Welcome to the PMBug forums - a watering hole for folks interested in gold, silver, precious metals, sound money, investing, market and economic news, central bank monetary policies, politics and more. You can visit the forum page to see the list of forum nodes (categories/rooms) for topics.
Why not register an account and join the discussions? When you register an account and log in, you may enjoy additional benefits including no Google ads, market data/charts, access to trade/barter with the community and much more. Registering an account is free - you have nothing to lose!
While the runup to this weekend’s G20 summit was dominated by talk of the growing divide between China and host nation India, the summit itself served to underline the growing rift between the BRICS nations and the West, which could have significant long-term impacts on the U.S. dollar and commodities in the years to come.
The first and most obvious point of dispute between the BRICS and the West was the reference to Ukraine in the G20 Leaders’ Declaration, the wrangling over which began long before the leaders arrived in New Delhi.
According to Svetlana Lukash, Russia’s G20 ‘sherpa’, this weekend was "one of the most difficult G20 summits" in the nearly 25-year-old history of the forum. "It took almost 20 days to agree on the declaration before the summit, and five days here on the spot," Lukash told Russian news agency Interfax.
...
The Leaders’ Declaration also devoted a fair amount of ink to reforming the international financial system, saying that the 21st century “requires an international development finance system that is fit for purpose, including for the scale of need and depth of the shocks facing developing countries,” and called on the international community to deliver “better, bigger and more effective MDBs [Multilateral Development Banks] by enhancing operating models, improving responsiveness and accessibility, and substantially increasing financing capacity to maximise development impact.”
It’s worth noting that the BRICS made reforming international financial institutions, including beefing up their own MDB, the New Development Bank, a major priority ahead of next year’s summit in Russia, and they are developing new payment instruments and platforms ahead of the summit.
The G20 Declaration also highlighted cross-border payments as an area of particular focus, calling on member nations to meet global targets for “faster, cheaper, more transparent and inclusive cross-border payments by 2027.”
Incoming BRICS chair Russia is very motivated to accelerate the ongoing process of de-dollarization, including a new commodity-backed currency to supplant the U.S. dollar. And incoming G20 leader Lula has been the most outspoken of all BRICS members about the need for an alternative currency. The coming year may provide an unprecedented alignment between leader relationships and national economic goals combined with direction of international organizations to make de-dollarization and a new cross-border currency a reality.
...
Brussels, 13 September, 2023 – Swift has entered a new phase of its breakthrough work on Central Bank Digital Currency (CBDC) interoperability, announcing that three central banks are beta testing its innovative solution for interlinking CBDCs, while 30 financial institutions are experimenting with the solution in a new sandbox to explore further use cases.
Swift committed to developing a beta version of its CBDC connector solution after a first iteration of sandbox testing, with participants recognising the solution’s ‘clear potential and value’. The beta solution has taken its next step, with three central banks and monetary authorities, including the Hong Kong Monetary Authority (HKMA) and the National Bank of Kazakhstan, integrating the solution with their own infrastructure for direct testing.
Swift has also initiated a second phase of sandbox testing, in which commercial banks, central banks and financial market infrastructures are exploring additional use cases, including trigger-based payments for digital trade platforms, foreign exchange models, delivery vs payment and liquidity saving mechanisms. The Reserve Bank of Australia, Deutsche Bundesbank, HKMA, Bank of Thailand and CLS are among the enlarged group of more than 30 leading institutions in this second phase. Eighteen central and commercial banks took part in the first phase of the sandbox.
...
tokenisation might be the next major leap for the monetary system.
Lawmakers on both sides of the aisle said at a Thursday hearing of the House Financial Services Committee digital assets panel that a Fed-issued retail central bank digital currency could stifle bank lending and grant excessive power to the Federal Reserve, highlighting the significant political headwinds facing any proposal to create a digital dollar.
...
...
Countries should set up legal frameworks that support the deployment of central bank digital currencies (CBDC), Agustin Carstens, general manager of the Bank for International Settlements, an international bank said on Wednesday.
Around 80% of central banks are either not allowed to issue a CBDC under existing laws or they have legal frameworks which lack clarity on this matter, a 2020 paper by the International Monetary Fund said.
...
The U.S. dollar's share of global currency reserves reported to the International Monetary Fund was 58.9% in the second quarter, unchanged from the first three months of the year, IMF data showed on Friday.
...
Representatives of Banque de France, the French central bank, have embraced the global perspective on the central bank digital currency (CBDC) discussion, touting it as the foundation of a new international monetary system.
On Oct.3, Denis Beau, the first deputy governor at Banque de France, called the CBDC “the catalyst for improving cross-border payments by enabling the build-up of a new international monetary system.” The official emphasizes the necessity of considering cross-border issue around CBDCs from the outset and not as an afterthought.
...
... Driving Saudi interest in restoring relations with Israel is its historical distrust of Iran, which it blamed for the attacks on its oil facilities in 2019. The recent reopening of embassies has not mitigated this distrust, which was made evident last Monday when the Saudi soccer team Al-Ittihad traveled to Isfahan to face the Iranian team Sepahan in an Asian Champions League match. The visitors left the stadium without playing when they discovered at the entrance to the field three busts of Qasem Soleimani, a Revolutionary Guard general assassinated by the U.S. in Baghdad. For the Iranians, he is a hero, but for the Saudis, he is a terrorist. Saudi Arabia saw the presence of the busts as a provocation.
