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Industry roundup: 4 January

PBOC launches pilot of digital yuan wallet app

China has issued pilot versions of its digital yuan wallet application on mobile phone app stores as People’s Bank of China’s (PBOC) accelerates the development of its own digital currency.

A pilot version of the e-CNY app, developed by the central bank’s digital currency research institute, has been made available for download on Chinese Android and Apple app stores in Shanghai.

Individual users in China can download a version of the app to try out “personal wallet opening and management” and “e-CNY exchange and circulation services,” local news outlet BlockBeats confirmed via a tweet, which also featured screenshots of the app.

However, to download the trial app and activate the wallet, users must be in one of 11 selected locations: Shenzhen, Suzhou, Xiong’an, Chengdu, Shanghai, Hainan, Changsha, Xi’an, Qingdao, Dalian and the Winter Olympics area.

A notice in the app stressed that it is in a research and development pilot phase and is only available to selected users through supported institutions that provide e-CNY services, including major domestic banks.

In November the PBOC’s Governor, Yi Gang said that China intended to press ahead with the development of its central bank digital currency and improve its design and usage, including increasing its interoperability with existing payment tools. 

In its subsequent year-end meeting, the PBOC confirmed that it would continue to push forward with the research and development of the digital yuan. Since April 2020, the central bank has indicated that it will be ready for use during the Beijing Winter Olympics, which commences on 4 February.

Philippines plans digital corporate bond issue next month

The Philippine Dealing System Holdings Corp. (PDS), holding company of the PDS Group, is to issue the country’s first digital corporate bond next month to deepen local capital markets, according to an announcement by the Department of Finance (DoF). The issue will utilise distributed ledger technology (DLT), with transactions recorded in several sites instead of a centralised database.

Antonio A. Nakpil, president and CEO of Philippine Dealing and Exchange Corp’s (PDEx) – a dealing exchange for major banks in the Philippines, which is a PDS subsidiary –  said that PDS is working with a Singapore-based fintech company a proof of concept (POC) DLT-backed registry and depository infrastructure.

 “The goal of the POC is to deploy a viable DLT-powered digital registry and depository that will be resilient and robust enough to support the full life cycle of a digital bond from issuance, asset servicing, transfers, and settlement up to maturity,” Nakpil explained.

“The PDS is aiming to conduct an end-to-end test of the digital registry and depository with market participants by January this year and is targeting its possible live launch with an issuance of a digital bond by late February.”

He added that the digitalisation roadmap for the corporate bond market includes the use of DLT, which will be integrated with the PDS online platform. The platform, otherwise known as the electronic securities portal (e-SIP), was launched for the primary market last year.

The e-SIP allows the online submission of documents required for PDEx listing and Philippine Depository and Trust Corp. registry services for initial public offerings (IPOs) for corporate bonds. It was piloted last year by real estate company Ayala Land, Inc, which used it to offer its four-year Peso 10 billion bond. Four more issuers have subsequently onboarded securities and client investors through the online portal.

PDS last month said it was preparing cybersecurity measures as it rolls out its online platform for the secondary market. The Philippines’ Finance Secretary Carlos G. Dominguez III has said that while he supports digitalisation initiatives to deepen the country’s capital markets, he is also concerned about their security. “I’m telling you this type of digitalization is probably going to be a target for hackers and scammers, and just plain thieves,” local media quoted him as saying. Nakpil says that the PDS is assessing the vulnerability of its systems to potential threats.

The PDS is also working with the Bankers' Association of the Philippines (BAP) and the National Association of Securities Broker Salesman Inc. (NASBI) to maximise the use of the e-SIP, the Finance Department announced.

"This initiative looks to do away with a tedious process for investors to keep filling up the same forms several times when buying corporate bonds from different brokers," it added.

US banking giants delay return to the office

US banking giants Goldman Sachs, Citi and JP Morgan, along with other financial service firms, have interrupted their drive to get more employees back to the office after an extended period of working from home due to Covid-19 due to the highly contagious Omicron strain of the virus.

Forbes magazine reports that while New York has once more become the epicentre of the virus in the US, it is not only the banks that have had to reconsider their back to the office plans due to the rapid spreading of the new variant. It cites a recent survey initiated by Gartner, which found that 44% of companies have changed their timelines on requiring workers to return to the office. Nearly 30% of business executives said they are delaying reopening plans or shutting down offices, and almost 20% are reducing the number of people that can be at the worksite at any given time.

Goldman Sachs, which had been particularly keen to get its bankers back in the office, e-mailed them at the start of this week that they should continue to work from home until 18 January due to the increase in coronavirus infection rates. Its CEO, David Solomon, had previously described remote working as an “aberration.” Although the bank’s offices will remain open, it is asking individuals for proof of anti- Covid vaccinations and boosters, bi-weekly testing and the compulsory wearing of masks.

JP Morgan, which has already put back planned starting dates for staff to return to the office, has also said that employees can continue to work from home for the first two weeks of 2022. However, reports state that a corporate memo shows that it wants its traders, loan officers, compliance, audit, banking and other professionals to eventually return to in-office schedules by 1 February. 

The note to staff adds, “Across the US, we are seeing a rapid rise in Covid-19 cases related to the Omicron variant. With the increase in holiday travel and gatherings, we are allowing for more flexibility during the first two weeks of January.”  However, the bank reiterates that it is “not changing [its] long-term plans of working in the office” and expects “everyone to return to their in-office schedule.”

Citi is also reported to have asked its U. staff to work remotely for the opening weeks of 2022 due to the spike in cases due to Omicron. “We will continue to monitor the data and provide an update in January on when we expect to be back in the office in a similar manner as we have been,” the bank adds. US insurer MetLife, which has asked staff to return to the office from 10 January, said last week that the date is now being put back to March.

Pakistan sets out framework for digital banks

The State Bank of Pakistan (SBP) has issued a licencing and regulatory framework for digital banks which provides details for setting up digital banks as a separate and distinct category in Pakistan.

Under the proposed framework, the SBP said it may grant two types of digital bank licences: digital retail bank (DRB) and digital Full Bank (DFB). DRBs would mainly focus on retail customers while DFBs could deal with both retail customers and business and corporate entities.

The framework includes guidance regarding licencing requirements, potential sponsors, and permissible use-cases during different phases. It also sets requirements for applicants to have sound digital governance, robust, secure, and resilient technology infrastructure, effective data management strategy and practices.

Under the framework, digital banks are required to maintain a principal place of business in Pakistan to house the offices of its management, staff, other support operations and serve as the main point of contact for various stakeholders, including SBP and other regulators.

“Digital banks are the culmination of the digital journey on which the banking industry embarked upon many years ago,” the SBP said in a news release. “The framework for digital banks being issued today is the latest in a series of recent initiatives by the State Bank of Pakistan towards digitalisation of banking and payments solution in the country.”

In January 2021, Pakistan launched a new government-run instant digital payment system in a bid to boost financial inclusion and government revenue in the country where only a small percentage of all economic transactions occur on the books.

The new system, called “Raast” or “direct way” has been rolled out in three phases over the past year and was developed through a multi-year collaboration between the SBP and the Bill & Melinda Gates Foundation, with support from the World Bank, the UK and the United Nations. Another goal for Raast has been to boost the involvement of women in Pakistan’s formal economy.

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