...by Daniel Szego
quote
"On a long enough timeline we will all become Satoshi Nakamoto.."
Daniel Szego

Sunday, March 19, 2023

Wholesale CBDC

 

A wholesale CBDC (central bank digital currency) is a digital currency issued by a central bank that is designed for use among financial institutions, rather than for use by the general public. Wholesale CBDCs are typically used to facilitate large-value, high-speed transactions between financial institutions and can be used as a settlement tool between these institutions.

Unlike traditional forms of settlement, such as through the use of central bank reserves or commercial bank deposits, wholesale CBDCs can provide a more efficient, secure, and resilient means of settling financial transactions. Wholesale CBDCs can also enable real-time gross settlement (RTGS) systems, which can further enhance the speed and efficiency of financial transactions.

Wholesale CBDCs are still a relatively new concept and have yet to be widely adopted, but several central banks around the world are actively exploring the potential benefits and drawbacks of introducing such a system.

Examples for wholes CBDC innitiatives:

  • Project Stella: This is a joint project between the European Central Bank (ECB) and the Bank of Japan that aims to explore the potential use of distributed ledger technology (DLT) for cross-border payments. As part of this project, the two central banks have been testing the feasibility of using wholesale CBDCs to settle payments between each other.
  • Project Jasper: This was a collaborative project between the Bank of Canada, Payments Canada, and several Canadian financial institutions. The project explored the use of DLT and wholesale CBDCs to enhance the speed and efficiency of high-value payments and settlements.
  • Project Ubin: This is a collaborative project between the Monetary Authority of Singapore (MAS) and several financial institutions. The project aims to explore the use of DLT and wholesale CBDCs for clearing and settling payments and securities transactions.
  • Project Dunbar: This is a joint project between the Bank of England and Her Majesty's Treasury that aims to explore the potential use of wholesale CBDCs for settling payments between financial institutions in the UK.
  • Digital Dollar Project: This is a private-sector initiative that aims to explore the potential for a wholesale CBDC in the United States. The project is backed by several financial services firms and is focused on developing a prototype for a digital dollar that could be used for wholesale transactions.