VOLUME 3 – ISSUE 8 / AUGUST 2020 IN DEPTH: SPOTLIGHT: INDUSTRY PROFILE: CHINA’S NEXT MOVES MINDBRIDGE PROGRESSSOFT Untangling the latest payments Gerry Gaetz on how MindBridge is A turning point is on the horizon for developments at the People’s Bank of harnessing AI for the risk management, financial inclusion… ProgressSoft’s China—from CBDC to blockchain oversight, and analysis of payments systems Carole Elias explains why PAGE 3 PAGE 20 PAGE 26 ™ PAYMENTS NEWS FOR THE CENTRAL BANK COMMUNITY FEATURED ARTICLE Albania—Chasing the Financially Excluded Director of Payment Systems Ledia Bregu outlines the Bank of Albania’s efforts to unlock opportunities for development through financial inclusion READ MORE ON PAGE 22 AUGUST 2020 Contents 3// IN DEPTH 26// INDUSTRY PROFILE The next moves for China’s Carole Elias of ProgressSoft central bank on eKYC as a turning point for financial inclusion 4// IN THE NEWS INDUSTRY HAPPENINGS The latest developments 27// in payments A shortlist of upcoming payments events 18// PEOPLE ON THE MOVE REPORTS IN REVIEW Industry nominations, appointments, 28// and retirements Recent payments reports and whitepapers 20// SPOTLIGHT TALKING POINTS MindBridge’s Gerry Gaetz outlines 29// how AI is the ideal choice for A roundup of speeches on enhancing payments systems relevant payments issues 22// FEATURE Ledia Bregu describes the Bank of Albania’s efforts to chase the financially excluded Contributors Ledia Bregu Carole Elias Director of Payment Systems, Business Development Officer, Accounting and Finance ProgressSoft Department, Bank of Albania LinkedIn LinkedIn Gerry Gaetz Executive Advisor, MindBridge, Strategic Advisor, Tata Consultancy Services LinkedIn 2 IN DEPTH AUGUST 2020 CBDC, Fintech, Blockchain: Next Moves for China Rumours continue to swirl around China’s much anticipated Global media picked up the story, eager for more information central bank digital currency project, known as Digital Cur- about the potential launch date of DCEP. But just days later, rency Electronic Payment, or DCEP. In what the South China state-run Xinhua press agency poured cold water on the news. Morning Post is calling a “hot guessing game amid leaks and Citing an anonymous source, the Xinhua article said the DCEP expectations,” pundits have had their hands full attempting to pilot tests would take place only in the four previously named separate fact from fiction. Here’s what we know about the latest cities, the 2022 Winter Olympics venues, and the retail part- developments. ners named above. View the English-language coverage in the South China Morning Post for more information. In early August, reports emerged that China’s big four state- owned banks had started large-scale internal testing of DCEP. SO IS CHINA’S DCEP CLOSE TO LAUNCH? The Agricultural Bank of China, the Bank of China, the China DCEP has been a work in progress at China’s central bank since Construction Bank, and the Industrial and Commercial Bank 2014. Efforts to test the digital yuan have accelerated over the of China are now actively working with the People’s Bank of past year, driven partly by the announcement of Facebook’s Li- China (PBOC) to pilot DCEP with a select group of clients in bra stablecoin initiative and the success of the country’s mobile major cities, including Shenzhen, Suzhou, Xiongan New Area, payment platforms such as Alipay and WeChat Pay. But, as not- and Chengdu. ed (link in Chinese) in late May by PBOC Governor Yi Gang, an According to the reports, customers participating in the DCEP official launch date remains undetermined. pilot can register with a mobile phone number to access the FINTECH PILOT EXTENDS REACH app, which can be used to top up accounts, withdraw money, make payments, and transfer funds. The four banks are addi- PBOC first announced the launch of its fintech innovation reg- tionally testing offline account-to-account transfers. A small ulation pilot project in December 2019, with Beijing selected as number of employees at the state-run banks are also apparent- the first municipality to experiment with and test new regula- ly using the DCEP app to make transfers and pay bills. tions in the city’s fintech sector. After rolling out the pilot to sev- en more regions—Shanghai, Chongqing, Shenzhen, Xiongan Back in April, a series of screenshots leaked onto social media New District, Hangzhou, Suzhou, and Guangzhou—the capital of what appeared to be an alpha version of the DCEP mobile of China’s Sichuan province, Chengdu, has now been added wallet being trialed by Agricultural Bank of China customers. (link in Chinese) to the list. The leak led to a frenzy of speculation about the digital yuan’s impending launch, which has since been tempered by official The cities of Chengdu, Shenzhen, Suzhou, and Xiongan New announcements from PBOC officials, who have called the pilots Area are also participating in the ongoing DCEP tests, as de- a “closed test.” According to a recent statement from a PBOC scribed