Kiffmeister’s #Fintech Daily Digest (20220810)

HKMA announces competition to promote CBDCs

The Hong Kong Monetary Authority (HKMA), has added a central bank digital currency (CBDC) section to the annual Global Fast Track business competition to encourage research into the use cases of digital currencies. Companies are invited invited to pitch business plans relating to the adoption, programmability, interoperability, privacy, cybersecurity, foreign exchange and liquidity management, and offline payments of CBDCs. Shortlisted applicants will then enter a pitching session exclusive for the track and compete for three awards. All qualified candidates may also have the opportunities to work with the HKMA on research projects and pilots to foster the future growth of the CBDC ecosystem. [Read more at the HKMA]

Kiffmeister’s Global Central Bank Digital Currency Monthly Monitor

Just a reminder that I produce a monthly digest of central bank digital currency (CBDC) developments exclusively for the official sector. So for any of you out there who work for a central bank, ministry of finance or international financial institution who would like to receive it by email on the first business day of every month, please DM me on LinkedIn or email me at chronicles@kiffmeister.com.

Upcoming events I’m affiliated with:

The CBDC Think Tank, in partnership with the International Monetary Fund and George Washington University, is hosting a full-day in-person CBDC Masterclass on October 12 in Washington DC. The sessions are designed as instructional deep dives with full presentations and Q&A components.  [Register here]

The CBDC Think Tank, in partnership with Georgetown University and the DC FinTech Week, is hosting a Digital Currency Lecture Series, a set of digital currency lightning talks delivered by subject matter experts, on October 14 in Washington DC. [Request an invite here]

Kiffmeister’s #Fintech Daily Digest (20220809)

Retail Central Bank Digital Currency: Current Landscape

I often get asked to share what I know about which central banks are doing what in the retail central bank digital currency (CBDC) space, so I’ve posted an abbreviated version of my retail CBDC presentation slides here.

Reserve Bank of Australia to Explore Use Cases for CBDC

The Reserve Bank of Australia (RBA) has launched a research project to explore use cases for a CBDC in Australia. It is expected to take about a year to complete, and will involve the development of a limited-scale CBDC pilot that will operate in a ring-fenced environment for a period of time. Interested industry participants will be invited to develop specific use cases that demonstrate how a CBDC could be used to provide innovative and value-added payment and settlement services to households and businesses. The Bank and the DFCRC will then select a range of different use cases to participate in the pilot, based on their potential to provide insights into the possible benefits of a CBDC. [Read more at the RBA]

Chainalysis says $2 billion stolen in cross-chain bridge hacks this year, more expected

Chainalysis says cross-chain bridges that allow transfer of assets between independent blockchains are among the highest risk protocols in the blockchain industry for scams and bad actors. Chainalysis in a new report estimates that $2 billion worth of cryptocurrency has been stolen from cross-chain bridges across 13 attacks so far this year, accounting for 69% of all stolen funds during that time. Cross-chain bridges were once considered the solution to interoperability between blockchains in the crypto industry, but as the protocols continue to seem vulnerable to hacks and attacks that view is beginning to change. [Read more at Chainalysis]

U.S. Treasury Sanctions Virtual Currency Mixer Tornado Cash

The U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) sanctioned Tornado Cash, a crypto-asset mixer that mixes potentially identifiable or “tainted” cryptocurrency funds with others, so as to obscure the trail back to the fund’s original source. OFAC claims that Tornado Cash has been used to launder more than $7 billion worth of virtual currency since its creation in 2019. The sanctions mean U.S. crypto investors can no longer use Tornado Cash. 38 ETH addresses and 6 USDC addresses were added to OFAC’s Specially Designated Nationals (SDN) list. Circle, the issuer of the USDC stablecoin, reportedly froze over $75,000 worth of USDC funds linked to those 6 USDC addresses. Several leading figures in the crypto industry expressed their concerns about the sanctions. [Read more at Finance Magnates]

Survey on potential CBDC use cases in the Asia-Pacific region

Deborah Healey and Heng Wang of the University of New South Wales have launched a study of the impact of retail central bank digital currency (CBDC) on stakeholders and consumers across the Asia-Pacific region. In that regard they are inviting such stakeholders and consumers in the region to take part in a survey on the potential uses of retail CBDC in Asia. The survey should take 12-15 minutes to complete and will be active until midnight August 24, 2022 (AEST). Responses will be anonymous and not attributed to users or their organizations. If you have any questions, would like an invitation to the launch and a copy of the final report please email d.healey@unsw.edu.au. Also, please feel free to share this request with others in the region. [Click here to take the survey]

Kiffmeister’s Global Central Bank Digital Currency Monthly Monitor

Just a reminder that I produce a monthly digest of central bank digital currency (CBDC) developments exclusively for the official sector. So for any of you out there who work for a central bank, ministry of finance or international financial institution who would like to receive it by email on the first business day of every month, please DM me on LinkedIn or email me at chronicles@kiffmeister.com.

