SWIFT will trial live transactions of tokenized assets and digital currencies in 2025, aiming to integrate blockchain-based tokens into the broader financial system.
Global financial messaging network SWIFT will trial live transactions of tokenized assets and digital currencies in 2025, marking a step toward broader adoption of blockchain-based finance, per a Reuters report on Oct. 3.
Banks and asset managers have long explored tokenizing assets like bonds, hoping blockchain technology can streamline trading and cut costs by eliminating middlemen. However, these efforts have struggled to gain traction in the wider market.
SWIFT has been involved in trials of central bank digital currencies and tokenized assets. The network’s latest initiative aims to connect these innovations with traditional banking, a move SWIFT says reflects rising industry demand for real-world digital asset transactions.
“To successfully trade and settle a tokenized bond transaction, you need the cash and that’s where a tokenized deposit or wholesale CBDC comes in. It’s not good enough if you just have delivery or just payment, you need both.”
SWIFT
As 90% of the world’s central banks explore digital currency options, SWIFT’s new platform — expected to launch within the next one to two years — aims to integrate CBDCs into the financial ecosystem. The organization believes that successful trading and settlement of tokenized bonds require both tokenized deposits or wholesale CBDCs, ensuring that payment and delivery are equally supported.
However, despite SWIFT’s integration efforts, not all countries are rushing to develop their digital currencies. Concerns persist regarding technological and regulatory hurdles, as highlighted by Sweden’s Riksbank, which emphasized the need for extensive technical and regulatory development to ensure secure offline payments with e-kronas.
The Bank of Canada has reportedly shifted its focus away from the idea of introducing a digital Canadian dollar.
The Bank of Canada seems to be shifting its focus away from developing a government-backed digital currency, seven years after it first began exploring the idea in response to the rapid digitalization of payments. Per a CBC News report, the Canadian central bank appears less inclined to pursue the so-called digital Loonie.
As of press time, the Bank of Canada made no public statements on whether it has paused its research efforts toward developing the digital currency. In a commentary to CBC News, a spokesperson for the central bank admitted that the bank has undertaken “significant research on the implications of a retail central bank digital currency.”
However, the bank decided to shift its efforts toward analyzing payment system trends in Canada and globally, the report reads. The shift comes as data from the think tank Atlantic Council revealed that 134 countries, covering 98% of the global economy, are exploring digital currencies, with 44 currently piloting central bank digital currencies.
Canada takes pause amid global push for CBDC
The data also shows that over 65 countries, including India, Australia, and Brazil, are in advanced stages of CBDC exploration, whether in the development, pilot, or launch phases. Every G20 country is now investigating its own CBDC, with 19 in the advanced stages of exploration, per the think tank.
In mid-August, Canadian Conservative Leader Pierre Poilievre voiced strong opposition to the development of a central bank digital currency in Canada, pledging to protect cash usage and resist the government’s push toward economic digitization. He also expressed support for a member of the House of Commons of Canada Ted Falk’s Bill C-400, which seeks to ban the introduction of such a currency.
Australia’s central bank has announced a shift toward wholesale CBDC development, citing greater economic benefits and fewer challenges compared to a retail version.
The Reserve Bank of Australia seems to be prioritizing wholesale CBDC development over retail, citing greater economic benefits and fewer challenges for the country’s financial system.
In a Sept. 18 conference speech, RBA assistant governor Brad Jones emphasized the RBA’s focus on wholesale CBDC, viewing it as an “evolutionary than revolutionary” addition to the existing monetary systems, particularly in the context of systemically important markets.
“[…] unlike a retail CBDC that would be issued for use among the public, a wholesale CBDC would represent more an evolution than revolution in our monetary arrangements.”
Brad Jones
To prioritize a whole CBDC, Jones announced a three-year research initiative into digital money, with immediate plans to collaborate with industry on this type of central bank digital currency and tokenized commercial bank deposits. The central bank official says the project will explore new ledger technologies and concepts such as programmability and atomic settlement to assess potential gains for Australia‘s financial infrastructure.
In contrast, the RBA views the benefits of a retail CBDC as “modest or uncertain at the present time,” citing that it would represent a “significant change” to Australia’s financial arrangements. Jones highlighted that many of the international arguments in favor of retail CBDCs are either less relevant to Australia or “uncertain at the present time, relative to the challenges it would introduce.”
