Q1: What is a stablecoin and why does compliance matter?

A stablecoin is a digital token backed by reserves to maintain price stability. Compliance ensures AML/CFT controls, reserve transparency, and adherence to the FATF Travel Rule.

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Q2: What is a CBDC and how should banks prepare?

A CBDC (Central Bank Digital Currency) is issued by a central bank. Preparation requires upgrading data models, joining pilots, and implementing settlement, liquidity, and AML/CFT controls.

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Q3: What is the FATF Travel Rule?

The FATF Travel Rule requires originator and beneficiary information to accompany digital asset transfers, ensuring transparency and preventing illicit finance.

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Q4: How do stablecoins impact cross-border payments?

Stablecoins can reduce settlement costs and increase speed, but regulatory compliance and interoperability with banking infrastructure are essential.

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Q5: What risks are associated with CBDCs?

Risks include privacy concerns, cyber threats, liquidity impacts on commercial banks, and the need for strict AML/CFT safeguards.

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Q6: What is stablecoin reserve transparency?

It refers to disclosing and auditing the assets backing a stablecoin, ensuring it is fully collateralized and trusted by users and regulators.

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Q7: How does ISO 20022 relate to digital money?

ISO 20022 provides structured, machine-readable data that improves reconciliation and monitoring — making it critical for stablecoin and CBDC interoperability.

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Q8: What are AML/CFT requirements for stablecoins and CBDCs?

They include strong KYC, transaction monitoring, sanctions screening, suspicious activity reporting, and compliance with cross-border regulations.

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Q9: How does SWIFT support CBDC and stablecoin integration?

SWIFT is piloting interoperability projects to connect CBDCs and tokenized assets across its network using ISO 20022 messaging standards.

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Q10: What does “CBDC readiness” mean for financial institutions?

It means adapting systems for CBDC integration, testing in pilots, building compliance frameworks, and aligning liquidity and settlement processes.

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Q11: What is programmable money?

Programmable money allows conditions to be embedded into transactions, enabling use cases such as automated treasury management and supply chain finance.

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Q12: How do central banks regulate stablecoins?

Central banks require licensing, reserve audits, AML/CFT compliance, and sometimes restrict usage until clear regulatory frameworks are in place.

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Q13: What is Circle’s approach to stablecoin compliance?

Circle emphasizes reserve transparency, licensing, Travel Rule compliance, and interoperability standards to align USDC with global regulations.

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Q14: What are wholesale CBDCs?

Wholesale CBDCs are digital currencies restricted to financial institutions, designed to improve settlement efficiency in interbank and cross-border markets.

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Q15: What are retail CBDCs?

Retail CBDCs are digital currencies available to the public, designed as a digital complement to cash for everyday transactions.

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Q16: How does the UAE Central Bank approach digital money?

The UAE Central Bank is piloting the Digital Dirham with cross-border focus, strict AML/CFT controls, and international interoperability.

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Q17: What role does BIS play in CBDC development?

The BIS coordinates central bank research, publishing frameworks on interoperability, privacy, and risk management for CBDCs.

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Q18: How can banks mitigate digital money compliance risks?

Banks should strengthen KYC, deploy AI-driven transaction monitoring, join Travel Rule networks, and integrate ISO 20022 data standards.

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Q19: What is tokenized deposits vs stablecoins?

Tokenized deposits are digital representations of bank deposits, issued by regulated banks, while stablecoins are private tokens backed by reserves.

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Q20: Why should institutions act now on digital money compliance?

Early action reduces regulatory risk, ensures readiness for CBDC pilots, and positions institutions to capture first-mover advantage in digital finance.