r = rate of interest Singapore exchange is the leading exchange of Asia allowing investors to take positions in different products based on the futures which are traded on the exchange. Issuer Offer documents/Issue Summary Document, Delivery and Settlement Procedure - Bullion, Underlying: Symbol of the underlying security. If 1st day is a holiday then the following working Can an Indian trade in SGX Nifty? Singapore and Indian belong to the same continent. The minimum price SGX Nifty is the price at which the Indian Nifty is traded in the Singapore Stock Exchange (SGX). (Amended and Restated Effective February 28,2019)Form 8-K filed on March 4,2019,Exhibit 3.24.1*Form of 4.000%Note due September 15,2025Form 8-K filed on September 19,2022,Exhibit 4.24.2*Form of 4.500%Note due September 15,2032Form 8-K filed on September 19,2022,Exhibit 4.34.3*Form of 4.950%Note due September 15,2052Form 8-K filed on September 19,2022,Exhibit 4.415.1Acknowledgement of Independent Registered Public Accounting Firm31.1Certification of the Chair,President and Chief Executive Officer pursuant to Rule 13a-14(a)31.2Certification of the Executive Vice President and Chief Financial Officer pursuant to Rule 13a-14(a)32.1Certification of the Chair,President and Chief Executive Officer furnished pursuant to Section 906 of the Sarbanes-Oxley Actof 200232.2Certification of the Executive Vice President and Chief Financial Officer furnished pursuant to Section 906 of the Sarbanes-Oxley Act of 2002101.INSXBRL Instance Document-the instance document does not appear in the Interactive Data file because its XBRL tags areembedded within the Inline XBRL document101.SCHInline XBRL Taxonomy Extension Schema Document101.CALInline XBRL Taxonomy Extension Calculation Linkbase Document101.DEFInline XBRL Taxonomy Extension Definition Linkbase Document101.LABInline XBRL Taxonomy Extension Label Linkbase Document101.PREInline XBRL Taxonomy Extension Presentation Linkbase Document104Cover Page Interactive Data File(formatted as inline XBRL and contained in Exhibit 101)22Table of ContentsSIGNATURESPursuant to the requirements of the Securities Exchange Act of 1934,the registrant has duly caused this report to be signed on its behalf by theundersigned thereunto duly authorized.THE HOME DEPOT,INC. so Foreign Institutional Investors (FIIs) can also take positions in all major indices while being in Singapore. For long-term investment, you can use Moving Average Convergence/Divergence (MACD) Charts, Candle Stick Charts, and Relative Strength Index (RSI) to get the idea about the future prediction of SGX Nifty. A person who buys an option is said to belong in the option. WebContract : CNX Nifty 50 Index : Exchange : SGX : Tick Size : 0.5 index point (USD 1.00 per contract) Daily Limit : 10% in either direction from the previous day's settlement price : In all, 38 of the Nifty50 stocks closed in the red. A centrally-located venue at the heart of Hong Kong financial hub, the HKEX Connect Hall is an iconic venue for Hong Kongs financial community. TRADING 2.1 Trading Months JPX: Mock Testing for three-month TONA futures, Nikkei 225 Micro Futures and Mini Options, ESG Index Futures and Contract Unit changes for Silver and Palladium futures May 14. It is crucial to understand that not all of the stocks that Nifty encompasses are traded in SGX. Contract Specifications Futures Expirations First Notice Dates Options Expirations Economic Calendar. Browse NSE products under Cash, derivatives, currency derivatives etc. (%Change in 2023 vs.2022)0%2%4%6%8%-2%Social engagement Pitches opened or clickedSentiment/consumer attitudesWebsite conversions/form submissionsSocial shares/mentionsSales pipeline or revenueMessage pull throughPitches replied toShare of voiceJournalist reachPitches sentSEO metricsWebsite trafficAudience reachAdvertising value(AVE)Coverage/stories placed10%7%6%5%5%5%4%4%4%3%3%3%7%7%6%-4%-3%of PR pros do not share website traffic metrics with clients/executivesThe metrics that PR pros report the least to clients/executives are website traffic tied to earned media(15wer),pitches replied to(14wer)and pitches opened or clicked(13wer).Which metrics do you not share with clients/executives?0%2%4%6%8%Share of voiceMessage pull throughSEO metricsCoverage/stories placedPitches replied toPitches sentWebsite trafficSentiment/consumer attitudesPitches opened or clickedAudience reachSocial media shares/mentionsJournalist reachSocial media engagementWebsite conversions/form submissionsSales,pipeline or revenueAdvertising value equivalency(AVE)15%8%7%7%6%6%6%5%4%4%4%4%3%0%How do PR pros share reports and updates?2Fewer PR pros use spreadsheets for reporting compared to last yearLast year,93%said they use spreadsheets(Excel or Google Sheets)for reporting.This year,82%said they use spreadsheets.8%more use presentations(Powerpoint or Google Sheets).What formats do you report in? Singapore Stock Exchange allows 24-hour trading so investors can hedge their investment any time via after market trades. View Historical Reports of securities/contracts traded on the Exchange. These securities are traded in the Capital Market segment of the Exchange. The price step in respect of the options contracts is Re.0.05. (2)On August 18,2022,our Board of Directors approved a$15.0 billion share repurchase authorization that replaced the previous authorization of$20.0 billion,which was approved on May 20,2021.This new authorization does not have a prescribed expiration date.SALES OF UNREGISTERED SECURITIESDuring the third quarter of fiscal 2022,we issued 579 deferred stock units under The Home Depot,Inc.Nonemployee Directors Deferred StockCompensation Plan pursuant to the exemption from registration provided by Section 4(a)(2)of the Securities Act and Rule 506 of the SECsRegulation D thereunder.The deferred stock units were credited during the third quarter of fiscal 2022 to the accounts of those non-employeedirectors who elected to receive all or a portion of board retainers in the form of deferred stock units instead of cash.The deferred stock unitsconvert to shares of common stock on a one-for-one basis following a termination of service as described in this plan.During the third quarter of fiscal 2022,we credited 1,108 deferred stock units to participant accounts under the Restoration Plan pursuant to anexemption from the registration requirements of the Securities Act for involuntary,non-contributory plans.The deferred stock units convert toshares of common stock on a one-for-one basis following a termination of service as described in this plan. Important Information, reference materials and latest announcements for members. The strike scheme for options contracts on all individual securities is based on the volatility of the underlying stock. The additional strikes may be enabled during the day at regular intervals and message for the same shall be broadcast to all trading terminals. SGX had already bought 49 per cent of EMC in August 2012. Apart from India the exchange also allows one to take positions in FTSE, China A50 index, MSCI Asia, MSCI Hongkong, MSCI Singapore, MSCI Taiwan ,Nikkei 225, Strait Times etc. Identify support and resistance levels based on stock future contract. )Power operations with 100%renewable energy by 2025Achieve net-zero carbon emissions by 2040Become water positive by 2030(that is,replenish more water than it consumes)Power operations with 100%renewable energy by 2025Become water positive by 2030Obtain zero-waste certification by 2030Become carbon negative by 2030Remove,by 2050,all the carbon Microso has released into the atmosphere since its founding in1975Run all data centers on carbon-free energy by 2030Replenish 120%of the water it consumes by 2030Maximize the reuse of finite resources(for example,send zero waste to landfills from datacenters)2023 Boston Consulting Group7The race to open new data centers is occurring in three phases,with most cloud providers nearing theend of the second phase:Growth and Penetration SlowsAnnualized revenue growth among the three CSPs fell from about 40%in mid-2021 to about 28%in thethird quarter of 2022.Their total quarterly revenue reached about$50 billionwith AWS accountingPhase 1.Build out foundational hubs within regions that are either currently,or have a history ofbeing,continental technology centers(for example,Virginia,London,and Singapore).Phase 2.Establish additional hubs in Europe,North America,and Asiaimproving connectivityand incorporating hubs across all continents.Phase 3.Establish hubs in localized settings away from city centers(for military bases or researchparks,for example)and in emerging markets and noncore regions,such as Africa and SouthAmerica.2023 Boston Consulting Group8for the most revenue,at$20.5 billion.At that rate,the CSPs should have total revenue of about$1trillion by 2030. WebThe SGX Nifty Futures Contracts (Nifty Contracts) offer global investors a cost-efficient way to gain broad exposure to the performance of the Indian equity market. (3)Sales per retail square foot represents annualized sales divided by retail store square footage.Sales per retail square foot is a measure of the efficiency ofsales based on the total square footage of our stores and is used by management to monitor the performance of the Companys retail operations as anindicator of the productivity of owned and leased square footage for these retail operations.SalesWe assess our sales performance by evaluating both net sales and comparable sales.Net Sales.Net sales for the third quarter of fiscal 2022 were$38.9 billion,an increase of 5.6%from$36.8 billion for the third quarter of fiscal2021.The increase in net sales for the third quarter of fiscal 2022 primarily reflected the impact of positive comparable sales driven by anincrease in comparable average ticket,partially offset by a decrease in comparable customer transactions.A stronger U.S.dollar negativelyimpacted net sales by$132 million in the third quarter of fiscal 2022. SGX Nifty signals a negative start Nifty futures on the Singapore Exchange traded 34.50 points, or 0.19 per cent, lower at 17,823, hinting at a negative start for the NIFTY50 16,483 147 (-0.8%) SENSEX 55,268 497 (-0.8%) What's Up STOCK TODAY'S CHANGE Bajaj Finserv 13,292 672 (+5.3%) JSW Steel 595 10 (+1.7%) Grasim 1,515 16 (+1.1%) What's Down STOCK TODAY'S CHANGE Infosys 1,450 52 (-3.5%) HUL 2,542 80 (-3.0%) Axis Bank 706 20 (-2.8%) Whats trending? (1)(1)(2)(2)21Table of ContentsItem 6.Exhibits.Exhibits marked with an asterisk(*)are incorporated by reference to exhibits or appendices previously filed with the SEC,as indicated by thereferences in brackets.All other exhibits are filed or furnished herewith.ExhibitDescription3.1*Amended and Restated Certificate of Incorporation of The Home Depot,Inc.Form 10-Q filed on September 1,2011,Exhibit 3.13.2*By-Laws of The Home Depot,Inc. WebChina A50 SGX EURO STOXX 50 SiMSCI SGX Nikkei SGX Nifty. :Results of Review of Interim Financial InformationWe have reviewed the consolidated balance sheet of The Home Depot,Inc.and subsidiaries(theCompany)as of October 30,2022,therelated consolidated statements of earnings,comprehensive income,and stockholders equity for the three-month and nine-month periodsended October 30,2022 and October 31,2021,the related consolidated statements of cash flows for the nine-month periods ended October 30,2022 and October 31,2021,and the related notes(collectively,theconsolidated interim financial information).Based on our reviews,we arenot aware of any material modifications that should be made to the consolidated interim financial information for it to be in conformity with U.S.generally accepted accounting principles.We have previously audited,in accordance with the standards of the Public Company Accounting Oversight Board(United States)(PCAOB),the consolidated balance sheet of the Company as of January 30,2022,and the related consolidated statements of earnings,comprehensiveincome,stockholders equity,and cash flows for the fiscal year then ended(not presented herein);and in our report dated March 23,2022,weexpressed an unqualified opinion on those consolidated financial statements.In our opinion,the information set forth in the accompanyingconsolidated balance sheet as of January 30,2022,is fairly stated,in all material respects,in relation to the consolidated balance sheet fromwhich it has been derived.Basis for Review ResultsThis consolidated interim financial information is the responsibility of the Companys management.We are a public accounting firm registeredwith the PCAOB and are required to be independent with respect to the Company in accordance with the U.S.federal securities laws and theapplicable rules and regulations of the Securities and Exchange Commission and the PCAOB.We conducted our reviews in accordance with the standards of the PCAOB.A review of consolidated interim financial information consistsprincipally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters.It is substantiallyless in scope than an audit conducted in accordance with the standards of the PCAOB,the objective of which is the expression of an opinionregarding the financial statements taken as a whole.Accordingly,we do not express such an opinion./s/KPMG LLPAtlanta,GeorgiaNovember 21,202212Table of ContentsItem 2.Managements Discussion and Analysis of Financial Condition and Results of Operations.The following discussion provides an analysis of the Companys financial condition and results of operations from managements perspectiveand should be read in conjunction with the consolidated financial statements and related notes included in this report and in the 2021 Form 10-Kand with our MD&A included in the 2021 Form 10-K.Our MD&A includes the following sections:Executive SummaryResults of OperationsLiquidity and Capital ResourcesCritical Accounting PoliciesEXECUTIVE SUMMARYThe following table presents quarter-to-date and year-to-date highlights of our financial performance:dollars in millions,except per share dataThree Months EndedNine Months EndedOctober 30,2022October 31,2021October 30,2022October 31,2021Net sales$38,872$36,820$121,572$115,438 Net earnings4,339 4,129 13,743 13,081 Diluted earnings per share$4.24$3.92$13.37$12.31 Net cash provided by operating activities$10,021$13,386 Proceeds from long-term debt,net of discounts6,942 2,979 Repayments of long-term debt2,423 1,480 Repurchases of common stock5,136 10,374 We reported net sales of$38.9 billion in the third quarter of fiscal 2022.Net earnings were$4.3 billion,or$4.24 per diluted share.For the firstnine months of fiscal 2022,net sales were$121.6 billion and net earnings were$13.7 billion,or$13.37 per diluted share.During the third quarter of fiscal 2022,we opened one new store in the U.S.and two new stores in Mexico,and we had no store closures,resulting in a store count of 2,319 at the end of the quarter.As of October 30,2022,a total of 313 stores,or 13.5%of our total store count,werelocated in Canada and Mexico.For the third quarter of fiscal 2022,sales per retail square foot were$618.50,and for the first nine months offiscal 2022,sales per retail square foot were$646.81.Our inventory turnover ratio was 4.3 times at the end of the third quarter of fiscal 2022,compared to 5.4 times at the end of the third quarter of fiscal 2021.The decrease in our inventory turnover ratio was driven by an increase inaverage inventory levels during the first nine months of fiscal 2022 resulting from strategic investments to promote higher in-stock levels and pullforward merchandise in response to ongoing global supply chain disruption,as well as continued investment in our new supply chain facilitiesand carry over of some spring seasonal inventory.We generated$10.0 billion of cash flow from operations and issued$6.9 billion of long-term debt,net of discounts,during the first nine months offiscal 2022.This cash flow,together with cash on hand,was used to fund cash payments of$5.9 billion for dividends and$5.1 billion for sharerepurchases.In addition,we repaid$2.4 billion of long-term debt and$1.0 billion of net short-term debt and funded$2.2 billion in capitalexpenditures.In February 2022,we announced a 15%increase in our quarterly cash dividend to$1.90 per share.Our ROIC for the trailing twelve-month period was 43.3%at the end of the third quarter of fiscal 2022 and 43.9%at the end of the third quarter offiscal 2021.See the Non-GAAP Financial Measures section below for our definition and calculation of ROIC,as well as a reconciliation ofNOPAT,a non-GAAP financial measure,to net earnings(the most comparable GAAP financial measure).13Table of ContentsRESULTS OF OPERATIONSThe following table presents the percentage relationship between net sales and major categories in our consolidated statements of earnings.FISCAL 2022 AND FISCAL 2021 THREE MONTH COMPARISONSThree Months EndedOctober 30,2022October 31,2021dollars in millions$%ofNet Sales$%ofNet SalesNet sales$38,872$36,820 Gross profit13,224 34.0,563 34.1%Operating expenses:Selling,general and administrative6,468 16.6 6,168 16.8 Depreciation and amortization608 1.6 600 1.6 Total operating expenses7,076 18.2 6,768 18.4 Operating income6,148 15.8 5,795 15.7 Interest and other(income)expense:Interest income and other,net(7)(15)Interest expense413 1.1 341 0.9 Interest and other,net406 1.0 326 0.9 Earnings before provision for income taxes5,742 14.8 5,469 14.9 Provision for income taxes1,403 3.6 1,340 3.6 Net earnings$4,339 11.2%$4,129 11.2%Note:Certain percentages may not sum to totals due to rounding.Three Months EndedSelected financial and sales data:October 30,2022October 31,2021%ChangeComparable sales(%change)4.3%6.1%N/AComparable customer transactions(%change)(4.4)%(5.8)%N/AComparable average ticket(%change)8.8.7%N/ACustomer transactions(in millions)409.8 428.2(4.3)%Average ticket$89.67$82.38 8.8%Sales per retail square foot$618.50$587.28 5.3%Diluted earnings per share$4.24$3.92 8.2%(1)Does not include results for HD Supply. sgx nifty futures is the derivative contract which is traded on the Singapore stock exchange. You are in Platforms . With SGX trading, investors can hedge their bets 24 hours a day. Cash Markets. NCDEX Jeera 19 May 2023. SCOPE OF CONTRACT SPECIFICATIONS AND DEFINITIONS 2. For day traders PCR (Put Call Ratio)trends and Nifty SpotPrice are considered extremely reliable indicators. WebOn Oct. 1, 2014 SGX acquired the remaining 51 per cent stake in the operator of Singapore's national electricity market, Energy Market Co (EMC) for $23 million, giving it a platform for electricity and other energy futures contracts. The derivative contract size of each SGX Nifty contract is: Contract Size = $2 (USD) * Current Price of NIFTY Index futures price. The Nifty Futures is the most widely traded futures instrument, thus making it the most liquid contract in the Indian derivative markets. (See Exhibit 2. This gives international investors the flexibility of betting on Indian markets without having to setup or register the entity with the Indian authorities. The Indian bourse opens at 9:15 am and closes at 3:30 pm. SGX nifty is Nifty futures contract trading in Singapore Stock Exchange and in India, Nifty contract trades on NSE. - 4:45a.m. S&P CNX Nifty Index is a market capitalization-weighted index of 50 component stocks listed on the Indian (SeeExecutive Summary.)The Power of Market ShapingEXECUTIVE SUMMARY To achieve global net zero by 2050,the global community must invest$3.5 trillionper year in emerging climate technologies,such as green hydrogen,clean steel,and long-duration energy storage.Emerging climate technologies oen require significant amounts of capital withuncertain returns.Market-shaping mechanismssuch as innovative financing,climate-friendly legislation,and industry coalitionsreduce the investment risk.All companies,regardless of size or climate maturity,can play a role in creating amarket for emerging climate technologies.To define their role in shaping the market and accelerating deployment of climatetech solutions,leaders should ask:What can my company do now?Define your decarbonization strategy;set tangible,actionable net-zero targets(rather than mere ambitions)and transition plans;issueadvance market commitments,especially when you cannot act alone;and set sustainablefinancing commitments.What can my company do with industry partners now?Execute oake agreements andvolume guarantees,pool procurement of climate technologies,and join industrycoalitions.What should I advocate for?Advocate for just transition incentives,support permittingreform,and engage with the public sector to steer future policy.2023 Boston Consulting Group3Market shaping is a strategy used by companies,governments,and investors to address marketfailures and positively shape the development of a market.By coordinating actions with otherstakeholders,organizations can address the bottlenecks and breakdowns that occur within a diverseecosystem,distribute risk,and leverage purchasing power.In the case of climate technologies,marketshaping has the potential to dramatically speed up the green revolution.Consider this.The global equity market cap is$120 trillion,and the global fixed-income market isanother$120 trillion.By leveraging innovative market-shaping mechanisms,this huge pool of privatecapital that would otherwise go to less impactful investments can instead be directed into climateaction.Private capital can be used to advance novel technologies faster,scale up proven solutions,andsupport adaptation and resilience to improve the lives of billions.A decade ago,we saw the power of market-shaping mechanisms in global health when governmentsand philanthropists committed$1.5 billion to GAVI,the Vaccine Alliance.This landmark public-privatepartnership accelerated development and production of pneumococcal vaccines by at least five years,saving over half a million lives.Public and philanthropic funding combined with market-shaping mechanisms are keyto avoiding the worst impacts of climate change.The same sense of urgency and investment are needed to address the defining challenge of our time:climate change.Market-shaping activities are most effective when multiple players have a stake in theoutcome,but limited incentives to act individually.Climate technology producers face uncertaintiesaround the potential demand and willingness to pay for their products,while climate technologybuyers can be reluctant to make long-term purchase commitments.Market-shaping mechanisms playa crucial role in creating the collective incentive for players across the climate technology value chainby derisking both demand-side and supply-side factors and encouraging economies of scale.We know what happens if we dont invest aggressively in climate technologies.Recent models showthat if we had invested$5 billion into solar in 1985,solar would have scaledand started displacingcarbon-intensive power eight years sooner.The Challenges of Scaling Climate Technologies2 2023 Boston Consulting Group4Strategic investments in climate technologies,combined with market-shaping activities,can acceleratethe development and deployment of critical climate technologies.The aim of market shaping is toensure high-potential technologies can successfully cross the so-called valley of deaththe gap infunding that exists when companies want to transform a proven concept into a viable and affordableproduct. Visit the link: https://www.nseindia.com/trade/all-member-faqs, YOU ARE ON THE NEW NSE WEBSITE, ACCESS THE OLD WEBSITE ON THE URL, . The permitted lot size for futures contracts & options contracts shall be the same for a given underlying or such lot size as may be stipulated by the Exchange from time to time. (See Exhibit 4. t = time to expiration WebCNX Nifty 50 Index Contract Size USD 2 times Nifty 50 Index Tick Size 0.5 index point (USD 1.00 per contract) Trading Hours 9:00a.m. Last Trading Day (LTD) The second last trading day of the contract month. Latest Metals news (1)11Table of ContentsREPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMTo the Stockholders and Board of DirectorsThe Home Depot,Inc. SGX Nifty signifies Indian Nifty in Singapore Stock Exchange. SGX Nifty, also known as a Singapore Nifty, involves taking position in the Singapore Exchange on Futures contracts . ENIT - A Portal for Trading Members of NSE to manage their Membership and Compliance requirements. 5G auction kicks, 5G auction kicks off, Bajaj Auto rides on price hikes. )2455 Paces Ferry RoadAtlanta,Georgia30339(Address of principal executive offices)(Zip Code)Registrants telephone number,including area code:(770)433-8211Securities registered pursuant to Section 12(b)of the Act:Title of each classTrading SymbolName of each exchange on which registeredCommon Stock,$0.05 Par Value Per ShareHDNew York Stock ExchangeSecurities registered pursuant to section 12(g)of the Act:NoneIndicate by check mark if the registrant is a well-known seasoned issuer,as defined in Rule 405 of the Securities Act.Yes No Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d)of the Act.Yes No Indicate by check mark whether the registrant(1)has filed all reports required to be filed by Section 13 or 15(d)of the Securities Exchange Act of 1934 during the preceding 12 months(or for such shorter period that the registrant was required to file such reports),and(2)has been subject to such filing requirements for the past 90 days.Yes No Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T(232.405 of this chapter)during the preceding 12 months(or for such shorter period that the registrant was required to submit such files).Yes No Indicate by check mark whether the registrant is a large accelerated filer,an accelerated filer,a non-accelerated filer,a smaller reporting company,or an emerging growth company.See the definitions oflarge accelerated filer,accelerated filer,smaller reporting company,andemerging growth companyin Rule 12b-2 of the Exchange Act.Large accelerated filer Accelerated filer Non-accelerated filer Smaller reporting company Emerging growth company If an emerging growth company,indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a)of the Exchange Act.Indicate by check mark whether the registrant has filed a report on and attestation to its managements assessment of the effectiveness of its internal control over financial reporting under Section 404(b)of the Sarbanes-Oxley Act(15 U.S.C.7262(b)by the registered public accounting firm that prepared or issued its audit report.If securities are registered pursuant to Section 12(b)of the Act,indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements.Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrants executive officers during the relevant recovery period pursuant to 240.10D-1(b).Indicate by check mark whether the registrant is a shell company(as defined in Rule 12b-2 of the Act).Yes No The aggregate market value of voting common stock held by non-affiliates of the registrant on July 29,2022 was$308.0 billion.The number of shares outstanding of the registrants common stock as of March 1,2023 was 1,014,955,506 shares.DOCUMENTS INCORPORATED BY REFERENCEPortions of the registrants proxy statement for the 2023 Annual Meeting of Shareholders are incorporated by reference in Part III of this Form 10-K to the extent described herein.Table of ContentsTABLE OF CONTENTSCommonly Used or Defined TermsiiForward-Looking StatementsiiiPART IItem 1.Business.1Item 1A.Risk Factors.10Item 1B.Unresolved Staff Comments.22Item 2.Properties.22Item 3.Legal Proceedings.23Item 4.Mine Safety Disclosures.24PART IIItem 5.Market for Registrants Common Equity,Related Stockholder Matters and Issuer Purchases of Equity Securities.24Item 6.Reserved.25Item 7.Managements Discussion and Analysis of Financial Condition and Results of Operations.25Item 7A.Quantitative and Qualitative Disclosures About Market Risk.32Item 8.Financial Statements and Supplementary Data.33Item 9.Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.62Item 9A.Controls and Procedures.63Item 9B.Other Information.65Item 9C.Disclosure Regarding Foreign Jurisdictions that Prevent Inspections.65PART IIIItem 10.Directors,Executive Officers and Corporate Governance.65Item 11.Executive Compensation.66Item 12.Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.66Item 13.Certain Relationships and Related Transactions,and Director Independence.66Item 14.Principal Accountant Fees and Services.66PART IVItem 15.Exhibit and Financial Statement Schedules.67Item 16.Form 10-K Summary.71SIGNATURES72Fiscal 2022 Form 10-KiCOMMONLY USED OR DEFINED TERMSASUAccounting Standards UpdateBODFSBuy Online,Deliver From StoreBOPISBuy Online,Pickup In StoreBORISBuy Online,Return In StoreBOSSBuy Online,Ship to StoreCDPThe not-for-profit organization formerly known as the Carbon Disclosure ProjectComparable salesAs defined in the Results of Operations section of MD&ADIFMDo-It-For-MeDIYDo-It-YourselfEH&SEnvironmental,Health,and SafetyEPAU.S.Environmental Protection AgencyESGEnvironmental,social,and governanceESPPEmployee Stock Purchase PlanExchange ActSecurities Exchange Act of 1934,as amendedFASBFinancial Accounting Standards Boardfiscal 2020Fiscal year ended January 31,2021(includes 52 weeks)fiscal 2021Fiscal year ended January 30,2022(includes 52 weeks)fiscal 2022Fiscal year ended January 29,2023(includes 52 weeks)fiscal 2023Fiscal year ending January 28,2024(includes 52 weeks)GAAPU.S.generally accepted accounting principlesIRSInternal Revenue ServiceLIBORLondon interbank offered rateMD&AManagements Discussion and Analysis of Financial Condition and Results of OperationsMROMaintenance,repair,and operationsNOPATNet operating profit after taxNYSENew York Stock ExchangePLCCPrivate label credit cardProProfessional customerRestoration PlansHome Depot FutureBuilder Restoration Plan and HD Supply Restoration PlanROICReturn on invested capitalSECSecurities and Exchange CommissionSecurities ActSecurities Act of 1933,as amendedSG&ASelling,general,and administrativeTermDefinitionTable of ContentsFiscal 2022 Form 10-KiiFORWARD-LOOKING STATEMENTSCertain statements contained herein,as well as in other filings we make with the SEC and other written and oral information we release,regarding our performance or other events or developments in the future constituteforward-looking statementsas defined in the Private Securities Litigation Reform Act of 1995.Forward-looking statements may relate to,among other things,the demand for our products and services;net sales growth;comparable sales;the effects of competition;our brand and reputation;implementation of store,interconnected retail,supply chain and technology initiatives;inventory and in-stock positions;the state of the economy;the state of the housing and home improvement markets;the state of the credit markets,including mortgages,home equity loans,and consumer credit;the impact of tariffs;issues related to the payment methods we accept;demand for credit offerings;management of relationships with our associates,potential associates,suppliers and service providers;cost and availability of labor;costs of fuel and other energy sources;international trade disputes,natural disasters,climate change,public health issues(including the continuing impacts of the COVID-19 pandemic and the related recovery),cybersecurity events,military conflicts or acts of war,supply chain disruptions,and other business interruptions that could compromise data privacy or disrupt operation of our stores,distribution centers and other facilities,our ability to operate or access communications,financial or banking systems,or supply or delivery of,or demand for,our products or services;our ability to address expectations regarding ESG matters and meet ESG goals;continuation or suspension of share repurchases;net earnings performance;earnings per share;dividend targets;capital allocation and expenditures;liquidity;return on invested capital;expense leverage;changes in interest rates;changes in foreign currency exchange rates;commodity or other price inflation and deflation;our ability to issue debt on terms and at rates acceptable to us;the impact and expected outcome of investigations,inquiries,claims,and litigation,including compliance with related settlements;the challenges of international operations;the adequacy of insurance coverage;the effect of accounting charges;the effect of adopting certain accounting standards;the impact of legal and regulatory changes,including changes to tax laws and regulations;store openings and closures;financial outlook;and the impact of acquired companies on our organization and the ability to recognize the anticipated benefits of any acquisitions.Forward-looking statements are based on currently available information and our current assumptions,expectations and projections about future events.You should not rely on our forward-looking statements.These statements are not guarantees of future performance and are subject to future events,risks and uncertainties many of which are beyond our control,dependent on the actions of third parties,or currently unknown to us as well as potentially inaccurate assumptions that could cause actual results to differ materially from our historical experience and our expectations and projections.These risks and uncertainties include,but are not limited to,those described in Part I,Item 1A.Risk Factors,and elsewhere in this report and also as may be described from time to time in future reports we file with the SEC.You should read such information in conjunction with our consolidated financial statements and related notes and Part II,Item 7.Managements Discussion and Analysis of Financial Condition and Results of Operations in this report.There also may be other factors that we cannot anticipate or that are not described herein,generally because we do not currently perceive them to be material.Such factors could cause results to differ materially from our expectations.Forward-looking statements speak only as of the date they are made,and we do not undertake to update these statements other than as required by law.You are advised,however,to review any further disclosures we make on related subjects in our filings with the SEC and in our other public statements.Table of ContentsFiscal 2022 Form 10-KiiiPART IItem 1.Business.INTRODUCTIONThe Home Depot,Inc.is the worlds largest home improvement retailer based on net sales for fiscal 2022.We offer our customers a wide assortment of building materials,home improvement products,lawn and garden products,dcor products,and facilities maintenance,repair and operations products.We also provide a number of services,including home improvement installation services and tool and equipment rental.As of the end of fiscal 2022,we operated 2,322 stores located throughout the U.S.(including the Commonwealth of Puerto Rico and the territories of the U.S.Virgin Islands and Guam),Canada,and Mexico.The Home Depot stores average approximately 104,000 square feet of enclosed space,with approximately 24,000 additional square feet of outside garden area.We also maintain a network of distribution and fulfillment centers,as well as a number of e-commerce websites in the U.S.,Canada and Mexico.When we refer toThe Home Depot,theCompany,we,usorourin this report,we are referring to The Home Depot,Inc.and its consolidated subsidiaries.The Home Depot,Inc.is a Delaware corporation that was incorporated in 1978.Our Store Support Center(corporate headquarters)is located at 2455 Paces Ferry Road,Atlanta,Georgia 30339.Our telephone number at that address is(770)433-8211.OUR BUSINESSOUR STRATEGYThe retail landscape has changed rapidly over the past several years,with customer expectations constantly evolving.In fiscal 2022,we continued to operate with agility to meet the challenges created by a fluid domestic and global business environment,including supply chain disruptions,tight labor market conditions,and ongoing inflationary pressures.Our ability to operate successfully and meet the needs of our customers was due in significant part to our investments over the past several years aimed at creating an interconnected,frictionless shopping experience that enables our customers to seamlessly blend the digital and physical worlds.Going forward,we will leverage the momentum of these investments and continue to invest in our business in support of the following goals:We intend to provide the best customer experience in home improvement;We intend to extend our position as the low-cost provider in home improvement;andWe intend to be the most efficient investor of capital in home improvement.We believe that these goals will help us grow faster than the market and deliver value to our shareholders.We are steadfast in this commitment,while also recognizing that exercising corporate responsibility and being informed by the needs of our other stakeholders,including our customers,associates,supplier partners,and communities,creates value for all stakeholders,including our shareholders.DELIVER SHAREHOLDER VALUE We deliver on our objective to create shareholder value through our disciplined approach to capital allocation.Our capital allocation principles are as follows:First,we intend to reinvest in our business to drive growth faster than the market.Second,after meeting the needs of the business,we look to pay a quarterly dividend,which we intend to increase as we grow earnings.Third,after reinvesting in our business and paying our dividend,we intend to return excess cash to our shareholders through share repurchases.In fiscal 2022,we invested$3.1 billion in capital expenditures to support our business,advance our goals,and continue to build an interconnected customer experience.We also focused on driving productivity throughout the business to lower our costs.The combination of reinvesting in the business to drive higher sales and supporting productivity to lower costs creates what we refer to as a virtuous cycle,which has allowed us to improve the customer experience,increase our competitiveness in the market,and deliver shareholder value.In fiscal 2022,we returned over$14 billion to shareholders in the form of cash dividends and share repurchases.Our capital allocation is discussed further in Part II,Item 7.Managements Discussion and Analysis of Financial Condition and Results of Operations.Table of ContentsFiscal 2022 Form 10-K1OUR CUSTOMERSWe serve two primary customer groups consumers(including both DIY and DIFM customers)and professional customers and have developed varying approaches to meet their diverse needs:DIY CustomersThese customers are typically homeowners who purchase products and complete their own projects and installations.Our associates assist these customers both in our stores and through online resources and other media designed to provide product and project knowledge.We also offer a variety of clinics and workshops both to share this knowledge and to build an emotional connection with our DIY customers.Professional Customers(orPros)These customers are primarily professional renovators/remodelers,general contractors,maintenance professionals,handymen,property managers,building service contractors and specialty tradespeople,such as electricians,plumbers and painters.These customers build,renovate,remodel,repair,and maintain residential properties,multifamily properties,hospitality properties,and commercial facilities,including education,healthcare,government,institutional,and office buildings.We have a number of initiatives designed to drive growth with our Pros,including a customized online experience,a dedicated sales force,an extensive delivery network,our Pro Xtra loyalty program,enhanced credit offerings,and inventory management programs.Building on our historical strength as a destination for urgent purchase needs,we are investing in capabilities that will help us better serve our Pros planned purchase needs(in-store or via our dedicated sales team),including our expanded supply chain capabilities and advance ordering through our interconnected digital platforms.We believe that focusing on meeting the Pros planned purchase needs,particularly for larger renovator/remodeler Pros,will help us drive growth and deliver value to our shareholders.We extended our reach in the MRO marketplace with our fiscal 2020 acquisition of HD Supply,a leading national distributor and provider of MRO products and related value-added services to multifamily,hospitality,healthcare,and government housing facilities,among others,and in fiscal 2021 we integrated our legacy Interline Brands business into HD Supply.Our MRO operations use a distribution center-based model that sells products primarily through a professional sales force and through e-commerce platforms and print catalogs.We recognize the great value our Pros provide to their clients,and we strive to make their jobs easier and help them grow their businesses.We believe that investments aimed at deepening our relationships with our Pros are yielding increased engagement and will continue to translate into incremental sales to these customers.DIFM CustomersIntersecting our DIY customers and our Pros are our DIFM customers.These customers are typically homeowners who use Pros to complete their project or installation.Currently,we offer installation services in a variety of categories,such as flooring,water heaters,bath,garage doors,cabinets,cabinet makeovers,countertops,sheds,furnaces and central air systems,and windows.DIFM customers can purchase these services in our stores,online,or in their homes through in-home consultations.In addition to serving our DIFM customer needs,we believe our focus on the Pros who perform services for these customers helps us drive higher product sales.OUR PRODUCTS AND SERVICESA typical The Home Depot store stocks approximately 30,000 to 40,000 items during the year,including both national brand name and proprietary products.Our online product offerings complement our stores by serving as an extended aisle,and we offer a significantly broader product assortment through our websites and mobile applications,including ,our primary website;homedepot.ca and .mx,our websites in Canada and Mexico;,our website for our MRO products and related services;,our online site for custom window coverings;and ,our online site featuring textiles and dcor products.We believe our merchandising organization is a key competitive advantage,delivering product innovation,assortment and value,which reinforces our position as the product authority in home improvement.In fiscal 2022,we continued to invest in merchandising resets in our stores to refine assortments,optimize space productivity,introduce innovative new products to our customers,and improve visual merchandising to drive a better shopping experience.At the same time,we remain focused on offering everyday values in our stores and online.To help our merchandising organization keep pace with changing customer expectations and increasing desire for innovation,localization,and personalization,we are continuing to invest in tools to better leverage our data and drive a deeper level of collaboration with our supplier partners.As a result,we have continued to focus on enhanced Table of ContentsFiscal 2022 Form 10-K2merchandising information technology tools to help us:(1)build an interconnected shopping experience that is tailored to our customers shopping intent and location;(2)provide the best value in the market;and(3)optimize our product assortments.Our merchandising team leverages technology and works closely with our inventory and supply chain teams,as well as our supplier partners,to manage our assortments,drive innovation,and adjust inventory levels to respond to fluctuations in demand,which helped us navigate the challenges of continuing global supply chain disruption in fiscal 2022.As cost pressures have risen in several product categories in the current environment,our tools have helped our merchandising,finance and data analytics teams as they work with our supplier partners to manage these pressures.To complement our merchandising efforts,we offer a number of services for our customers,including installation services for our DIY and DIFM customers,as noted above.We also provide tool and equipment rentals at locations across the U.S.and Canada,providing value and convenience for both Pros and consumers.To improve the customer experience and continue to grow this differentiated service offering,we are continuing to invest in more locations(including piloting rental locations in Mexico),more tools,and better technology.Sourcing and Quality AssuranceWe maintain a global sourcing program to obtain high-quality and innovative products directly from manufacturers in the U.S.and around the world.During fiscal 2022,in addition to our U.S.sourcing operations,we maintained sourcing offices in Mexico,Canada,China,India,Vietnam and Europe.To ensure that suppliers adhere to our high standards of social and environmental responsibility,we also have a global responsible sourcing program.Under our supplier contracts,our suppliers are obligated to ensure that their products comply with applicable international,federal,state and local laws.These contracts also require compliance with our responsible sourcing standards,which cover a variety of expectations across multiple areas of social compliance,including supply chain transparency,compliance with local laws,health and safety,environmental laws and regulations,compensation,hours of work,and prohibitions on child and forced labor.To drive accountability with our suppliers,our standard supplier buying agreement includes a factory audit right related to these standards,and we conduct factory audits and compliance visits with non-Canada and non-U.S.suppliers of private branded and direct import products.Our 2022 Responsible Sourcing Report,available on our website at https:/ underResponsibility Sourcing Responsibly,provides more information about this program.In addition,we have both quality assurance and engineering resources dedicated to establishing criteria and overseeing compliance with safety,quality and performance standards for our private branded products.Intellectual PropertyOur business has one of the most recognized brands in North America.As a result,we believe that The Home Depot trademark has significant value and is an important factor in the marketing of our products,e-commerce,stores and business.We have registered or applied for registration of trademarks,service marks,copyrights and internet domain names,both domestically and internationally,for use in our business,including our proprietary brands such as HDX,Husky,Hampton Bay,Home Decorators Collection,Glacier Bay,Vigoro,Everbilt and Lifeproof.The duration of trademark registrations varies from country to country.However,trademarks are generally valid and may be renewed indefinitely as long as they are in use and/or their registrations are properly maintained.We also maintain patent portfolios relating to our business operations,retail services,and products,and we seek to patent or otherwise protect innovations we incorporate into our business.Patents generally have a term of twenty years from the date they are filed.As our patent portfolio has been built over time,the remaining terms of the individual patents across our patent portfolio vary.Although our patents have value,no single patent is essential to our business.We continuously assess our merchandising departments and product lines for opportunities to expand the assortment of products offered within The Home Depots portfolio of proprietary and exclusive brands.COMPETITION AND SEASONALITYOur industry is highly competitive,very fragmented,and evolving.As a result,we face competition for customers for our products and services from a variety of retailers,suppliers,service providers,and distributors and manufacturers that sell products directly to their respective customer bases.These competitors range from traditional brick-and-mortar,to multichannel,to exclusively online,and they include a number of other home improvement retailers;electrical,plumbing and building materials supply houses;and lumber yards.With respect to some products and services,we also compete with specialty design stores,showrooms,discount stores,local,regional and national hardware stores,paint stores,specialty and mass digital retailers,warehouse clubs,independent building supply stores,MRO distributors,home dcor retailers,and other retailers,as well as with Table of ContentsFiscal 2022 Form 10-K3providers of home improvement services and tool and equipment rental.The internet facilitates competitive entry,price transparency,and comparison shopping,increasing the level of competition we face.Both in-store and online,we compete primarily based on customer experience,price,quality,product availability and assortment,and delivery options.We also compete based on store location and appearance,presentation of merchandise,and ease of shopping experience.Our Pros also look for a dedicated sales team,competitive credit and pricing options,project planning tools,and product depth and job lot quantities,particularly for their planned purchase needs.Furthermore,with respect to delivery options,customers are increasingly seeking faster and/or guaranteed delivery times,low-price or free shipping,and/or convenient pickup options.Our ability to be competitive on delivery and pickup times,options and costs depends on many factors,including the success of our supply chain investments,described more fully underOur Supply Chainbelow.Our business is subject to seasonal influences.Generally,our highest volume of sales occurs in our second fiscal quarter,as we move into the spring season in the regions in which we operate.INTERCONNECTED SHOPPING EXPERIENCEWe continue to enhance our capabilities to provide our customers with a frictionless interconnected shopping experience across our stores,online,on the job site,and in their homes,focusing on continued investments in our website and mobile apps to enhance the digital customer experience.Digital ExperienceEnhancements to our digital properties are critical for our increasingly interconnected customers,who often research products online and check available inventory before going into one of our stores to view the products in person or talk to an associate and then make their purchase in store or online.While in the store,customers may also go online to access ratings and reviews,compare prices,view our extended assortment,and purchase additional products.Our investments in a truly interconnected experience are focused on bringing together the power of our physical retail presence and the frictionless interaction of our digital capabilities.A significant majority of the traffic in our digital channels is on mobile devices.Mobile customers expect more simplicity and relevancy in their digital interactions.As a result,we have made investments to our digital properties to improve the overall presentation and ease of navigation for the user.We have also enhanced theshopabilityof an online product by including more information on the products landing page,including related products and/or parts of a collection,as well as various fulfillment options.We believe our focus on improving search capabilities,site functionality,category presentation,product content,speed to checkout,and enhanced fulfillment options has yielded higher traffic,better conversion and continued sales growth.Further,we do not view the interconnected shopping experience as a specific transaction;rather,we believe it encompasses an entire journey from inspiration and know-how,to purchase and fulfillment,to post-purchase care and support.Customers expect more personalized messaging,so we are continuing to focus on connecting marketing activities with the online and in-store experiences to create seamless engagement across channels.From the inspirational point of the purchase journey to providing product know-how,we continue to invest in the infrastructure and capabilities needed to deliver the most relevant marketing messages to our customers based upon what is important to them today.Store ExperienceOur stores remain the hub of our business,and we continue to invest to improve the customer shopping experience through easier navigation and increased convenience and speed of checkout.In fiscal 2022,we continued to leverage the investments made in our stores over the past several years to operate effectively and meet changing customer expectations.These investments include wayfinding signage and store refresh packages;self-service lockers,online order storage areas at front entrances and curbside pickup to provide convenient pickup options for online orders;electronic shelf label capabilities;and the re-design of front-end areas,including reconfigured service desks,improved layouts in checkout areas,and expanded and enhanced self-checkout options.To improve the customers experience in our stores,we have also empowered our customers with additional self-help tools,including mobile app-enabled store navigation.Our app provides store-specific maps,which allow customers to pinpoint the exact location of an item on their mobile devices.We believe these investments are driving higher customer satisfaction scores,and we will continue to invest to improve the customer experience going forward.Investing in Associate Productivity.We continually strive to improve our store operations for our associates.Our goal is to remove complexity and inefficient processes from the stores to allow our associates to focus on our customers.To this end,we have continued to focus our efforts in such areas as optimizing product flow to decrease the amount of time a store associate spends locating product and to improve on-shelf product availability;creating a Table of ContentsFiscal 2022 Form 10-K4simpler order management system;expanding in-aisle,real-time mobile learning tools for our associates own development and to assist with customer questions;and using labor model tools to better align associate activity with customer needs.For several years,our associates have used web-enabled handheld devices to help them more efficiently meet the needs of the business and serve customers.In fiscal 2022,we began rolling out the next generation of digital phones to our stores,which we callhdPhones,so that each associate will have a digital device during their shift.The new devices offer enhanced functionality to allow associates to readily query inventory,access applications that support customer service,and drive on-shelf availability of product.Investing in Safety.We are committed to maintaining a safe shopping and working environment for our customers and associates.We empower trained EH&S associates to evaluate,develop,implement and enforce policies,processes and programs on a Company-wide basis.Our EH&S policies are woven into our everyday operations and are part of The Home Depot culture.Common program elements include daily store inspection checklists(by department);routine follow-up audits from our store-based safety team members and regional,district and store operations field teams;equipment enhancements and preventative maintenance programs to promote physical safety;departmental merchandising safety standards;training and education programs for all associates,with varying degrees of training provided based on an associates role and responsibilities;and awareness,communication and recognition programs designed to drive operational awareness and an understanding of EH&S matters.OUR SUPPLY CHAINWe continue to focus on building best-in-class competitive advantages in our supply chain to be responsive to our customers expectations for how,when and where they choose to receive our products and services.As part of enhancing the interconnected shopping experience,we continue to invest in expanding our supply chain network,with the goal of achieving the fastest,most efficient and most reliable delivery capabilities in home improvement.Our efforts are focused on ensuring product availability and increasing the speed and reliability of delivery for our customers while managing our costs.Our supply chain investments have helped us to operate effectively and meet our customers needs throughout the challenging environment over the past few years.We centrally forecast and replenish the vast majority of our store products through sophisticated inventory management systems and utilize our network of distribution centers to serve both our stores and customers needs.Our supply chain includes multiple distribution center platforms in the U.S.,Canada,and Mexico tailored to meet the needs of our stores and customers based on types of products,location,transportation,and delivery requirements.These platforms include rapid deployment centers,stocking distribution centers,bulk distribution centers,and direct fulfillment centers,among others.As part of the expansion of our supply chain,we have invested to further automate and mechanize our rapid deployment center network to drive efficiency and faster movement of product.We are also continuing to expand our fulfillment network,investing in a significant number of new fulfillment facilities to drive speed and reliability of delivery for our customers and to help us ultimately meet our goal of reaching 90%of the U.S.population with same or next day delivery for extended home improvement product offerings,including big and bulky products.These facilities include omni-channel fulfillment centers,which deliver product directly to customers,and market delivery operations,which function as local hubs to consolidate freight for dispatch to customers for the final mile of delivery,with a focus on appliances.In fiscal 2022,we realized our goal to control more of our appliance delivery end-to-end and began managing all of our appliance delivery volume through our market delivery operations.We have also added flatbed distribution centers,which handle large items like lumber and building materials that are transported on flatbed trucks.As of the end of fiscal 2022,we have opened a number of additional fulfillment facilities,and we will continue to build out our fulfillment network to support our business.Our network is designed to create a competitive advantage with unique,industry-leading capabilities for home improvement needs for both Pros and consumers.In addition to our distribution and fulfillment centers,we leverage our stores as a network of convenient customer pickup,return,and delivery fulfillment locations.Our premium real estate footprint provides a distinct structural and competitive advantage.For customers who shop online and wish to pick up or return merchandise at,or have merchandise delivered from,our stores,we have implemented four interconnected retail programs:BOSS,BOPIS,BODFS,and BORIS.We also provide curbside pickup to complement our BOPIS offerings,in addition to the self-service lockers at the front entrance of many of our stores.We also offer express car and van delivery service that covers over 80%of the U.S.population.For fiscal 2022,approximately 50%of our U.S.online orders were fulfilled through a store.We also continue to focus on developing new capabilities to improve both efficiency and customer experience in our store delivery program.Our strategic intent is to have a portfolio of efficient,timely and reliable sources and methods of delivery to choose from,optimizing order fulfillment and delivery based on customer needs,inventory locations and available transportation options.Table of ContentsFiscal 2022 Form 10-K5CORPORATE RESPONSIBILITY AND HUMAN CAPITAL MANAGEMENTWe view environmental,social and governance matters through the lens of our business,with an understanding that if we support our associates,our customers,our supplier partners,and the communities we serve,we also support our business and create long-term value for our shareholders.As a result,we believe that ESG is fundamentally embedded in our operations and culture.We organize our efforts around three pillars:(1)Focus on Our People,(2)Operate Sustainably,and(3)Strengthen Our Communities.Highlights of each of these pillars are set forth below.For further information on our three pillars and other ESG-related matters,see our annual ESG Report,available on our website at https:/ on Our PeopleOur culture and our associates provide intangible and hard-to-replicate competitive advantages,which have been key to helping us navigate challenging market conditions.Our associates are essential to providing the experience and service that our customers demand.To preserve and protect that customer experience,we focus on cultivating a compelling associate experience,which we believe supports our ability to attract and retain our associates.This includes investing in competitive wages and benefits while also providing the culture,tools,training and development opportunities that make working at The Home Depot an enjoyable and rewarding experience.These actions are the foundation of our key tenets of putting customers first and taking care of our associates.Culture and Values.The Home Depot has a strong commitment to ethics and integrity,and we are a values-and culture-centric business.Our commitment to