While the RBA remains open to exploring retail CBDC in the future, Jones indicated that any move in that direction would require a public policy case and “legislative change,” aligning with international norms. “As such, the Australian Government would ultimately decide whether to introduce a retail CBDC,” he said, underscoring the need for close coordination with Treasury and other government bodies.
Blockchain startup Parfin has secured $10 million in its Series A round, aiming to drive global expansion and bridge traditional finance with blockchain.
Mastercard-incubated Blockchain infrastructure firm Parfin has successfully closed the first tranche of its Series A funding, raising $10 million.
In a press release shared with crypto.news, the startup revealed that the round, led by ParaFi Capital, also saw contributions from Framework Ventures, L4 Venture Builder, and Núclea, with total funding projected to reach $16 million by the end of the second closing.
The proceeds from the funding are expected to help Parfin further develop its enterprise-grade blockchain platform, Rayls, increase its workforce, and accelerate its global expansion efforts throughout 2024. Parfin co-founder Marcos Viriato highlighted the strategic impact of the funding, noting that it will allow the firm to “help more banks and financial institutions realize new sources of revenue and stay relevant by leveraging the efficiency, security, and transparency of digital assets.”
Synchronizing defi with tradfi in Latin America
Founded in 2019 by Marcos Viriato, Alex Buelau, and Cristian Bohn, Parfin aims to bridge the gap between decentralized finance and traditional finance, offering financial institutions the regulatory compliance and privacy they need while capitalizing on blockchain technology.
In May, Parfin was selected for Mastercard’s Start Path program, which supports blockchain and digital asset startups with tailored training, collaboration opportunities, and access to Mastercard’s network and customers. To date, the company has raised a total of $38 million and serves clients including Banco BV, Núclea, and B3 Digitas, the digital asset services subsidiary of the Brazilian Stock Exchange.
Additionally, Parfin’s Rayls platform is now part of a pilot program with Brazil’s central bank, testing Ethereum‘s virtual machine privacy and scalability solutions for central bank digital currency initiatives.
Kyrgyzstan’s central bank has proposed amendments to the law to legalize its digital currency as a legal tender.
The National Bank of Kyrgyzstan has initiated public discussions on constitutional law amendments aimed at integrating its own digital currency — known as digital som — into the nation’s financial system, marking a big step toward a digitized economy.
Under the proposed amendments published on Aug. 8, the digital som will be integrated into the financial system through a “specialized software system” managed by the central bank. The draft does not contain terms like “blockchain” or “distributed ledger,” though it does mention “smart contracts,” leaving the technical details of the platform somewhat unclear.
The system’s design includes the introduction of “digital accounts” and “digital wallets.” While digital accounts will be specialized accounts managed by the platform operator for participants, digital wallets will be available to individual users for transactions. These wallets can be accessed via applications provided by banks and other financial institutions participating in the platform.
Central bank controls encryption keys
The digital som platform itself will enable transactions and interaction among its operator, participants, and users. The platform’s rules, which will be issued by the National Bank, will define the roles and responsibilities of each participant, access conditions, and the types of transactions permitted.
In terms of governance, the central bank, as the platform operator, will oversee the issuance and accounting of digital soms as well as ensuring the platform’s operation and security measures, including data encryption and authentication mechanisms, the draft reads.
The system is said to be supporting both online and offline transactions, with offline payments allowing users to conduct transfers even in the absence of an internet connection, with transactions recorded on the device and later synchronized with the platform.
The digital currency is expected to be fully integrated into the country’s financial ecosystem by January 2027, providing a legal framework that aligns with the rapid evolution of digital currencies on the international level.
India is not looking to regulate the cryptocurrency sector anytime soon according to Minister of State for Finance Pankaj Chaudhary.
Chaudhary’s comments came in response to questions directed to him by GM Harish Balayogi, a member of parliament. Balayogi’s questions sought clarity over the government’s stance regarding cryptocurrencies.
Specifically, the MP inquired about the extent of research or initiatives undertaken by the government to understand the crypto sector and wether or not there are any forthcoming legislations planned in this regard.
In his written reply on Aug. 5, Chaudhary said there is “no proposal” to regulate the “sales and purchase” of cryptocurrencies, which the Indian constitution refers to as virtual digital assets.
Regarding the establishment of an oversight mechanism to monitor the sector, Chaudhary said the Financial Intelligence Unit is “authorized” to designate Virtual Digital Asset Service Providers as reporting entities.
