BlogJune 2023 Crypto Revue: India and Kazakh...

June 2023 Crypto Revue: India and Kazakhstan closer to CBDCs, SEC against Binance and Coinbase

Jun 21 • 8 min read

Eastern Caribbean Central Bank (ECCB) Governor Timothée Antoine said he was pleased with the results of the central bank digital currency (CBDC) pilot project dubbed DCash aimed at improving financial inclusion and modernizing payment systems, according to the official press release. He said that partnerships with licensed financial institutions and regional businesses and organizations have allowed DCash to expand its reach, improve platform features and integrate 8 countries in the region into one system.

Americans not behind CBDCs 

Only 16% of Americans support issuing a CBDC, according to polls conducted by the Cato Institute and YouGov.

The majority of Americans polled are against a digital dollar that would allow the government to track their spending (68%) or control how they spend money (74%). Fearing that a CBDC would allow the government to do this potentially, 76% of those polled said the government should ban the Fed from issuing a digital dollar.

Lack of support for CBDCs in Philippines

Central Bank of the Philippines (BSP) Governor Felipe M. Medalla presented an updated central bank roadmap in which he highlighted the lack of interest in issuing retail CBDCs. He was particularly concerned about the potential loss of payment privacy:

“Sure, [retail CBDCs] save a lot of money on printing, [but] the government will actually know more about you than your wife. In my case, this is not dangerous; there is nothing to know about me. But a lot of people are a little worried. So all these issues must be resolved.”

Head of BSP Felipe Medalla

Central Bank of Israel Explores Enhancing Digital Shekel Adoption

The Central Bank of Israel is wondering how to enhance the network effects of its CBDC. Features that should increase digital shekel adoption and network effects among users include:

  • the ability to receive (make) payments from (to) the government, i.e. taxes and benefits;
  • (providing an efficient and convenient payment method;
  • the widespread use of peer to peer  (P2P) payments, including offline payments.

Of course, the cost to businesses should be less than those of the existing alternatives and should simplify their operational processes, such as paying taxes.

Mauritius, India, and Kazakhstan: Advancements in CBDC Implementation

Mauritius will soon launch a CBDC sandbox application process while a public opinion poll on the qualities of a CBDC is ongoing and soon the bank will invite participants to launch pilot versions of their projects in November 2023.

Binur Zhalenov, CEO of the Kazakhstan Interbank Settlement Center of the National Bank of Kazakhstan, provided an update on the three-year digital tenge project. A central bank digital currency is scheduled to be released in 2023 and pilot projects will test various specific use cases, starting with building a scalable social assistance distribution platform for government central bank partners. Several MVPs will be created to streamline cross border payments, wholesale transactions and DLT integration.

The Reserve Bank of India (RBI) launched a pilot on December 1, 2022, in four cities with four banks. At the moment, four more banks have been added, and in the near future, another four will be added in ten cities.

IMF’s Review of Nigeria’s e-Nira CBDC and Crypto Regulation

he IMF has published a document outlining the first year of operation of the e-Nira, the first CBDC in Africa. Despite almost uninterrupted operation during the first full year, the digital currency project has enjoyed limited popularity. The IMF believes that coordinated policy action will be required to overcome the initial low network effect. In order to capitalize on eNira’s potential for financial inclusion, a strategy needs to be built to crystalize the digital currency’s relationship with mobile money, given the former’s potential to either complement or replace the latter. Cost savings by integrating CBDC as a link into the money transfer process can also be significant, according to the IMF.

In parallel to this, recent political measures have led to a de facto ban on cryptocurrencies; in mid-June 2023, the Nigerian regulator outlawed Binance. News about the detention of the chairman of the Central Bank of Nigeria also appeared in the press earlier.

Stablecoins and Tokenization: Circle, SWIFT, and Mitsubishi Initiatives

Circle licensed in Singapore

Circle’s Singapore subsidiary has been licensed by the Monetary Authority of Singapore (MAS) to provide digital token services in Singapore (MPI) after receiving prior approval in November last year. This allows Circle Singapore to offer tokenization, cross-border money transfer and domestic money transfer services in the city-state.