our core values drives our approach to human capital management.Our culture is based on our servant leadership philosophy represented by the inverted pyramid,which puts primary importance on our customers and our associates by positioning them at the top,with senior management at the base in a support role.We bring our culture to life through our core values,which serve as the foundation of our business and as the guiding principles behind the decisions we make every day.Our values also guide our efforts to create an environment that will help us attract and retain skilled associates in the competitive marketplace for talent.We empower our associates to deliver a superior customer experience by living our values,and we position our associates to embody our core values by integrating the importance of our culture into ongoing development programs,performance management practices,and rewards programs.Leaders participate in programs designed to build and strengthen our culture,such as training on leadership skills,cross-functional collaboration,inclusiveness,and associate engagement,and all associates receive annual training on unconscious bias.Our core values are at the root of our human capital management programs.Our Workforce.At the end of fiscal 2022,we employed approximately 471,600 associates,of whom approximately 46,500 were salaried,with the remainder compensated on an hourly basis.Set forth below is the geographic makeup of our workforce:Geographic LocationNumber of Associates%of Total WorkforceUnited States418,90088.8nada34,5007.3%Mexico17,9003.8%Other(1)3000.1%Total471,600100%(1)Includes associates in our sourcing organization located in China,Vietnam,India,Italy,Poland and Turkey.Table of ContentsFiscal 2022 Form 10-K6Talent Attraction and Development.As we attract and hire new associates,we strive to create a customer-like experience for jobseekers as they progress through the steps of our recruiting process by focusing on speed and personalization.We employ targeted marketing practices through our careers website,which personalizes the users experience based on jobseeker location and searching behavior.Jobseekers can also apply for roles from anywhere using desktop or mobile devices.Once a jobseeker has applied for a role and has been selected to move forward in the recruiting process,we provide self-service by allowing candidates to schedule or reschedule pre-hire activities directly from their mobile device.Lastly,we created a quick hiring process for candidates by leveraging job-matching automation that matches candidates to jobs that fit their needs.We offer all of our associates the opportunity to benefit from robust development opportunities.Our Home Depot University,orHDU,program,is a key part of this development,offering relevant content through multiple platforms,including instructor-led classes,e-learning,mobile learning,and additional online resources.We invest in ongoing growth and development by integrating our culture and values into our performance management practices,providing coaching through continuous leader support,and empowering our associates to learn new skills at their own pace through mobile applications our associates can access at any time.We equip our leaders with the tools they need to develop themselves and their teams through several programs designed to help them lead inclusively,empower their teams,and serve as mentors for our associates.In fiscal 2022,we supported both associate development and engagement by starting the year with a new store leadership structure.We created new management positions in our stores focused on the customer service experience,increasing the number of managers on the floor at any given time.This new structure frees up time for other store leaders to devote to associate training and development.The result is an improved customer and associate experience,while also providing new career paths for associates.Associate Engagement.Associate engagement is the emotional commitment associates have to The Home Depot.It is vital to our culture and to our success.We create an engaging workplace by continuously listening to and acting on associate feedback.We provide several pulse check surveys to associates throughout the year that help us determine how emotionally connected those associates are to our customers,the Company,their jobs,fellow associates,and leaders.In addition,our annual Voice of the Associate survey,which includes all associates,serves as our primary means of gauging associates level of engagement within their roles.We use the feedback from these surveys to help improve the overall associate experience.We also maintain a digital associate engagement platform that links associates with common interests and fuels connections to co-workers and Company leaders.Additionally,we have a number of programs to recognize stores and individual associates for exceptional customer service and demonstrating our core values.Diversity,Equity and Inclusion.Guided by our core values and grounded in our culture,we believe that having a diverse,equitable and inclusive Company is key to our success.We are focused on building a workplace and retail space that reflect the customers and communities we are proud to serve.We strive to maintain a Company where our associates are valued and respected and feel a sense of belonging in the workplace,so that they can provide the customer experience that supports our business.Our Office of Diversity,Equity and Inclusion supports our focus on associate diversity,supplier diversity,and engagement with our communities.Below is the fiscal 2022 diversity data for our U.S.associates:Associate PopulationRace/EthnicityGender%Minority%White%Undisclosedmale%Male%UndisclosedU.S.Workforce48P%28b%1%U.S.Managers&Above(1)39%15e%0%U.S.Officers26s%2)i%2%(1)Does not include officers.Note:Certain percentages may not sum to totals due to rounding.As a Company,we have identified several priorities designed to guide our efforts to enhance diversity,equity and inclusion.We believe these associate-,supplier-and community-focused priorities will further enhance our customers experience and make a sustainable difference within the workplace,marketplace,and community:Associate EngagementIncrease diverse representation throughout our organizationCreate an environment where every associate feels included and valued for who they arePromote equal opportunity in recruitment,hiring,training,development and advancementTable of ContentsFiscal 2022 Form 10-K7Supplier DiversityIncrease use of and spend with diverse suppliersDevelop diverse suppliers by providing mentorship and sharing resourcesCommunity EngagementPartner with organizations on programs designed to close the wealth gapSupport programs that advance education for allCompensation and Benefits.Consistent with our core values,we take care of our people by offering competitive compensation and comprehensive benefits programs.We continuously make wage investments to ensure our compensation packages reflect the evolving circumstances across our markets,and our profit-sharing program for hourly associates provides semi-annual cash awards for performance against our business plan.We transitioned from the enhanced pay and benefits we provided for our associates in fiscal 2020 to alleviate some of the challenges presented by the COVID-19 pandemic to permanent compensation enhancements for our frontline,hourly associates,which we have continued to make since fiscal 2020.Our associates can take advantage of a range of benefits,including healthcare and wellness programs,vacation and leave of absence benefits including parental leave and paid sick/personal time off,a 401(k)match,our ESPPs,personal finance education and advisory services,assistance programs to help with managing personal and work-life challenges,family support programs,and educational assistance.Operate SustainablyWe have a long-standing and substantial commitment to sustainable business operations,understanding that if we make our operations more efficient and sustainable,we can support both our business and the environment.This philosophy extends from the products and services we offer to our customers;to our store construction,maintenance and operations;to our supply chain and packaging initiatives;to our ethical sourcing program.As we strive to operate sustainably,we have focused on efforts that help protect the climate,reduce our environmental impact,and source products responsibly,and we have set goals to drive progress in these areas.Our 2022 ESG Report,available on our website at https:/ more information on our goals,as well as specific initiatives we have in place to help achieve these goals.Below are highlights of our sustainability strategy.Our Environmental Goals.We currently have several goals to help address climate impact and reduce our environmental footprint:Year AnnouncedGoalGoal DateStatus2018Cleaning Products Chemical Reduction:Eliminate certain added chemicals from residential household cleaning products sold in-store or online by the end of fiscal 20222022Complete(1)2018Science-Based Carbon Emissions Targets:Reduce Scope 1 and 2 carbon emissions by 2.1%per year,with the goal to achieve a 40%reduction by the end of fiscal 2030 and a 50%reduction by the end of fiscal 20352030;2035In Process2019Recyclable Packaging:Exclude expanded polystyrene foam(EPS)and polyvinyl chloride(PVC)film from the packaging of private-brand products we sell,replacing them with easier-to-recycle materials by the end of fiscal 20232023In Process2020Renewable/Alternative Energy Sources:Produce or procure,on an annual basis,335 megawatts of renewable or alternative energy by the end of fiscal 20252025In Process2021100%Renewable Electricity:Produce or procure renewable electricity equivalent to the needs for all Home Depot facilities worldwide by the end of fiscal 20302030In Process(1)A de minimis number of suppliers are still in the process of reformulating and transitioning their product assortment.These goals follow the completion of a number of previously announced goals,including goals related to reducing store electricity use,eliminating certain chemicals from products we sell,and helping customers reduce their greenhouse gas emissions and water use and save on electricity costs.Table of ContentsFiscal 2022 Form 10-K8Our Environmental Programs and Initiatives.In order to progress against our goals,we have a number of environmentally-focused programs and initiatives,including:Store Operations and Renewable/Alternative Energy.We have reduced store energy consumption through initiatives such as LED lighting upgrades;installation of energy-efficient HVAC systems;participation in demand mitigation;on-site alternative or renewable energy projects such as fuel cells and solar panels;and contracts with off-site wind and solar power providers.We have continued to work toward our goal to produce or procure renewable electricity equivalent to the electricity needs for all Home Depot facilities by the end of fiscal 2030.We have also continued our focus on saving water,implementing smart irrigation systems capable of reducing irrigation-related water use in more than 500 U.S.stores.Product Offerings.Through our Eco ActionsTM program,we have helped our customers more easily identify products related to five areas:carbon emissions,circularity,responsible chemistry,sustainable forestry,and water use.Under our Eco Actions program,we sell ENERGY STAR certified appliances;WaterSense-labeled bath faucets,showerheads,aerators,toilets,and irrigation controllers;LED light bulbs;tankless water heaters;and many other products.These products,through proper use,help our customers save money on their utility bills and reduce their environmental impact.Through Eco Actions,we also provide customers with resources,such as project tutorials,to take individual action on environmental issues.In-Store Recycling Programs.We offer customer-facing recycling programs in the U.S.,including in-store recycling programs for compact fluorescent light bulbs,rechargeable batteries,and lead acid batteries.Chemical Strategy.We are committed to increasing our assortment of products that meet high environmental standards,and we encourage our suppliers to invest in developing environmentally-innovative products.We periodically evaluate our Chemical Strategy to ensure our approach and goals are appropriate.Sustainable Packaging.In addition to our goal related to eliminating EPS and PVC from our private-brand products,we are continually working with our suppliers to find ways to make product packaging more recyclable or simply use less materials,such as through the reduction of single-use plastics.Supply Chain Optimization.Through our supply chain initiatives such as space sharing and optimization technology,we are working to maximize our use of every mile to make our supply chain more efficient.We also utilize hydrogen fuel cell technology in a number of our forklifts to make our supply chain even more environmentally responsible.CDP Participation.We are a long-standing participant in the annual CDP Climate Change reporting process.CDP is an independent,international,not-for-profit organization providing a global system for companies and cities to measure,disclose,manage,and share environmental information.In February 2023,we received a score ofBfrom CDP.We have also announced that we plan to begin participating in CDPs Forests reporting process.Assessment of SBTi Goals.In fiscal 2021,we announced plans to adopt,by the end of fiscal 2023,new Science Based Targets Initiative(SBTi)goals to reduce Scope 1,2 and 3 emissions in line with Paris Agreement goals.Adoption of SBTi goals would build on our current science-based goals to reduce Scope 1 and 2 carbon emissions by 2.1%per year,to achieve a 40%reduction by the end of fiscal 2030 and a 50%reduction by the end of fiscal 2035.In fiscal 2022,we continued to work on evaluating potential SBTi goals.Over the past several years,our commitment to sustainable operations has resulted in a number of environmental awards and recognitions.In 2022,we received the following awards:an EPA WaterSense Partner of the Year Award for our commitment to offering and promoting water-efficient products;an EPA SmartWay High Performer Award,which recognized us as an industry leader in improving freight efficiency and environmental performance;an EPA Safer Choice Partner of the Year Award,which recognizes achievement in products with safer chemicals that furthers innovative source reduction;and an EPA ENERGY STAR Partner of the Year Award for our contribution to promoting energy efficiency.Strengthen our CommunitiesOne of our core values isGiving Back,and we support our communities in a number of ways.The Home Depot Foundation focuses on improving the homes and lives of U.S.veterans,assisting communities affected by natural disasters,and training skilled tradespeople to fill the labor gap.The Company and The Home Depot Foundation are partnering with industry leaders on training programs to train the next generation of skilled tradespeople and help them find careers in the home improvement industry through our Path to Pro program,which includes a new career networking site to connect skilled tradespeople to industry Pros.Our Team Depot associate volunteers also extend Table of ContentsFiscal 2022 Form 10-K9the mission of the Home Depot Foundation in communities across the country,donating thousands of volunteer hours each year on a wide variety of projects.We partner with diverse suppliers and organizations to further support our diversity,equity and inclusion efforts.As noted above,our Office of Diversity,Equity and Inclusion partners with community organizations on programs designed to close the wealth gap and enhance education outcomes across underserved and underrepresented communities.To further advance diversity,equity and inclusion in our communities,we have a supplier diversity program through which we provide supplier development and other resources to our diverse suppliers,and in fiscal 2021 we launched a Tier II supplier diversity program that aims to drive more spending from our direct suppliers to diverse suppliers.In fiscal 2022,the Company joined the Billion Dollar Roundtable Inc.,or BDR,a not-for-profit organization that promotes supplier diversity excellence and best practices.The BDR consists of U.S.-based corporations that spend$1.0 billion or more annually with minority-and woman-owned suppliers.We are working to cultivate a supplier base that creates long-lasting growth and mutual business success,while reflecting the diversity of our customers and strengthening the communities in which our customers and associates live.Please see our 2022 ESG Report for additional information about our efforts to support the communities we serve.GOVERNMENT REGULATIONAs a company with both U.S.and international operations,we are subject to the laws of the U.S.and foreign jurisdictions in which we operate and the rules and regulations of various governing bodies,which may differ among jurisdictions.Compliance with these laws,rules and regulations has not had,and is not expected to have,a material effect on our capital expenditures,results of operations,or competitive position as compared to prior periods.AVAILABLE INFORMATIONOur internet website is .We make available on the Investor Relations section of our website,free of charge,our Annual Reports to shareholders,Annual Reports on Form 10-K,Quarterly Reports on Form 10-Q,Current Reports on Form 8-K,Proxy Statements,and Forms 3,4 and 5,and amendments to those reports,as soon as reasonably practicable after filing such documents with,or furnishing such documents to,the SEC.We include website addresses throughout this report for reference only.The information contained on these websites is not incorporated by reference into this report.Item 1A.Risk Factors.Our business,results of operations,and financial condition are subject to numerous risks and uncertainties.In connection with any investment decision with respect to our securities,you should carefully consider the following risk factors,as well as the other information contained in this report and our other filings with the SEC.Additional risks and uncertainties not presently known to us or that we currently deem immaterial may also impair our business operations.Should any of these risks materialize,our business,results of operations,financial condition and future prospects could be negatively impacted,which in turn could affect the trading value of our securities.You should read these Risk Factors in conjunction with Part II,Item 7.Managements Discussion and Analysis of Financial Condition and Results of Operations and our consolidated financial statements and related notes in Item 8.STRATEGIC RISKSStrong competition could adversely affect prices and demand for our products and services and could decrease our market share.Our industry is highly competitive,highly fragmented,and evolving.As a result,we face competition for customers for our products and services from a variety of retailers,suppliers,service providers,and distributors and manufacturers that sell products directly to their respective customer bases.These competitors range from traditional brick-and-mortar,to multichannel,to exclusively online,and they include a number of other home improvement retailers;electrical,plumbing and building materials supply houses;and lumber yards.With respect to some products and services,we also compete with specialty design stores,showrooms,discount stores,local,regional and national hardware stores,paint stores,specialty and mass digital retailers,warehouse clubs,independent building supply stores,MRO distributors,home dcor retailers,and other retailers,as well as with providers of home improvement services and tool and equipment rental.The internet facilitates competitive entry,price transparency,and comparison shopping,increasing the level of competition we face.We compete primarily based on customer experience,price,quality,product availability and assortment,and delivery options,both in-store and online.We also compete based on store location and appearance,presentation of merchandise,and ease of shopping experience.Our Pros also look for a dedicated sales team,competitive credit Table of ContentsFiscal 2022 Form 10-K10and pricing options,project planning tools,and product depth and job lot quantities,particularly for their planned purchase needs.Furthermore,customers are increasingly shopping online and seeking faster and/or guaranteed delivery times,low-price or free shipping,and/or convenient pickup options.Our ability to be competitive on delivery and pickup times,options and costs depends on many factors,including leveraging the momentum of our strategic investments in our supply chain and our interconnected retail capabilities to further enhance the customer shopping experience.Failure to successfully manage these factors and offer competitive delivery and pickup options could negatively impact our profit margins and the demand for our products.We use our marketing,advertising and promotional programs to drive customer traffic and compete more effectively,and we must regularly assess and adjust our efforts to address changes in the competitive landscape.Intense competitive pressures from one or more of our competitors,such as through aggressive promotional pricing or liquidation events,or our inability to adapt effectively and quickly to a changing competitive landscape,could adversely affect our prices,our margins,or demand for our products and services.If we are unable to timely and appropriately respond to these competitive pressures,including through the delivery of a superior interconnected customer experience or through maintenance of effective sales and marketing,advertising or promotional programs leveraging both our digital and physical platforms,our market share and our financial performance could be adversely affected.In addition,we are operating in a highly inflationary environment.If inflation increases beyond our ability to control our related costs,we may not be able to adjust prices to sufficiently offset the effect of the various cost increases without negatively impacting consumer demand,or it may adversely affect our ability to compete based on price.We may not timely identify or effectively respond to consumer needs,expectations or trends,which could adversely affect our relationship with our customers,the demand for our products and services,and our market share.The success of our business depends in part on our ability to identify and respond promptly to evolving trends in demographics;shifts in consumer preferences,expectations and needs;and unexpected weather conditions,public health issues(including pandemics and related impacts),natural disasters,or changes in the macroeconomic environment that impact our customers,while also managing appropriate inventory levels in our stores and distribution or fulfillment centers and maintaining an excellent customer experience.It is difficult to successfully predict the products and services our customers will demand.As our customers expect a more personalized experience,our ability to collect,use and protect relevant customer data is important to our ability to effectively meet their expectations.Our ability to collect and use that data,however,is subject to a number of external factors,including the impact of legislation or regulations governing data privacy and security and customer expectations around data collection and use.In addition,each of our primary customer groups has different needs and expectations,many of which evolve as the demographics in a particular customer group change.Customer preferences and expectations related to sustainability of products and operations are also changing.If we do not successfully differentiate the shopping experience to meet the individual needs and expectations of or within a customer group,we may lose market share with respect to those customers.Customer expectations about the methods by which they purchase and receive products or services are also becoming more demanding.Customers routinely and increasingly use technology and a variety of electronic devices and digital platforms to rapidly compare products and prices,read product reviews,determine real-time product availability,and purchase products,and new channels and tools to expand the customer experience appear and change rapidly.Our Pros also look for additional capabilities,including a dedicated sales team,competitive credit and pricing options,project planning tools,and product depth and job lot quantities,particularly for their planned purchase needs.Once products are purchased,customers seek alternate options for delivery of those products,including advance ordering through digital platforms for Pros,and they often expect quick,timely,and low-price or free delivery and/or convenient pickup options.We must continually anticipate and adapt to these changes in the shopping and purchasing process by continuing to adjust and enhance the online and in-store customer experience as well as our delivery options.The coordinated operation of our network of physical stores,distribution facilities,and online platforms is fundamental to the success of our interconnected strategy.We cannot guarantee that our current or future fulfillment options will be maintained and implemented successfully or that we will be able to meet customer expectations on delivery or pickup times,options and costs.In addition,as our customers continue to leverage our enhanced interconnected shopping and fulfillment options,a greater concentration of online sales with direct fulfillment could result in a reduction in the amount of traffic in our stores,which would,in turn,reduce the opportunities for cross-selling of merchandise that such traffic creates and could reduce our overall sales and adversely affect our financial performance.A greater concentration of online sales with direct fulfillment could also result in higher costs for delivery,potentially impacting our profit margins.Table of ContentsFiscal 2022 Form 10-K11Failure to provide a relevant or effective online customer experience in a timely manner that keeps pace with technological developments and dynamic customer expectations;to maintain appropriate inventory;to provide quick and low-price or free delivery alternatives and convenient pickup options;to differentiate the customer experience for our primary customer groups;to effectively implement an increasingly localized merchandising assortment;or to otherwise timely identify or respond to changing consumer preferences,expectations and home improvement needs could adversely affect our relationship with our customers,the demand for our products and services,and our market share.A positive brand and reputation are critical to our business success,and,if our brand and reputation are damaged,it could negatively impact our relationships with our customers,current and potential associates,suppliers,vendors,and shareholders,and,consequently,our business and results of operations or the price of our stock.Our brand and reputation are critical to attracting customers,current and potential associates,suppliers and vendors to do business with us.We must continue to manage and protect our brand and reputation.Negative incidents can erode trust and confidence quickly,and adverse publicity about us could damage our brand and reputation;undermine our customers confidence in us;reduce demand for our products and services;affect our ability to recruit,engage,motivate and retain associates;attract regulatory scrutiny;and impact our relationships with current and potential suppliers and vendors.Further,our actual or perceived position or lack of position on social,environmental,governance,political,public policy,economic,geopolitical,or other sensitive issues,and any perceived lack of transparency about those matters,could harm our reputation with certain groups.Customers are also increasingly using social media to provide feedback and information about our Company,including our products and services,in a manner that can be quickly and broadly disseminated.Negative sentiment about the Company shared over social media,or misinformation from fraudulent accounts impersonating the Company,could impact our brand and reputation,whether or not it is based in fact.The execution of initiatives to expand our supply chain and enhance the interconnected shopping experience could disrupt our operations in the near term,and these initiatives might not provide the anticipated benefits or might fail.We continue to invest in our interconnected retail strategy,including by making significant investments to expand our supply chain.These investments are designed to streamline our operations to allow our associates to continue to provide high-quality service to our customers;simplify customer interactions;provide our customers with a more interconnected shopping experience;better address Pro planned purchase needs;and create the fastest,most efficient delivery network for home improvement products.Failure to choose the right investments and implement them in the right manner and at the right pace could disrupt our operations.Executing our interconnected retail strategy requires continual investment in our operations and information technology systems,as well as the development and execution of new processes,systems and support.Building out our supply chain also involves significant real estate projects as we expand our distribution network,requiring us to identify and secure available locations with appropriate characteristics needed to support the different types of facilities.If we are unable to effectively manage the volume,timing,nature,location,and cost of these investments,projects and changes,our business operations and financial results could be materially and adversely affected.The cost and potential problems,defects of design,and interruptions associated with the implementation of these initiatives,including those associated with managing third-party service providers,employing new online tools and services,implementing new technologies,implementing and restructuring support systems and processes,securing appropriate facility locations,and addressing impacts on inventory levels,could disrupt or reduce the efficiency of our operations in the near term,lead to product availability issues,and impact our profitability.In addition,our stores are a key element of our interconnected retail