Central Banks News

Japanese Yen has set off alarms in the world of international finance and monetary policy. For the first time since 1990, the yen has weakened past the 160 level against the U.S. dollar, representing a staggering 20% loss in purchasing power over just the last year. This historic slide begs the question — is the yen acting as the proverbial «canary in the mine», providing an early warning sign of deeper systemic risks brewing in the global monetary system? The crisis facing the yen stems from a confluence of factors that have pushed the Bank of Japan into an economic policy corner. With a debt-to-GDP ratio of over 260%, among the highest in the world, Japan has been effectively locked into keeping interest rates at ultra-low levels, near zero, for years. Even as inflationary pressures have built, the BOJ has resisted aggressive rate hikes for fear of making their enormous debt burden even more unmanageable.

While markets have begun pricing in rate cuts from key central banks in 2024, it is 'clear that higher interest rates are here to stay'.

The conviction that the Federal Reserve has reached the peak of its hiking cycle is now the strongest since investors began providing their view on the timing.

Catherine Mann is a member of the Bank of England's Monetary Policy Committee

Swift has partnered with three central banks to conduct beta testing of its central bank digital currency (CBDC) connector solution in an effort to advance cross-border payments using CBDCs.

central banks across emerging and advanced economies are expected to have digital currencies in circulation by the end of the decade, the Bank for International Settlements (BIS) found in a survey published on Monday. Central banks around the globe have been studying and working on digital versions of their currencies for retail use to avoid leaving digital payments to the private sector amid an accelerating decline of cash. Some are also looking at wholesale versions for transactions between financial institutions. Most of the new Central Bank Digital Currencies (CBDCs) will emerge in the retail space, where eleven central banks could join peers in the Bahamas, the Eastern Caribbean, Jamaica and Nigeria which already run live digital retail currencies, the BIS found in its survey of 86 central banks conducted late 2022. On the wholesale side, which in future could allow financial institutions to access new functionalities thanks to tokenisation, nine central banks could launch CBDCs, the BIS said.

Bitcoin is set for its best January since 2013 on bets that monetary tightening and the crypto-sector crisis are both ebbing. The largest token is up 40% since the turn of the year, a first-month gain bettered only twice before when crypto was in its infancy. Smaller coins like Solana, Axie Infinity and Decentraland have doubled in value, part of a $280 billion January climb in digital assets overall, CoinGecko figures show. Bitcoin retreated 2.5% to $23,200 as of 11:37 a.m. in London on Monday amid broad declines in risk assets. The rebound from last year's deep rout is part of a wider revival in risk appetite on expectations that central banks will slow interest-rate hikes and perhaps even cut borrowing costs later this year as high inflation moderates. The rally in virtual coins has weathered ongoing fallout from the collapse of Sam Bankman-Fried's FTX exchange — such as the bankruptcy of crypto lender Genesis Global Holdco LLC and a spate of layoffs across the industry.

Barring stablecoins, the majority of the tokens were trading with gains. Avalanche and Solana zoomed 7 per cent each, whereas Cardano gained 5 per cent. Bitcoin, Ethereum and Polkadot gained 4 per cent each. The global cryptocurrency market cap was trading quite higher at the $1.27 trillion mark, rising more than 3 per cent in the last 24 hours. However, the total cryptocurrency trading volume zoomed over 18 per cent to $51.28 billion.

Central banks across the world should look at bringing cryptocurrencies in the regulated space though non-fungible tokens (NFT) or stable coins will not replace fiat currency, says DBS Bank Group CEO Piyush Gupta during an interaction. Gupta, who was speaking at The Economic Times Global Business Summit, said that there is a better use case of wholesale cross-border central bank digital currencies (CBDC). «I don't think that crypto currencies will become money as we know it, but it can be an alternative to gold and its value,» Gupta said. «The other big challenge is volatility in value. If you want to use this to pay for something, you don't know what it's costing you. Today cryptos are a potential source of speculated value, it's unlikely that this is a source of money as we know it.»

When you make a UPI payment, your bank settles the amount on your behalf at the end of the day. Digital payments like UPI are electronic instructions that authorise intermediaries such as banks to facilitate transactions. Even if they are ‘cashless’ modes of payment, they involve transfer of fiat money (government-issued currency). Now imagine a UPI-like system where digital currency issued by a central bank is transacted instead of bank balances. The need for interbank settlement disappears and you have the option to pay someone securely, without third-party risks. What if money itself could be ‘digital’? The RBI has called for a complete ban on crypto as it believes partial restrictions won’t work. But, at the same time, it is considering issuing its own digital currency by leveraging the technology that powers crypto. “A central bank digital currency (CBDC) would also potentially enable more real-time and cost-effective globalisation of payment systems. Time zone difference would no longer matter,” said T Rabi Shankar, RBI deputy governor, in a speech last year. The RBI defines a CBDC as a legal tender issued by a central bank in a digital form. “It is the same as a fiat currency and is exchangeable oneto-one with the fiat currency. Only its form is different,” said Shankar. The RBI is working towards a phased implementation strategy. Presented ByDid you Know?Producer, direc

cryptocurrencies were finally embraced by institutions. Now those same money-managers say the asset class is ripe for a big selloff next year.