CBDC vs Stable Coin for Treasurers
The rise of Central Bank Digital Currencies (CBDCs) and stablecoins is a hot topic in the world of treasury and payments, particularly with the push toward faster, more efficient international transactions. Here’s a comparison of CBDCs and stablecoins, focusing on control and their potential usefulness for corporate treasurers: 1. CBDCs (Central Bank Digital Currencies) CBDCs are digital versions of a country’s fiat currency, issued and regulated by central banks. They’re essentially a government-backed digital asset, often with the same legal status as physical cash. Key Aspects: Usefulness for Corporate Treasurers: Challenges for Treasurers: 2. Stablecoins Stablecoins are digital currencies designed to maintain a stable value by being pegged to an underlying asset (like a US dollar, gold, or a basket of assets). They’re typically issued by private companies rather than central banks. Key Aspects: Usefulness for Corporate Treasurers: Challenges for Treasurers: Comparison of CBDCs vs Stablecoins for Corporate Treasurers Feature CBDCs Stablecoins Control High (centralized control by govts) Low (private issuers or decentralized) Stability Very high (tied to national currency) High (tied to fiat currency, gold, or basket of assets) Regulation Strong government oversight Varied (some issuers may be subject to regulations, but not by central governments) Use for Cross-Border Payments Potentially faster and cheaper than traditional banking, but may face issues of interoperability Faster, cheaper, and decentralized cross-border payments with fewer intermediaries Liquidity Management Allows treasury to manage cash within a highly stable framework Allows treasury to manage liquidity with some flexibility, especially if there’s a stable backing asset Risk Management Limited risk exposure (depends on gov’t policy) Potentially higher risk exposure (issuer solvency, regulatory risks) Conclusion: For corporate treasurers, both options hold potential, but each comes with its own set of risks and challenges. The key will be closely monitoring the regulatory landscape and adoption trends as these technologies continue to evolve. Also Read Join our Treasury Community Treasury Mastermind is a community of professionals working in treasury management or those interested in learning more about various topics related to treasury management, including cash management, foreign exchange management, and payments. To register and connect with Treasury professionals, click [HERE] or fill out the form below to get more information. Notice: JavaScript is required for this content.
Franklin
Are You Checking Your FX Trade Time-stamps?
This article is a contribution from our content partner, Just The UK Financial Conduct Authority (FCA) has released a statement confirming its recognition of the updated FX Global Code. As part of that statement, the FCA also clarified its view that it is not consistent with the principles in the Code for FX providers to delay a client’s trade request beyond the time needed to complete price and validity checks as part of a “last look policy” in order to see if future price changes would increase FX provider margins. Specifically, the FCA stated, “Market participants should not prolong the duration of the last look window for the purpose of seeing if future prices move in their favour in relation to the client’s trade request.” This kind of practice has occurred in the marketplace and has meant that companies have paid unfair prices for their FX trades. An example of a particularly egregious abuse of this practice was the recent case in the U.S. where Wells Fargo was fined 72.6 million USD for unfair and fraudulent FX practices, which included delaying a client’s trade execution to find a price that better suited its margins. These practices also highlight why it is important to pay attention to timestamps that relate to when a trade is ordered and when it is executed. What is the FX Global Code and what does it say about time-stamps? The FX Global Code was developed as an effort between central banks market participants in 20 jurisdictions around the globe to promote principles of good practices in the wholesale foreign exchange market. The FX Global Code addresses time-stamps, and was written “to apply to all FX Market Participants that engage in the FX Markets, including sell-side and buy-side entities, non-bank liquidity providers, operators of FX E-Trading Platforms, and other entities providing brokerage, execution, and settlement services.” According to Principle 36 in the FX Global Code, “Market Participants should apply sufficiently granular and consistent time-stamping so that they record both when an order is accepted and when it is triggered/executed… Information should be made available to Clients upon request, to provide sufficient transparency regarding their orders and transactions to facilitate informed decisions regarding their market interactions.” You can search whether your FX provider has signed up to the code here. Detailed time-stamps on FX trade confirmation receipts help protect corporate FX customers A key part of controlling corporate FX costs and managing corporate FX is ensuring that trades are executed in a timely manner in alignment with customer agreements and expectations. This is why it is particularly important for corporate FX customers to ensure that their FX provider is including the trade execution time-stamp in the receipts confirming their trades. The trade execution timestamp is information corporate FX customers have a right to view, but some FX providers exclude this information unless specifically requested by the customer. FX providers should also provide the time-stamps with sufficient detail, such as including the seconds (and not just the minute) in the time-stamps they provide, and also making clear the timezone. In a previous Just FX Blog, we have provided further detail for corporate FX customers on how to review trade confirmation receipts. Time-stamps on FX trade confirmation receipts give corporate customers the power to get fair rates and fair margins By checking trade confirmation receipts to review the time-stamps, corporate FX customers can monitor whether trades were completed in a timely manner and whether they received the prices they expected. It also enables customers to check whether they received fair rates through a process known as FX benchmarking, as the time-stamp is critical for such analysis. In a related Just FX Blog, we explain the importance and process of FX Benchmarking. Also Read Join our Treasury Community Treasury Masterminds is a community of professionals working in treasury management or those interested in learning more about various topics related to treasury management, including cash management, foreign exchange management, and payments. To register and connect with Treasury professionals, click [HERE] or fill out the form below. Notice: JavaScript is required for this content.