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Why Canada's CBDC has become one of the financial hot spots that have attracted more attention in recent years? The primary reason is the decline in cash usage. (Payments Canada, 2020) In 2020, only one-third of cash was transacted in Canada, a proportion that fell by more than half from 2019(Stephen Murchison, 2019). Driven by such a cashless transaction method, the transformation of cash into a cashless currency role is one of the necessary trends in a financial revolution. For Canadians, switching to cash transactions is simple and easy (Stephen Murchison, 2019). Secondly, the security and convenience brought by the digital currency issued by the central bank exceeds that of other private currencies. The issuance of CBDC allows users to directly link to the central bank’s financial system, and their funds are stored in the central bank’s wallet. Compared with Compared with other commercial banks, it has higher security. The government can use mobile devices to ensure the immutability and information security of transactions to enhance the security of payments (McKinsey Company,2023). Finally, when faced with complex financial institutions, people do not need to consider the risk of capital losses caused by financing and deposits, because CBDC itself is a highly secure financing channel and also brings users a sense of security in financing credit. (Barry Choi, 2023) Moreover, digital financial services brought by financial service providers can save approximately US$40 billion annually (McKinley Company, 2023). The savings in capital costs also provide people with more practical channels for the source of CBDC. Of course, the issuance of CBDC also brings great benefits to the Bank of Canada itself, such as it can directly supervise and control people's funds (Amber Wadsworth, 2018). People’s financing in the central bank will also increase day by day, bringing higher efficiency income to the central bank.

Today, the Bank of international Settlements together with 7 central banks announced plans to join forces with the private sector to explore how tokenisation can enhance the functioning of the monetary system. Project Agorá brings together seven central banks: Banque de France, Bank of Japan, Bank of Korea, Banco de México, Swiss National Bank, Bank of Englandand Federal Reserve Bank of New York. They will seek to work in partnership with a large group of private financial firms convened by the Institute of International Finance. The project builds on the unified ledger concept proposed by the BIS and will investigate how tokenised commercial bank deposits can be seamlessly integrated with tokenised wholesale central bank money in a public-private programmable core financial platform. This could enhance the functioning of the monetary system and provide new solutions using smart contracts and programmability, while maintaining its two-tier structure. Project Agora offers a bold vision that allows central and commercial banks to unlock the value of a unified ledger, tokenization, and has the potential to transform cross-border payments. It is a ground-breaking initiative that will enable settlement innovation on global scale. #Tokenisation #CrossBorderPayments #CentralBanks Peter Marshall Jan Bellens Brendan Maher, CFA Omar Ali David Sellick Shawn Smith Christopher Woolard CBE Dan Cooper Nigel Moden Oliver Carew Muneeb Shah Emanuel Vila (ChMC) Margherita Baroni Mike Zehetmayr Darko Stefanoski Olivier Perrin Ramon Hernandez Suarez Martin Eduard Debusmann John Alton Andrew Pilgrim yoshiaki Nishita Jean-François Delorme Jennifer Moore Lucas

Great read about Financial, digital, and accessibility inclusion in the Bank of Canada's paper, 'Redefining Financial Inclusion for a Digital Age.' It highlights the barriers that rural populations, Indigenous communities, Canadians with low incomes, and persons with disabilities face in using financial products. Although this study was published for the purpose of CBDC, this research can be part of the design consideration for new digital payment or financial products offered by FinTech and Digital Banks, with a strong focus on inclusivity. #FinancialInclusion #CBDC #DigitalBanking #FinTech #AccessibilityInTech

It's no secret that the 3 Local Banks will be the go-to and safe haven banks for Singapore depositors. So the increased deposit limit for digital banks is an opportunity to bring about more sustainable and stable growth for the digital banks. #digitalbanks #singaporebanks #depositlimit #growthstrategy #growthopportunities

🤑 When 60 CEOs from the world's biggest banks gather privately to combat the threats of open banking and the increased competition it prompts from fintechs, that should tell you all you need to know about whether open banking is good for Canadians. You can tell Ottawa to keep their promise to modernize Canada's banking system in 2024 here: https://lnkd.in/gw7JvZq2 #openbanking #consumerdrivenbanking #choosemore

