Burkhard Fassbach

Among important recent developments in digital currency is the increasing governmental move toward Central Bank Digital Currency (CBDC) and other forms of digital currency. In the following guest post, Burkhard Fassbach takes a detailed look at the rapidly evolving world of CBDCs and what their advent may mean for the D&O insurance industry. Burkhard is a D&O lawyer in private practice in Germany I would like to thank Burkhard for allowing me to publish his article as a guest post on this site. I welcome guest post submissions from responsible authors on topics of interest to this blog’s readers. Please contact me directly if you would like to submit a guest post. Here is Burkhard’s article.



A Central Bank Digital Currency (CBDC) is a digital fiat currency. Upon introduction of the CBDCs in the jurisdictions of the major insurance markets, D&O insurers must accept premium payments from D&O Policyholders in CBDCs and the insurers will have to pay D&O claims in CBDCs. What is the timeline? Presumably the digital dollar, the digital pound and the digital euro will be introduced as legal tender in about five years. Federal Reserve Vice Chair Lael Brainard recently said that creating a CBDC in the U.S. would likely take five years. Likewise, ECB President Christine Lagarde has announced that the ECB could introduce the digital euro in five years at the latest. The Bank of England stated that the earliest date to issue the digital pound would be the second half of the decade.

The insurance industry should take a close look at CBDCs in order to be prepared for the launch. What is a CBDC? A CBDC is a liability of the central bank and denominated in the sovereign currency, as is the case with physical banknotes and coins. The way to access the CBDC will be through a digital wallet as a form of central bank electronic money that could be used by households and businesses to make payments. Unlike “retail CBDC”, which is generally designed as a central bank liability universally accessible to individuals and businesses within a jurisdiction’s financial system, “wholesale CBDC” refers to a digitized central bank liability designed for sizable (generally interbank) transactions, and for which access is limited to certain financial institutions. As opposed to cryptocurrencies, which are issued privately, the CBDCs will be issued by Central Banks (Federal Reserve, Bank of England, ECB) and be backed by the Government. As cryptocurrencies and stablecoins have become more popular, the world’s central banks have realized that they need to provide an alternative – or let the future of money pass them by.

According to the Atlantic Council 2023 is already shaping up to be a major year in central bank digital currency exploration. As of March 1, 2023 sixty-five countries are in the advanced stage of development, and over twenty central banks have launched their CBDC pilots. To dive deeper into these countries, the Atlantic Council has launched a CBDC tracker which updates developments in 119 countries, representing more than 95 percent of the world’s GDP. The CBDC tracker can be found here.

The Federal Reserve provides constantly updated information about the digital dollar here. The Bank of England publishes information about the digital pound here. The ECB releases information about the digital euro here.

The International Framework of CBDCs

On an international level CBDCs are being pushed by The International Monetary Fund (IMF), The Digital Currency Monetary Authority (DCMA) and The Bank for International Settlements (BIS).

The International Monetary Fund (IMF) has recently announced that it will release a CBDC Handbook that will serve as a guide for countries exploring a CBDC. The IMF Policy Paper No. 2023/016 published on April 11, 2023 can be found here.

The Digital Currency Monetary Authority (DCMA) introduced “The Unicoin Network”, which is a decentralized international banking network open to central banks, retail and commercial banks, Fintech, governments, and cryptocurrency exchanges. Central banks can deploy a resilient CBDC monetary system adopting the Unicoin Network Crypto 2.0 protocol. Unicoin is a cryptocurrency engineered as a universal monetary unit (UMU) for global, continental, and domestic trade and payments. The primary goals are to establish a monetary policy framework for realizing Unicoin as a continuous demand store of value and a medium of exchange cryptocurrency and to ensure Unicoin qualifies as a cash reserve deposit currency for central banks around the world. Further information on the UMU can be found here.

The Bank for International Settlements (BIS) and the central banks of Israel, Norway and Sweden have concluded “Project Icebreaker”, which studied the potential benefits and challenges of using retail central bank digital currencies in international payments. “Project Icebreaker” tested the technical feasibility of conducting cross-border and cross-currency transactions between different experimental retail CBDC systems. Cecilia Skingsley, Head of the BIS Innovation Hub, stated: “Project Icebreaker is unique in its proposition. It first allows central banks to have almost full autonomy in designing a domestic retail CBDC. Then it provides a model for that same CBDC to be used for international payments.” The BIS published the 42 pages “Project Icebreaker Report”, which can be found here.