...
... I wonder how the Iran/Hamas attack on Israel while Israel was negotiating an accord with Saudi Arabia is going to affect Saudi-Iran relations (and prospects for each to become BRICS members).
Saudi Arabia suggested Israel was to blame for Saturday’s deadly attack by Hamas, as it called for an immediate end to the violence between Israelis and Palestinians.
Riyadh was edging closer to a historic deal to normalise relations with Jerusalem, a taboo in the Arab world because of the Palestinian issue, before hostilities erupted.
In a sign that Saudi Arabia may not be ready to abandon the delicate US-backed diplomacy, the Kingdom did not explicitly blame Israel or back Hamas.
But, in a veiled criticism, it said on Saturday it had warned of the dangers of Israeli treatment of Palestinians leading to an “explosion of the situation”.
Crown prince Mohammed bin Salman told Fox News a fortnight ago that normalised ties were “getting closer every day” but the issue of the Palestinian territories would have to be solved.
...
The Saudi Arabian foreign ministry said on Saturday: “We are following the unprecedented developments between a number of Palestinian factions and Israel occupation forces which has led to a high level of violence on a number of fronts.
“The Kingdom calls for an immediate halt to the escalation between the two sides, the protection of civilians, and restraint.”
It added: “The Kingdom recalls its repeated warnings of the dangers of the explosion of the situation as a result of the continued occupation, the deprivation of the Palestinian people of their legitimate rights, and the repetition of systematic provocations against its sanctities.”
Hugh Lovatt, a senior policy fellow at the European Council on Foreign Relations think tank and an expert on the Middle East, Israel and Palestine, said: “The statement is pretty neutral and reflective of how Riyadh is trying to balance various interests.”
“It will be concerned that this could lead to broader regional escalation which could undermine its ongoing normalisation talks with the US and Israel, and potentially further bolster Iranian influence.”
Greater Iranian influence could upset the new and “delicate detente” with Iran, he said, and Saudi Arabia had long-held animosity towards Hamas.
But Riyadh has also “sought to portray itself as a committed and active supporter of Palestinian rights,” Mr Lovatt said.
He added: “It will also be aware that there is still a strong pro-Palestinian public opinion in the Kingdom which will be enthused by the current scenes of Palestinian triumph.”
Mr Lovatt warned: “This balancing act will become even more difficult should Israel’s retaliation provoke a large Palestinian death toll in Gaza, as seems likely. In that case, expect them to take a stronger line against Israel.”
Hizbollah, the Iran-backed militia in Lebanon, praised the “heroic” attack, which it said was a “decisive response to Israel’s continued occupation and a message to those seeking normalisation with Israel”.
...
India’s government is expected to reject demands from Russian oil companies to pay for Russia’s crude oil imports in Chinese yuan, Indian officials told Bloomberg on Friday.
...
The tech will be designed with abuse in mind.Lulz... If the tech allows it, it will be abused.
Deutsche Bank and Standard Chartered’s SC Ventures are testing a system that will allow blockchain-based transactions, stablecoins, and central bank digital currencies (CBDCs) to talk to one another, taking an approach similar to the SWIFT messaging layer in legacy banking infrastructure.
The banks are running a series of test cases, including transferring and swapping USDC stablecoins, on the Universal Digital Payments Network (UDPN), a permissioned blockchain system composed of validator nodes run by an alliance of banks, financial institutions and consultancies.
...
“The UDPN is a network where the affiliation of members is permissioned. But the key thing here is that the transactions themselves are placed onto the underlying infrastructure, which includes permissionless networks,” Thorsten Neumann, CTO of SC Ventures, said in an interview.
For instance, when carrying out a cross-border currency transfer, the sending institution takes the tokenized value and transfers it into a smart contract managed by the UDPN, which will then release the intended target currency from that smart contract, Neumann said.
“There is almost a DeFi-type capability within a permissioned network. It’s important to note this is done without a central organization setting out something like a SWIFT message format,” he said.
The UDPN currently comprises about 25 organizations running around 10 proof-of-concept tests in parallel, according to Steffen Schacher, UDPN lead at GFT Group. That group includes banks from the USA, Australia, Latin America and Europe, he said.
...
The Bank of England (BOE) garnered over 50,000 responses to its consultation on a digital pound, Deputy Governor Jon Cunliffe said in a speech on Thursday.
The majority expressed concerns over privacy, programmability and the decline of cash, Cunliffe said at a conference held by the Federal Reserve Board in Washington, D.C.
...
Users of the digital pound will have access to the same level of privacy that they enjoy today when making electronic payments he said to quench concerns, adding that the BOE would not see people's data.
Respondents were concerned the central bank would make the digital pound programmable and constrain its functionality – something that won't happen, Cunliffe said. "It would be for private sector firms to develop and offer, for user consent, payment services involving greater programmability," he said.
