Shalini Nagarajan

India&#8217;s central bank is ramping up two ongoing central bank digital currency (CBDC) test projects, which study both retail and wholesale implementations of a digital rupee.



The Reserve Bank of India (RBI) says it’s now introducing a range of use cases and features for the pilots over the next financial year. The Reserve Bank launched the digital rupee — or e-Rupee — <a href="https://blockworks.co/news/india-central-bank-hopes-cbdc-can-combat-crypto-threat" target="_blank" rel="noreferrer noopener">pilots</a> last year.



There are plans to expand the retail pilot, bringing in a larger number of participating banks, according to the bank’s <a href="https://rbidocs.rbi.org.in/rdocs/AnnualReport/PDFs/0ANNUALREPORT20222322A548270D6140D998AA20E8207075E4.PDF" target="_blank" rel="noreferrer noopener">annual report</a> published on May 30. 



India’s wholesale CBDC tests commenced last November. The idea is to facilitate settlement of secondary market transactions in government securities using the digital rupee. Nine banks participated in the first phase.



The retail pilot kicked off in December, with the goal of using the digital rupee as a standin for physical currency notes. The central bank said eight banks are already involved in the retail pilot, and an additional five are in the process of joining.



“The results of both the pilots so far have been satisfactory and in line with expectations,” RBI said.



The issuance and redemption of the e-Rupee will be handled by the RBI, while the distribution and payment services will be entrusted to the banks.



“Settlement in central bank money would reduce transaction costs by pre-empting the need for settlement guarantee infrastructure or for collateral to mitigate settlement risk,” the bank said.



Before the pilots, a <a href="https://rbidocs.rbi.org.in/rdocs/PublicationReport/Pdfs/CONCEPTNOTEACB531172E0B4DFC9A6E506C2C24FFB6.PDF" target="_blank" rel="noreferrer noopener">&#8220;concept note&#8221; on CBDC</a> was released to increase awareness. In this note, the RBI said the e-Rupee would provide another option alongside traditional forms of money. While it is similar to physical banknotes, being digital makes it potentially easier, faster and cheaper to use, per the central bank.



RBI noted that India has become more resilient in the aftermath of the pandemic, largely due to the wave of digital transformation.



As of now, the specific technology behind the e-Rupee is unclear. The RBI still appears to be figuring out whether to opt for a regular centralized payments system, like WeChat and Venmo, or a distributed ledger technology (DLT) system.



Reuters&nbsp;<a href="https://www.reuters.com/markets/currencies/india-cenbank-says-digital-currency-transactions-stay-largely-anonymous-2022-12-07/" target="_blank" rel="noreferrer noopener">reported</a>&nbsp;in December that RBI was working with DLT, a term which mostly encompasses enterprise blockchain. But the official concept note states DLT systems, in their current form, are only viable in limited capacities. Blockworks has reached out to the RBI to learn more.



In any case, India is part of a small group of countries testing CBDCs, alongside&nbsp;<a href="https://blockworks.co/news/rba-to-explore-cbdc-use-cases-in-australia-via-research-pilot" target="_blank" rel="noreferrer noopener">Australia</a>,&nbsp;<a href="https://blockworks.co/news/china-cbdc-government-salaries" target="_blank" rel="noreferrer noopener">China</a>,&nbsp;<a href="https://blockworks.co/news/digital-hong-kong-dollar-trial" target="_blank" rel="noreferrer noopener">Hong Kong</a>, and&nbsp;<a href="https://blockworks.co/news/nigeria-cbdc-push-limits-cash-withdrawals" target="_blank" rel="noreferrer noopener">Nigeria</a>. Meanwhile, the US is&nbsp;<a href="https://blockworks.co/news/banks-pen-paper-cbdc-implementation" target="_blank" rel="noreferrer noopener">inching closer</a>&nbsp;to potentially deciding on formally proposing a Fed-issued digital dollar.



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CBDC

India To Onboard More Banks For Digital Rupee Pilots

Sebastian Sinclair

Distributed ledger technology (DLT) such as enterprise blockchain could unlock $20 billion in annual savings across global clearing and settlement costs.



That’s according to a report from the Global Financial Markets Association (GFMA) in collaboration with Boston Consulting Group and two other law firms. The GFMA is a global body representing interests of capital markets participants and stakeholders.



Its report evaluates opportunities and risks associated with settling global trade on DLT-based systems. 



