On July 31, it was confirmed that the Bank of Korea has chosen Jeju, Busan and Incheon as its candidates for the “private target CBDC test bed.”

Eventually, according to the report, the bank plans to select one of the three regions, along with experimenting with payments and distribution at a public level and securing franchises that can accept payments via CBDC.

An official at the bank is quoted as saying: “The CBDC electronic wallet app will allow not only local residents but also many civilians, such as tourists to [partake].” The Bank of Korea said that the regional closed tests of the CBDC will be similar to the issuance and distribution of the current local currency scheme in place in various regions of South Korea. 

The local currency scheme was introduced during the Covid-19 pandemic as a basic income and relief payment solution. Jeju, Busan and Incheon — the three regions selected as candidates for the pilot — all current issue and distribute their own local currencies such as “Tamranjeon,” “Dongbaekjeon” and “Incheon e-Eum,” respectively. 

An official from a commercial bank in Korea is reported to have said that, in Busan, the number of eligible citizens is “so large that the Bank of Korea is burdened in many ways” and, therefore, the choice was “greatly inclined” to Jeju, which has the second largest population.

According to the local report, the local currency scheme has fewer “technical barriers” to overcome compared to CBDCs. 

Many banks in South Korea have indicated that they are  researching stablecoins as CBDC alternatives for efficiency purposes.
 

Blockchain could save financial institutions US$10 billion by 2030, says Ripple

Blockchain has the potential to save financial institutions approximately US$10 billion in cross-border payment costs by the year 2030, claims a newly released report from crypto solutions developer Ripple.

Among the 300 finance professionals surveyed across 45 countries, “results show that global payments leaders are dissatisfied with legacy rails for cross-border payments,” commented Ripple, , and 97% said that they believe that blockchain will play a crucial role in faster payment systems within the next three years.

Participants from the Middle East and African regions showed the highest level of confidence, with 27% believing that most merchants would accept crypto as a payment method within the next year. Professionals in the Asia-Pacific region were the least confident, with only 13% expressing the same confidence. However, across all surveyed participants worldwide, 17% expressed their belief that such adoption could happen within the next year.

“In the survey, over 50% of respondents believe that lower payment costs — both domestically and internationally — is crypto’s primary benefit,” the report notes.

According to the report, fintech analysis company Juniper Research predicts that the use of blockchain in global transactions will result in substantial cost savings for banks over the next six years. “Juniper Research supports this notion, pointing to blockchain’s potential to significantly increase savings for financial institutions conducting cross-border transactions — an estimated US$10 billion by 2030.”

As the e-commerce landscape expands and businesses prioritise international markets, cross-border payments are expected to grow over the coming years. The report highlighted a significant anticipated increase in international payment transactions by 2030. “Global cross-border payment flows are expected to reach US$156 trillion — driven by a 5% compound annual growth rate,” the report’s authors noted.

Ripple’s report comes after research from the Bank of International Settlements (BIS) revealed up to 24 central bank digital currencies (CBDC) could be circulating within the next six years.

In a report published by BIS on July 10, which surveyed 86 central banks from October to December 2022, it revealed that 93% of central banks are researching CBDCs, and that there could be up to 15 retail and nine wholesale CBDCs in circulation by 2030.

Bank of Italy launches decentralised finance initiative

Milano Hub, the Bank of Italy’s fintech innovation centre in support of digital evolution, has launched a decentralised finance (DeFi) project.

The institutional DeFi initiative aims to help traditional finance entities across the country including Italy’s banks, asset managers and other financial institutions.

Milano Hub will also support the development of the “Institutional DeFi for Security Token” platform, the programme that aims to support traditional finance (TradFi) to experiment with security tokens and execute transactions using DeFi in a secure and regulated way.

The initiative will be led by Cetif Advisory involving DeFi’s major players, Polygon Labs and crypto infrastructure provider Fireblocks, also joined by tech developer Reply, legal consultant Linklaters along with web3 studio DVRS.

“We believe it is vitally important to create the conditions for DeFi to become a safe and open operating environment for supervised entities as well,” said Imanuel Baharier, general manager of Cetif Advisory, a consultancy group of Milan University’s Cetif Research Centre.

Intesa Sanpaolo, Italy’s largest banking group, is also joining the project. It is estimated that Intesa Sanpaolo has over US$1 trillion in total assets under management.

The move comes as several other countries explore and incorporate use cases of blockchain technology for economic advantages. Last week Russian President Vladimir Putin signed into law a bill that will grant legal tender to a “digital rouble” amid severe Western sanctions.

Australia leaves rates unchanged for second month

Australia’s central bank has held interest rates at 4.1% for a second month on Tuesday as it continues to assess the impact of previous hikes, while warning of possible further rises in the coming months.

Economists were divided on whether the Reserve Bank of Australia (RBA) would resume its tightening policy at this month’s meeting, with a slim majority expecting a 25-basis point hike.

The decision to keep rates on hold for now comes as inflation in Australia slowed to 6% in the second quarter from 7% in the first quarter but was still well above the RBA’s stated target of 2% to 3%. Australia’s central bank had previously hiked interest rates by a cumulative 400 basis points since May 2022 to its highest in 11 years.