...
With a cbdc, it'll be full reserve banking, won't it?Go ask anyone wanting to implement a CBDC if such a system solves the problems inherent in any fiat currency rooted in fractional reserve banking, physical or digital.
...
Let me structure my remarks as follows: I'll first say a few words on how I see the international role of the US dollar. I will then explore the consequences of a dollar-centred global monetary system before drawing some lessons for the international safety net.
The dollar remains the number one currency in the global financial system by several measures. The dollar's dominance is particularly stark in FX markets, where it is on one side of 88% of all transactions. This is quite noteworthy because just over 20 years ago many expected the dollar to lose market share to the euro. This has not happened. BIS Triennial Surveys show that the dollar's share in global FX trading has remained stable while the euro's share fell from 38% in 2001 to 31% in 2022. By comparison, the renminbi's share is still at 7%, despite its rapid ascent in recent years.
The US dollar is also the most important currency in international banking. The size of foreign currency assets and liabilities of the banking system has grown immensely over the last two decades, but the share of the dollar in those assets and liabilities has remained remarkably constant at around 60%. The dollar also dominates debt security issuance and trade invoicing, although in the case of the latter with significant differences across regions.1
...
Let me conclude by summarising my two main points:...
- While we may see a shift towards a global financial system with multiple lead currencies at some point in the future, any changes are likely to remain gradual. The dollar is likely to remain the dominant currency for some time.
The Bank of Thailand (BOT) supports the use of local currencies for trade between countries to reduce the risk amid volatile fluctuations in the dollar.
In particular, the Bank encourages the use of four local currencies for cross-border trade which, it says, should minimise risks associated with the fluctuating US dollar, which has recently reached 8-9%. This has led to increased hedging activities among business operators.
The increased volatility of the US dollar against the Thai baht has prompted the Bank to expedite support for entrepreneurs to use local currencies in cross-border trade.
This is not the first time the BOT has pushed for the use of these four currencies, namely the Chinese yuan, Malaysian ringgit, Indonesian rupiah, and Japanese yen, and intends to further promote their increased usage shortly.
...
There are more ongoing cross-border CBDC trials with cute names than one can possibly keep track of (such as Cedar, Icebreaker, Jasper, Mariana and many more). But one stands out: the mBridge project.
Why? For the following reasons:
- It involves 23 central banks, including the BIS (the official organization for central banks)
- It is designed to bypass the US dollar-based global financial system
- It is almost ready to go live
...
... mBridge. It officially launched in 2021 as a joint venture between the innovation arm of the BIS and the central banks of Hong Kong, China, Thailand and the UAE, specifically to test the viability of central bank digital currencies (CBDCs) for cross-border trade. The key aim is to streamline payments between commercial banks in different jurisdictions by connecting them to a network co-managed by their central bank.
Beyond the use case of cross-border trade, the project has been working with commercial banks (including all the large Chinese institutions, Goldman Sachs, HSBC, SocGen and others) as well as exchanges to trial blockchain-based security issuance, multi-jurisdiction insurance payments, programmable trade finance, FX settlement and more.
At the end of October, the BIS published an updated document on mBridge showing that, in addition to the five principal participants, 25 other official entities have signed on as observers. These include the IMF, the World Bank and the central banks of 23 countries, including Saudi Arabia, Turkey, South Africa, Namibia, Malaysia, France, Italy, Norway, Chile, Australia… every continent has representation. Even the U.S. central bank is present, via the Federal Reserve Bank of New York. The European Central Bank is also in the group. ...
Central bank digital currencies (CBDC) are key to innovating financial systems, and the private sector will play a major role in getting them to market, said Agustín Carstens, the head of the Bank for International Settlements.
"Whether in wholesale form – as a type of digital central bank reserve – or retail form – as a digital banknote – it is increasingly clear, at least to me, that these new forms of money will sit at the core of the future financial system," Carstens said in a speech at a conference on CBDCs in Basel, Switzerland on Wednesday.
...
Kristalina Georgieva - IMF said:...
I am proud the IMF is part of this great community and that I am with you today. I come in the footsteps of my predecessor, Christine Lagarde, who five years ago gave a speech here encouraging policymakers to follow the “winds of change,” and embark on a digital money voyage by exploring the use of central bank digital currencies, or CBDCs, and fintech.
Five years on, I’m here to provide an update on that voyage. I have four main messages. First, countries did set sail. Many are investigating CBDCs and are developing regulation to guide digital money developments. Second, we have not yet reached land. There is so much more space for innovation and so much uncertainty over use-cases. Third, this is not the time to turn back. The public sector should keep preparing to deploy CBDCs and related payment platforms in the future. Fourth, these platforms should be designed from the start to facilitate cross-border payments, including with CBDCs.
...
In that spirit, I am delighted to announce the launch of a CBDC Handbook available on the IMF website starting today. The Handbook is intended to collect and share knowledge on CBDCs for policymakers around the world—to help them to sail ahead.
...
We use cookies and similar technologies for the following purposes:
Do you accept cookies and these technologies?
We use cookies and similar technologies for the following purposes:
Do you accept cookies and these technologies?