Despite the promising outlook, the GFMA acknowledged widespread adoption of DLT in securities markets has yet to occur, largely due to a lack of institutional interest alongside poor liquidity and risk management.



Investor demand for securities running on DLTs is likely to hinge on fixed-income offerings (corporate bond markets), and tokenized &#8220;illiquid and private asset classes like investment funds.”



“The global value of tokenized illiquid assets is estimated to be worth about $16 trillion by 2030, from a base of [around $0.3 trillion] today,” the report said. “New instruments (e.g., tailored frequency income payments) through product innovation may also act as a key value driver to serve client needs.”



DLT is a broader term that encompasses various decentralized technologies, while blockchain is a specific implementation of DLT with differing governance, consensus mechanisms, scalability and use cases.



Adam Farkas, GFMA chief executive said DLT holds growth potential and calls for a regulatory framework supporting stability, responsible innovation and fair competition.



“Policymaking should focus on creating a regulatory framework that supports financial stability and responsible innovation in digital asset markets,” Farkas said in a <a href="https://www.gfma.org/banks-call-for-regulators-to-take-more-innovative-approach-to-dlt/" target="_blank" rel="noreferrer noopener">statement</a>.



The executive also urged officials to “find a way forward” ensuring stability and protections, while also allowing the industry and wider economy to grab hold of the benefits the nascent tech promises.



Australia’s planned DLT overhaul of its primary securities exchange is perhaps the most prominent attempt at running a major settlement system on the technology.



The ASX ultimately <a href="https://blockworks.co/news/blockchain-not-bitcoin-is-dead-australian-bourse-cans-dlt-shift" target="_blank" rel="noreferrer noopener">canned the idea</a> late last year after spending $170 million.



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distributed ledger technology

Tokenized Assets, Distributed Ledgers Could Save Finance Billions: GFMA

The Australian Securities Exchange (ASX) has placed a blockchain system (DLT) intended to upgrade its aging settlement layer on indefinite hold after three years of development.



The move marks the end of what was to be one of the most impactful implementations of distributed ledger technology — business-speak for <a href="https://cms.blockworks.co/news/enterprise-blockchain-provider-targets-wall-street-partners-with-rebrand" target="_blank" rel="noreferrer noopener">enterprise blockchain</a> — to date.



In a <a href="https://www2.asx.com.au/content/dam/asx/about/media-releases/2022/60-17-november-2022-CHESS-Replacement-ASX-reassessing-financial-derecognition_.pdf" target="_blank" rel="noreferrer noopener">statement</a> on Wednesday, ASX said its DLT, once pegged to replace its 25-year-old Clearing House Electronic Subregister System (CHESS), simply didn’t measure up.



ASX inked a <a href="https://www.asx.com.au/documents/about/MediaRelease-ASX-DigitalAsset-and-VMware-join-forces-on-DLT.pdf" target="_blank" rel="noreferrer noopener">three-party memorandum of understanding</a> in 2019 with enterprise blockchain firm Digital Asset and cloud computing giant VMware to build the software.



Between 245 million and 255 million Australian dollars ($165 million to $171 million) spent on developing the DLT will be scrubbed from ASX’s balance sheet starting next year, a spokesperson told Blockworks. 



The funds were previously listed as a financial asset or liability. ASX doesn&#8217;t expect the outcome to impact the company’s dividends.



DLTs are private (permissioned) blockchain-powered networks; databases involving multiple vetted parties across multiple trusted nodes, which process actions within a closed system.&nbsp;



Large companies and other institutions have gravitated towards DLT solutions rather than permissionless blockchains, as they award supreme power and control over the networks they support, with “blockchain, not Bitcoin” the mantra for many over the past five years.



Compare that with public (permissionless) blockchain systems such as Bitcoin and Ethereum. These networks have no central power and allow anyone at all (with the right equipment) to join, validate and otherwise participate in the network.



The ASX spokesperson said that while current activities on the project have been paused, it has not definitively ruled out a DLT implementation in the future.&nbsp;



“As we revisit solution design we will go back with an open mind,” the spokesperson said. “We will evaluate a number of options and we will work with both [Digital Asset] and VMware in those investigations.”&nbsp;



<h3 class="wp-block-heading">ASX repeatedly pushed back its DLT blockchain system</h3>



The Australian bourse, which handles clearing, settlement and registration of securities and equities in the country, first began exploring options to replace CHESS more than seven years ago.&nbsp;



Toward the end of 2018, DLT was tipped as the technology of choice to help modernize its systems, leading to a formal agreement to develop a blockchain-based solution a year later.