above. spokesperson, the new version of the pilot app bears a water- A total of nine regions are currently participants in the fintech marked identification code to prevent new screenshots from pilot program, which assists licensed financial institutions and being similarly leaked. tech firms in complying with established laws and regula- During a recent virtual conference, PBOC said (link in Chi- tions and helps ensure that consumer rights and interests are nese) that the DCEP trials in the first half of 2020 have been protected. successful and that the central bank will “actively and steadily PBOC PUBLISHES BLOCKCHAIN RULES, STANDARDS promote the development of legal digital currency” for the re- mainder of 2020. And in blockchain news, PBOC recently published the Notice Concerning Driving the Standardised Usage of Blockchain DCEP PILOT TO EXPAND? Technology, a set of standards to be used in the assessment of Where else does PBOC plan to trial the DCEP app? This is a the application of blockchain in China’s financial sector. The No- question that the media is currently trying to untangle. tice was released in tandem with the central bank’s Blockchain Technology Financial Application Assessment Rules. News about the commercial bank pilot detailed above first trick- led out in December 2019, when news outlet Caijing reported News outlet China Banking News outlines the basic require- (link in Chinese) that PBOC planned to run the DCEP pilot on a ments for the country’s financial institutions, as articulated in limited scale in partnership with the four commercial banks, as the two documents: establishing sound risk prevention mech- well as three major telecoms operating in the country. anisms for applications based on blockchain technology; reg- ularly undertaking external security assessments; driving the Since then, PBOC has also identified the locations of the 2022 standardised usage of blockchain technology in the financial Winter Olympics in Beijing and Zhangjiakou, select foreign re- sector; and undertaking filing work for blockchain technology tail chains such as Subway and Starbucks, the leading Chinese applications in accordance with regulations. ride hailing service DiDi, and possibly food delivery giant Meitu- an, as candidates for DCEP pilot testing. The People’s Bank previously issued the Financial Distributed Ledger Technical Security Standards earlier this year, consid- Most recently, on 14 August, China’s Ministry of Commerce an- ered to be the first blockchain standards for the Chinese finan- nounced that the digital yuan would roll out for testing in sev- cial sector, and among the first for global finance. eral additional areas across the country, including cities in the Greater Bay Area (including Hong Kong), the Beijing-Tianjin-He- Research and development in blockchain technology have bei region, the Yangtze River Delta region (including Shanghai), been on the rise in China following an active endorsement of and select cities in central and western China. See the official the technology from President Xi Jinping in October 2019. statement here (PDF, link in Chinese). The trials are expected to start before the end of this year. 3 IN THE NEWS AUGUST 2020 Russia Passes Long-Awaited Crypto Bill After two years of deliberation, the Russian State Duma has digital financial asset exchanges and to supervise the informa- passed its long anticipated crypto bill, On Digital Financial As- tion system operators. Further, the Bank of Russia will have the sets, in its third and final reading. The bill, signed into law by right to determine features of digital assets that can be pur- President Vladimir Putin on 31 July, grants legal status to cryp- chased by investors. to-assets but prohibits their use as a means of payment for More detailed information about the regulation of cryptos will goods and services. be included in a different bill, On Digital Currency, expected to First introduced in 2018, On Digital Financial Assets was origi- be adopted in the fall 2020 session of the State Duma. nally scheduled to become law in April 2020 after various gov- On Digital Financial Assets is expected to be officially adopted ernmental bodies reached an agreement on remaining points in Russia on the first day of 2021. of contention. However, the final passage and issuance of the regulations were put on hold (link in Russian) due to the Cov- id-19 pandemic. As reported by state news agency Tass, the bill sets forth a for- mal definition of a digital currency as “an aggregate of electron- ic data capable of being accepted as the payment means, not being the monetary unit of the Russian Federation or a foreign state, and as investments.” While the final version of the law takes a less strict approach to digital financial assets than observers had anticipated, it ren- ders assets like Bitcoin and Ethereum largely useless for any purpose beyond investments, which are only permitted under specific defined conditions.