“The RBA appears to be very close to the interest rate peak, especially as it now expects inflation to return to target within its forecast horizon,” commented analysts at Commerzbank.

“Of course, whether another rate hike will follow in the coming months will depend crucially on data developments, especially wage growth and service sector inflation. However, we see today's decision as a clear signal that the RBA is taking a wait-and-see approach for the time being.”

UBS drops Credit Suisse’s Russian clients

Up to three-in four of Credit Suisse’s Russian clients will have to look for a new bank, according to a weekend report in the NZZ am Sonntag.

The paper reports that this is because the risks are regarded as too high for Swiss bank UBS, which recently took over its rival in a government-brokered merger.

It is unclear exactly which Russians are affected, the paper added. However, they are said to be primarily Russian offshore clients: clients with a Russian passport who live abroad and who are currently serviced by Credit Suisse from Switzerland on a cross-border basis.

UBS did not want to take a position on the issue, the NZZ am Sonntag said, but it did mention its lower appetite for risk than its former competitor. Moreover, it wanted to “anchor its risk management principles and corporate structure throughout the combined organisation” of UBS and Credit Suisse, it told the paper.

The bank’s decision would also affect other Credit Suisse clients in other regions, but to a lesser extent, according to the report.
 

ANZ report says India can fill global commodity demand gap as China slows

India’s demand for commodities is set for continued strong growth and could cover more than half of China’s demand shortfall as its own growth slows, especially in the energy sector, an ANZ Bank report suggests.

India’s economic growth is likely to outpace China’s, with the South Asian nation set to become the third-largest economy by the end of this decade, the bank predicted.

“India’s demand for commodities is slated to grow rapidly, supported by favourable demographics, urbanisation, the expansion of manufacturing and exports and the build-up of infrastructure,” ANZ analysts wrote. 

India’s annual demand for major commodities such as oil, coal, gas, copper, aluminium and steel could rise collectively by more than 5% until 2030 the bank estimated. compared against China’s demand of between 1% to 5%.

India recently overtook China to become the most populous country and according to ANZ’s data, its rate of urbanwzation is expected to rise to 40% by 2030 from current levels of 35% — stoking demand for industrial metals and energy commodities which are often associated with a rise in demand for infrastructure and manufacturing.

“India will scale up its efforts to decarbonise by 2030, but those efforts may be frustrated by the nation’s rapidly growing energy needs,” said ANZ.

UK banks to bring open banking to savings market

UK banks have committed to explore the expansion of open banking into the savings market, according to watchdog the Financial Conduct Authority (FCA).

In its report on the savings market, the regulator confirmed that banks and building societies have committed to explore how investment in open banking can be used to support savings customers. 

This includes carrying out a review to report back in 2024 on the scope and opportunities for open banking capabilities to help customers make their money work harder. Most savings products are currently outside the frameworks for data sharing and requirements.

The report noted that opening up savings data has “the potential to bring consumers up to date and personally relevant information to enable them to make active switching decisions”. 

Sheldon Mills, executive director of consumers and competition at the FCA, said “we have asked the banks to look into the expansion of open banking into the savings market”.

Launched in 2017, open banking is an attempt to boost competition in retail banking by requiring high street lenders to open customers’ data to trusted third-party firms.

The scheme entered a “new phase” last January this year after the UK’s six largest banks implemented the requirements of the open banking roadmap. In April, regulators announced a new long-term regulatory framework would be established to “unlock” its potential.

Since its launch, it has garnered over 7 million customers of which 750,000 are small or medium-sized businesses. However, so far it has only applied to a handful of financial products – particularly current accounts. 

Regulators are currently considering the next steps in open banking, determining what form a new regulator will take and which products should fall under the open finance remit.

Fubon Bank partners with Ripple for e-HKD pilot programme

Hong Kong's Fubon Bank has partnered with blockchain company Ripple to investigate real estate tokenisation solutions as part of the Hong Kong Monetary Authority’s (HKMA) digital Hong Kong dollar (eHKD) pilot programme.

Fubon Bank Hong Kong’s Executive vice president and chief strategy officer, Xu Luosheng, said the bank would conduct an initial trial focused on customers seeking refunds. The trial will involve tokenising property liens and providing digital HKD loans using Ripple’s customised technology.

Customers who secure these loans will be able to use the digital HKD for various payment scenarios, thereby increasing the practicality and usage of the digital currency.

Xu Luosheng confirmed that individuals looking for mortgages would be the main focus of the trial. The bank will use Ripple’s central bank digital currency (CBDC) platform to digitise legitimate HKD for testing at a fixed 1-to-1 ratio.

Customers can use Fubon’s eHKD e-wallet to access up-to-date information such as loan-to-value ratios (LTV), stress test results, and property valuations, simplifying the loan application process compared to traditional methods. The pilot program does not include the issuance of digital HKDK.

Instead, Fubon Bank will continue to provide its current mortgage loan services to customers who may want to apply for a larger mortgage following the trial.