strategy,serving as the hub of our customers interconnected shopping experience.We have an aging store base that requires maintenance,investment,and space reallocation initiatives to deliver the shopping experience that our customers desire.We also need to identify and secure available locations with appropriate characteristics for new stores to ensure we can continue to serve our customers effectively.Our investments in our stores may not deliver the relevant shopping experience our customers expect or fully support an interconnected shopping experience.We must also maintain a safe store environment for our customers and associates,as well as protect against loss or theft of our inventory(also calledshrink),including as a result of organized retail crime.High rates of shrink,which we continue to experience,or an unsafe store environment,requires operational changes that may increase costs and adversely impact the customer and associate experience.Our investments to enhance our interconnected shopping experience and expand our supply chain might not provide the anticipated benefits,might take longer than expected to complete or realize anticipated benefits,or Table of ContentsFiscal 2022 Form 10-K12might fail altogether,each of which could adversely impact our competitive position and our financial condition,results of operations,or cash flows.If we are unable to effectively manage and expand our alliances and relationships with certain suppliers of both brand name and proprietary products,we may be unable to effectively execute our strategy to differentiate ourselves from our competitors.As part of our focus on product differentiation,we have formed strategic alliances and exclusive relationships with certain suppliers to market products under a variety of well-recognized brand names.We have also developed relationships with certain suppliers to allow us to market proprietary products that are comparable to national brands.Our proprietary products differentiate us from other retailers and generally carry higher margins than national brand products.If we are unable to manage and expand these alliances and relationships,maintain favorable terms with current suppliers,or identify alternative sources for comparable brand name and proprietary products,we may not be able to effectively execute product differentiation,which may impact our sales and gross margin results.Our strategic transactions involve risks,which could have an adverse impact on our business,financial condition and results of operations,and we may not realize the anticipated benefits of these transactions.We regularly consider and enter into strategic transactions,including mergers,acquisitions,investments,alliances,and other growth and market expansion strategies.We generally expect that these transactions will result in sales increases,cost savings,synergies,enhanced capabilities or various other benefits.Assessing the viability and realizing the benefits of these transactions is subject to significant uncertainty.For each of our acquisitions,we need to determine the appropriate level of integration of the target companys products,services,associates,and information technology,financial,human resources,compliance,and other systems and processes,and then successfully manage that integration into our corporate structure.Integration can be a complex and time-consuming process,and if the integration is not fully successful or is delayed for a material period of time,we may not achieve the anticipated synergies or benefits of the acquisition.In addition,the integration of businesses may create complexity in our financial systems,internal controls,technology and cybersecurity systems,and operations and may make them more difficult to manage.Even if the target companies are successfully integrated,the acquisitions may fail to further our business strategy as anticipated,expose us to increased competition or challenges with respect to our products or services,and expose us to additional risks and liabilities.Strategic transactions may also be subject to significant regulatory uncertainty.The changing enforcement landscape may result in additional costs or delays that affect the anticipated outcome of a transaction.Any failure in the execution of a strategic transaction or investment,our approach to the integration of an acquired asset or business,or achievement of synergies or other benefits could result in slower growth,higher than expected costs,the recording of an impairment of goodwill or other intangible assets,and other actions which could adversely affect our business,financial condition and results of operations.OPERATIONAL RISKSOur success depends upon our ability to attract,develop and retain highly qualified associates to provide excellent customer service and to support our strategic initiatives while also controlling our labor costs.Our customers expect a high level of customer service and product knowledge from our associates.To meet the needs and expectations of our customers,we must attract,develop and retain a large number of highly qualified associates and maintain a productive relationship with those associates.Our ability to meet our labor needs while controlling labor costs is subject to numerous external factors,including increased market pressures with respect to prevailing wage rates,unemployment levels,and health and other insurance costs;the impact of legislation or regulations governing labor relations,employment,immigration,minimum wage,and healthcare benefits;changing demographics and expectations among the workforce;public health concerns;and our reputation within the labor market.We also compete with other retail businesses for many of our associates in hourly positions,and we invest significant resources in training and motivating them to maintain a high level of job satisfaction.These positions often have high turnover rates,which can lead to increased training and retention costs,particularly in a competitive labor market.We have faced and may continue to face additional challenges in recruiting and retaining associates due to wage pressure;flexible scheduling needs;disruption in the availability of childcare;challenges related to a remote or hybrid working environment for associates who work in our store support centers;and health and safety concerns.We are also subject to labor union efforts to organize groups of our associates from time to time and,if successful,those organizational efforts may decrease our operational flexibility and efficiency,and/or otherwise negatively impact our operations or reputation.These factors,together with growing competition among potential employers,have resulted in and may continue to result in increased salaries,benefits,or other employee-related Table of ContentsFiscal 2022 Form 10-K13costs,and/or may impair our ability to recruit and retain associates,which could have an adverse impact on our business operations,financial condition and results of operations.In addition,to execute our interconnected retail strategy,including our supply chain investments,we must attract and retain a large number of skilled professionals,including technology professionals,to implement our ongoing technology and other investments.The market for these professionals is very competitive.An inability to provide wages and/or benefits,including remote or hybrid work flexibility,that are competitive within the markets in which we operate could adversely affect our ability to retain and attract associates.Further,changes in market compensation rates may adversely affect our labor costs.Additionally,our ability to successfully execute organizational changes,including management transitions within the Companys senior leadership,and to effectively motivate and retain associates is critical to our business success.If we are unable to locate,attract or retain qualified associates,or manage leadership transitions successfully,our ability to effectively manage our strategy may be negatively impacted,the quality of service we provide to our customers may decrease,and our financial performance may be adversely affected.A failure of a key information technology system or process could adversely affect our business.We rely extensively on information technology systems and related personnel to collect,process,retain,manage,transmit,and protect transactions and data.Some of these systems are managed or provided by third-party service providers,including certain cloud platform providers.In managing our business,we also rely heavily on the integrity of,security of,and consistent access to,operational and financial data for information such as sales,customer data,supplier data,associate data,job applicant data,partner data,demand forecasting,merchandise ordering,inventory replenishment,supply chain management,payment processing,order fulfillment,customer service,and post-purchase matters.For these information technology systems,applications,and processes to operate effectively,we or our service providers must maintain and update them.Delays in the maintenance,updates,upgrading,or patching of these systems,applications or processes could impair,and on occasion have impaired,their effectiveness or could expose us to security risks.Our systems and the third-party systems with which we interact are subject to and on occasion have experienced damage or interruption from a number of causes,including power and other critical infrastructure outages;computer and telecommunications failures;computer viruses;data or security breaches;internal or external data theft or misuse;cyber-attacks,including the use of malicious codes,worms,phishing,smishing,vishing,spyware,denial of service attacks,and ransomware;responsive containment measures by us that may involve voluntarily taking systems offline;natural disasters and catastrophic events such as fires,floods,earthquakes,tornadoes,hurricanes,or other extreme weather events;public health concerns,such as pandemics and quarantines;military conflicts,acts of war,terrorism or civil unrest;other systems outages;inadequate or ineffective redundancy;and design or usage errors or malfeasance by our associates,contractors or third-party service providers.In addition,as more business activities have shifted online,and as many of our store support associates continue to work in a remote or hybrid environment,we face an increased risk due to the potential failure of internal or external information technology infrastructure as well as increased cybersecurity threats and attempts to breach our security networks.Although we and our third-party service providers seek to maintain our respective systems effectively and to successfully address the risk of compromise of the integrity,security and consistent operations of these systems,such efforts are not always successful.As a result,we or our service providers could experience errors,interruptions,delays or cessations of service in key portions of our information technology infrastructure,which could significantly disrupt our operations or impair data security;impact our ability to operate or access communications,financial or banking systems;be costly,time-consuming and resource-intensive to remedy;and adversely impact our reputation and relationship with our customers,suppliers,shareholders or regulators.In addition,we are currently making,and expect to continue to make,substantial investments in our information technology systems,infrastructure and personnel,in certain cases with the assistance of strategic partners and other third-party service providers.These investments involve replacing existing systems,some of which are older,legacy systems that are less flexible and efficient,with successor systems;outsourcing certain technology and business processes to third-party service providers;making changes to existing systems,including the migration of applications to the cloud;maintaining or enhancing legacy systems that are not currently being replaced;or designing or cost-effectively acquiring new systems with new functionality.These efforts can result in significant potential risks,including failure of the systems to operate as designed,potential loss or corruption of data,failures in security processes and internal controls,cost overruns,implementation delays or errors,disruption of operations,and the potential inability to meet business and reporting requirements.Any system implementation and transition difficulty may result in operational challenges,security failures,reputational harm,and increased costs that could adversely affect our business operations and results of operations.Table of ContentsFiscal 2022 Form 10-K14Disruptions in our customer-facing technology systems could impair our interconnected retail strategy and give rise to negative customer experiences.Through our information technology systems,we are able to provide an improved overall shopping and interconnected experience that empowers our customers to shop and interact with us from a variety of electronic devices and digital platforms.We use our digital platforms as sales channels for our products and services,as methods of providing inspiration,and as sources of product,project,and other relevant information to our customers to help drive sales.We also have multiple online communities,digital platforms,and knowledge centers that allow us to inform,assist and interact with our customers.The retail industry is continually evolving and expanding,with a significant increase in sales initiated online and via mobile applications.We may not be successful at managing this increased volume and related delivery options without interruption in the future.Additionally,we must effectively respond to new developments and changing customer preferences with respect to a digital and interconnected experience.We continually seek to enhance all of our online and digital properties to provide a personalized,user-friendly interface for our customers.Disruptions,delays,failures or other performance issues with our customer-facing technology systems,either due to increased volume,system modifications,or other factors,or a failure of these systems to meet our or our customers expectations,could impair the value they provide,adversely impact our sales,and negatively affect our relationship with our customers.Disruptions in our supply chain and other factors affecting the availability and distribution of our merchandise could adversely impact our business.Disruption within our logistics or supply chain network,such as the industry-wide supply chain challenges resulting from the COVID-19 pandemic,have in the past and may in the future adversely affect our ability to receive and deliver inventory in a timely manner,impair our ability to meet customer demand for products,and result in lost sales,increased supply chain costs,and/or damage to our reputation.Such disruptions may result from damage or destruction to our distribution or fulfillment centers or those of our supply chain service providers;weather-related events;cybersecurity incidents or attacks;natural disasters;international trade disputes,trade policy changes or restrictions,or import-or export-related governmental sanctions or restrictions;customs actions,including regulatory enforcement inquiries,holds,detentions,and exclusions;quotas,tariffs or other import-related taxes;strikes,lock-outs,work stoppages or slowdowns;shortages of supply chain labor,including truck drivers;shipping capacity constraints,including shortages of related equipment;raw material or other shortages;third-party contract disputes or inability to maintain favorable contract terms;supply or shipping interruptions or costs;increased costs or unavailability of fuel;military conflicts or acts of war,as well as any related sanctions or other government or private responses;acts of terrorism;public health issues,including pandemics or quarantines(such as the COVID-19 pandemic)and related shut-downs,re-openings,or other actions by government regulators or others;civil unrest;or other factors beyond our control.In recent years,ports in the U.S.and elsewhere have been impacted by capacity constraints,port congestion and delays,periodic labor disputes,security issues,weather-related events,and natural disasters.Disruptions to our supply chain due to any of the factors listed above could negatively impact our financial performance or financial condition.If our efforts to maintain the privacy and security of customer,associate,job applicant,business partner,and Company information are not successful,we could incur substantial costs and reputational damage and could become subject to litigation and enforcement actions.Our business,like that of most retailers,involves the collection,processing,retention,management,transmission,and deletion of personal information(including identifiers,internet activity,preferences,and payment information)from our customers,associates,job applicants,and business partners,as well as confidential Company information.We also work with third-party service providers that provide technology,systems and services that we use in connection with the handling of information.Our information systems,and those of our third-party service providers,are vulnerable to continually evolving data protection and cybersecurity risks.Unauthorized parties have in the past gained access,and will continue to attempt to gain access,to these systems and data through fraud or other means of deceiving our associates or third-party service providers.Hardware,software or applications we develop or obtain from third parties may contain exploitable vulnerabilities,bugs,or defects in design,maintenance or manufacture or other problems that could unexpectedly compromise information security.We have experienced and continue to face the ongoing risk of exploitation of our software providers and our software development and implementation process,including from coding and process vulnerabilities and the installation of so-called back doors that provide unauthorized access to systems and data.The increased use of a remote workforce has also expanded the possible attack surface areas.In addition,the risk of cyber-attacks has increased in connection with Russias invasion of Ukraine and the resulting geopolitical conflict.In light of this and other geopolitical events,nation-state actors or their supporters may launch retaliatory cyber-attacks,and may attempt to cause supply chain and other third-party service provider disruptions,or take other geopolitically-motivated retaliatory actions that may disrupt our Table of ContentsFiscal 2022 Form 10-K15business operations,result in data compromise,or both.Nation-state actors have in the past carried out,and may in the future carry out,cyber-attacks to achieve their aims and goals,which may include espionage,monetary gain,disruption,and destruction.To achieve their objectives,nation-state actors and other cyber criminals have used and may continue to use numerous attack vectors and methods,including use of stolen passwords,social engineering,phishing,smishing,vishing,identity spoofing,ransomware or other disruptive and destructive malware,supply chain compromises,and man-in-the-middle and denial of service attacks.The methods used to obtain unauthorized access,disable or degrade service,or sabotage systems are constantly changing and evolving,increasing in frequency and sophistication,and may be difficult to anticipate or detect for long periods of time.To protect against unauthorized access to or use of data,prevent data loss,preserve data integrity,and protect our own access to systems,we have implemented and regularly review and update systems,processes,and procedures;third-party assessments and testing;and annual associate training and other specific training initiatives.However,the ever-evolving threats mean that we and our third-party service providers and business partners must continually evaluate and adapt our respective systems and processes and overall security environment,as well as those of companies we acquire.There is no guarantee that the measures we take will be adequate to safeguard against all threats,including vulnerabilities,data security breaches,system compromises or misuses of data.As we saw in connection with the data breach we experienced in 2014,any significant compromise or breach of our data security,whether external or internal,or misuse of customer,associate,job applicant,business partner,or Company data,could result in significant costs,including costs to investigate and remediate,as well as lost sales,fines,lawsuits,regulatory investigations,and damage to our reputation.Furthermore,because the techniques used to obtain unauthorized access,disable or degrade service,or sabotage systems change frequently and may not immediately produce signs of anomalous activity or compromise,we may be unable to anticipate these techniques or to implement adequate preventative measures.Additionally,as occurred in the case of the data breach we experienced in 2014,we or our third-party service providers may not discover any security breach,vulnerability or compromise of information for a significant period of time after the occurrence of a security incident.In addition,data governance failures can adversely affect our reputation and business.Our business depends on our customers,associates,job applicants and business partners willingness to entrust us with their personal information.Events that adversely affect that trust,including inadequate disclosure to our customers,associates,job applicants,or business partners of our uses of their information or failing to keep our information technology systems and our customers,associates,job applicants and business partners personal information secure from significant attack,theft,damage,loss or unauthorized disclosure or access,whether as a result of our action or inaction(including human error or malfeasance)or that of our service providers or other third parties,could adversely affect our brand and harm our reputation.Further,the regulatory environment related to data privacy and cybersecurity is constantly changing,with new and increasingly rigorous requirements applicable to our business.The implementation of these requirements has also become more complex.Maintaining our compliance with evolving requirements,including state privacy laws,requires significant effort and cost,requires changes to our business practices,and may limit our ability to collect and use certain data to support the customer experience.In addition,failure to comply with applicable requirements could subject us to fines,sanctions,governmental investigations,lawsuits or reputational damage.Additionally,our cyber insurance coverage may not be adequate for liabilities or costs actually incurred,and we cannot be certain that insurance will continue to be available to us on economically reasonable terms,or at all,or that any insurer will not deny coverage of a future claim.We are subject to payment-related risks that could increase our operating costs,expose us to fraud or theft,subject us to potential liability,and potentially disrupt our business.We accept payments using a variety of methods,including credit and debit cards,our private label credit cards,cash,checks,PayPal,installment loan programs,trade credit,and gift cards,and we may offer new payment options over time.Acceptance of these payment options subjects us to rules,regulations,contractual obligations and compliance requirements,including payment network rules and operating guidelines,data security standards and certification requirements,and rules governing electronic funds transfers.These requirements may change over time or be reinterpreted,making compliance more difficult,costly,or uncertain.For certain payment methods,including credit and debit cards,we pay interchange and other fees,which may increase over time and raise our operating costs.We rely on third parties to provide payment processing services,including the processing of credit cards,debit cards,and other forms of electronic payment.If these companies become unable to provide these services to us,or if their systems are compromised,it could potentially disrupt our business.The payment methods that we offer,and the selling channels in which we operate,also subject us to potential fraud and theft by threat actors,who are becoming increasingly more sophisticated,seeking to obtain unauthorized access to or exploit weaknesses that may exist in our sales,payments and payment processing systems.If we fail to comply with applicable rules or requirements for the payment methods we accept,or if payment-related data is compromised Table of ContentsFiscal 2022 Form 10-K16due to a breach or misuse of data,we may be liable for costs incurred by payment card issuing banks and other third parties or we may be subject to fines and higher transaction fees,or our ability to accept or facilitate certain types of payments may be impaired.In addition,our customers could lose confidence in certain payment types,which may result in a shift to other payment types or potential changes to our payment systems that may result in higher costs.As a result,our business and operating results could be adversely affected.Our business is subject to seasonal influences,and uncharacteristic or significant weather conditions,climate change,natural disasters,as well as other catastrophic events,could impact our operations.Natural disasters,such as hurricanes,tropical storms,fires,floods,droughts or water scarcity,tornadoes,and earthquakes;unseasonable,unexpected or extreme weather conditions,whether as a result of climate change or otherwise;acts of terrorism or violence,including active shooter situations;public health concerns,such as pandemics and quarantines and related shut-downs,re-openings,or other actions by government regulators or others;civil unrest;military conflicts or acts of war,as well as any related sanctions or other government or private responses;or similar disruptions and catastrophic events can affect consumer spending and confidence and consumers disposable income,particularly with respect to home improvement or construction projects,and could have an adverse effect on our financial performance.These types of events can also adversely affect our work force and prevent associates and customers from reaching our stores and other facilities.They can also,temporarily or on a long-term basis,disrupt or disable operations of stores,support centers,and portions of our supply chain and distribution network,including causing reductions in the availability of inventory and disruption of utility services.In addition,these events may affect our information systems and digital platforms,resulting in disruption to various aspects of our operations,including our ability to transact with customers and fulfill orders;to communicate with our stores,facilities,store support centers or senior management;or to access financial or banking systems.Unseasonable,unexpected or extreme weather conditions such as excessive precipitation,warm temperatures during the winter season,or prolonged or extreme periods of warm or cold temperatures,could render a portion of our inventory incompatible with customer needs.Furthermore,the long-term impacts of climate change,whether involving physical risks(such as extreme weather conditions)or transition risks(such as regulatory or technology changes)are expected to be widespread and unpredictable.These changes over time could affect,for example,the availability and cost of or demand for certain consumer products,commodities,and energy(including utilities),which in turn may impact our ability to procure certain goods or services for the operation of our business at the quantities and levels we consider optimal.As a consequence of these or other catastrophic or uncharacteristic events,we may experience interruption to our operations,increased costs,or losses of property,equipment or inventory,which would adversely affect our revenue and profitability.If we fail to identify and develop relationships with a sufficient number of qualified suppliers,or if our suppliers experience financial difficulties or other challenges,our ability to timely and efficiently access products that meet our high standards for quality could be adversely affected.We buy our products from suppliers located around the world,who in turn procure materials from across the globe.Our ability to continue to identify and develop relationships with qualified suppliers who can satisfy our high standards for quality and responsible sourcing,as well as our need to access products in a timely and efficient manner,is a significant challenge.Our ability to access products from our suppliers can be adversely affected by economic or political instability;civil unrest;military conflicts or acts of war,as well as any related sanctions or other government or private responses;acts of terrorism or violence;public health issues(including pandemics and related impacts);the financial instability of suppliers;suppliers noncompliance with applicable laws;contract disputes or inability to maintain favorable contract terms;trade restrictions;tariffs;currency exchange rates;disruptions in our suppliers logistics or supply chain networks or information technology systems;inability to sell certain products due to customs actions,including regulatory enforcement inquiries,holds,detentions,and exclusions;raw material or other shortages;and other factors beyond our or our suppliers control.If we are unable to access products to meet our customers demands and expectations in a timely and efficient manner,our sales and gross margin results may be adversely impacted.Failure to achieve and maintain a high level of product and service quality and safety and ensure compliance with responsible sourcing laws and standards could damage our reputation with customers,expose us to litigation or enforcement actions,and negatively impact our sales and results of operations.Product and service quality issues could negatively impact customer confidence in our brands and our Company.If our product and service offerings do not meet applicable product standards or our customers expectations regarding safety or quality,we could experience lost sales and increased costs and be exposed to legal,financial Table of ContentsFiscal 2022 Form 10-K17and reputational risks,as well as governmental enforcement actions.Actual,potential or perceived product safety concerns,including health-related concerns,could expose us to litigation or government