Some ASX customers initially balked at the idea, complaining that the blockchain implementation could ultimately fail. The exchange delayed the implementation <a href="https://www.thetradenews.com/asx-confirms-one-year-delay-to-dlt-post-trade-system/" target="_blank" rel="noreferrer noopener">several times</a> due to concerns over exactly how the new system would function.&nbsp;



The transition was initially slated to go live in 2020. Citing significant challenges posed by the design, ASX’s decision to can its DLT stemmed from a <a href="https://www2.asx.com.au/content/dam/asx/markets/clearing-and-settlement-services/asx-chess-replacement-application-delivery-review-2022.pdf" target="_blank" rel="noreferrer noopener">review</a> undertaken by IT consulting giant <a href="https://cms.blockworks.co/news/asx-taps-accenture-to-review-delayed-delivery-of-blockchain-system/" target="_blank" rel="noreferrer noopener">Accenture</a>, which was started in <a href="https://cms.blockworks.co/news/asx-taps-accenture-to-review-delayed-delivery-of-blockchain-system" target="_blank" rel="noreferrer noopener">August this year</a> and issued earlier this month.



Accenture said distributed systems introduce higher latency, exacerbated by multiple layers including client nodes, CHESS’ application and the ledger itself, where transactional data is stored.



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Accenture

‘Blockchain, not Bitcoin’ is Dead? Australian Bourse Cans DLT Shift

Casey Wagner

<div id="highlights-block_63204f9297890" class="highlights">
 <ul>
 <li>The best time to revamp is during crypto winter, Symbiont said</li>
 <li>The enterprise technology infrastructure provider has partnered with Vanguard, Citigroup, Nasdaq and Franklin Templeton Investments</li>
 </ul>
 
</div>



Following a tumultuous summer for crypto markets, enterprise technology infrastructure provider Symbiont has unveiled a “brand refresh,” designed to show Wall Street blockchain technology is here to stay.&nbsp;



Symbiont, founded in the early days of crypto in 2013, launched its first enterprise blockchain product in 2019 with Vanguard. The company also partners with other big names in banking, including Citigroup, Nasdaq and Franklin Templeton Investments.&nbsp;



The enterprise blockchain product allows for smart contracts to take over data normalization for Vanguard’s passive index funds, allowing for orders to be executed autonomously. <a href="https://www.symbiont.io/" target="_blank" rel="noreferrer noopener">Symbiont</a> currently manages about $2.3 billion of Vanguard’s passive indices value through that network, Mark Smith, CEO and co-founder of Symbiont, said.



On a backdrop of uncertain macroeconomic conditions, the looming <a href="https://cms.blockworks.co/dreams-of-forked-ether-have-defi-dapps-preparing-for-nightmare-scenarios/" target="_blank" rel="noreferrer noopener">Ethereum Merge</a>, and increasing regulatory scrutiny, Symbiont’s facelift could not come at a more opportune time, the team said.



Symbiont does not use public Ethereum or other permissionless protocols, calling them “unsuitable for enterprise use,” in <a href="https://www.symbiont.io/post/public-vs-permissioned-blockchains" target="_blank" rel="noreferrer noopener">a company blog post</a>.



Now is the time “to better educate the industry on the entire digital asset/blockchain ecosystem on the heels of a crypto winter,” Smith said.



<blockquote class="wp-block-quote is-layout-flow wp-block-quote-is-layout-flow">“This is a time of pronounced market cycles that maturing industries face, and the next phase is difficult to predict; however, what is crystal clear is the importance of blockchain technology as an emerging technology that is underpinning the digital asset industry and here to stay for the long haul,” he said.&nbsp;&nbsp;&nbsp;</blockquote>



​​Vanguard and State Street now use Assembly, Symbiont’s distributed ledger technology, in the margin calculation process for a live trade of a 30-day foreign exchange forward contract.



“We identified blockchain as a viable fintech solution to solve financial market infrastructure challenges dating back to 2013, have worked with regulators to identify the long-term opportunity for smart contracts, and are now in a new phase of development as highlighted by the timely release of our Symbiont Assembly platform,” Smith said.&nbsp;



The company has plans to expand its current Wall Street partnerships, it said.&nbsp;



“Symbiont continues to gain traction in bringing blockchain market infrastructure to financial institutions with partners Vanguard and State Street and is on target for a broader roll-out of its smart collateral product later this year,” Silvia Davi, Symbiont’s chief marketing and communications officer, said.



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