Citi Payments Perspectives

14 Treasury and Trade Solutions Citi Payments Perspectives Global Initiatives Payments Infrastructure Developments Regional Developments (North America) CPMI-IOSCO Consultation on Application of the Principles for FMIs to Stablecoin Arrangements In October 2021, the CPMI and the International Organization of Securities Commissions (IOSCO) issued a public consultation preliminary guidance 11 intending to confirm and clarify that stablecoin arrangements should observe the Principles for Market Infrastructures (PFMI), international standards for payment, clearing and settlement systems. Citi is supportive of the full application of the PFMI to stablecoin arrangements that are, or are likely to become, systemically important, and participated in the comment letter drafted and submitted by The Clearing House (TCH). Key recommendations proposed within the TCH comment letter: • Clarify handling of stablecoin arrangements that do not align to the PFMI (i.e., may face the risk of being prohibited or become systematically important). • Revise the considerations for determining the systemic importance of a stablecoin arrangement to include whether there is an existing regulatory framework in place to appropriately address risks posed by the stablecoin arrangement. • Amend guidance to remove an authority’s “discretion” of using potential growth and future state of stablecoin arrangements to determine the systemic importance. • Include a requirement that when settlement is conducted with a stablecoin instead of central bank money, the issuer of that stablecoin should be 1) a bank or other appropriately regulated financial institution, or 2) deposit funds at a bank or other appropriately regulated financial institution, which is regulated, supervised, and maintains sufficient controls to manage risks arising from the stablecoin arrangement. Project Helvetia: Bank of International Settlements (BIS), Swiss National Bank (SNB), and SIX Joint Exploration on Wholesale CBDC Project Helvetia is a multiphasic investigation by the BIS Innovation Hub, SNB, and SIX (Swiss FMI Operator) to demonstrate how wholesale CBDC (wCBDC) can be integrated with existing core banking systems and processes of commercial and central banks by leveraging tokenization and distributed ledger technology (DLT). The project has gone through two phases and included participation from five commercial banks including Citi. Phase one of the project was completed in 2020 and showed that wCBDC can be used to settle tokenized assets in central bank money. Phase two of the project was completed in January 2022 and expanded on practical complexities, legal questions, and policy implications of issuing wCBDC. In particular, Phase two expanded the work carried out in Phase one but (i) adding commercial banks to the experiment, (ii) integrating wCBDC into the core banking systems of the central bank and commercial banks, and (iii) running transactions from end-to-end. Specifically, from a payments flow perspective, settlement instructions for financial transactions were entered by the commercial banks or the SNB, instructions were matched and subsequently settled in wCBDC with finality on the SDX platform, and finally booked and reconciled in core banking systems. 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