enforcement actions,and could result in costly product recalls and other liabilities.We may not be successful in obtaining adequate contractual indemnification and insurance coverage from our suppliers and service providers,which may result in claims having an adver, Canada Retail Rent SurveyCBRE RESEARCH H2 2022REPORTIntelligent Investment CBREs H2 2022 Retail Rent Survey presents a snapshot of retail trends and rents for 10 cities across Canada.Kate Camenzuli Vice PresidentChristina CattanaResearch ManagerExecutive SummaryExecutive Summary2CBRE RESEARCH2023 CBRE LIMITEDIntelligent InvestmentCanada Retail Rent Survey H2 2022|ReportThe Canadian retail landscape continued to build momentum in the latter half of the year with markets noting stability and increased levels of activity.Asking rents have appreciated in response to a combination of demand,limited supply,and elevated construction costs.Focus across Canada has remained on construction cost challenges and higher interest rates.Together,this has put a spotlight on demand for second-generation space or units with existing build-out in place.With limited inventory,however,good real estate is being leased quickly.National and international brands have been active across Canada in a broad range of sectors including a noted resurgence of luxury brands in urban,high-profile destinations.More market movements were reported as of H2 when compared to H1 with 24 noted increases and only three reductions on benchmark rent prices.Geographically,the majority of the increases were seen in western provinces.TorontoOttawaHalifaxMontrealKey Urban Area BoundariesGlossaryOccupier TrendsKey FindingsExecutive SummaryCalgaryEdmontonSaskatoonWinnipegKitchener-WaterlooVancouverKey FindingsKey Findings3CBRE RESEARCH2023 CBRE LIMITEDIntelligent InvestmentCanada Retail Rent Survey H2 2022|ReportOpen-air centres are reigning supreme with power,community(unenclosed),and neighbourhood centres noting increased rental rate ranges in four of 10 markets.Demand remains strong for space in these formats,especially if grocery or food anchored.Western provinces experienced the most widespread rent appreciation with all cities west of Winnipeg reporting a minimum of two rent increases.This was led by Saskatoon and Vancouver,both seeing increasing rates in six formats or key urban areas.Market recalibration is taking place in Montreal having noted two of three total rental declines noted across Canada this half.Construction cost challenges and higher interest rates continue to impact leasing.Tenants and landlords are working together to get deals done in the current cost environment.Despite economic headwinds,retail and retailer sentiment remains positive across Canada going into the new year.12345TorontoOttawaHalifaxMontrealKey Urban Area BoundariesGlossaryOccupier TrendsKey FindingsExecutive SummaryCalgaryEdmontonSaskatoonWinnipegKitchener-WaterlooVancouverOccupier TrendsMatthew JacksonVice Presidentemail|websiteOccupier Trends4CBRE RESEARCH2023 CBRE LIMITEDIntelligent InvestmentCanada Retail Rent Survey H2 2022|ReportGroceryThere has been continued growth in the grocery sector with concepts such as Farm Boy and ethnic grocers including Oceans expanding throughout Ontario.Some larger national brands,meanwhile,have begun downsizing and reducing their home goods offerings.ApparelThe apparel sector experienced a slowdown during the pandemic with most struggling to keep up with changing lifestyles.Those that adapted or were previously suited to the consumer shift are recovering well and/or experienced growth in 2022,including Aritzia,Under Armour,and Nike.FoodQSR activity has remained strong and is benefitting from less competition against cannabis users for prime space.Freestanding pads with drive-thru are still in high demand but are difficult to find in most urban areas.Service/MedicalThis sector has seen significant growth from non-traditional users such as fertility,medical spas,and plastic surgery clinics.The introduction of these minor elective surgery clinics has offloaded hospital demand and is a boon to centres as they typically occupy non-primary locations.PetPet stores have seen considerable growth on average per ticket with more pets adopted during COVID,but the number of pet retail locations,in general,remained level in 2022.Digitally NativeDigitally Native brands continue to grow both in brick and mortar,online and through other channels.Brands like Mejrui,Allbirds and the recently converted Monos are paving the way for more groups to understand that brick and mortar is an important part of the retail ecosystem.ChildrenDaycares and learning centres which offer services within the childrens segment has seen growth.This differs to stores covering apparel and toys,such as The Childrens Place,Disney,Gymboree,ToysRUs/BabiesRUs,which have experienced closures since the onset of the pandemic.TorontoOttawaHalifaxMontrealKey Urban Area BoundariesGlossaryOccupier TrendsKey FindingsExecutive SummaryCalgaryEdmontonSaskatoonWinnipegKitchener-WaterlooVancouverNet Asking Rental Rate($PSF)Rental Rate Range($PSF)see boundariesVancouverAdrian BeruschiSenior Vice Presidentemail|website5CBRE RESEARCH2023 CBRE LIMITEDIntelligent InvestmentCanada Retail Rent Survey H2 2022|Report Foot traffic levels within the downtown core remain below their pre-lockdown peaks and as a result vacancy rates remain slightly elevated.Suburban shopping centres anchored by grocery tenants in close proximity to transit continue to see growing demand,primarily driven by population growth.As the residential market has slowed,numerous mixed use developments with retail podiums have been put on hold.Opportunities still exist within the core,with mostly second generation product keeping vacancy rates elevated.Most of those who have succeeded in recent years have placed a greater emphasis on the customer experience in order to expand their consumer base.Notable new deliveries for the upcoming year include The Post in downtown Vancouver and the expansion of Willowbrook Mall in Langley.Both have garnered significant traction and should pave the way for a strong year for retail in 2023.$0$20$40$60$80$100PowerCentreCommunityEnclosedCommunityUnenclosedNeighbourhood Convenience/StripMixed-UseUrbanMixed-UseSuburbanFORMATRANGEr6moRegional Mall$100-$155Power Centre$35-$55Community-Enclosed$35-$50tuCommunity-Unenclosed$20-$40tuNeighbourhood$25-$40tuConvenience/Strip$20-$35tuMixed-Use-Urban$65-$90tuMixed-Use-Suburban$60-$90tuKEY URBAN AREASAlberni Street$195-$300Robson Street$120-$185Granville Street$85-$125West 4th Avenue$60-$100TorontoOttawaHalifaxMontrealKey Urban Area BoundariesGlossaryOccupier TrendsKey FindingsExecutive SummaryCalgaryEdmontonSaskatoonWinnipegKitchener-WaterlooVancouverNet Asking Rental Rate($PSF)Rental Rate Range($PSF)see boundariesCalgaryAlistair CorbettSenior Vice Presidentemail|website6CBRE RESEARCH2023 CBRE LIMITEDIntelligent InvestmentCanada Retail Rent Survey H2 2022|Report Construction cost challenges and higher interest rates are having an impact on new development projects with some increased inducements required for restaurant deals.In new development leasing you need to maximize the rent being paid to make the proforma work because of the increased costs.We are seeing a continuation of tenants looking hard at spaces with some existing infrastructure to save costs on build-out.Landlord and tenants are working together to sort out extended fixturing periods as there are always delays.It has become rare to hit initial set dates,with landlords turning over spaces later than anticipated as they struggle to complete their work due to material shortages.Tightening vacancy has resulted in increases in renewal rates and limited options for relocations.$0$10$20$30$40$50PowerCentreCommunityEnclosedCommunityUnenclosedNeighbourhoodConvenience/StripMixed-UseUrbanFORMATRANGEr6moRegional Mall$130-$165tuPower Centre$27-$29tuCommunity-Enclosed$28-$32tuCommunity-Unenclosed$40-$44Neighbourhood$38-$40tuConvenience/Strip$36-$40Mixed-Use-Urban$25-$35tuMixed-Use-Suburban$20-$35tuKEY URBAN AREAS17th Avenue SW$30-$75tuMarda Loop$42-$45tuKensington Gate$33-$37tuTorontoOttawaHalifaxMontrealKey Urban Area BoundariesGlossaryOccupier TrendsKey FindingsExecutive SummaryCalgaryEdmontonSaskatoonWinnipegKitchener-WaterlooVancouverNet Asking Rental Rate($PSF)Rental Rate Range($PSF)see boundariesEdmontonMatthew HansonSales Representativeemail|website7CBRE RESEARCH2023 CBRE LIMITEDIntelligent InvestmentCanada Retail Rent Survey H2 2022|Report Construction costs have continued to rise with most of the burden being passed along to tenants.Pre-leasing is greatly affected with deals slow to finalize.Rates are being set,then revisited or updated as needed if deals are slow to go unconditional.Rising interest rates and worries of a looming recession are the topics of discussion,with some tenants opting to wait and see what happens in the coming months before moving forward with space commitments.Edmontons ICE District has seen a lot more excitement and pedestrian traffic with the recent openings of Loblaws City Market,The Banquet and the Canadian Ice House restaurants.This will hopefully continue to drive people downtown to spend money.$0$10$20$30$40$50$60PowerCentreCommunityEnclosedCommunityUnenclosedNeighbourhood Convenience/StripMixed-UseUrbanMixed-UseSuburbanFORMATRANGEr6moRegional Mall$110-$130tuPower Centre$22-$28tuCommunity-Enclosed$40-$55tuCommunity-Unenclosed$37-$42Neighbourhood$37-$42Convenience/Strip$28-$35tuMixed-Use-Urban$30-$42tuMixed-Use-Suburban$20-$32tuKEY URBAN AREASWhyte Avenue$15-$40tu124 Street$15-$35tuJasper Avenue$18-$35tuTorontoOttawaHalifaxMontrealKey Urban Area BoundariesGlossaryOccupier TrendsKey FindingsExecutive SummaryCalgaryEdmontonSaskatoonWinnipegKitchener-WaterlooVancouverNet Asking Rental Rate($PSF)Rental Rate Range($PSF)see boundariesSaskatoonBen KelleyAssociate Vice Presidentemail|website8CBRE RESEARCH2023 CBRE LIMITEDIntelligent InvestmentCanada Retail Rent Survey H2 2022|Report The retail market in Saskatchewan continues to benefit from an increasingly positive economic climate.Commodity prices in primary industries are driving growth in jobs,wages,and immigration,which is having a positive effect on retail sales and brand expansion.While demand remains strong,some landlords are renegotiating net deals and moving tenants away from concessions provided during the pandemic.Additionally,increases in construction prices coupled with steady demand for new construction has resulted in rising asking rates of roughly 7%.The latest phases of Brighton Marketplace and Meadows Market,Saskatoons newest and most prominent retail developments,are both nearly fully leased with new phases expected to start by early 2024.While retail in the downtown core remains slower than in the suburbs,the recent return-to-office push in Q4 should accelerate the pace of transactions and bring more activity in the desirable Broadway and 8th Street area.$0$10$20$30$40PowerCentreCommunityEnclosedCommunityUnenclosedNeighbourhood Convenience/StripMixed-UseUrbanMixed-UseSuburbanFORMATRANGEr6moRegional Mall$50-$85tuPower Centre$22-$28Community-Enclosed$18-$26tuCommunity-Unenclosed$30-$34Neighbourhood$26-$30Convenience/Strip$22-$28tuMixed-Use-Urban$24-$35Mixed-Use-Suburban$22-$26tuKEY URBAN AREAS8th Street E$26-$3622nd Street W$16-$26TorontoOttawaHalifaxMontrealKey Urban Area BoundariesGlossaryOccupier TrendsKey FindingsExecutive SummaryCalgaryEdmontonSaskatoonWinnipegKitchener-WaterlooVancouverNet Asking Rental Rate($PSF)Rental Rate Range($PSF)see boundariesWinnipegPaul KornelsenVice President,Managing Directoremail|website9CBRE RESEARCH2023 CBRE LIMITEDIntelligent InvestmentCanada Retail Rent Survey H2 2022|Report The Winnipeg retail market has remained steady with net rental rates holding at current values over recent quarters.Very little space has been added to the market over the last two years helping to maintain balance with demand.Retail construction in Winnipeg is heavily tied to new mixed-use developments.Neighbourhoods such as Bridgewater and Sage Creek are seeing a lot of activity,meanwhile The Refinery District and Polaris Place are creating new neighbourhoods in some of the fastest growing areas of the city.Established retail nodes are experiencing low availability and are able to achieve strong rental rates whether they are grocery-anchored or not.$0$10$20$30$40$50PowerCentreCommunityEnclosedCommunityUnenclosedNeighbourhoodConvenience/StripMixed-UseUrbanFORMATRANGEr6moRegional Mall$40-$50tuPower Centre$32-$40Community-Enclosed$18-$23tuCommunity-Unenclosed$16-$20Neighbourhood$18-$28Convenience/Strip$16-$26tuMixed-Use-Urban$12-$30tuKEY URBAN AREASAcademy Road$20-$30tuCorydon Avenue$15-$20tuOsborne Village$15-$20tuTorontoOttawaHalifaxMontrealKey Urban Area BoundariesGlossaryOccupier TrendsKey FindingsExecutive SummaryCalgaryEdmontonSaskatoonWinnipegKitchener-WaterlooVancouverNet Asking Rental Rate($PSF)Rental Rate Range($PSF)see boundariesMel de OliveriaVice Presidentemail|websiteKitchener-Waterloo10CBRE RESEARCH2023 CBRE LIMITEDIntelligent InvestmentCanada Retail Rent Survey H2 2022|Report Downtown Kitchener retail vacancies are increasing and asking lease rates are softening with the continued reduced levels of foot traffic brought on by low office attendance rates.In addition to steady demand from restaurant and specialty grocery users,we are seeing an increase in tenants providing personal services such as fitness training,hair and nail salons,spas,and physiotherapists.A number of cannabis tenants are giving up their spaces and in many cases are being replaced by tenants that are not paying the same premium.Development activity continues to be predominantly through mixed-use projects with retail on the ground floor.Limited projects are moving forward elsewhere unless if built-to-suit.FORMATRANGEr6moRegional Mall$65-$80tuPower Centre$14-$24tuCommunity-Enclosed$20-$40tuCommunity-Unenclosed$32-$42tuNeighbourhood$28-$38tuConvenience/Strip$32-$40tuMixed-Use-Urban$25-$35tuKEY URBAN AREASBelmont Village1$25-$40tuUptown Waterloo2$25-$40tuDowntown Kitchener3$20-$35q1Belmont Avenue W2King Street S3King Street W$0$10$20$30$40$50PowerCentreCommunityEnclosedCommunityUnenclosedNeighbourhoodConvenience/StripMixed-UseUrbanTorontoOttawaHalifaxMontrealKey Urban Area BoundariesGlossaryOccupier TrendsKey FindingsExecutive SummaryCalgaryEdmontonSaskatoonWinnipegKitchener-WaterlooVancouverNet Asking Rental Rate($PSF)Rental Rate Range($PSF)see boundariesArlin MarkowitzExecutive Vice Presidentemail|websiteToronto11CBRE RESEARCH2023 CBRE LIMITEDIntelligent InvestmentCanada Retail Rent Survey H2 2022|Report Pent-up demand from deferred decisions over the last two years has bubbled over.Downtown continues to see positive absorption with second-generation space remaining the most desirable.For those that are looking to locate downtown now is the time with tenants and landlords working together to achieve balanced deal terms.With increased levels of demand,landlords are prioritizing tenants with good covenants and are being slightly more selective than six months ago.Bloor Street had a strong finish to the year with record levels of leasing activity from the luxury sector.The Well,meanwhile,is due for occupancy in the coming year and is now approximately 80%pre-leased.Smaller units remain available at this exciting development which will transform the area.FORMATRANGEr6moRegional Mall$155-$165Power Centre$45-$50Community-Enclosed$40-$45tuCommunity-Unenclosed$25-$30tuNeighbourhood$18-$25tuConvenience/Strip$20-$25tuMixed-Use-Urban$35-$65tuMixed-Use-Suburban$30-$50KEY URBAN AREASBloor-Yorkville$200-$250Yonge-Dundas$100-$150tuKing Street W$75-$100tuQueen Street W$75-$110tu$0$20$40$60$80PowerCentreCommunityEnclosedCommunityUnenclosedNeighbourhood Convenience/StripMixed-UseUrbanMixed-UseSuburbanTorontoOttawaHalifaxMontrealKey Urban Area BoundariesGlossaryOccupier TrendsKey FindingsExecutive SummaryCalgaryEdmontonSaskatoonWinnipegKitchener-WaterlooVancouverNet Asking Rental Rate($PSF)Rental Rate Range($PSF)see boundariesOttawaJamie BoyceSenior Vice Presidentemail|website12CBRE RESEARCH2023 CBRE LIMITEDIntelligent InvestmentCanada Retail Rent Survey H2 2022|Report Continued positive activity was seen throughout the second half of 2022,with strong leasing and momentum in all formats throughout the Ottawa market.By category,QSR is the most active for new leasing followed by furniture,home improvement,activewear retailers,and financial institutions.Despite the current cost environment,the new development pipeline is the most active it has been in recent years due to a lack of second-generation space.Looking forward to 2023,excitement is building around the sale of the Ottawa Senators,placing attention on the city and the associated future of LeBreton Flats.$0$20$40$60PowerCentreCommunityEnclosedCommunityUnenclosedNeighbourhoodConvenience/StripMixed-UseUrbanFORMATRANGEr6moRegional Mall$75-$110tuPower Centre$25-$35tuCommunity-Enclosed$45-$55tuCommunity-Unenclosed$35-$45tuNeighbourhood$28-$38tuConvenience/Strip$32-$40tuMixed-Use-Urban$35-$45tuKEY URBAN AREASGlebe(Bank Street)$38-$50tuByWard Market$35-$50tuWestboro(Richmond Road)$32-$45tuTorontoOttawaHalifaxMontrealKey Urban Area BoundariesGlossaryOccupier TrendsKey FindingsExecutive SummaryCalgaryEdmontonSaskatoonWinnipegKitchener-WaterlooVancouverNet Asking Rental Rate($PSF)Rental Rate Range($PSF)see boundariesChristopher RundleAssociate Vice Presidentemail|websiteMontreal13CBRE RESEARCH2023 CBRE LIMITEDIntelligent InvestmentCanada Retail Rent Survey H2 2022|Report$0$20$40$60$80PowerCentreCommunityEnclosedCommunityUnenclosedNeighbourhood Convenience/StripMixed-UseUrbanMixed-UseSuburban Demand for retail space has rebounded with improved market sentiment in Montreal.New-to-market entries are being seen from domestic and international players alike,and F&B tenants are expanding and opening new restaurants once again.Labour shortages are still an issue,but are improving and presenting less of a hurdle for some.Rental rates have increased in the suburbs and slightly decreased downtown.Construction costs have come down since their record high,however,financing has skyrocketed leading some groups to pause on new commitments.Development activity has slowed due to the increase in interest rates.Major projects are still in progress but new development and major acquisition plays have effectively stopped overnight as a result.FORMATRANGEr6moRegional Mall$90-$105qPower Centre$35-$40tuCommunity-Enclosed$20-$30tuCommunity-Unenclosed$25-$35tuNeighbourhood$25-$35Convenience/Strip$18-$28tuMixed-Use-Urban$25-$65qMixed-Use-Suburban$25-$60tuKEY URBAN AREASSainte-Catherine Street W$150-$175tuRue de la Montagne$65-$85tuSherbrooke Street W$35-$70tuSaint-Laurent Boulevard$25-$65tuTorontoOttawaHalifaxMontrealKey Urban Area BoundariesGlossaryOccupier TrendsKey FindingsExecutive SummaryCalgaryEdmontonSaskatoonWinnipegKitchener-WaterlooVancouverNet Asking Rental Rate($PSF)Rental Rate Range($PSF)see boundariesRebecca ToddSales Associateemail|websiteHalifax14CBRE RESEARCH2023 CBRE LIMITEDIntelligent InvestmentCanada Retail Rent Survey H2 2022|Report The market sentiment remains positive in Halifax with significant leasing and development activity taking place.Power centres,neighbourhood,and enclosed malls are all healthy and performing well.Rental rates meanwhile have remained steady over the last six months across all formats.Long-time vacancies have been leased to mid-box,F&B,pet supply and fitness retailers.New-to-market and existing,successful retailers are aggressively expanding in Halifax because they recognize the citys growth and are capitalizing on this opportunity.Development activity continues to progress with significant mixed-use developments transforming the downtown core.Well-planned projects such as Richmond Yards,the largest mixed-use development in Halifax,are building communities and creating more opportunities for retailers to expand.FORMATRANGEr6moRegional Mall$65-$85tuPower Centre$28-$30tuCommunity-Enclosed$15-$18tuCommunity-Unenclosed$18-$20tuNeighbourhood$28-$32tuConvenience/Strip$24-$26tuMixed-Use-Urban$32-$36tuMixed-Use-Suburban$20-$22tuKEY URBAN AREASSpring Garden Road$65-$75tuQuinpool Road$36-$40tu$0$10$20$30$40PowerCentreCommunityEnclosedCommunityUnenclosedNeighbourhood Convenience/StripMixed-UseUrbanMixed-UseSuburbanTorontoOttawaHalifaxMontrealKey Urban Area BoundariesGlossaryOccupier TrendsKey FindingsExecutive SummaryCalgaryEdmontonSaskatoonWinnipegKitchener-WaterlooVancouverVancouverCalgaryEdmontonSaskatoonWinnipegKitchener-WaterlooTorontoOttawaMontrealHalifaxKey Urban Area Boundaries*Inclusive of Yorkville VillageAlberni StreetThurlow St-Burrard StRobson StreetBute St-Burrard StGranville StreetSmithe St-W Pender StWest 4th AvenueVine St-Maple St17th Avenue SW9th St SW-4th St SWMarda Loop22nd St SW-19th St SWKensington GateKensington Rd NW-10A St NW-10 St NWWhyte Avenue109 St NW-99 St NW124 StreetJasper Ave-109 Ave NWJasper Avenue124 St-100 St NW8th Street ECumberland Ave S-Circle Dr E22nd Street WIdylwyld Dr N-Circle DrAcademy RoadLockwood St-Cambridge StCorydon AvenueOsborne St-Harrow StOsborne VillageRoslyn Road-Donald StBelmont Village (Belmont Avenue W)Union Blvd-Glasgow StUptown Waterloo (King Street S)Young St W-William St EDowntown Kitchener (King Street W)Water St S-Frederick StBloor-YorkvilleAvenue Rd-Yonge St-SS of Bloor St W-NS of Yorkville Ave*Yonge-DundasGerrard St E-Queen StKing Street WBathurst St-Spadina AveQueen Street WBathurst St-University AveGlebe(Bank Street)Powell Ave-Rideau CanalByWard MarketClarence St-Rideau St-Sussex Dr-Dalhousie StWestboro (Richmond Road)Golden Ave-McRea AveSainte-Catherine Street WBishop St-McGill College AveRue de la MontagneSherbrooke St W-Ste-Catherine St WSherbrooke Street WClairmont Ave-Roslyn AveSaint-Laurent BoulevardMont-Royal Ave W-Prince Arthur St WSpring Garden RoadBarrington St-South Park StQuinpool RoadRobie St-Connaught Ave15CBRE RESEARCH2023 CBRE LIMITEDIntelligent InvestmentCanada Retail Rent Survey H2 2022|ReportTorontoOttawaHalifaxMontrealKey Urban Area BoundariesGlossaryOccupier TrendsKey FindingsExecutive SummaryCalgaryEdmontonSaskatoonWinnipegKitchener-WaterlooVancouverGlossary16CBRE RESEARCH2023 CBRE LIMITEDIntelligent InvestmentCanada Retail Rent Survey H2 2022|ReportMethodology:Net asking rental rate ranges are provided by CBREs retail advisory&transaction service professionals.Ranges are intended to indicate what asking rents would be as of the reports date for a well-performing Class A centre with a strong and stable tenant mix in each respective market.Assumptions also include a 10-year deal with standard inducements to a tenant with good covenant and desirability(excluding anchors).In the case of Regional Malls,we have also looked at the most coveted CRU locations within Class A centres,i.e.in areas with high foot traffic,good visibility and desirable co-tenancy,which come at a premium relative to the remainder of the centre.r6mo:Change over the last six months,indicated as an arrow showing as either up(),down(q)or stable(tu).CRU:Commercial Rental UnitPSF:unit of measurement,per sq.ft.QSR:Quick Service RestaurantSF:unit of measurement,sq.ft.Regional Mall:Enclosed centres that have strong anchors with a high percentage of national tenants in CRU space.Occupiers focus on general merchandise or fashion-oriented offerings.Properties are typically anchored by at least two large format tenants,including most often a department store.The typical centre size is greater than 300,000 SF and has a trade area of 8 20 km or larger.Power Centre:Unenclosed centres comprised of freestanding and mostly unconnected single-story properties orbig boxes,often including at least one large format brand name anchor tenant.The typical centre size is between 100,000 1,000,000 SF and has a trade area of 8 20 km or larger.Community:Enclosed or unenclosed centres that serve a community and are generally anchored by some combination of a junior department store,supermarket,or pharmacy.Typically offer a wider range of apparel and soft goods to neighbourhood centres.The average centre size is between 100,000 400,000 SF and has a trade area under 10 km.Neighbourhood:Unenclosed centres that serve a neighbourhood and are generally anchored by a supermarket or pharmacy.Typically offer a wider range of goods to convenience/strip centres.The average centre size is between 40,000 100,000 SF and has a trade area under 5 km.Convenience/Strip:Unenclosed centres providing convenience shopping for the daily needs of consumers in the immediate area.Centres offer a narrow mix of goods and personal services.The typical centre size is under 40,000 SF and has a very limited trade area.Mixed-Use:Multi-component structure developed as a single and coherent entity where its retail component is located as part of the podium below or alongside non-retail uses(residential,office,or hotel).In urban settings,these centres can share similar characteristics to regional malls having a large selection of goods and services.Key Urban Areas:Streetfront properties either centrally located along a high-profile retail corridor or side by side along major urban thoroughfares in close proximity to public transit.Parking is typically available on street or within a public parking structure.TorontoOttawaHalifaxMontrealKey Urban Area BoundariesGlossaryOccupier TrendsKey FindingsExecutive SummaryCalgaryEdmontonSaskatoonWinnipegKitchener-WaterlooVancouver Copyright 2023.All rights reserved.This report has been prepared in good faith,based on CBREs current anecdotal and evidence based views of the commercial real estate market.Although CBRE believes its views reflect market conditions on the date of this presentation,they are subject to significant uncertainties and contingencies,many of which are beyond CBREs control.In addition,many of CBREs views are opinion and/or projections based on CBREs subjective analyses of current market circumstances.Other firms may have different opinions,projections and analyses,and actual market conditions in the future may cause CBREs current views to later be incorrect.CBRE has no obligation to update its views herein if its opinions,projections,analyses or market circumstances later change.Nothing in this report should be construed as an indicator of the future performance of CBREs securities or of the performance of any other companys securities.You should not purchase or sell securitiesof CBRE or any other companybased on the views herein.CBRE disclaims all liability for securities purchased or sold based on information herein,and by viewing this report,you waive all claims against CBRE as well as against CBREs affiliates,officers,directors,employees,agents,advisers and representatives arising out of the accuracy,completeness,adequacy or your use of the information herein.Report AuthorsMarc MeehanDirector,ResearchMarc.MChristina CattanaResearch Manager Christina.CAlex EdmisonSenior Vice President,TorontoAlex.EKate Camenzuli Vice President,TorontoKate.CAdrian BeruschiSenior Vice President,VancouverAdrian.BAlistair CorbettSenior Vice President,CalgaryAlistair.CJohn MossVice President,CalgaryJohn.MMatthew HansonSales Representative,EdmontonMatthew.HLandlord Transaction ServicesBen KelleyAssociate Vice President,SaskatoonBen.KPaul KornelsenVice President&Managing Director,WinnipegPaul.KMel de OliveriaVice President,Kitchener-WaterlooMel.deOArlin MarkowitzExecutive Vice President,TorontoArlin.MMatthew PieszchalaVice President,TorontoMatthew.PJamie BoyceSenior Vice President,OttawaJamie.BChristopher RundleAssociate Vice President,MontrealChristopher.RRebecca ToddSales Associate,HalifaxRebecca.TContactsTenant Transaction ServicesMatthew JacksonVice President,Toronto NorthMatthew.J Geoffrey SmithDirector,Toronto NorthGeoffrey.SValuation&Appraisal ServicesAaron HarlangManaging DirectorAaron.H, 1OMFIF.ORGDigital Monetary Institute2023DMI ANNUALWHAT COMES AFTER THE CRYPTO WINTERCOMING BACK FROM COLLAPSE omfif.org/dmiDMI ANNUAL 202323IN VIEW of their commitment to stakeholder capitalism and globalisation,it was unsurprising that delegates at the World Economic Forum gathering in Davos were not enamoured of the threat to international harmony allegedly posed by the anarchic crypto ecosystem.It is also hardly shocking that the preferred solution was a universal,comprehensive,standardised regulatory system based on the existing financial regulatory architecture,applying to all market participants,governments and customers.The underlying regulatory principle ought to be same activity,same risk,same regulation,echoing the Financial Stability Boards calls for regulatory equivalence between conventional and crypto financial instruments.This also has the no doubt unintended consequence of cementing the existing advantages of industry incumbents.It all has interesting echoes of Britains attempts as the owner of the worlds largest navy in the mid-1800s to prevent the development and introduction of the submarine.Clearly this would require some new regulatory agencies,more supervisors and a raft of new laws and regulations.At best,it would be a global,technocratic system that trumps the inconvenient rough edges of national borders and political preferences something not dissimilar to the European Unions Markets in Crypto-Assets regulation due in spring,which aims to set the global standard for crypto regulation.The Bank for International Settlements Committee on Banking Supervision goes a step further in making crypto activity unattractive for existing regulated financial institutions.It suggests that in extreme cases the reserve asset requirements for holding cryptoassets should amount to an eye-watering 1,250%.The EU may also seek to introduce this.At Davos,much was made of the risks posed to good order by the scale of money laundering,scams and assorted financial crime perpetrated through cryptocurrencies.Also on the charge sheet were losses incurred by investors,the risks posed to gullible retail customers,potential threats to the stability of the global financial system and a general inability to trace and bring malefactors to justice.SOMETHING MUST BE DONE!THE CRYPTO REGULATORY CHALLENGE FOR 2023The crypto winter has caused many to worry about the consequences of the crypto industry continuing to operate unfettered,but are the threats dire enough to warrant drastic regulatory action?By Philip Middleton,chair,Digital Monetary Institute.THE CRYPTO WINTER OF 2022,DURING WHICH CRYPTO MARKETS SLUMPED FROM AN ESTIMATED VALUE OF$3.1TN TO$1TN AND SEVERAL