Citi Payments Perspectives

11 Treasury and Trade Solutions Citi Payments Perspectives Global Initiatives Payments Infrastructure Developments Regional Developments (North America) White House Executive Order on Ensuring Responsible Development of Digital Assets, March 09, 2022 The White House has issued a much-anticipated Executive Order (“Ensuring Responsible Development of Digital Assets”) setting the tone for the US government’s strategy for digital assets, defined to include cryptocurrencies and other forms of exchange that are recorded on the blockchain. The Executive Order represents the first whole- of-government approach to the benefits and risks of digital assets. It is a general policy statement that reflects the views of the administration, as opposed to a specific proposal for regulation. It also prompts the Federal Reserve to step up the pace on exploration of the case for a central bank digital currency (CBDC). The Order acknowledges the exponential growth and opportunity that the digital asset ecosystem presents and outlines a policy interest in “responsible financial innovation” and the need for evolution and coordination to help ensure that US continues to be a leader in the space. It also lays out a number of perceived general risk areas that digital assets can pose on issues ranging from consumer protection to national security to the environment. To address these risks, the Executive Order tasks various federal agencies, working in coordination, to draft a host of reports, frameworks and action plans to evaluate the various perceived challenges and opportunities presented by digital assets. Watch this space for more on the topic in the coming months. OCC: Acting Comptroller Michael J. Hsu’s remarks before the America Fintech Council “Leveling Up Banking and Finance” In this speech 5 given on November 3rd at the 2021 Fintech Policy Summit, Mike Hsu from the OCC summarized the nature and potential risks of Synthetic Banking Providers (or “SBP”). He also wrote about how regulators and traditional banking providers need to “level up” as a result. He previewed that the financial community, including SBPs should be expecting chartering decisions, interpretive letters, and a “crypto sprint” in coming months from U.S. regulators. This may include universal/holding company-like supervision of firms that may provide “banking” like services across multiple unregulated or loosely regulated entities. Finally, he also noted an increased focus on banks that provide services to large fintechs as this may facilitate synthetic banking outside of the bank regulatory perimeter. FRB: USD Update The Federal Reserve Board published a discussion paper titled “Money and Payments: The U.S. Dollar in the Age of Digital Transformation” on January 20, 2022. The paper examines the pros and cons of a potential U.S. CBDC and requests comments from the public on benefits, risks, policy considerations, and design. The Federal Reserve’s initial analysis suggests that a potential U.S. CBDC, if one were created, would best serve the needs of the United States by being privacy-protected, intermediated, widely transferable, and identity-verified. In Other Words • White House Executive Order sets the scene for whole-of-government approach to digital assets, Fed exploration of the case for CBDCs, and the creation of frameworks to evaluate risks and rewards. • OCC tells market to anticipate crypto chartering decisions, interpretive letters, and a “crypto sprint” from U.S. regulators. • ECB confirms plan to issue digital euro and sets two-year timetable for investigation of challenges and opportunities. Continued � Global Initiatives Financial Stability Board (FSB) Enhancing Cross-Border Payments Roadmap Emerging Payments and Digital Assets Payments Infrastructure Developments ISO 20022 SWIFT Transformation Instant Payments Financial Market Infrastructure (FMI) Interlinkage Initiatives Regional Developments (North America) Immediate Cross-Border Payments (IXB) TCH Request for Pay (RFP) Bill Pay Latest on Fed/CHIPS ISO Timelines Lynx — Canadian High-Value Payment System Glossary