that cryptocurrency regulation plays a key role in developing the digital asset sector in Indonesia, including CBDCs. The Indonesian government views cryptocurrencies as a commodity. Therefore, Indonesian authorities have introduced new tax rules regarding the use of cryptocurrencies since May 1, 2022. Under the new laws, crypto transactions are subject to value-added tax (VAT) and income tax of 0.1% on capital gains.
France Moves to Second Phase of Testing of Wholesale Digital Euro
François Villeroy de Galhau, Governor of the Banque de France, announced that the first phase of wholesale CBDC testing, which involved developing its own blockchain and testing an automated platform for market makers, has been completed. According to Villeroy de Galhau, the Banque de France is ready to start the second phase of digital euro testing.
The head of the Central Bank also emphasized the achievements of the EU in developing a regulatory framework for the cryptocurrency market, highlighting the steps taken within the Markets in Crypto-Assets (MiCA) bill.
The Banque de France is actively experimenting with CBDCs and has been fundamentally changing the country’s financial market infrastructure since 2020. The Central Bank is testing a wholesale version of the digital euro, which will be used for interbank transfers, including cross-border ones.
The second phase of CBDC testing will involve about five new experiments, including trials with private entities and other central banks. The testing will occur in preparation for the pilot project, scheduled for 2023. Villeroy de Galhau stressed the importance of implementing distributed ledger technology (DLT) in the traditional banking system.
The ECB intends to issue a digital currency for financial settlements between individuals by 2026.
South Korea Starts Testing CBDC with Commercial Banks
The Bank of Korea has completed the first and second phases of its retail central bank digital currency (CBDC) tests and is moving on to practical trials of the digital won with at least ten commercial banks. Local media Aju Economy reports this.
The testing with commercial banks led by Shinhan Bank and NH Nonghyup Bank will focus on researching money transfers and payments between users to test the interoperability between CBDCs and IT systems of financial institutions.
The BOK began testing the digital won last year by creating the Klaytn public blockchain in cooperation with ConsenSys. In July 2021, the Central Bank selected Ground X, a subsidiary of Kakao, Korea’s largest social network, as its technology partner to model the CBDC.
The first phase of CBDC testing included:
- testing the basic functions of the CBDC: creation, issuance, and burning;
- enabling users to make payments via wallets.
The second phase of CBDC testing explored several functionalities of the digital currency:
- offline payments;
- usage of tokenized assets for payments;
- cross-border transfers.
Notably, Aju Kyungjae, the head of BOK, stressed that despite CBDC development and testing, the Central Bank is still cautious about issuing digital tokens. Kyungjae also noted that the actual issuance of the digital won is not planned before 2024. The statement is likely due to the fact that the South Korean government has begun to develop a regulatory framework for cryptocurrencies, which is expected to be implemented in 2023.