LEADING INDUSTRY PLAYERS SUCH AS FTX,TERRA LUNA AND GENESIS LOST THEIR SHIRTS,HAS PROVIDED AMMUNITION FOR BOTH CAMPS IN THE REGULATORY DEBATE.2023 OMFIF Limited.All Rights Reserved.Strictly no photocopying is permitted.It is illegal to reproduce,store in a central retrieval system or transmit,electronically or otherwise,any of the content of this publication without the prior consent of the publisher.While every care is taken to provide accurate information,the publisher cannot accept liability for any errors or omissions.No responsibility will be accepted for any loss occurred by any individual due to acting or not acting as a result of any content in this publication.On any specific matter reference should be made to an appropriate adviser.Company Number:7032533.ISSN:2398-4236Official Monetary and Financial Institutions Forum 181 Queen Victoria Street,London,EC4V 4EG T: 44(0)20 700 27898enquiriesomfif.org omfif.orgABOUT OMFIFWith a presence in London,Washington and New York,OMFIF is an independent forum for central banking,economic policy and public investment a neutral platform for best practice in worldwide public-private sector exchanges.AUTHORSPhilip MiddletonDeputy Chairman at OMFIFLewis McLellan Editor,Digital Monetary InstituteJulian JacobsEconomistEdward Maling Research AnalystSinan Yilmaz Account and Content ManagerEDITORIALWilliam Coningsby-BrownProduction ManagerFergus McKeown SubeditorClive HorwoodManaging Editor and Deputy CEOSimon HadleyHead of ProductionSarah MoloneySubeditorCONTENTS3 Something must be done!The crypto regulatory challenge for 2023 Philip Middleton5 Technological readiness and understanding of global asset owners James Redgrave6 Regulators poised to strengthen oversight of digital assets Edward Maling8 Crypto and blockchainIndustries desperatelyNeed a win in 2023 Lewis McLellan10 Distributed ledger technology set for renewed growth in 2023 Olivier Truquet12 Quantum computingRevolution approaches Gary Seybold13 Digital currency within 10 years Sinan Yilmaz and Katerina Liu16 A year in crypto:expertise and tools required for the new frontier Suzanne Morsfield17 Digitalisation redraws the lines for the public and private sectors Sinan Yilmaz19 Central banks must push forward exploration of cbdc use cases Chris Ostrowski20 Interoperability at core of work on nepals cbdc Koji Fusa21 Financial institutions are cautiously wading into digital assets Julian Jacobs22 What emerging markets teach us about CBDC innovation Wolfram Seidemann24 Adoption of central bank digital currencies will boom in 2023 Mary Hall26 Technology can solve split between CBDC privacy and compliance David Dab28 Smart regulation needed to rebuild trust in crypto Rana Kortam29 Exploring institutional decentralised finance Larissa de Lima30 Central bank digital currencies can help central banks tame inflation David Bahamon31 Effective crypto regulation starts at layer 1 Michael Kanovitz omfif.org/dmiDMI ANNUAL 202345INSTITUTIONAL INVESTORS are beginning to look at digital finance and investment from the perspective of how its technology can benefit their operations and less as a means of holding cryptocurrencies.Data from State Streets latest digital assets survey show growing education and awareness among asset owners about the applications of smart contracts and distributed ledger-based asset issuance,trading,ownership and administration.However,this understanding remains nascent and its extent varies widely between institutions,as does their confidence in digital technology to transform investment operations and expectations of the timescale over which this could happen.The study polled 100 asset owners worldwide(alongside the same number of asset managers and insurance companies)on their attitudes to and holdings of digital assets,such as cryptocurrencies.It also asked questions about their level of sophistication in terms of internal systems and platforms,workforce expertise and third-party relationships regarding blockchain and distributed ledger technology.Respondents seem to be cooling on their interest in crypto as an institutional asset classes.One-third of respondents(35%)said they had reduced their allocations to the asset class in the past 12 months(whether through direct holdings,funds containing crypto or funds holding crypto industry-related securities),compared to 26%who either increased their holdings or began holding the asset class for the first time.Three-quarters(74%)planned to decrease or maintain allocations this year(including those with no existing allocations),while only 26%planned to increase their holdings or invest for the first time.However,over the longer term 73%do still aim to grow their crypto exposure.Meanwhile,interest in other types of digital asset is growing.When asked what assets were of most interest,specifically as direct holdings,44%of asset owners selected decentralised finance tokens,while only 26%cited cryptocurrencies.In terms of technological preparedness,a surprising number of asset owners(12%)already claimed to have traded tokenised versions of traditional assets on distributed ledger/blockchain and 16%said their internal systems and processes were up to it,if the wider market infrastructure was in place.However,the significant majority(69%)was not prepared for this and only a little over half of those had a clear strategy for becoming so.Readiness notwithstanding,asset owners clearly feel this is the future of asset management.More than three-quarters(76%)said they expect digital tokenisation and trading to become a commonplace form of transferring mainstream assets,although 41%thought this would take a decade or more and only 15%thought it would happen in under five years.Equally clear from the data was the fact they anticipate real benefits from tokenisation and are keen to start developing in-house expertise and building crucial relationships with essential partner organisations.In particular,the potential to fractionalise illiquid assets,like private equity and real assets,was seen as a big advantage.Most respondents(56%)thought private equity would be tokenised first,with 46%expecting that real assets would be first.More than half(60%)said transparency,lower compliance costs(51%)and faster trading(50%)were the top three benefits of tokenisation,with 52%citing reduced failed trades as the biggest area of cost saving.And while most respondents are building teams with digital finance expertise(70%have already started or are formally planning to do so),58%said they would look to fully or partially outsource a range of vital services,such as digital custody and wallets,smart contract generation and maintenance and digital fund administration.Overall,the picture painted by this research is of an industry confident in the digital future of finance,but one which is not consistently clear on how or when it will arrive.To see more of this research,and for information about how to request a presentation of the full results,see State Streets January Digital Digest newsletter.TECHNOLOGICAL READINESS AND UNDERSTANDING OF GLOBAL ASSET OWNERSState Street survey shows that respondents are confidant of finances digital future,though unsure when it will arrive.By James Redgrave,vice president,thought leadership and editorial,State Street Digital.OPINIONEstimates of the amount of money laundered globally through the use of crypto in 2022 amounted to between$8bn and$20bn.In January 2023,four offenders were sentenced in the UK for fraudulently obtaining and laundering around$27m in crypto obtained from an Australian cryptocurrency exchange.This seems egregious but is a rounding error compared with the United Nations Office on Drugs and Crimes estimate that$1.7tn,or up to 5%of global gross domestic product,was laundered in 2022.The overwhelming bulk of this,despite far reaching international regulatory accords on anti-money laundering and countering terrorist financing regulation and enforcement,will have been perpetrated through the conventional financial system.The crypto winter of 2022,during which crypto markets slumped from an estimated value of$3.1tn to$1tn and several leading industry players such as FTX,Terra Luna and Genesis lost their shirts,has provided ammunition for both camps in the regulatory debate.For those demanding regulation,it is evidence that crypto poses a significant threat not only to investors wealth,but also to the health of the financial system itself.But then in 2022 most investment was unhelpful to wealth:according to Bloomberg,$18tn was wiped off the value of global stocks.Previously stellar companies such as Meta and Tesla saw their stock prices reduced by almost two-thirds,the MSCI World Stock Index was down 20%and bond markets saw their worst returns for a century.All of this seems to demonstrate that crypto,far from being an alternative investment as many of its proponents like to claim,is closely correlated to the conventional financial system.Furthermore,despite the huge destruction of value,the industry limps on within its own walls and the collapse transmitted no dangerous shockwaves into the global financial system.Losses both corporate and retail have been painful for some but manageable for the system as a whole.This may be because the sector was not big enough and insufficiently integrated into the global system to present much transmission danger.It may be that its links to conventional finance were sufficiently well-policed by both public and private actors for much harm to be done.Or it may be that,since the 2008 financial crisis,the belts and braces of the worlds financial system have been considerably tightened and the whole system is now far more resilient to shocks.The most notorious victim of the crypto winter has been the crypto exchange FTX,once valued at$32bn,which filed for bankruptcy in November 2022.Its founder,Sam Bankman-Fried,has been charged by several US agencies with orchestrating massive financial fraud,misusing customers funds and defrauding equity investors.The former billionaire has pleaded not guilty.Interestingly,these alleged crimes are being prosecuted by existing public agencies,in existing courts,under existing laws.While the possible inattention of some of FTXs regulators might come under the spotlight,from a broader regulatory perspective,and irrespective of the outcome of the case,there is little in the FTX story to date that suggests a massive new regulatory infrastructure is needed to police the world of cryptocurrency and assets.Some commentators have gone further and suggested that,since crypto instruments are neither currencies,commodities,securities nor units of account,they should be left to their own devices with a large caveat emptor/no widows and orphans sticker prominently placed on them.It has even been suggested that,since regulating crypto instruments would in effect legitimise them,efforts in that direction might do more harm than good.Nevertheless,there are some undeniable gaps in the coverage of existing laws,regulations and institutions.One,recently addressed by the UK Law Commission(and covered in an OMFIF panel session),is the amorphous definition of property rights particularly with regard to digital assets and non-fungible tokens.In the US,the spot market in cryptos that have not been officially determined to be securities is unpoliced.The Financial Stability Oversight Council has strongly recommended that Congress legislate to close this loophole.Though bills have been proposed in Congress,we still await developments.These gaps might be closed by the establishment of a self-regulatory agency for crypto markets.However,there is debate over whether this would be a real regulatory agency,and it would involve making crypto firms responsible for regulating themselves.From a whole spectrum of perspectives,2023 looks set to be a defining year for cryptocurrencies,cryptoassets and central bank digital currencies.The regulatory debate surrounding this will be far-reaching and vibrant with passionate advocates for each of the main options.These include:strangling crypto through regulation;creating a discrete regulatory regime for crypto;bringing crypto within the existing financial system;and identifying and plugging existing gaps in laws but otherwise relying on caveat emptor.Needless to say,OMFIF and its members look forward to being at the centre of that debate.SOME COMMENTATORS HAVE SUGGESTED THAT,SINCE REGULATING CRYPTO INSTRUMENTS WOULD IN EFFECT LEGITIMISE THEM,EFFORTS IN THAT DIRECTION MIGHT DO MORE HARM THAN GOOD.omfif.org/dmiDMI ANNUAL 202367REGULATORS POISED TO STRENGTHEN OVERSIGHT OF DIGITAL ASSETS Bills and consultations are nearing completion in several jurisdictions in response to the tumult of last year.By Edward Maling,Research Analyst,OMFIF.CALLS FOR CLOSER scrutiny of digital asset markets have intensified following the tumult of last year.Though the risks posed by their widespread adoption have long been on the radar for regulators,successive crises namely the collapse of algorithmic stablecoins and failure of major exchanges have contributed to the loss of trillions in market value.Growing concerns for consumer protection,and of the possibility of contagion for traditional financial institutions,have heaped pressure on regulators to enhance their supervision of an asset class,which is decentralised by design.Against this backdrop,OMFIF has produced the digital assets regulatory policy tracker.Launched in October alongside the Digital assets report,this resource tracks the regulatory treatment of digital assets across 24 jurisdictions.At the country level,it includes information from relevant regulators and granular breakdowns on the legal status of various digital products and services,including those pertaining to virtual asset service providers and exchanges,stablecoin designs and derivatives products.The information is reviewed and updated on a quarterly basis,most recently in January 2023.The tracker categorises regulatory treatment more broadly by highlighting progress made towards the design of tailored legislative DIGITAL ASSET REGULATORY TRACKERframeworks.Despite the progress made by international bodies to coordinate the design of regulatory frameworks,the categorisations represented in the interactive map paint a more fragmented picture.Attempts to rein in the more dangerous excesses of the digital assets market have led several countries to broaden the remits of market regulators by extending existing regulatory frameworks.This includes the extension of securities laws,as well as scrutiny of service providers compliance with reporting and registration requirements,particularly under anti-money laundering/combatting the financing of terrorism legislation.In jurisdictions with clear definitions both in terms of regulatory mandates and categorisations of different tokens and robust structures already in place,the extension of traditional securities laws has helped to provide sufficient coverage without impeding innovations in this space.Concurrently,innovation has encouraged some lawmakers to pursue more comprehensive,tailored regulatory regimes.Developments in the composition of cryptoassets markets in recent years in particular,the proliferation of new product offerings among a widening pool of retail investors have created additional channels that potentially threaten financial stability.These have simultaneously blurred the lines around regulators jurisdictions.Questions continue to hang over how to accurately categorise,and best treat,different assets based on their use and characteristics.Movement towards the implementation of tailored legislation has only been accelerated by last years events.Renewed urgency hastened the development of tailored laws in a number of jurisdictions,including both the European Union and Japan where legislation on stablecoin issuer requirements has resulted in an effective ban of fiat-pegged products without collateralisation.We will continue to monitor the progress of countries working on tailored legislation,with several bills nearing ratification already.For some jurisdictions,there are hints that new frameworks will be accompanied with more favourable conditions.In Hong Kong,for instance,a new licensing framework is expected to be accompanied by increasing access to retail investors as jurisdictions attempt to lure companies to their markets.In others,the primary concern is curtailing investors access to risky products.Assessments which saw the banning of derivatives offerings in the UK and Spain explicitly referenced consumer protection.Similar justifications lie behind the extension of advertising restrictions,present in both of these countries as well as India,Japan and Singapore.For financial institutions with exposures to cryptoassets,prudential regulators in jurisdictions such as Canada have issued guidance clarifying their relationship to capital and liquidity requirements.In more extreme cases,financial stability risks have been used to justify outright bans on all crypto-related activities,as observed in China where growing ownership and mining operations were perceived as threats to national strategies for central bank digital currency development and net zero targets.The latest update of the Digital Assets Regulatory Tracker is available to view nowTailored legalisation(legalised)Tailored legalisation Tailored law in progress Applying existing securities law Tailored legalisation(banned)omfif.org/dmiDMI ANNUAL 202389 9CRYPTO AND BLOCKCHAIN INDUSTRIES DESPERATELY NEED A WIN IN 2023Much work is needed to overcome the fiascos of last year.By Lewis McLellan,editor,Digital Monetary Institute,OMFIF.REELING FROM high-profile failures in 2022,those seeking to promote blockchain as a major solution for financial industries need to demonstrate some success if they are to regain their momentum.The crypto industry suffered some savage blows in 2022.A virulent combination of incompetence and malignity brought down first the Terra Luna stablecoin ecosystem and then FTX,until recently the second largest cryptocurrency exchange in the world.The consequences for the cryptocurrency market cap have been devastating.Optimists say that these events will serve to blow away the speculative froth,shake out the bad actors and let the rest of the industry get on with building some truly valuable applications for blockchain under the renewed scrutiny of regulators.Perhaps theyre right,but even those outside of the crypto speculation game that are seeking to make blockchain work for the finance world will have a great deal of work to do in 2023 to overcome the fiascos that occurred towards the end of last year.While the crypto collapse grabbed the headlines,Sopnendu Mohanty,chief fintech officer at the Monetary Authority of Singapore,said that the Australian Securities Exchanges decision to abandon its blockchain securities exchange project after six years and A$245m-A$255m($164m-$171m)invested would have a bigger impact on the adoption of blockchain.Speaking at the OMFIF Asia forum in December,Mohanty called the development a fiasco,saying ASXs blockchain project was supposed to be the leading light showing how distributed ledger technology can change everything and make the processes super efficient,and that collapsed.Shortly after the failure of ASXs blockchain replacement project,TradeLens,a blockchain-omfif.org/dmiDMI ANNUAL 20231011DESPITE significant challenges in 2022,distributed ledger technologies have demonstrated resilience and reliability over the past year.Following the FTX collapse and as the trial of its 30-year-old founder,Sam Bankman-Fried,starts in the Bahamas,blockchain technologies did not fail FTX clients and stakeholders.Still,the lack of sound operational,accounting and decision-making processes certainly did.Public ledger technologies solve specific problems:centralisation and a lack of transparency.On-chain public records have allowed the community to raise concerns over FTXs solvency.They are very likely to become a crucial source of evidence for law enforcement authorities to uncover the mistakes and wrongdoings of the FTX management team leading to its bankruptcy.In 2023,the blockchain industry will continue its journey to maturity with additional regulations and the broader adoption of regulated digital currencies(stablecoins,central bank digital currencies and tokenised deposits),further decentralised finance experimentation and critical technical developments such as zero-knowledge proofs applications.In 2022,most central banks and financial regulators started developing digital legal tender.The Peoples Bank of China is currently running the largest CBDC pilot project in the world;Chinese digital natives have embraced this new means of payment with great enthusiasm.Convenience,attractive coupons and seamless integration between banks and mobile applications have allowed the e-yuan to achieve rapid adoption.With a transaction volume worth$13.9bn,China is set to become one of the first countries to launch a CBDC at scale.Project Orchid,led by the Monetary Authority of Singapore,was also in full display at the Singapore Fintech Festival,where visitors had the opportunity to experiment with various forms of programmable money in the form of a fiat-backed Singapore dollar stablecoin and CBDC.The Bank for International Settlements has released a series of reports exploring CBDC bridge applications developed with various central banks.This trend will accelerate in 2023.The BIS will continue steering central banks efforts in developing interoperable CBDCs,while new central banks will join the race to launch production-ready digital legal tender.With trustworthy money in place,decentralised finance builders will continue to innovate and develop compliant financial applications in line with the Web3 ethos of transparency and openness.DeFi has an opportunity to move itself away from crypto farming schemes and excessive annual percentage yields to achieve widespread adoption.Businesses solving actual issues such as expensive foreign exchange transactions,crypto-to-fiat on-/off-ramps,and access to reliable stores of value will thrive in 2023.DeFi builders must implement proper risk management and conduct regular,independent smart contract audits in addition to being cognisant of traditional finance best practices to ensure sound business operations,profitability and the security of funds.In 2023,blockchain technology will continue advancing towards maturity,with new zero-knowledge-proof applications and the development of battle-tested protocols such as Ethereum.Zero-knowledge proofs may further contribute to developing scalability solutions through verifiable computation,authentication and identity management and anonymous payments.For instance,Matter Labs is spearheading the build of a Layer 2 protocol based on zero-knowledge proofs,zkSync 2.0.It is expecting to launch the alpha version of its mainnet in the next year after a complete architecture upgrade and a closed alpha launch for testing in 2022.The Ethereum core developers working on the Shanghai Upgrade(the next milestone on the Ethereum development roadmap)have estimated that it may occur in March 2023.This upgrade is significant because it would enable Ethereum staking withdrawals by validators and stakers.Further upgrades are expected later this year to improve Layer 2 scalability and the Ethereum Virtual Machine.There is cautious optimism about these new timelines,as the Ethereum core developers have notoriously preferred ensuring code security over meeting self-imposed deadlines.In 2023,DLT will continue its journey towards mass adoption.Tier 1 financial institutions may lead the way thanks to their strong brands,custodial know-how and sound business practices.Innovators will continue developing and launching new technologies that benefit businesses and their clients.As they say in the digital assets space:onwards and upwards.DISTRIBUTED LEDGER TECHNOLOGY SET FOR RENEWED GROWTH IN 2023Regulated digital currencies,resilient distributed applications and emerging technologies will spur DLT expansion.By Olivier Truquet,Asia Pacific distributed ledger technology lead at GFT.OPINIONpowered supply chain ecosystem,announced that it would also be discontinuing operations early in 2023.The project was a joint venture from AP Moller Maersk and IBM and its demise signals the end of one of the more promising avenues of enterprise blockchain deployment.These two events have seriously dented hopes that the promises made about blockchains ability to revolutionise processes in financial markets will be realised.That,combined with the collapse of cryptocurrency value,has robbed the industry of much of what momentum was left after central banks around the world began to tighten monetary conditions and the tide of cheap credit began to ebb.But,despite the loss of momentum,Mohanty is far from ready to throw in the towel on blockchain.He affirmed that Singapore remains invested in DLT as a technology that can add value by changing business processes.That may take a more radical approach to governance.Mohanty suggested that some of the problems that emerged in 2022,particularly in the case of FTX,stem at least in part from an excessive centralisation of control.Mohanty pointed out that this was possible because of the creation of private,permissioned blockchains designed to fit in with existing players preferences.He suggested returning to the original public blockchain model.The cryptocurrency industry must also make changes.Speaking on the same panel,Rana Kortam,director of global public policy at Binance,said:Its on us at Binance and every player to hold ourselves to a higher standard.The companies that differentiate themselves will be those that adopt proper risk management measures.The panellists also agreed that DLT has a great deal to offer in terms of modernising cross-border payments.That could involve the use of effectively collateralised stablecoins,as suggested by Binances Kortam,or deposit coins issued by banks as suggested by fellow panellist Naveen Mallela,managing director of JP Morgans Onyx Coin Systems project.Andrew McCormack,centre head for the Bank for International Settlements Innovation Hub in Singapore,warned that,though blockchain-based solutions like these may seem attractive,the proliferation of these kinds of systems may well lead to fragmented liquidity unless there is an effective solution for interoperability.THE COLLAPSE OF CRYPTOCURRENCY VALUE HAS ROBBED THE INDUSTRY OF MUCH OF WHAT MOMENTUM WAS LEFT AFTER CENTRAL BANKS AROUND THE WORLD BEGAN TO TIGHTEN MONETARY CONDITIONS AND THE TIDE OF CHEAP CREDIT BEGAN TO EBB.omfif.org/dmiDMI ANNUAL 20231213THE ERA of quantum computing is coming more quickly than many realise.Both public and private sectors,particularly financial services,must ensure they are ready for the huge changes that the new technology will bring.For decades,quantum computing has been viewed as a futuristic technology:it would change everything,if it ever moved from the fantastical to the practical.Even in recent years,despite billions of dollars in research investment and extensive media coverage,the field is sometimes dismissed by real-life decision-makers as a far-out pursuit for academics and theorists.However,new challenges,like climate change,novel diseases and the worlds ever-growing population,have driven an increased need for agility,resiliency and accelerated digital maturity.With this acceleration,there will be soon a new era of computation.Quantum computing,as the heart of quantum-centric supercomputing,will dramatically impact how science and business evolve.By accelerating the discovery of solutions to big global challenges,quantum computing could unleash positive disruptions significantly more unexpected than technology waves of the past decades.Classical computer bits can store information as either a 0 or a 1.That the physical world maintains a fixed structure with defined states is in keeping with classical mechanics.But scientists have pushed into the quantum realm of subatomic particles and realised that matter takes on probabilistic states different possible features in different conditions.The field of quantum physics emerged to explore and understand that phenomena.Quantum computing uses quantum physics to solve problems beyond the capabilities of classical computers.The power of quantum computing rests on two cornerstones of quantum mechanics:interference and entanglement.The principle of interference allows a quantum computer to cancel unwanted solutions and enhance correct solutions.Entanglement means the combined state of the qubits contains more information than the qubits do independently.These two principles have no classical analogy and modeling them on a classical computer would require massive resources.For example,representing the full complexity of a 100-qubit quantum computer would require more classical bits than there are atoms on earth.The building blocks of quantum computing are already emerging.IBM is running quantum computing systems on the cloud at an unprecedented scale,compilers and algorithms are rapidly advancing and communities of quantum-proficient talent are growing.The technologys applicability is no longer a theory,but a reality to be understood,strategised about and planned for.The implications of quantum computing for businesses and governments are colossal.Much of our information is stored and protected by encryptions that,though highly resilient to conventional cyber-attack,will offer little protection against an attack by a quantum computer.There are opportunities as well as threats,however.The immense processing power quantum computing offers could yield remarkable results,offering new tools for analysis of data,which could revolutionise how portfolio management and risk analysis operations are performed.Quantum computing will not replace classical computing;it will extend and complement it.But even for the problems that quantum computers can solve better,we will still need classical computers.Because data input and output will continue to be classical,quantum computers and quantum programmes will require a combination of classical and quantum processing.IBM Quantum is continuing to push forward its technology roadmap to realise quantum computing and quantum-centric supercomputing.These advances will bring useful quantum computing to the world and help solve some of the most pressing challenges humanity faces.QUANTUM COMPUTING REVOLUTION APPROACHESClassical computing wont disappear,but new approaches bring challenges as well as