These entities, according to the FIU, are businesses that are obliged to adhere to the stipulations of the Prevention of Money Laundering Act (PMLA) of 2002. The move allows the regulator to keep a check on illicit activities such as money laundering and terrorism financing.
Further, the minister added that despite the lack of a solid regulatory framework, law enforcement agencies, which comprise regulators like the Reserve Bank of India, are equipped to investigate and act against illegal activities under existing laws.
One such agency, the Directorate General of GST Intelligence, recently sent a show-cause letter to Binance, ordering the exchange to pay $86 million in due taxes.
Regarding the inquiry about the government’s research work, Chaudhary said government doesn’t collect any data on cryptocurrencies as its an “unregulated” sector.
The minister of state also pointed towards the G20 Roadmap on Crypto Assets adopted by the G20 member nations under India’s presidency last year. The roadmap stemmed from a joint IMF-FSB synthesis paper that presented several recommendations on how member nations should approach crypto regulations.
According to Chaudhary, the G20 member nations, including India are currently evaluating the “country-specific” risks and benefits associated with cryptocurrencies. Subsequently, the next step would be to coordinate with global “standard setting bodies” before considering any measures.
Chaudhary also did not mention the upcoming discussion paper that will reportedly shed light on the government’s stance on cryptocurrencies.
Last month, Ajay Seth, secretary of Economic Affairs, said an inter-ministerial group comprising multiple regulators is working on a “wider policy for cryptocurrencies,” as per the IMF-FSB guidelines. The paper is expected to be released before September 2024.
Currently, India has a licensing regime in place that the FIU implemented after blocking several foreign crypto exchanges, stipulating that locals are required to report their crypto holdings and pay a 30% tax on capital gains, per a tax law passed in 2022.
The nation is also actively pursuing its central bank’s digital currency, the e-rupee, which achieved 1 million retail transactions in late June. Initially limited to just local banks, the pilot phase now allows applications from payment firms. Notable names like AmazonPay and GooglePay have expressed interest in enabling e-rupee transactions on their respective platforms.
Soramitsu Labs, a blockchain developer, intends to conduct a digital currency pilot in Papua New Guinea aimed at improving financial inclusion and security through economic digitization.
Japan-based blockchain firm Soramitsu Labs is gearing up to initiate a proof-of-concept experiment for a central bank digital currency (CBDC) in Papua New Guinea, as requested by the nation’s central bank. The Tokyo-headquartered says the initiative aims to leverage blockchain technology to create “a common platform for Pacific island nations,” according to a press release seen by crypto.news.
Papua New Guinea, grappling with some challenges in financial inclusion and security, appears to be seeking new blockchain-based solutions to address these issues. Many regions in the country experience frequent violent crimes, including robberies, which hinder financial accessibility and safety.
Soramitsu says the introduction of a CBDC could serve as a potential solution, providing a “traceable record for potential recovery” should such incidents occur. However, the company didn’t specify the duration of the pilot or when Papua New Guinea plans to launch its CBDC.
Meanwhile, Soramitsu is set to build a blockchain-based bond market gateway for the Pacific island nation of Palau. As crypto.news reported earlier, the company secured the contract and plans to introduce the marketplace on a trial basis in fiscal 2024, with a full rollout expected the following year. The initiative will enable the Palauan government to issue bonds to individual investors and manage principal and interest payments efficiently.
In 2020, Soramitsu gained prominence by introducing a CBDC in Cambodia, achieving over 10 million accounts by December 2023, representing 60% of the country’s population. Cambodia’s central bank governor Chea Serey later revealed plans to expand the CBDC’s global footprint through collaborations with UnionPay International, China’s primary card payment service, and other international partners.
Data from the Atlantic Council suggests a staggering 134 countries around the world, representing 98% of global GDP, are now experimenting with one.
Of those, just three have launched so far, while 36 more are currently being put through their paces in pilot programs.
CBDC projects around the world | Source: Atlantic Council
But despite the talk of faster cross-border transactions, reduced fees for businesses, and innovative new payment methods, there’s an uncomfortable truth for many nations who have invested countless millions into creating this infrastructure: demand has been pretty tepid.
The Federal Reserve Bank of Kansas City released a staggering report that examined how successful three retail CBDCs in the Caribbean had been since launch. It noted that none had managed to achieve widespread adoption among consumers.
