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New Compliance Test Ensures Central Bank Digital Currencies Are Exchangeable

CBDCs
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EDITOR NOTE: In an effort not to be left behind in the digital currency race, central banks are charging ahead to get their sovereign digital currencies up and running ASAP. EMTECH, a fintech company, has partnered with Microsoft to develop a compliance platform that can help central banks with digital currency implementation. There are a few things we don’t know. First off, many similar fintech developments are geared toward regulating users but have poor security measures themselves, making them vulnerable to (human and tech) error and cybersecurity breaches. Simply, it can anticipate the latest innovations in cyberattack methods and tech. Second, we don’t know to what extent this platform may collect and record our personal transaction data, who’s at the other end of the screen, and how that may infringe on our financial privacy. In terms of real risk, it’s a losing scenario either way for users. Hence, the need to retain physical money (whether cash, silver, or gold).

Fintech company EMTECH is launching a compliance platform that helps central banks tackle compliance issues or safely test their central bank digital currencies (CBDC) in partnership with Microsoft, the firm announced Monday. 

“It is a regulator-based solution that allows central banks to seamlessly introduce CBDCs,” Carmelle Cadet, EMTECH co-founder and CEO, told CoinDesk. 

According to Cadet, the goal of EMTECH’s Modern Central Bank Sandbox is to assist central banks in setting up a digital currency that is interoperable, meaning it can easily be converted to other cryptocurrencies and are compatible with payment devices and terminals across the world.  

With the government of China closing in on issuing its own digital yuan, a number of large economies around the world including South Korea and Sweden have begun working on their own CBDCs. But according to the Bank of International Settlements, emerging economies report stronger motivations for developing national digital currencies as they could help address systemic issues like financial exclusion and payments inefficiencies.    

Cadet said the firm is actively working with the Central Bank of Bahamas on the digital sand dollar, a project to issue a digital equivalent of the Bahamian dollar.  

U.S.-based EMTECH competed against other fintechs to work with the Bahamas’ digital currency, Cadet added. The Caribbean nation’s central bank piloted its CBDC late last year. The Bahamas launched the sand dollar in October 2020.  

The project appears to be in early stages, according to a spokesperson for the Central Bank of the Bahamas.

Related: China's Latest Digital Currency Trial Is Its Most Important Yet

“EMTECH’s involvement in the project is limited to architecting our cross-border minimal viable product (MVP), which remains a work in progress,” a spokesperson for the Central Bank of the Bahamas told CoinDesk via an email. 

Cloud computing platform Microsoft Azure has partnered with EMTECH to deploy pilot programs as the firm continues to work on engaging central banks interested in issuing CBDCs, Cadet said. 

“We look forward to helping EMTECH on its global mission to enable accelerated central bank digital innovation, harnessed on Microsoft’s highly secure, compliant and scalable Azure platform,” said Chris Lwanga, principal director of software partnerships at Microsoft, in the announcement. 

Cadet explained her research has shown central banks are keen on introducing national digital currencies but they often work behind closed doors. 

“If they build it internally, not thinking about interoperability, is probably going to fail when it comes out,” Cadet said.

The EMTECH leadership team includes Diane R. Maurice, a finance industry regulator with an extensive portfolio of risk management duties and who served at the Federal Reserve, the U.S Treasury Department, and the Central Bank of Tunisia.

Originally posted on Yahoo! Finance

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