The raising of the deposit caps on Singapore’s digital start-up banks is unlikely to have repercussions for the profitability of the country’s dominant incumbent banks. The small size of digital bank deposits relative to those of the three largest local banks suggests near-term implications for competition and net interest margins (NIMs) will not be significant. Read more: https://ow.ly/bQiV50Pkj4X #AsiaPacific #Singapore #banks #digitalbank

Bank of Canada recently published its latest research paper (https://lnkd.in/gDFTVQm8) on the impact of a retail Central Bank Digital Currency (CBDC). The possibility of introducing a retail central bank digital currency (CBDC) for public use in retail transactions, could result in competition with bank deposits in the digital money market. There are concerns that this could lead to a significant reduction in bank deposits, potentially destabilizing the financial system by increasing funding costs and decreasing bank profitability. However, the extent of CBDC adoption and its impact on bank deposits remains largely uncertain. BoC’s model describes a financial system with two main agents: households and banks. Households first decide on a bank for depositing digital money, then allocate their assets between digital money and physical cash, influenced by the deposit rates offered by different banks. Their utility from holding liquid assets is affected by the chosen bank's deposit rates. If households require a financial product, they may choose a different bank or stick with their deposit bank, benefiting from the utility of complementarity between deposits and financial products within the same bank. The problem is solved using backward induction, starting with portfolio allocation and bank choice for financial products, then determining the deposit bank choice considering utilities from liquidity, complementary financial products, and the utility from branch networks of various banks. Some of their preliminary findings emphasize the complementary nature of financial products offered by banks alongside deposits, and the consumer value placed on physical service locations. Utilizing a structural model and a unique Canadian dataset on household bank choices for various financial products, their study explores the potential effects of CBDC implementation, indicating that the negative impact of a CBDC on bank deposits is mitigated by the complementary relationship between deposits and other bank-provided financial products, as well as by the existing physical service network of banks. The paper also discovers that the success of a CBDC could significantly depend on its service location network, with a scenario suggesting that leveraging Canada Post offices could enhance CBDC uptake, especially benefiting rural households. Additionally, the study examines the introduction of a limit on CBDC holdings, concluding that while it may reduce CBDC adoption, the effect on consumer surplus is comparatively minor.

Fitch: Singapore's «Big 3» to Withstand Digital Cap Lift: Profitability at Singapore’s «Big 3» banks is unlikely to be affected by the easing of the deposit cap for the city-state’s digital banks, according to Fitch. #Fitch #digitalbanks

The Bank of Canada published some interesting research in which they attempt to model the impact of a rCBDC on bank deposits. It is widely thought that, depending on the design options, a rCBDC could lead to a switching from commercial bank deposits to central bank money: a phenomena that could have all sorts of negative consequences, such as adversely impacting the "money creation" process. The Bank of Canada attempts to test this hypothesis under different parameters. The most important observation is that a rCBDC would not be a perfect substitute for deposits because commercial banks also provide a range of other services that a Central Bank would not replicate. However, if one assumes that consumers don't care, then the study suggests up to 39% of deposits could move to a rCBDC. This is, of course, not necessarily reflective of the real world and consumers are likely to care about the credit cards or lending facilities that they get alongside their deposits. Under this circumstance, the research finds only up to 12% of deposits might move. Further, the research also looks at the impact of service points -- or physical presence -- on switching and found that, if the Central Bank didn't provide a service point for the rCBDC, then only 1% might move. The 12% is therefore predicated on some sort of physical branch network existing, either operated by the Central Bank itself or through an agent network, such as post offices. The research also explored the impact of holding limits (which are considered one policy instrument to mitigate some of the well-known risks associated with rCBDC disintermediation). They found that, if relatively modest limits of $18,500 were introduced, the uptake of the rCBDC would halve. In summary, it's an interesting study that highlights the fact that not all rCBDCs are equal and that the different design options play a major role in determining both the uptake (and, by extension, the impact on the commercial banking sector). https://lnkd.in/dR4_RKkk

Banks' strategic choices will be tested as they contend with multiple fundamental challenges to their business models. They must demonstrate conviction and agility to thrive. https://lnkd.in/g5rMQaQ Deloitte International Monetary Fund European Central Bank PayPoint India Bank of England Bank of Canada Federal Reserve Board BNPL Consumer Financial Protection Bureau FIAKS - Forum of Industry and Academic Knowledge Sharing Anuradha Panditrao #FIAKS #bankingindustry #capitalmarkets #finance