Bank of France (representing the Eurosystem), Bank of Japan, Bank of Korea, Bank of Mexico, Swiss National Bank, Bank of England and the Federal Reserve Bank of New York will seek to work in partnership with a large group of private financial firms convened by the Institute of International Finance (IIF). 

Project Agorá builds on the unified ledger concept proposed by the BIS and will investigate how tokenised commercial bank deposits can be "seamlessly integrated with tokenised wholesale central bank money in a public-private programmable core financial platform."

According to BIS, this could "enhance the functioning of the monetary system and provide new solutions using smart contracts and programmability, while maintaining its two-tier structure." 

The BIS will issue a call for expressions of interest to private financial institutions to join Project Agorá. 

Designated as the VOLT initiative this ongoing project has focused on enhancing DFS’s Vision, Operations, Leadership, and Technology in order to "further cement DFS’s role as the leading regulator of virtual currency in the nation." 

In furtherance of this initiative, Superintendent Harris published proposed guidance which adopts enhanced criteria for coin-listing and delisting procedures, as well as updated guidance on the framework for designating coins or tokens to the DFS greenlist.  

The proposed guidance "enhances the original framework issued by the Department in 2020 by clarifying DFS’ expectations with respect to the coin-listing and delisting policies of DFS-regulated entities".

The guidance:  

• heightens risk assessment standards for coin-listing policies and tailors enhanced requirements for retail consumer-facing businesses; 
• requires licensees to develop and submit to DFS for approval a coin-delisting policy that is compliant with this proposed guidance; and 
• updates the DFS Greenlist, the list of coins and tokens approved for all licensees to list or custody, and Greenlist process. 

The proposed guidance is open for public feedback until October 20, 2023.  

The bill, called The Crypto Regulation, Protection, Transparency, and Oversight Act (CRPTO), sets out requirements for independent public audits of cryptocurrency exchanges and preventing  individuals from owning the same companies, such as brokerages and tokens, to stop conflicts of interest. Crypto platforms "would have responsibilities to customers similar to banks under the federal Electronic Fund Transfer Act by requiring platforms to reimburse customers who are the victims of fraud." The bill would also strengthen the New York State Department of Financial Services’ (DFS) regulatory authority of digital assets.

Overview of CRPTO

1. Stopping conflicts of interest

The bill would stop conflicts of interest by:

• preventing common ownership of crypto issuers, marketplaces, brokers, and investment advisers and preventing any participant from engaging in more than one of those activities;
• preventing crypto brokers and marketplaces from trading for their own accounts;
• prohibiting marketplaces and investment advisers from keeping custody of customer funds;
• prohibiting brokers from borrowing or lending customer assets; and
• prohibiting referrals from marketplaces to investment services for compensation.

2. Requiring public reporting of financial statements

The bill would increase transparency in the industry by requiring companies to:

• undergo mandatory independent auditing and publish audited financial statements;
• provide investors with material information about issuers, including risks and conflict-of-interest disclosures;
• require marketplaces to establish and publish listing standards; and
• require cryptocurrency promoters to register and report their interest in any issuer whose cryptoassets they promote.

3. Bolstering investor protections

At present, the law does not protect investors’ cash or provide a means for returning an investor’s crypto holdings if a crypto exchange, broker, or platform fails.

The bill would bolster investor protections by:

• enacting and codifying 'know-your-customer' provisions, meaning brokers would have to know essential facts about their customers, and requiring crypto brokers and marketplaces to only conduct business with firms that comply with KYC provisions;
• banning the use of the term 'stablecoin' to describe or market digital assets unless they are backed 1:1 with U.S. currency or high-quality liquid assets as defined in federal regulations; and
• requiring platforms to reimburse customers who are the victims of unauthorised asset transfers and transfers resulting from fraud.

The CRPTO Act gives the Attorney General jurisdiction to enforce any violation of the law, issue subpoenas, impose civil penalties of $10,000 per violation per individual or $100,000 per violation per firm, collect restitution, damages, and penalties, and shut down businesses engaging in fraud and illegality.

The bill would also codify DFS’ authority to license digital asset brokers, marketplaces, investment advisors, and issuers prior to engaging in business in New York and allow DFS to oversee the digital asset licensing regime.

Attorney General James said: “Rampant fraud and dysfunction have become the hallmarks of cryptocurrency and it is time to bring law and order to the multi-billion-dollar industry. New York investors should have the peace of mind that there are safeguards in place to protect them and their money. All investments are regulated to account for every penny of investors’ money — cryptocurrency should be no exception. These commonsense regulations will bring more transparency and oversight to the industry and strengthen our ability to crack down on those that don’t pay respect to the law.”

This bill will be submitted to the State Senate and Assembly for their consideration during the 2023 legislative session.

Project Cedar Phase II x Ubin+ will investigate how wCBDCs could improve the efficiency of cross-border wholesale payments involving multiple currencies. The project will enhance designs for "atomic settlement of cross-border cross-currency transactions, leveraging wCBDCs as a settlement asset." 

The project, which involves establishing "connectivity across multiple heterogeneous simulated currency ledgers", aims to "significantly reduce settlement risk, a key pain point in cross-border cross-currency transactions."

Project Cedar is a multi-phase research effort to develop a technical framework for a "theoretical wCBDC in the Federal Reserve context and aims to contribute to a broad and transparent public dialogue about CBDC from a technical perspective." Phase I of Project Cedar found that using a wCBDC prototype to facilitate transactions supported by blockchain technology could improve the speed and safety of cross-border wholesale payments.

The 12-week experiment found that wholesale cross-border digital currency transactions supported by blockchain technology can deliver fast and safe payments.

The Phase 1 report summarises the problem space, hypothesis, design and results of the experiment conducted in Phase I, which focused on a wholesale cross-border payments use case.

Phase 1 showed three key findings:

• Faster payments: In the test environment, transactions on the blockchain-enabled distributed ledger system settled under 15 seconds on average.
• Atomic settlement: The simulated ledger network enabled atomic settlement, meaning both sides of the simulated transactions were settled either simultaneously or not at all, and reducing the risks currently borne by counterparties.
• Safer and accessible transactions: The distributed ledger system design enabled payments on a 24/7/365 basis and supported objectives related to interoperability by enabling transactions across separate, homogeneous ledgers networks representing a variety of financial institutions, including central and private sector banks.

The guidance sets out that stablecoins traded in the U.S. state of New York should be fully backed by certain assets, with these assets segregated from the issuers’ operational funds and attested to by an auditor regularly. 

According to NYDFS’s guidance, stablecoins, the value of which is intended to be pegged to the U.S. dollar or other assets, must be backed by a reserve composed of U.S. Treasury bills with no more than three months to maturity, U.S. Treasury notes, some types of U.S. Treasury bonds or reverse repurchase agreements that are collateralised by Treasury bills.