opportunities.By Gary Seybold,associate partner,offering management(business process operations),IBM.OPINIONBY ACCELERATING THE DISCOVERY OF SOLUTIONS TO BIG GLOBAL CHALLENGES,QUANTUM COMPUTING COULD UNLEASH POSITIVE DISRUPTIONS SIGNIFICANTLY MORE UNEXPECTED THAN TECHNOLOGY WAVES OF THE PAST DECADES.OMFIFS Future of payments survey found that two-thirds of central bank respondents expect to issue a CBDC in the next 10 years.Research into CBDCs has been accelerating in the past few years and several countries have already deployed their CBDC solutions,either as pilots or full-scale rollouts.These projects,though not necessarily perfect in their execution or adoption,have given watching central banks real-world projects to learn from.Many questions remain about the form and structure CBDC designs will take but having live projects to analyse has given other central banks more confidence about their own plans.The survey also revealed that around 38%of respondents had become more inclined to issue a CBDC over the course of 2022.CENTRAL BANKS ARE PURSUING CBDCS FOR VARIOUS REASONS,BUT NONE CITED IMPROVING CROSS-BORDER PAYMENTS AS THE MAIN MOTIVATION Central banks motivations for pursuing a CBDC vary according to their environment and the challenges they face.Most central banks selected other and indicated that their aim was to increase the efficiency of their domestic payments network.Some felt that,with the widespread decline of cash,a CBDC would allow central banks to retain a role in payments networks that are increasingly dominated by private actors.Source:OMFIF Future of payments survey 202224122935Within 1-2 yearsWithin 3-5 yearsWithin 6-10 years10 yearsWe do not expect to issue a digital currency1:Two-thirds of central banks expect to issue a CBDC within 10 yearsWhen do you expect to issue a CBDC?Share of respondents,%Some jurisdictions,particularly those with lower levels of financial inclusion,want to use a CBDC as a means of broadening access to financial services.Not one central bank claimed their main objective with a CBDC was to aid cross-border payments,even though these are generally slower and more costly than domestic systems.While innovation can help make tedious manual DIGITAL CURRENCY WITHIN 10 YEARS CBDCs sooner rather than later,say central banks.By Sinan Yilmaz and Katerina Liu.omfif.org/dmiDMI ANNUAL 20231415processes more efficient,CBDCs are not necessarily the best way to address the problem.Regulatory frameworks differ between regions,as well as the requirements to gather information for anti-money laundering,know your customer and combatting terrorist financing.NEVERTHELESS,MANY THOUGHT THAT INTERLINKING CBDCs OFFER A PROMISING AVENUE FOR IMPROVING CROSS-BORDER PAYMENTS Although no central bank stated it was their main objective,many respondents said that interlinking CBDC systems is the most promising option for improving cross-border payments.Improvements in cross-border payments have lagged behind the progress domestic markets have made.Some central banks hope that CBDCs will represent a clean slate,allowing them to build a more naturally interoperable system.Through its innovation hubs,the Bank for International Settlements is already running several projects to test different methods of cross-border transfers with CBDCs.Project Jura and Project Helvetia explore settlement in wholesale CBDCs when transferring tokenised assets on distributed ledger technology.Project Dunbar and Project mBridge explore a common DLT platform for multiple CBDCs to transact on.Project Icebreaker is studying how CBDCs could be used for international retail and remittance payments.IMPROVEMENTS IN CROSS-BORDER PAYMENTS HAVE LAGGED BEHIND THE PROGRESS DOMESTIC MARKETS HAVE MADE.SOME CENTRAL BANKS HOPE THAT CBDCS WILL REPRESENT A CLEAN SLATE,ALLOWING THEM TO BUILD A MORE NATURALLY INTEROPERABLE SYSTEM.2:No strong consensus of central banks objectives for pursuing a CBDCWhat is your main objective by pursuing a CBDC?Share of respondents,%Source:OMFIF Future of payments survey 202205101520253035404550OtherPreserve the central banks role in money provisionBoost financialinclusionImproving thetransmissionmechanism ofmonetary policyAid cross-borderpaymentsWe are notpursuing a CBDC3:Interlinking CBDCs shows most promise for cross-border payments What do you think is the most promising avenue to improve cross-border payments?Share of respondents,%Source:OMFIF Future of Payments survey 202205101520253035Interlinking CBDCsInterlinking real-timegross settlementsystemsGlobal stablecoinsHarmonising formatslike ISO 20022Other0102030405060708090TechnologyprovidersCommercialbanksAcademicsAdvisoryservices to helpwith strategyLegal servicesMarketing andpromotionprovidersOtherCurrently working withIntending to work with4:Central banks are working with the full range of third-party servicesWhich of the following third-parties are you currently working with/intend to work with on digital currencies?Share of respondents,%Source:OMFIF Future of Payments survey 20220510152025CybersecurityLow adoptionBankdisintermediationNeed for newinfrastructureDecline of cashusageOther5:Low adoption and cybersecurity tie as primary concerns over deploying a CBDC What is your main concern over deploying a CBDC?Share of respondents,%Source:OMFIF Future of payments survey 2022A RANGE OF PRIVATE SECTOR PLAYERS WILL PARTICIPATE IN CBDCA whole suite of new players is involved in the introduction of a CBDC.Technology providers are helping build the framework that digital cash will run on,advisory services are assisting with strategy and other third parties like marketing companies are involved in the process too,aiming to encourage public adoption.Commercial banks are engaging with central banks on the topic of CBDCs,but the rise of fintechs and non-bank payment services providers are likely to play an important role in the distribution of a CBDC.ENCOURAGING ADOPTION OF CBDCs IS A PRIMARY CONCERN FOR CENTRAL BANKS,WHILE BANK DISINTERMEDIATION IS A SECONDARY CONCERN Central banks are expressing concerns around the adoption of CBDCs,given that some active projects are experiencing lower levels of uptake than expected.Addressing these concerns requires central banks to educate the public about the benefits of a CBDC and to design it to be as interoperable with existing payments systems as possible.Some are taking more dramatic steps.The Central Bank of Nigeria has imposed a limit on the value of cash withdrawals to push the adoption of its CBDC.Commercial bank disintermediation is another main concern for central banks.The design of the CBDC is important too,since central banks must ensure that they do not deprive commercial banks of their deposits.Another major concern faced by central banks is cybersecurity.A CBDC will require many central banks to supervise or operate a complex digital system,which they will need to ensure is secure and trustworthy enough for people to use for their payments.omfif.org/dmiDMI ANNUAL 20231617THE HIGHS and lows of the crypto world made 2022 seem like an eternity.Balancing the limitlessness of a new frontier that is redefining multiple industries with the accompanying turbulence similar to the wild west creates short life cycles that are not for the faint of heart.There is a renewed sense of urgency for responsible actors to have an increased impact on how the ecosystem develops,to make sure the balance does not tip too far in one direction.Lukka,having the advantage of being deeply embedded in the industry since 2014,understands not only this balance,but also the clear benefits of blockchains innovative technology and the necessary democratisation provided through crypto,allowing it to stand at the forefront of responsible development in this new frontier.Every global development in crypto would be difficult to cover in a year of extreme growth,changes,pull-backs and multiple scandals.However,three themes emerged that are important to the evolution of the industry.As one regulator stated:Its not for governments to pick winners and losers whether specific industries,new technologies or individual entities.This means,even with the best corporate governance,reporting or regulations,there will always be entity failures.While restructuring is never ideal,when it does happen,effective restructuring that enables both rebuilding and creditor/investor compensation is of utmost importance.Unfortunately,crypto witnessed the restructuring process play out multiple times in 2022.But alongside these pitfalls is the opportunity for the industry to build back better.One necessity to do that is the understanding that high-quality data becomes critical not only for locating on-chain assets,but also for connecting them with off-chain transactions in order to also accurately identify and value all assets.Difficult events highlight why the industry needs to mature its risk management perspective and shore up its approaches to middle and back office operations.These approaches include:Strong corporate governance with robust checks and balances.Audited financial statements and disclosures.American Institute of Certified Public Accountants SOC 2,Type II attestations for service providers.Clear,truthful terms and conditions.Segregation of customer assets from company assets.Regulators have been eyeing crypto with a mix of support and caution for years.While many still err on the side of caution,2022 was a progressive year for proposed legislation of the crypto industry globally.Most regions attempted to balance the necessity of strong guardrails with encouraging innovation.Others paid closer attention to taxonomy and classification.However,a less talked about,but no less important,regulatory evolution is happening within financial reporting.US capital markets saw several key developments here,including the Financial Accounting Standards Boards new fair value measurement requirements and disclosures for crypto,and the Security and Exchange Commissions requirement for fair value estimation and disclosures about the type and amount of crypto-specific activities in certain cases.Other regions have not revised their reporting rules yet but are monitoring these developments.A strong response to 2022s events is possible,but a full suite of relevant expertise and solutions is required,including:Robust reference data sets and data analysis capabilities,like Lukka Reference Data,to standardise the ecosystem.A digital asset classification system to improve transparency and efficiency in analysing digital assets,such as the Lukka Digital Asset Classification System.Asset identification and fair market valuation,like that Lukka Prime provides for actively-traded crypto assets.Data and information about crypto activities that support required disclosures to a very detailed level at any point in time.Responsibly addressing the industrys shortfalls head-on with robust data and thoughtful solutions will allow 2023 to not seem quite as long for crypto.A YEAR IN CRYPTO:EXPERTISE AND TOOLS REQUIRED FOR THE NEW FRONTIERThemes surrounding restructuring,risk management and global regulations emerged in 2022.By Suzanne Morsfield,global head of accounting solutions,and Brian Whitehurst,head of regulatory affairs at Lukka.OPINIONDIGITALISATION REDRAWS THE LINES FOR THE PUBLIC AND PRIVATE SECTORSPublic and private institutions are battling to defend their roles in the provision of money.By Sinan Yilmaz,account and content manager,Digital Monetary Institute,OMFIF.BOTH PUBLIC and private institutions are deeply involved in the provision of money,payments and capital markets infrastructure,as well as the auxiliary service of digital identity verification.But as technology changes whats possible,these roles are becoming redefined and both groups must innovate to protect their roles.There is,of course,a collaborative element.Public organisations have a responsibility to ensure services are provided in a secure and efficient fashion.This requires them to foster a climate that allows the private sector to compete and innovate.However,the arrival of new technologies is prompting such rapid innovation that the lines between private and public responsibilities are being blurred.If the public sector fails to keep up with the pace of innovation,private companies will dominate and squeeze it out,reducing its ability to oversee and shape the economy to protect businesses and individuals.Private sector companies are always under pressure to innovate faster than the competition or lose market share,but if the public sector overtakes them as the source of innovation,they may find the services they wish to sell being provided as public goods.Payments is a key battleground.Given the reduction in the use of cash,central banks have been looking into creating a digital representation of fiat currency to preserve their role in the payments industry.Central bank digital currency implementation,pilots and research projects are underway around the world.omfif.org/dmiDMI ANNUAL 20231819Close to 100 central banks have confirmed they are exploring the technology and 126 central banks attended the Digital Monetary Institutes annual central banks and digital currencies symposium in 2022.OMFIFs survey of central banks included in 2022s Future of payments report also found that two-thirds of respondents expect to issue a CBDC within 10 years with many planning launches much sooner.Given the ease with which most people in advanced economies can send money and make payments,it is tempting to ask why a CBDC is worth developing.The motivations central banks described in the FoP survey varied broadly.Many cited a desire to ensure they retain a role in a world of increasingly digitalised payments,ensuring their sovereignty and giving them the opportunity to oversee financial activity.Others suggested that they would be able to improve efficiency in payments something easier to achieve in countries with a less well-established mobile or digital payments infrastructure.Still others highlighted a CBDC as a means of improving financial inclusion,broadening access to digital payments.Interestingly,no central bank suggested that improving cross-border payments was the primary objective,although some respondents to a separate question said that they thought it might prove to be a secondary benefit.The Bank for International Settlements is among several institutions working on realising this promise with its multi-CBDC pilot,mBridge,which aims to develop a platform for cross-border payments with CBDCs.Fintechs and commercial banks arent content to let the public sector dominate innovation in payments.Private institutions are finding cutting-edge methods of moving money to bring down costs,time and risks.Some are focusing on tokenising deposits or creating tokens to facilitate the efficient transfer of cash internally.The industry is doing all it can to stay one step ahead of central banks as they continue their efforts with CBDCs.Outside of the traditional banking sector,some organisations are utilising the improvements in clarity on the regulation of stablecoins to offer these as payments solutions,particularly in jurisdictions with less reliable currencies and institutions.Regulatory developments on stablecoins and cryptocurrency can be viewed with the DMIs digital asset regulation tracker.While the precise delineation of the roles of the public and private sectors remains an open question,both groups are united in a desire for innovation and improved services.Both also acknowledge that they will not achieve this without collaboration.Many central banks lack the technical expertise to develop and maintain a CBDC,while the private sector payments industry knows that without the approval of regulators,their innovations will count for little.Away from the payments world,efforts to innovate in capital markets intensified in 2022.The European Investment Bank developed Project Venus,issuing a fully digital native bond on a private blockchain in collaboration with two central banks and private companies.The Banque de France and Banque Centrale du Luxembourg provided a digital representation of euro-denominated central bank money,while Goldman Sachs,Santander and Socit Gnrale acted as underwriters and provided the technology platform to create the instrument.Though public institutions like EIB are leading the way in the creation of digital versions of traditional financial instruments,private institutions are also working on projects to make use of blockchain and tokenisation to remodel traditional finance,improve settlement speed and security and provide greater access to liquidity.The structure of the capital markets business is inherently collaborative and,as such,efforts to improve the market infrastructure tend to involve both the public and the private sector.But digital innovation has not been confined to financial services.Digital identity has advanced to the point where it can function as a tool to support communities during times of crisis.Galvanised by the stresses of the pandemic and geopolitical instability,governments across the world have intensified their study of digital identity systems and services.Ukraine introduced a digital ID that can be used anywhere in the country.The platform has given 21.7m Ukrainians access to 14 digital documents,including their ID card,drivers licence,tax number,birth certificate and a foreign biometric passport.In the private sector,Microsoft has introduced its Entra Verified ID service through its Azure cloud platform.This decentralised system permits organisations and individuals to select the types of information they want to share,with whom and when they want it to take it back.Yoti,a digital identity verification company,has become the first government-approved digital ID in the UK for applying to jobs and renting property.It isnt clear whether governments or the private sector have produced more innovation in 2022,but what is clear is that both groups realise that we are in a digital revolution.To preserve their roles in a changing world,they need to understand the impact that technological innovation will have on their stakeholders.The stakes for both groups are high.However,perhaps the most valuable innovations those that stand the best chance of providing radical improvements in their industry stem not from competition between public and private but from collaboration.MANY CENTRAL BANKS LACK THE TECHNICAL EXPERTISE TO DEVELOP AND MAINTAIN A CBDC,WHILE THE PRIVATE SECTOR PAYMENTS INDUSTRY KNOWS THAT WITHOUT THE APPROVAL OF REGULATORS,THEIR INNOVATIONS WILL COUNT FOR LITTLE.THE MOST exhausting aspect of central bank digital currency discussions is the sheer range of policy issues at stake.When envisioning how multiple public money tokens(CBDCs or regulated stablecoins)will co-exist on distributed ledgers in the future,almost every key public policy area is impacted.Privacy,anonymity,cybersecurity,monetary policy transmission,social policy,the role of the worlds premier reserve currency,sanctions,national security,digital identity,banking regulation,cost of payments,big data and big tech monopolies are all impacted by the design choices and the implementation mechanism used to create a potential CBDC.It is no wonder that many central banks seek refuge in setting up industry and research groups,issuing calls for evidence and publishing discussion papers,rather than actually running a full pilot.Even running a pilot,never mind launching a CBDC,comes with the types of political risks and exposure that central banks are hard-wired to avoid.There is,however,no amount of research or industry analysis that can act as a substitute for the type of stress testing needed to identify how this new form of money will operate in a new digital habitat.This is not so much about choosing a particular type of technology.It is more about identifying and evaluating the new and specific use cases which may come with public digital money in token form.Central banks are increasingly looking towards use case analysis when considering policy issues around CBDCs.They ask what practical benefits public digital money will bring to the lives of citizens.To answer this question,there needs to be a set of measurable,real-life use cases that central banks and other CBDC actors can roll out safely to their citizens in order to test hypotheses and drive adoption.In emerging market and developing economy countries,there is a clear role for token-based public money to drive financial inclusion and offer a route out of poverty for the unbanked and the underbanked.Low cost and immediate remittance payments,micro-insurance,secure savings,credit ratings and micro-credit products can all play a role in changing life outcomes for citizens in EMDE countries,in a way that cash and e-money will never be able to achieve.In developed market countries with effective e-money and online payment systems already in place,the question is different.Here,authorities ask what a CBDC does that e-money,cash and commercial bank money cant.By deploying smart contract governance mechanisms and programmability features into the tokens themselves or into the wallets which hold the tokens new use cases,such as micro-payments,tokenised atomic supply chains and machine-to-machine payments,can offer a new digital experience to the end user and all economic actors,which is currently only seen with private cryptocurrencies.Observing these use cases on safe,central bank-issued digital instruments offers a less exhausting and more exciting opportunity for central banks,commercial banks and other CBDC actors as they seek to make wise choices when launching or considering the launch of a CBDC.CENTRAL BANKS MUST PUSH FORWARD EXPLORATION OF CBDC USE CASESPolitical considerations hamper monetary authorities from pushing digital currency research forward.By Chris Ostrowski,chief executive officer and co-founder,Sovereign Official Digital Association.OPINIONIN EMERGING MARKET AND DEVELOPING ECONOMY COUNTRIES,THERE IS A CLEAR ROLE FOR TOKEN-BASED PUBLIC MONEY TO DRIVE FINANCIAL INCLUSION AND OFFER A ROUTE OUT OF POVERTY FOR THE UNBANKED AND THE UNDERBANKED.omfif.org/dmiDMI ANNUAL 20232021NEPAL and the Japan International Co-operation Agency executed the memorandum of understanding for the instant payment digital platform project in June 2022.By August,the Nepal Rastra Bank published Central bank digital currency:identifying appropriate policy goals and design for Nepal,its report looking into CBDCs.It outlined 10 policy goals the central bank wants to achieve via the introduction of a CBDC.In October 2022,GVE was appointed to advise on the feasibility study of the instant payments digital platform,equivalent to a CBDC in the widest sense.Visiting Nepal at the end of 2022,GVE met with key stakeholders,including the new prime minister,major government officials,the cybersecurity bureau of the police,department of money laundering investigation of the office of the prime minister and council of ministers,the telecommunication authority,the telco operator and commercial banks.GVEs team was able to advise governmental officials on two key developments.First,the creation of ISO/IEC 24643,which complements the ISO 20022.Second,an April 2022 patent for an alternative to the public key infrastructure in Japan,filed under the patent co-operation treaty.ISO 20022 is not enough to ensure the interoperability of different online systems,as pointed out by the G20.ISO/IEC 24643 was created to fix this and ensure the interoperability of 24/7 online systems to maintain high levels of security.By adopting ISO/IEC 24643,hacking and phishing of credit card companies or Swift can be prevented,as all users and beneficiaries have to go through know-your-customer processes before they use the system.ISO/IEC 24643 also encourages users of the payments system to take modular-based approaches,so that the users can avoid the vendor lock-in.The G20 also pointed out the existing cross-border payments systems are expensive,slow and opaque.GVEs CBDC architecture is designed not only to be used by central banks,but also by commercial banks and non-bank financial institutions,at minimal costs.In this way,the CBDC platform is able to replace certain cross-border services as it would reduce energy and server upkeep costs.The National Institute of Standards and Technology pointed out in 2016 that the current PKI would become obsolete once quantum computing took off.GVE has applied for a patent for an alternative to the PKI.This very wide patent was established in Japan in April 2022.This is a testament to the continuing innovativeness of a team which created the worlds first mobile payment service in 2004 and near field communication for contactless cards in 1997.INTEROPERABILITY AT CORE OF WORK ON NEPALS CBDCISO 20022 does not ensure consistent interoperability between different online systems.By Koji Fusa,chief executive officer of GVE.OPINIONGVES CBDC ARCHITECTURE IS DESIGNED NOT ONLY TO BE USED BY CENTRAL BANKS,BUT ALSO BY COMMERCIAL BANKS AND NON-BANK FINANCIAL INSTITUTIONS,AT MINIMAL COSTS.FINANCIAL INSTITUTIONS ARE CAUTIOUSLY WADING INTO DIGITAL ASSETSEconomies increasingly welcoming digital strategies into their financial system.By Julian Jacobs,economist,OMFIF.LAST YEAR will be remembered as one of reckoning for digital assets.After years of slushy and speculative asset price growth and the spread of numerous junk cryptocurrencies,with at best dubious value,the rapid collapse of the crypto world is something many economists had expected for a long time.Yet,amid such dynamics is also an opportunity for the best innovations in cryptocurrencies and digital assets to distinguish themselves.This was a key story in OMFIFs 2022 reports,which showed that financial institutions have been reconciling a general wariness of many products in the digital asset space alongside a clear recognition of the benefits of digital assets for their goals,including stamping out illicit markets,improved financial inclusion and introducing more efficient payments systems.Such benefits appeared to be particularly pronounced among developing countries.As revealed in OMFIFs Global Public Investor 2022 report,central bank reserve managers were averse to wading into digital asset classes in their portfolio investment.However,in our Digital assets,Future of payments and Absa Africa Financial Markets Index reports,survey respondents and interviewees expressed optimism about the potential for digital assets to improve the omfif.org/dmiDMI ANNUAL 20232223DESPITE challenging global market conditions in 2022,the digital world has continued to evolve.Forecast to become a$13tn business by 2030,the metaverse economy offers a growing range of revenue streams,while e-commerce and internet of things payment markets are also projected to thrive.Alongside these developments,central bank digital currencies enable banks and non-banks alike to build inclusive and pioneering digital schemes,products and services,bridging the gap between cash and the digital world.Emerging markets like Ghana and Eswatini are ahead in unlocking this value of CBDCs,leading the way in digital payment innovation.Developed markets can benefit from the pioneers learnings.This should give them the confidence to take their own bold steps towards digital public money,following the lead of emerging markets by developing a whole new infrastructure for economic growth.CBDC adoption is being powered by countries with less developed financial infrastructures or less competitive consumer choice.However,another shared characteristic sets these emerging markets apart a keen awareness of the need to innovate.As a digital form of cash,CBDCs bring benefits including convenience,security and cost effectiveness.They also spur digital innovation by offering network effects.This is vital for creating effective competition and efficiency through interoperable payments platforms.Emerging markets are seizing these opportunities to innovate and keep pace with the changes in digital finance.For example,Giesecke Devrient carried out a successful CBDC pilot with the Bank of Ghana,where swift integration of financial intermediaries is enabling the frictionless flow of CBDC between mobile money and bank accounts.This project highlights the benefits of interoperability in supporting seamless user experiences and new business opportunities.Ghana is now set to use the insights and feedback from the trial to support wider rollout plans.In introducing a CBDC,strong public-private collaboration is key to the success.After all,central banks do not have to and do not want to compete with private financial entities.A CBDC ecosystem should be created by distributing roles between the public and private sector.The public sector engages only if there is a gap to fill.While the central bank provides the open infrastructure,the private sector innovates on the platform and interacts with consumers and merchants.This is why early stakeholder engagement matters:financial intermediaries are crucial to on-boarding,distribution and wide-scale adoption.Countries like Ghana and Eswatini aim to build diverse ecosystems,where the core infrastructure is provided by the central bank and customer-facing services and products are developed by private players.Such public-private partnerships create trust in the currency and convenience of innovative financial services.Everyone should have access to convenient,secure digital payments and other financial services.CBDC has the potential to make this a reality.It is a digital version of physical cash a ubiquitous and fully inclusive financial instrument that people can use independently from the issuer.For the 1.4bn unbanked adults globally,as well as unbanked children who form the next generation,CBDCs promote participation in the digital economy.This should also inspire developed nations to leverage offline functionality,where a bank account is not needed,and introduce a digital form of public currency that is simple,resilient and universally accepted.CBDCs could ease life for many people by offering a cheaper way for cross-border payments for migrant workers or enabling digital payments for small merchants like rural market vendors.With the potential to shape tomorrows digital economy,a collaborative CBDC ecosystem will deliver fast adoption and strong growth opportunities.Its hard to imagine all future use cases for a CBDC and the new business models it could bring,but by providing a trusted and solid infrastructure with public interest at heart,CBDCs could serve as a platform for innovation thats safe and