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The Basel Institute of Governance has released a working paper titled “Cryptocurrencies in Asia and Beyond: Legislation, Regulation, and Enforcement.” In it as an example of the release CBDC use the work Ripple with the Royal Authority of Bhutan.
The working paper itself is based on a detailed analysis of how individual countries address legal, regulatory and enforcement issues related to cryptocurrencies and other virtual assets. The analysis focuses on Asia (although Russia and Ukraine are mentioned there), but is conducted in the context of global trends in crypto legislation, regulation and enforcement. It explores critical issues that will shape virtual asset policy at the corporate, national and international levels.
Example 4: New Digital Currency of the Central Bank of Bhutan
Among the countries experimenting with CBDC is the Kingdom of Bhutan. Its Royal Monetary Authority (RMA) announced in September 2021 that it is collaborating with the American company Ripple Labs in the creation of a national digital currency – the “digital ngultrum”.
One of the goals is for “simpler, faster and more affordable payments, both domestically and internationally” to help achieve financial inclusion for 85% of the population by 2023. Right now, thousands of Bhutanese citizens don’t have access to a savings account or credit cards. According to its 2021 Annual Report.
The RMA has acknowledged that even in Bhutan, citizens are abandoning cash in favor of contactless payment systems, and the use of physical money will continue to decline as technology advances. While people are more inclined to adapt and use cryptocurrencies, they exist in an unregulated space and cannot be controlled by the RMA, which creates a serious Problem.
A digital ngultrum would provide the public with a digital solution that can still be controlled and regulated by monetary authorities. Another unspoken goal may be to make the large volumes of remittances that a country receives easier and cheaper. Remittances in 2020 totaled more than $100 million. This is is almost 5% of the country’s GDP of $2.5 billion.
The Basel Institute of Governance (Switzerland) is an independent, international non-profit organization whose activities are aimed at preventing and combating corruption and other financial crimes, as well as strengthening governance around the world.
The Basel Institute is an associated institute of the University of Basel. It is an institute of the United Nations Crime Prevention and Criminal Justice Programme Network.
It is known for compiling the Basel AML Index, an annual ranking for measuring and comparing the risks of money laundering and terrorist financing in countries.
In particular, the document considers the use of cryptocurrencies to circumvent sanctions in Russia, where there is a very wise conclusion:
“Despite the fact that a decentralized blockchain should be open and limitless, and many users are considered anonymous, everything is not as simple as it seems. It is clear that Russians have been buying more and more cryptocurrencies in recent weeks, but are they ordinary people or legal entities circumventing sanctions? Probably the former.”
The document also mentions Stellar:
“On the contrary, in accordance with the PoS protocol, which is adopted Stellar, DASH and EOS, one (also known as a validator) must show that it has a “share” in the network to update the distributed ledger. The more bids a person has, the more likely they are to be selected as a validator. The PoS protocol saves more time and energy. Alogrand announced in April 2021 that its blockchain had accepted Pure Proof of Stake and was completely carbon neutral. Ethereum plans to move from PoW to PoS consensus by June 2022.”
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