It cited figures that show just 105,000 consumers and 1,500 merchants had embraced the Bahamian Sand Dollar by May 2023 — with the value of this CBDC representing a mere 0.19% of the total currency in circulation. Not good.
DCash, which spans the Eastern Caribbean Currency Union — as well as Jamaica’s JAM-DEX — have fared even worse, with a share of just 0.16% and 0.11% respectively.
On the other side of the world, in Asia, there have been similar teething troubles.
India has made much fanfare of the digital rupee — touting some of the main benefits as offline transactions in areas where there’s little internet access, along with programmable payments.
But a Reuters report recently revealed that, in the space of just six months, usage of this CBDC had plummeted precipitously to a mere tenth of the levels seen in December 2023. The sharp drop comes after incentives offered to early adopters came to an end.
Over in China, there was an especially embarrassing report when it emerged that government workers who were receiving their salaries in the digital yuan were swapping it for cash immediately.
Meanwhile, the International Monetary Fund said adoption of Nigeria’s eNaira was “disappointingly low” in the 12 months after launch, with 98.5% of wallets going unused, meaning a “coordinated policy drive” was required to drum up interest.
Making CBDCs cool (again?)
There are a multitude of factors as to why central bank digital currencies are struggling to take off.
For one, there can often be a lack of awareness about what they are — and a technical divide facing older consumers who are more accustomed to physical cash.
And even among those who do know what a CBDC is, hurdles to adoption remain. A common criticism relates to how private these transactions are, and whether such digital assets can offer the same amount of anonymity as cash. Other sticking points include limits on the amount of CBDC that a single consumer can hold, while a lack of interest payments can be off putting too.
It’s also fair to say that commercial banks aren’t exactly thrilled by the rise of central bank digital currencies, amid fears that they have the potential to undermine their business models.
For CBDCs to actually have a chance at gaining traction, they need to offer clear and compelling benefits — including perks that existing payment methods cannot match. Given how the likes of China are home to vast super-apps that blend everything from messaging to grocery shopping in one place, that’s easier said than done.
Some countries are now putting their foot down and are planning to introduce regulations that will effectively mandate the use of CBDCs. For example, the Bahamas is working on new rules that will force central banks to offer access to the Sand Dollar, in what’s been likened to a “carrot and stick” approach. Success here could influence what other economies do in the future.
You’ll be unsurprised to hear that crypto enthusiasts are rubbing their hands with glee when they hear about the resistance that CBDCs have suffered so far, along with a lack of momentum when it comes to uptake.
And with major economies such as the U.K., U.S. and EU still many years away from having a central bank digital currency of their own — with no guarantees one will ever debut — there’s a real chance some regions will abandon this policy altogether.
Over 40% of all crypto trades in Latin America involve the USDT stablecoin, signaling a waning interest in Bitcoin, which is even trailing XRP in the region’s top trading pairs.
Stablecoins are more popular in Latin America (LATAM) than Bitcoin as stablecoin-to-fiat trading pairs accounted for more than 60% of the top 10 trade volume in the region, according to data compiled by Kaiko, a blockchain analytics firm.
The data reveals that USDT, issued by Tether, is significantly more popular than Bitcoin among Latin American traders, accounting for over 40% of all trades. Kaiko notes that this growing dominance of stablecoins has prompted local central banks to “increasingly consider” issuing central bank digital currencies (CBDCs), though it “remains uncertain if they can compete effectively.”
Leading markets in LATAM in 2024 | Source: Kaiko
In a surprising development, in LATAM Bitcoin even lags behind XRP, a token developed by Ripple. Data indicates that the XRP/MXN trading pair has surpassed BTC/BRL by at least a billion dollars in turnover. However, Kaiko notes that XRP’s popularity in the region is mainly due to its partnership with the Bitso crypto exchange.
Despite these shifts, Binance continues to dominate the market in terms of turnover, particularly in stablecoin trades, according to Kaiko. The firm also highlighted the rapid growth of the Brazilian crypto market, with monthly BRL trade volumes averaging .3 billion, up from .7 billion in 2023. However, Kaiko says Binance’s dominance appears to be waning in the region, as trade volumes on Mercado Bitcoin, Brazil’s largest crypto exchange, more than doubled in 2024, driven by activity in both Bitcoin and altcoins.