accessible for everyone.It will provide added value to societies,serving as a driver for future innovation and inclusion across the globe.A world with CBDCs is drawing near.Emerging market economies are forging the path towards a reimagined digital economy.To become participants,developed countries should not ask what problems CBDCs could solve,but see the opportunities they bring.WHAT EMERGING MARKETS TEACH US ABOUT CBDC INNOVATIONAdoption is being driven by countries with less developed financial ecosystems,highlighting the benefits of digital currency.By Wolfram Seidemann,chief executive officer,Giesecke Devrient Currency Technology.OPINIONAS REVEALED IN OMFIFS GLOBAL PUBLIC INVESTOR 2022 REPORT,CENTRAL BANK RESERVES MANAGERS WERE AVERSE TO WADING INTO DIGITAL ASSET CLASSES IN THEIR PORTFOLIO INVESTMENT.Source:OMFIF Future of payments survey 202224122935Within 1-2 yearsWithin 3-5 yearsWithin 6-10 years10 yearsWe do not expect to issue a digital currency1:Two-thirds of central banks expect to issue a CBDC within 10 yearsWhen do you expect to issue a CBDC?Share of respondents,%mainstream financial system,including through a central bank digital currency.The Digital assets report focused on how countries and regulatory systems are reckoning with the broad issues around cryptocurrency regulation and implementation.This includes both the challenges of classifying digital assets for purposes of taxation as well as the know-your-customer and anti-money laundering regulations necessary to ensure the security and value of these products.OMFIF also produced a digital asset regulation tracker,which underscores the rules,guidelines and regulatory developments in major global economies.The results suggest a continued tentativeness in delivering a tailored digital asset regulatory system,though regulatory regimes are becoming more and more elaborate.It will be updated on a quarterly basis.A key area of growing development,however,is in the space of CBDCs,particularly in developing countries the Bahamas,Nigeria and eastern Caribbean states have already implemented a CBDC,and there is growing interest in implementing others.The Future of payments report noted central banks were increasingly shifting towards exploring a CBDC.Most respondents indicated that they expected to issue a CBDC currency either in a pilot or diffuse form within the next 10 years.Last year we noted developments in digital assets and financial technology beyond cryptocurrency and CBDCs.Our work in the AFMI report underscores some of the other digital tools countries are deploying to strengthen and digitalise their financial systems.This includes the Lusaka Securities Exchanges unveiling of a digital platform to provide financing to Zambian small-and medium-sized enterprises.Moreover,Cameroons government implemented a National Digital Payment Switch in order to connect digital service providers.Looking ahead to the rest of 2023,these trends are expected to continue.As a growing number of countries wrestle with regulations for digital assets,economies are increasingly welcoming digital strategies into their financial system.This includes CBDCs and extends to other digital financial tools and payments systems.In other words,our results suggest that the crypto crash may be precipitating a medium-term boom in other digital asset activity.We may see the start of this in 2023.A KEY AREA OF GROWING DEVELOPMENT,HOWEVER,IS IN THE SPACE OF CBDCS,PARTICULARLY IN DEVELOPING COUNTRIES THE BAHAMAS,NIGERIA AND EASTERN CARIBBEAN STATES HAVE ALREADY IMPLEMENTED A CBDC,AND THERE IS GROWING INTEREST IN IMPLEMENTING OTHERS.omfif.org/dmiDMI ANNUAL 20232425AS 2023 begins,the future of central bank digital currencies is accelerating.CBDCs offer reliable sources of digital currency for consumers,businesses and governments.Although privacy and fear of government overreach continue to be debated,the regulation and adoption of CBDCs and stablecoins continue to pick up pace.Since the Covid-19 pandemic,the world is becoming increasingly digital.The past 18 months have seen many citizens use mobile phones and digital wallets to carry out financial transactions.Blockchain-based CBDC solutions allow for integration with mobile apps,enabling greater financial inclusion for citizens,while simultaneously eliminating third-party banking fees.Current developments demonstrate that many of the worlds largest central banks are moving forwards with plans to pilot and launch their own digital currencies to complement existing fiat currencies.The Banco Central do Brasil is readying plans to launch a CBDC in 2024.The Reserve Bank of Australia has issued a whitepaper and lengthy request for proposals to explore the options for issuing digital currencies(stablecoins and CBDCs).The Bank of England recently sought applications to help develop a 200,000 CBDC wallet prototype.This work is the precursor to developing a CBDC pilot,or a digital pound.The Banque de France and the Banque Centrale du Luxembourg have announced they are working together on an experimental CBDC initiative.These facts demonstrate that the time is now for the advent of digital currencies backed by central banks.Because CBDCs can be managed,monitored,controlled and redeemed as needed by central banks,the implementation of these digital assets merits pilots and testing to establish trust and reliability.Ripples new CBDC private ledger and digital currency solutions offer a comprehensive platform for minting,managing,transacting and redeeming CBDCs that meets the high security standards of central banks.Ripple is currently engaged in CBDC and stablecoin pilots with the Republic of Palau and the Royal Monetary Authority of Bhutan.With strong technology like Ripples in place for central banks to launch their own CBDC,its expected that in 2023 there will be greater adoption of digital currencies.The transformation from fiat to digital currencies offers the promise of lower costs for basic financial services,increased security,accelerated payments and reduced energy consumption.When you consider these factors,as well as the audit trail that blockchain provides for tracking and tracing transactions,its easy to see why CBDCs are moving from vision to reality.ADOPTION OF CENTRAL BANK DIGITAL CURRENCIES WILL BOOM IN 2023Private technology platforms can help central banks accelerate their digital currency plans.By Mary Hall,global product marketing lead for CBDCs,Ripple.OPINIONBECAUSE CBDCS CAN BE MANAGED,MONITORED,CONTROLLED AND REDEEMED AS NEEDED BY CENTRAL BANKS,THE IMPLEMENTATION OF THESE DIGITAL ASSETS MERITS PILOTS AND TESTING TO ESTABLISH TRUST AND RELIABILITY.Digital Monetary InstituteThe phenomenon of decentralised transaction networks that began with bitcoin is gradually developing into an architecture for the secure and efficient exchange of a whole range of digital assets,including cryptocurrencies,representations of fiat currencies and non-fungible tokens representing ownership of digital or real-world assets.Richard Clarkson,chief revenue officer at Payoneer,and Ronit Ghose,head of banking,fintech and digital assets at Citi,join OMFIF to discuss the possibilities the metaverse brings,what technical features must be developed to deliver these possibilities and the legal architecture required for transactions in the metaverse to be safe and legally supported.They examine the next steps for building the metaverse landscape,key innovation opportunities and challenges for stakeholders and the comparative utility of metaverse models.Speakers:Robert Clarkson,Chief Revenue Officer,Payoneer Ronit Ghose,Global Head,Future of Finance,Citi Global InsightsRegister now Virtual roundtable Tuesday,14 February,15:00-16:00(UK)FORTHCOMING MEETINGPAYMENTS IN THE METAVERSE omfif.org/dmiDMI ANNUAL 20232627WITH AN INCREASING number of central banks looking to pilot central bank digital currencies(especially retail),tensions around financial privacy and legal compliance are re-emerging.Consumers and citizens want CBDCs to provide a high degree of privacy,if not full anonymity.Law enforcement and oversight authorities,however,want to prevent illicit actors from leveraging anonymous payments.This tension is not new.For traditional payments and stores of value,public authorities have devised consumer identity-based regulations and legal frameworks for addressing compliance issues.Over time,for those involved in illicit activities,this has tightened access to the digital financial system.With the potential disappearance of physical cash,privacy-conscious consumers will want to retain the option to make legitimate anonymous transactions.Simultaneously,cash going digital could provide an opportunity for criminals if transactions and balances are anonymous,including lower costs,higher speed and potential programmability.Naturally,law enforcement authorities wish to access CBDC transaction and balance histories,potentially delegating controls such as know your customer and anti-money laundering screening to financial intermediates.However,access to private information by public authorities must be restricted to legitimate uses and not be misappropriated for mass surveillance.The two parties,consumers and law enforcement,agree that there are legitimate interests but do not trust that the other party will behave within the proper boundaries.The public realises that access to private information to combat serious crimes is acceptable if it is done with proportionality and minimal impact on privacy.Authorities have little interest in knowing specifics of transactions done within the bounds of law.Unlike traditional systems,it is hard to agree on a trusted third party for CBDC systems because some of the parties involved have supreme powers.Modern cryptography provides an escape from this conundrum.Software can become the technological equivalent of a trusted third party,offering cryptographically verifiable proofs to the two parties.One way to implement this is to leverage confidential computing,where computers process data in a secure enclave.Data is always encrypted outside of the enclave and inaccessible when processed in it.Code running within the enclave is tamper proof and verifiable by both parties.In a CBDC system,the code will accept payment instructions with a verifiable identification,check availability of funds and transfer funds without revealing the ID or transaction details.In addition,the verifiable code would also perform AML and fraud detection checks.This maintains anonymity(stricter than pseudonymity)until a transaction is flagged as suspicious by the programmed rules.For audits of a single individual,the same system can enforce all necessary legal procedures before selectively revealing relevant CBDC transactions.Even in the unlikely case of a breach leading to physical access to computers running such a system,cryptographic controls guarantee the integrity of data and code.This reduces the reliance on the integrity of the operator.Also,the governance of the suspicion rules can be distributed and dictated by multiple stakeholders,such as between central bank,law enforcement,advisory institutions and non-profits representing the public interest.Governance itself can be viewed as a rule enforced by code making it cryptographically impossible to tamper with its requirements(such as quorums).Confidential computing is a mature technology.All building blocks required to develop privacy preserving CBDC are available and prevalent.A CBDC system that preserves privacy and ensures compliance,and mirrors,if not enhances,cash,is not constrained by technology.Programmed governance of privacy and compliance represents a shift in digital public infrastructure.CBDC systems are no exception.They may require a multi-stakeholder conversation among law enforcement,monetary authorities and defenders of data and privacy protection.After which technologies can be trusted to provide both CBDC financial privacy and compliance.TECHNOLOGY CAN SOLVE SPLIT BETWEEN CBDC PRIVACY AND COMPLIANCEConsumers want digital cash to be private,while authorities require oversight.Pre-programmed governance can bridge this gap.By David Dab,national technology officer,public sector,Belgium,and Aadharsh Kannan,principal applied scientist,office of the chief economist,Microsoft.OPINIONCENTRAL BANKS&DIGITAL CURRENCIESOn 10-11 May 2023,the DMI symposium returns to examine the distribution and use cases of both retail and wholesale central bank digital currencies,tokenised assets,deposits and capital markets,cross-border payments and domestic interoperability.Speakers will explore regulatory framework harmonisation,cybersecurity considerations and the future of money in the metaverse.GLOBAL ANNUAL DMI SYMPOSIUMLONDON 10-11 MAY 2023Register nowDigital MonetaryInstituteVisit here for an overview of the 2022 DMI symposium omfif.org/dmiDMI ANNUAL 20232829FROM THE carrier pigeon to the telegraph,the transistor to the mainframe,technological change has always shaped the finance industry.Decentralised finance,which uses blockchain-based smart contracts to automatically execute a variety of financial transactions without human intervention,has the potential to be the next great transformation.DeFi already enables peer-to-peer markets in the cryptoasset industry for borrowing and lending,as well as decentralised exchanges for trading cryptocurrencies and non-fungible tokens.Those largely unregulated markets have attracted billions of dollars in investor money,but theyve also experienced high volatility,sudden business failures and frequent thefts by hackers.To break into the mainstream,DeFi needs to incorporate the same,or higher,levels of security standards and safeguards that have been developed over decades in the finance industry.The collapse of FTX vividly underscores the point,even if it was a centralised exchange.The time is ripe for institutional DeFi,a system that combines the power and efficiency of DeFi software protocols with a level of protections and controls that regulators demand and customers expect.These include identity solutions to enable financial institutions to comply with anti-money laundering and know-your-customer regulations,strong cybersecurity to minimise the threat of hacking incidents and recourse mechanisms to make investors whole if something goes wrong.This new model and the steps financial institutions can take to prepare themselves are explored in our new paper,Institutional DeFi:The Next Generation of Finance?,prepared with DBS of Singapore,Onyx by JP Morgan and Japans SBI Digital Assets Holding.The cost savings and new business opportunities of using institutional DeFi to streamline the worlds trillion-dollar markets in foreign exchange,equities,bonds and other assets could be significant for issuers and investors,as well as for financial institutions that can adapt their technology and business models.Many firms are already creating digital representations,or tokens,of such real-world assets to bring them onto the blockchain.The next step showing how such tokens can be transacted using DeFi protocols on a public blockchain has been successfully demonstrated by our partner institutions in a pilot under the Monetary Authority of Singapores Project Guardian.It carried out foreign exchange and government bond transactions,both real and simulated,against liquidity pools of tokenised deposits and government bonds on a public blockchain network,using digital identity solutions and logic adapted from existing DeFi protocols.More work is needed to make the leap from proof of concept to real business and to scale that business to make an impact on global markets.The industry needs to collaborate to achieve greater legal clarity around the use and holding of cryptoassets,meeting KYC and AML requirements,and recourse mechanisms in case of disputes.The industry also needs to develop incentives to encourage adoption by institutions and liquidity providers,promote common standards to verify the credentials of market participants and facilitate interoperability,and refine business and operating models to capture the efficiency benefits of DeFi protocols.Individual firms should develop their own playbooks,starting by forming a house view on the impact of DeFi.That could range from a modest evolution of existing market structures to a complete revolution that leaves DeFi structures triumphant.Then institutions need to decide what their ambition is,where they want to play and how much theyre willing to invest taking into account their clients needs and capabilities.Firms also need to get themselves ready by determining the best organisational structure to fit their ambitions,choosing the right mix of in-house development and partnerships with peers and vendors,and creating a talent environment that attracts the necessary skills and fosters innovation.There is no single right answer on any of these issues,but answers are needed.The institutional DeFi opportunity is here.The time to build the future is now.EXPLORING INSTITUTIONAL DECENTRALISED FINANCECombining the power of decentralised finance with appropriate safeguards can unlock value.By Larissa de Lima,senior fellow,Jason Ekberg,partner and head of corporate and institutional banking,Michael Ho,partner,and Teddy Hung,engagement manager at Oliver Wyman.OPINIONTHE CRYPTO industry had a historic 2022.Between macroeconomic headwinds,a bear market,insolvencies of major exchanges and providers(such as FTX and BlockFi),which were preceded by the staggering collapse of stablecoin TerraUSD,the global crypto market capitalisation fell to$858bn in early December from highs of$3tn.Its easy to lose sight of the big picture on the back of a year punctuated by so many challenges.Around 10%of people around the world own digital assets.Crypto and blockchain technologies have proven their value in addressing real-world challenges for millions in financial services and beyond.Growth in blockchain technology is also set to become a core differentiator for economies and a key measure of international competitiveness in the next decade for attracting foreign direct investment,cultivating innovation and creating jobs.Investor appetite and sentiment around the technologys potential clearly substantiate that vision.The top 10 global crypto and blockchain venture capital funds raised over$12.5bn in 2022,making it a record-breaking year for fundraising activity in the industry despite a noticeable dip in the second half of the year.The dip follows a resilient first half and mirrors the more significant and persistent year-long retreats in other sectors that were instigated by the broader macroeconomic and geopolitical environment.Crypto appears to be at a regulatory tipping point in many places around the world.Governance,consumer protection and security remain the top concerns,understandably accentuated by recent events and/or lingering misconceptions around the technology.Financial stability and integrity are also top of mind for regulators.Although cryptoassets account for only a small portion of global financial system assets,with a total market capitalisation of under$1tn in June 2022,their rapid growth makes a strong case for significant regulatory attention.At this important juncture,the right balance is crucial to allow for responsible innovation and growth.A digital assets regulatory framework should:Maximise user protection and successfully eliminate bad actors Favour simpler technologies that deliver tangible solutions to the most pressing needs Provide clarity and avoid duplication or conflict with other regulations Adopt a proportionate and risk-based approach as the industry and technology continue to mature Create a level playing field to enable world-changing innovation.The backdrop of challenges and rapid growth arguably made 2022 the busiest year to date for crypto policy-making,accelerating the need for regulatory clarity to protect consumers.The industry saw a flurry of global regulatory and legislative developments as well as standard-setting activity and industry action.In terms of regulations,the European Union published its Markets in Crypto-Assets regulation,the first and most comprehensive digital assets regulatory framework to date-although it doesnt enter into force for another year.In the US,the work put in motion by the March White House executive order resulted in the USs first ever comprehensive framework.The UAE,Saudi Arabia,Bahrain and,most recently,Brazil have also introduced crypto regulations.Moreover,a lot of guidance has been put forth by global standard-setting bodies on different areas,such as the Financial Stability Boards framework,International Organization of Securities Commissions roadmap,Financial Action Task Forces guidelines for virtual assets and the Basel Committees recommendations.In 2023,there will be a lot of swift movement by countries to implement these proposals.There will also be a lot of focus on areas that were left out of scope in MiCA and other frameworks,such as decentralised finance,non-fungible tokens and others.Exchanges around the world have also been proactive and quick to launch their own voluntary initiatives to reassure consumers,increase transparency and(re)build trust in the ecosystem.Examples include publishing wallet addresses,proof of reserves and launching recovery funds.With proper guardrails in place,Web3 can improve the lives of millions of people by transforming financial services and beyond but only smart regulations and serious industry efforts can(re)build the trust needed to make it happen.SMART REGULATION NEEDED TO REBUILD TRUST IN CRYPTOThe rapid growth of cryptoassets makes a strong case for significant regulatory attention.By Rana Kortam,director,global public policy,Binance.OPINIONomfif.org/dmiDMI ANNUAL 20233031AS CENTRAL BANKS implement policy rate hikes around the globe,the risk of synchronous and mutually-reinforcing recessions is growing.The International Monetary Fund predicts that a third of world economies will enter recession in 2023.Soft versus hard landing debates all stem from one issue that has plagued central banks since the beginning of this bout of inflation:data,or rather the lack of it,for central banks to analyse their respective economies,particularly the rate of inflation and the effect of policy rate hikes on the real economy.The data and policy tools enabled by central bank digital currencies provide a way to significantly reduce this risk.When modeling the impact of policy rate hikes,the US Federal Reserve staff and its board of governors keep a close eye on indices measuring the prices of goods and services.Healthcare is increasingly prominent in the basket of important services.As explained by Omair Sharif,founder and president of Inflation Insights,in Bloombergs Odd Lots series,the process by which healthcare prices are measured is very different from the way prices of a monthly consumer price index report are measured.Healthcare price changes are not measured the same way food or durable goods are measured via monthly surveys or store visits.Rather,the Bureau of Labor Statistics,in charge of measuring CPI in the US,measures the cost of a business to offer health insurance:if the cost of health services to businesses rises then inflation rises and premiums go up.The current way of capturing this information is via the reported annual profit margins of insurance companies,released once a year by the US National Association of Insurance Commissioners,typically in autumn.As demonstrated by Sharif,the impact this survey has on the monthly CPI reports for healthcare is extremely strong.Many other CPI reports across the world are currently measured in this manner:asset and liability information submitted by market participants to central bank regulators is dated(multiple quarters behind),frequently incomplete and sometimes simply incorrect.Translating this torrent of information into a meaningful index of price inflation or financial risk for individual banks,and the financial system overall,involves a lot of sophisticated guesswork for central banks.Moreover,economists attempts to statistically model the propagation of inflation effects or financial stress through the banking system are constrained by the relative infrequency of business cycle contractions and the opacity surrounding much of this information.This flawed methodology does not need to be used:current CBDC architecture provides central bank economists and regulators with a wealth of near-real-time information on the CBDC balances of financial institutions,along with metadata which could tag which industry each CBDC is spent in,allowing real-time CPI measuring and even triangulated inflation fighting all the while maintaining robust privacy of all transactions for all users.A central bank doesnt need to wait for institutions to report its CBDC assets and liabilities;instead,central bank staff can query the CBDC balances directly.As we fight inflation in 2023,lessons learned can be used to give central banks the tools they need to manage their economies in a better manner,rather than possibly engineering unnecessary recessions.TAKE A moment to empathise with cryptocurrency regulators.Weve tasked them with managing a constantly morphing ecosystem that is both plagued by lawlessness and built atop blockchain technology that thwarts outside control.The effort required to identify and apprehend pseudonymous criminals makes enforcement impracticable for most blockchain crimes,and no amount of effort can stop an automated decentralised autonomous organisation like Tornado Cash.As a result,regulators are relegated primarily to know-your-customer processes via fiat on-/off-ramps to accomplish enforcement.In a decentralised,permissionless environment,relying on KYC alone is like attempting to tame the ocean by damming a few rivers.Effective regulation requires the full capabilities of law enforcement to protect property rights,remedy breaches of contract and intervene to stop crimes in progress.Such capabilities are available through layer 1 protocols that enforce the law on-chain.Such protocols obviate the need to seize private keys from pseudonymous criminals by enabling direct action on wallets and smart contracts.Officials invoke these protocols by obtaining a court order,just as they would for off-chain enforcement.For example,the US Treasury could shut down Tornado Cash by demonstrating cause to enjoin its smart contracts,or could seize assets by obtaining a warrant.On-chain enforcement was unthinkable to most even a year ago but,having endured weekly hacks for hundreds of millions of dollars and frauds for tens of billions more,the blockchain community is ready to embrace it.Most market participants not only acknowledge the need for effective law enforcement but are demanding it.Many see on-chain enforcement as the best hope to thaw the crypto winter and establish blockchain as the backbone of mainstream commerce and the decentralised internet.Adoption is already underway.Bitcoin SV(a top-50 blockchain proclaiming dedication to Satoshis vision)recently implemented a protocol for blockchain authorities to enforce court-ordered transfers of BSV coins.The community hopes this development ingratiates it with regulators and diverts users from legacy bitcoin.Similarly,Jurats layer 1 protocol enables consensus about the meaning of court orders so that nodes can execute them autonomously.The premise for on-chain enforcement is strong.More blockchains will follow.There are several objections to on-chain enforcement,but none should give regulators pause.First is the fear that tyrannical officials will seize digital assets.It is worth noting that those expressing this concern also own houses,cars and bank accounts,all of which the government leaves alone.Due process is an excellent protector of property rights,so limiting on-chain enforcement to valid court orders will keep digital property as sacrosanct as physical.Potential for abuse by intermediaries is a second objection,but an exaggerated one.Bitcoin SV chooses trusted notaries(assumedly solicitors)to interpret and publish court orders to the network.Jurat,by contrast,eliminates intermediaries by generating machine-readable hashes for judges to include in their docketed orders.Third is concerns about ledger immutability.These misunderstand the on-chain enforcement process.Courts do not rewrite ledgers.Rather,they enforce the law through a new remedial transaction that changes the effect of a prior(illegal)one.They do not alter the ledger itself.Regulators have multiple paths forward.Mandating minimum enforcement standards is one,but the multi-jurisdictional nature of public blockchains makes this impracticable.A second option is to do nothing.Self-interest should drive adoption given that property becomes more valuable as legal protections are strengthened.A third is for influential agencies like the US Treasury and the Securities Exchange Commission to offer a regulatory sandbox when providers use blockchains with on-chain enforcement.The move is justified because oversight is reduced when private actors can enforce legal rights(think of shareholder suits for fraud).This approach will also hasten legal protections on-chain the ultimate goal for any regulatory scheme.CBDCs CAN HELP CENTRAL BANKS TAME INFLATIONLack of correct,timely data hinders monetary authorities in their fight against rising prices.By James Shinn,executive director,Simon Chantry,co-founder and chief information officer,and David Bahamon,digital currency strategy manager at Bitt.OPINIONOPINIONEFFECTIVE CRYPTO REGULATION STARTS AT LAYER 1Objections to on-chain enforcement should not give regulators much cause for concern,writes Michael Kanovitz,chief executive officer,Jurat.Figure 1:Irregular healthcare price measurement causes major October CPI swingsCPI change month to month,%Source:Omair Sharif,Inflation Insights-5.0-4.0-3.0-2.0-1.00.01.02.03.04.0Jan-15Apr-15Jul-15Oct-15Jan-16Apr-16Jul-16Oct-16Jan-17Apr-17Jul-17Oct-17Jan-18Apr-18Jul-18Oct-18Jan-19Apr-19Jul-19Oct-19Jan-20Apr-20Jul-20Oct-20Jan-21Apr-21Jul-21Oct-21Jan-22Apr-22Jul-22Oct-22ON-CHAIN ENFORCEMENT WAS UNTHINKABLE TO MOST EVEN A YEAR AGO BUT,HAVING ENDURED WEEKLY HACKS FOR HUNDREDS OF MILLIONS OF DOLLARS AND FRAUDS FOR TENS OF BILLIONS MORE,THE BLOCKCHAIN COMMUNITY IS READY TO EMBRACE IT.Official Monetary and Financial Institutions Forum 181 Queen Victoria Street,London,EC4V 4EGT: 44(0)20 700 27898 enquiriesomfif.org omfif.orgWhere the public and private sectors meet to shape the digital future of finance.

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