SWIFT and Chainlink partner with financial institutions

SWIFT and Chainlink will partner with dozens of financial institutions to test how they can transfer tokenized assets across the blockchain using the Swift infrastructure. This work will build on a series of successful pilots conducted by SWIFT earlier in 2022.

Japanese conglomerate to issue stablecoins

Mitsubishi UFJ Financial Group (MUFG) plans to deploy stablecoins on various public blockchains. A Japanese bank has partnered with blockchain interoperability company Datachain and bridge company Toki to enable cross-chain coin exchanges using its Progmat Coin protocol. The announcement comes after Japan’s revised fund settlement law was passed in 2022, allowing financial institutions to issue stablecoins.

Korean Platform for Securities Tokens and Interoperability

The Korean Securities Depository (KSD) has announced plans to create a platform for securities tokens. This in itself is a big event as it constitutes a recognition that the traditional and crypto markets are increasingly overlapping. But the KSD went further, recognizing that tokenized securities will run on different blockchains and that there needs to be a way to combine them. It may also point to the promise of “bridge” technologies that connect networks and facilitate the transfer of available supply of tokens between networks.

Against this backdrop, enterprise blockchain companies R3 and Adhara have announced a partnership called Harmonia that will work on interoperability protocols that enable atomic swaps between institutions.

Regulation Review

SEC Moves Against Binance and Coinbase

The commission began proceedings against the two largest exchanges, first against Binance and the next day against Coinbase. 

There were 13 total Binance allegations, including unregistered offers and sales of BNB and BUSD tokens, Simple Earn and BNB Vault products and a staking program. Additionally, the SEC alleges in the lawsuit that Binance has not registered its platform as an exchange or broker-dealer clearing agency. CZ was sued as a “controlling entity.”

Coinbase is charged with violating federal securities laws. According to the SEC, Coinbase acted as an unregistered broker, exchange and clearing agency at the same time, claiming that it simultaneously attracted customers, processed orders, admitted to trading and acted as an intermediary.

The Coinbase platform does combine three functions that are usually separated in traditional securities markets, the functions of brokers, exchanges, and clearing agencies. However, Coinbase has never registered with the SEC as a broker, national securities exchange or clearing agency, thereby evading the disclosure regime that Congress has established for our securities markets.

U.S. Securities and Token Recognition

U.S. Securities Commission Chairman Gary Gensler, whose appointment resulted in high expectations in the digital asset industry, raised eyebrows with some of his quotes from recent interviews

“We already have digital currency. It’s called the U.S. dollar. It’s called the euro or it’s called the yen; they’re all digital right now. We already have digital investments… We have not seen over the centuries that economies or the public needs more than one way to move value.”

Head of SEC Gary Gensler

He also spoke on the topic of trust: “If there’s a real value in these crypto tokens, then compliance will build trust and the business model might change,” and claimed that the SEC’s recent actions are “aimed at supporting innovation.”

In the decision, the commission released a list of tokens as recognized securities, which serves as the basis for holding Coinbase and Binance US liable:

During the proceedings, Binance’s lawyers stated that Gensler offered himself to Binance US as an advisor in 2019. The SEC complaint against Coinbase cites their S-1 (documents required to conduct an IPO) as evidence that they knew they were listing securities, which seems odd considering the SEC approved the S-1. However, SEC S-1 approval only means that the form was filled out correctly.

Retail Crypto Trading Opens in Hong Kong: Exchanges Seeking Licenses

From June 1, retail crypto traders will be allowed to legally trade on registered exchanges in the global financial center of Hong Kong as the region’s leadership opens the door to digital assets. Chinese company Huobi was first in line, filing on May 26 to trade digital assets including Bitcoin and Ethereum. Crypto businesses must apply to the Hong Kong Securities and Futures Commission for this license before they can offer regulated services.


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