Daily Dash: US Plays Down Digital Dollar Plans

September 12, 2023
The Federal Reserve has said the US is a long way from issuing a central bank digital currency, Ireland has seen a surge in money mule activity, and a new study in Australia has found that slower payments might be the way to beat fraud.

US 'Long Away' From Digital Dollar, Says Fed Vice Chair

The United States is “a long way from” issuing a central bank digital currency (CBDC), said Michael Barr, vice chair for supervision at the Federal Reserve.

Speaking at a fintech conference in Philadelphia, Barr defended the Fed's efforts to explore new technologies and innovations in the financial sector, while he assured that this does not mean the Fed would go ahead with issuing a digital dollar any time soon.

He noted that there is ongoing experimentation in the private and public sectors regarding cryptocurrencies, stablecoins and CBDCs.

“In my view, as both the issuer of US currency and an operator in the payments system, the Federal Reserve must understand these developments and the tradeoffs they introduce.”

Barr said the engagement by Fed researchers is “crucial” so that they can support a safe and efficient payments system in the future.

“Of course, investigation and research are very different from decision making about next steps in terms of payments system development, and we are a long way from that,” Barr added.

He affirmed that the Fed “has made no decision” on issuing a CBDC and would only proceed with issuance once it had obtained clear support from the executive branch and authorising legislation from Congress.

50 Percent Rise In Money Mule Transfers, Warns Irish Banking Lobby 

New figures released by the Banking & Payments Federation of Ireland’s (BPFI) FraudSMART have revealed that €17.5m was illegally transferred through money mule accounts in the first half of 2023, a rise of almost 50 percent on figures from the same period in 2022.

FraudSMART members identified more than 2,600 money mule accounts in the first half of this year, with the average amount moved through the accounts in the region of €10,000, more than double the average amount observed in H1 2022. 

The majority of money mule bank accounts continue to belong to those aged between 18 and 24 years of age, with some as young as 15, the BPFI said. 

“Today’s figures from FraudSMART members show a significant rise in money mule activity,” commented Niamh Davenport, BPFI’s financial crime chief. “This may reflect increased levels of activity in text message scams and investment fraud observed by FraudSMART in recent months, as criminals seek ways to launder their profits.”

Australians Happy To Accept Slower Payments To Protect Against Fraud, Says Study

new study by National Australian Bank (NAB) has found that four in ten consumers would be “extremely prepared” to accept slower payment processing times to protect against fraud.

“Among consumers, older Australians are more willing to trade off speed for safety,” said Ross McEwan, CEO of NAB. “They are also more likely to invest time in educating themselves on scams than young Australians.”

Similarly, half of Australian SMEs said they would be “completely prepared” to reduce payment processing times if it can also reduce fraud.

The findings, which are based on a survey of 2,000 consumers and 760 SMEs, are part of an NAB Consumer & Business Insights study looking at approaches to scams and cybersecurity.

The study also found that only 15 percent of Australian SMEs conduct “extensive training” around scams and other cybersecurity risks.

India Hits Financial Inclusion Target In Six Years

Ahead of the G20 conference in Indian capital New Delhi, it was announced that India has met its financial inclusion target of 80 percent in six years. 

According to a G20 report, India’s advancements were accelerated by digital payment options such as government-backed Jan Dhan Bank accounts, Aadhaar, which is the world's largest biometric ID system, and mobile phones.

Other countries such as Estonia, Singapore and Brazil were also praised for their financial inclusion work in the report. 

For example, the report noted that, in Brazil, the introduction of Pix has accelerated the usage of digital payments beyond any trends observed earlier. 

Fifty million individuals made transfers through Pix when they had not made any account-to-account transfers in the 12 months prior to its launch, the report says. 

Adyen Grabs UK Banking Licence As Passport Rules Set To Expire

Payments giant Adyen has announced that it has been granted authorisation to provide banking services in the UK.

In a statement, Adyen said the authorisation will allow it to continue its current UK operations beyond the end of 2023, following the expiration of the Temporary Permissions Regime (TPR).

The TPR, which came into effect on December 31, 2020, allowed European firms to passport their services to the UK after Brexit, while preparing for full compliance with UK laws.

Adyen said the licence means that it can keep offering its recently launched suite of embedded finance products in the UK.

The suite enables platform businesses to provide bank accounts, virtual or physical cards to small and medium-sized business (SMB) clients. 

Capital, an Adyen cash advance service for SMBs, can also continue.

Costa Rica Applauds $430m Savings Thanks To Acquiring Fee Cap

Costa Rica’s regulations limiting the acquiring fees merchants pay for accepting card payments have saved businesses ₡231bn ($431.5m) between November 2020 and December 2022, the country’s central bank (BCCR) has said.

Costa Rica passed a law in 2020 establishing a 2.5 percent cap on acquiring fees and a 2 percent cap on interchange fees.

After monitoring the market, in December 2022, the central bank decided to lower these caps further to 2 percent for the acquiring fee and 1.5 percent for interchange.

The BCCR now says the fee regulations have levelled the playing field, benefiting more than 22,000 businesses.

It notes that at the time the legislation was passed, the amount of acquisition fees ranged from 0.25 percent to 12 percent, with some smaller businesses paying 48 times higher fees than large ones.

“Today, thanks to the BCCR regulation, pursuant to the national legislation, the highest commission charged for card payments is 2 percent,” the central bank said.

The BCCR confirmed it is also working to reevaluate the acquiring and interchange fee caps for 2024, as required by law.

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