The Digital Dollar – U.S. Central Bank Digital Currency

On March 9, 2022 President Biden signed an Executive Order on Ensuring Responsible Development of Digital Assets. A U.S. Central Bank Digital Currency shall be explored by placing urgency on research and development. The Order directs the U.S. Government to assess the technological infrastructure and capacity needs for a potential U.S. CBDC in a manner that protects Americans’ interests. The Order also encourages the Federal Reserve to continue its research, development, and assessment efforts for a U.S. CBDC. This effort prioritizes U.S. participation in multi-country experimentation, and ensures U.S. leadership internationally to promote CBDC development that is consistent with U.S. priorities and democratic values. The CBDC Fact Sheet published by the White House can be found here.

The President’s Executive Order is based on a paper by the Federal Reserve published in January 2022 on “Money and Payments: The U.S.Dollar in the Age of Digital Transformation”. The Federal Reserve’s initial analysis suggests that a potential U.S. CBDC would best serve the needs of the United States by being privacy-protected, intermediated, widely transferable, and identity-verified. The Federal Reserve Paper can be found here.

The CBDC backlash

The President’s Executive Order has almost immediately caused a CBDC backlash. On May 12, 2023 Florida Governor Ron DeSantis signed Senate Bill (SB) 7054 and SB 214 “to protect the personal finances of Floridians from government overreach and woke corporate monitoring.” SB 7054 prohibits the use of a federally adopted central bank digital currency (CBDC) by excluding it from the definition of money within Florida’s Uniform Commercial Code. Additionally, the bill prohibits foreign-issued CBDC “to protect consumers against globalist efforts to adopt a worldwide digital currency.” Governor Ron DeSantis called on like-minded states to join Florida in adopting similar prohibitions within their respective Commercial Codes to fight back against this concept nationwide. “If I’m President, we are not doing a central bank digital currency,” DeSantis said during a Twitter Space with Elon Musk on May 24, 2023, adding he would insist on Congressional authorization before a CBDC could ever be implemented. Florida Chief Financial Officer Jimmy Patronis said “The last thing our country needs is a federally controlled Centralized Bank Digital Currency weaponized by the Biden administration.” The Press Release can be found here.

Meanwhile Texas moved to create a gold-backed digital currency. Senate Bill 2334, and House Bill 4903 propose to: (1) Establish a new gold and silver based digital currency through the office of the Texas Comptroller of Public Accounts;  (2) Back each unit of issued digital currency with a corresponding fraction of a troy ounce of gold or silver held in trust; (3) Allow for individual accounts to be created at the Texas Bullion Depository that could be used to conduct transactions. According to an article by Hogan Gore in the Austin American-Statesman, proponents of the bill hailed the creation of a state-backed digital currency as a way to hedge against inflation and as an avenue to further assert states’ rights in the ongoing conversation of digital currency regulation. The article can be found here.

Alternative (optional) payment methods to CBDCs


Bitcoin is definitely not a viable payment method for D&O insurance premiums due to Bitcoin’s high price volatility. However, according to an article published by i-Brokers, Switzerland-based all-lines insurance provider AXA stated that they would accept Bitcoin as a payment option for its customers to pay premiums for all of their non-life products. AXA stated this represents an investment in the company’s digital future in response to growing customer demand for more choice when it comes to premium payments. AXA mentioned that it currently holds no bitcoin on its balance sheet and that it has partnered with cryptocurrency exchange Bitcoin Suisse, which helps the insurance company to convert Bitcoin into Swiss francs. Noteworthy, Metromile Inc., a San Francisco-based technology startup, fully acquired by the Lemonade Inc. insurance company in 2021, was the first insurer to both accept premiums and pay claims in cryptocurrency. Policyholders will be able to pick either cryptocurrency or old-fashioned dollars for premiums and claims transactions. The i-Brokers article can be found here.


Asset and commodity backed Stablecoins may be a viable alternative to fiat based CBDCs as a payment method for D&O premiums and D&O claims.

In the following we take a closer look at the gold standard: At the Bretton Woods Conference in 1944, the US dollar was tied to gold at thirty-five dollars per ounce, and all other currencies were tied to the US dollar at fixed exchange rates. That made the dollar the “world reserve currency,” which means it was the only currency accepted throughout the world for the settlement of international trade accounts. In the 1960s and early 1970s, the US government’s out-of-control spending spurred a run on US gold reserves by foreign governments. In response, President Richard Nixon ended all ties between the US dollar and gold in 1971. This led to higher inflation. In a FORBES article published May 4, 2023 Wayne Duggan and Benjamin Curry point to Research showing that between 1974 and 2008 there were eight years when U.S. inflation was considered high. During those periods, gold prices rose by an average of 14.9% year over year, which is why many investors consider gold to be the ultimate safe-haven hedge against inflation. The FORBES article can be found here.

