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Following the festive break, VIXIO PaymentsCompliance provides a short round up of some of the key events over the past few weeks that you may have missed, including Croatia becoming the latest eurozone member, the completion of the US CBDC project, new Malaysian electronic money rules and Russia to allow transfers with "unfriendly states".
Many readers will hopefully have taken the last fortnight as an opportunity for a break and recharge in preparation for the new year. In Europe, and the US in particular, things have largely been quiet. Nevertheless, there have been notable announcements.
Croatia joins eurozone
Perhaps the biggest announcement was that Croatia began 2023 as a member of the eurozone, bringing an end to its use of the Croatian kuna as the national currency. This also means that all domestic payments will now be done through Single European Payments Authority (SEPA) schemes.
Since October 2020, the European Central Bank (ECB) had already become responsible for directly supervising eight significant institutions and overseeing 15 less significant institutions in Croatia, due to an agreement with the central bank, Hrvatska Narodna Banka.
Kunas will still be accepted until January 15.
US CBDC project concludes
Meanwhile, the Federal Reserve Bank of Boston and the Massachusetts Institute of Technology (MIT) announced that their research into the technical feasibility of a potential digital dollar has concluded.
Known as Project Hamilton, the initiative has focused on better understanding the capabilities and limitations of different technologies that might be used to manage and transfer a central bank digital currency (CBDC).
“Project Hamilton took critical early steps toward a deeper understanding of how money might work better for all,” said Jim Cunha, the state central bank’s executive vice president, who also noted that the project has always been “agnostic” towards the issuance of a CBDC.
Research was published in 2022 on a transaction processor for a theoretical high-performance and resilient CBDC.
The processor was developed as open-source research software, called OpenCBDC, and project leaders urged global contributors to continue working on it.
According to the Boston Fed, more findings will be unveiled in 2023.
Dutch central bank issues climate warning to banks
De Nederlandsche Bank (DNB) has cautioned that banks are at risk due to companies’ slow climate transition.
Companies in carbon-intensive sectors to which banks lend are not switching to sustainable alternatives quickly enough to meet the goals of the Paris Climate Agreement, according to research by the DNB.
The DNB’s analysis revealed that car manufacturers are not switching from producing combustion-engine cars to electric cars rapidly enough to meet the Paris climate goals, and that the switch from fossil-fuel-based power generation to renewable sources is also progressing too slowly. In addition, oil extraction by companies in the loan portfolios of Dutch banks will increase in the coming years, while a decrease is needed.
Russia allows rubles transfers from unfriendly states
Russia’s invasion of Ukraine was one of the issues to dominate the news in 2022. It led to various regulatory announcements, including a broad package of sanctions, a SWIFT ban and beefed-up economic crime legislation in the UK.
On December 29, the Central Bank of Russia announced that it is permitting banks from “unfriendly states” to transfer funds in rubles abroad from correspondent accounts opened with Russian credit institutions.
This is to support continued settlements in rubles on foreign trade transactions.
In addition, the central bank has extended measures to support the country’s payment system. These measures were due to expire on January 1.
For example, the non-application of enforcement measures for a failure to register a payment system operator in the case of credit institutions’ compliance with local payments legislation has been extended until July.
Similarly, non-application of enforcement measures against credit institutions for a failure to offer mobile applications to their clients enabling money transfers through Russia’s Faster Payments System, provided that they offer other remote banking systems for these purposes, has also been extended until April.
New Malaysian regulations
In Malaysia, the central bank has released two policy documents relating to payment systems operators and electronic money institutions.
Policy documents are essentially the main legislative tool used by the central bank, Bank Negara Malaysia, to regulate specific entities. Despite their name, they do have regulatory effect and are binding on the regulated entities.
These documents outline requirements to ensure the safety and efficiency of payments and e-money systems, following up on public consultations that were issued in March and June, respectively.
Back to work
In the coming days, regulators, policymakers and politicians will be returning to work and beginning to unveil their latest policy announcements.
With the UK parliament voting through the mammoth, post-Brexit Financial Services and Markets Act, and the new Swedish presidency of the EU likely to prioritise getting anti-money laundering legislation over the finish line, it is likely to be another busy few months.