The World Gold Council stated that the gold market must undergo a digital transformation, allowing transparent and effortless retail and wholesale transactions in order to remain relevant. The digitalisation and tokenization is essential to modernise the gold market and make it more accessible. The developing technology is eyed as a way to take up the mission to create a new sort of global currency. The push to digitize gold supply is an opportunity for the Gold industry to participate in a very fungible currency that no politician can print. The digital transformation initiative by the World Gold Council encompasses three pillars focused on Integrity, Accessibility and Fungibility. Further information about Gold247 by the World Gold Council can be found here.

A cryptocurrency backed by gold is the modern evolution of the gold standard. Coins or tokens issued that follow the gold standard provide token holders with digital assets that have a value directly correlated to the physical gold assets they represent, whilst avoiding the lack of intrinsic value and high price volatility. Gold-backed Stablecoins can therefore enjoy more tangibility and more predictable price swings, compared to Bitcoin and other cryptocurrencies. The price of gold-backed Stablecoins will never drop below the price of gold that backs them, though the value of the token can increase in tandem with the underlying physical gold asset. A number of gold-backed Stablecoins are already on the market. For instance, Tether Gold is a digital token, backed by physical gold. Further information about the gold-backed Stablecoin can be found in the Whitepaper by the issuer here. Gold-backed cryptocurrencies are expected to become widely adopted.

Stablecoins will be subject to Regulation. According to a REUTERS article by By Hannah Lang published February 22, 2023, the Biden administration has called on Congress to regulate issuers of stablecoins akin to banks and subject them to strict supervision by banking regulators. While lawmakers have yet to pass any legislation governing stablecoins, senior U.S. House lawmakers made substantial progress on a draft last year that would subject stablecoin issuers to certain prudential banking standards. The REUTERS article can be found here. Treasury Secretary Janet Yellen said policymakers must move quickly to build a regulatory regime for the asset class. In November 2021 the President’s Working Group on Financial Markets (PWG), joined by the Federal Deposit Insurance Corporation (FDIC) and the Office of the Comptroller of the Currency (OCC), released a Report on Stablecoins. The Executive Summary states: Stablecoins are digital assets that are designed to maintain a stable value relative to a national currency or other reference assets. Proponents believe stablecoins could become widely used by households and businesses as a means of payment. If well-designed and appropriately regulated, stablecoins could support faster, more efficient, and more inclusive payments options. Moreover, the transition to broader use of stablecoins as a means of payment could occur rapidly due to network effects or relationships between stablecoins and existing user bases or platforms. The Report on STABLECOINS can be found here.

For readers of this D&O Diary Guest Post, who wish can take a deeper dive into the Regulation of Stablecoins reference is made to research papers from the IMF and the ECB and further information from the Digital Euro Association (DEA):

Regulating the Crypto Ecosystem: The Case of Stablecoins and Arrangements, published on September 26, 2022, authored by Parma Bains ; Arif Ismail ; Fabiana Melo ; Nobuyasu Sugimoto ; Nobuyasu Sugimoto, Free Download Electronic Access on the website of the INTERNATIONAL MONETARY FUND here.

Stablecoins’ role in crypto and beyond: functions, risks and policy, Prepared by Mitsu Adachi, Pedro Bento Pereira Da Silva, Alexandra Born, Massimo Cappuccio, Stephanie Czák-Ludwig, Isabella Gschossmann, Georg Paula, Antonella Pellicani, Sarah-Maria Philipps, Mirjam Plooij, Ines Rossteuscher and Pierfrancesco Zeoli, free access on the website of the ECB here.

In-depth information about CBDCs, stablecoins, crypto assets, and other forms of digital money by the think tank Digital Euro Association (DEA) can be found here.

Conclusion and Outlook

In the wake of the introduction of CBDCs in about 5 years from now, D&O-Policyholders may increasingly request alternative (optional) payment methods for both premium payments and claims payments. In times of high inflation asset-backed Stablecoins, such as gold-backed cryptocurrencies, may serve Policyholders better for the purpose of D&O asset protection than CBDCs linked to fiat currencies. The D&O insurance industry should explore both options – CBDCs and asset-backed Stablecoins – for issuing and offering D&O insurance policies, so that Policyholders have a choice. Insurers should monitor the developing regulatory environment for CBDCs and Stablecoins. Finally, the D&O insurance market may soon be ready for a gold-backed D&O Policy. A famous quote from J. P. Morgan reads: “Gold is money. Everything else is credit.”