Upcoming events I’m affiliated with:

The CBDC Think Tank, in partnership with the International Monetary Fund and George Washington University, is hosting a full-day in-person CBDC Masterclass on October 12 in Washington DC. The sessions are designed as instructional deep dives with full presentations and Q&A components.  [Register here]

The CBDC Think Tank, in partnership with Georgetown University and the DC FinTech Week, is hosting a Digital Currency Lecture Series, a set of digital currency lightning talks delivered by subject matter experts, on October 14 in Washington DC. [Request an invite here]

Kiffmeister’s #Fintech Daily Digest (20220808)

Kiffmeister’s Global Central Bank Digital Currency Monthly Monitor

Just a reminder that I produce a monthly digest of central bank digital currency (CBDC) developments exclusively for the official sector. So for any of you out there who work for a central bank, ministry of finance or international financial institution who would like to receive it by email on the first business day of every month, please DM me on LinkedIn or email me at chronicles@kiffmeister.com.

CBDC launch still on the table, BoJ says

A Bank of Japan (BoJ) official said the central bank has not scrapped its preparations for a potential CBDC launch, dismissing misleading reports by a number of media outlets. Tomohiro Sugo, head of the payment and settlement system division, told Central Banking that “the Bank of Japan continues preparing for the possible issuance of CBDC in the future and it has not quit its preparations.” [Read more at Central Banking] As I mentioned a few days ago the misleading reports started with an Asia Times op-ed that rehashed inaccurately a July 5, 2022 report from the BoJ’s Liaison and Coordination Committee on Central Bank Digital Currency.

Nepal’s central bank working to amend Act to issue digital currency

The Nepal Rastra Bank has reportedly initiated an exercise to revise the Nepal Rastra Bank Act in order to enable the central bank to issue digital versions of the Nepali currency. Revati Nepal, chief of the currency management department at the central bank. said that “a task force formed by the central bank has drafted an amendment bill to authorize the Nepal Rastra Bank to issue and manage a digital currency.” [Read more at the Kathmandu Post]

Cashlessness, Crime and Central Bank Digital Currency

David Birch argues that cash reduction via fintech means an increase in net welfare. People who are trapped in a cash economy, the poor in particular, are more likely to get robbed, to get bad deals, and to get shaken down. Although that argues for reducing cash usage,  what do we do about the people people who say they would “struggle to cope” in a cashless society (one in five according to a U.K. survey) and those who say it would be “problematic” (half of those surveyed)? [Read more here]

Survey on potential CBDC use cases in the Asia-Pacific region

Deborah Healey and Heng Wang of the University of New South Wales have launched a study of the impact of retail central bank digital currency (CBDC) on stakeholders and consumers across the Asia-Pacific region. In that regard they are inviting such stakeholders and consumers in the region to take part in a survey on the potential uses of retail CBDC in Asia. The survey should take 12-15 minutes to complete and will be active until midnight August 24, 2022 (AEST). Responses will be anonymous and not attributed to users or their organizations. If you have any questions, would like an invitation to the launch and a copy of the final report please email d.healey@unsw.edu.au. Also, please feel free to share this request with others in the region. [Click here to take the survey]

Upcoming events I’m affiliated with:

The CBDC Think Tank, in partnership with the International Monetary Fund and George Washington University, is hosting a full-day in-person CBDC Masterclass on October 12 in Washington DC. The sessions are designed as instructional deep dives with full presentations and Q&A components.  [Register here]

The CBDC Think Tank, in partnership with Georgetown University and the DC FinTech Week, is hosting a Digital Currency Lecture Series, a set of digital currency lightning talks delivered by subject matter experts, on October 14 in Washington DC. [Request an invite here]

Kiffmeister’s #Fintech Daily Digest (20220805)

Jurisdictions Where Retail CBDC Is Being Explored

I’ve made some minor updates to my tabulation of retail central bank digital currency (CBDC) explorers. I count 85, which is lower than the count of some other trackers that, for currency unions, count all member countries. I count only the central bank that is responsible for currency issuance (e.g., the European Central Bank (ECB) in the Eurozone, and the Eastern Caribbean Central Bank in the Eastern Caribbean Currency Union (ECCU)). If I count all eight Eurozone member countries whose central banks are contributing to the ECB CBDC work, plus all eight member countries of the ECCU, my tally goes up to 101. If I also include all Eurozone countries I have a big fat headline number of 112! [See my tabulation here]

Thailand’s Central Bank Extends Retail CBDC Study to Pilot Phase

The Bank of Thailand (BoT) is extending the scope of retail CBDC development by starting a pilot study. It will adopt technology developed by Giesecke+Devrient and it is expected to run from the end of 2022 to mid-2023. However, the BoT emphasized that the purpose of the pilot is to assess the suitability of technology and CBDC design, and at present it does not have plans to issue retail CBDC until thorough consideration of benefits and associated risks for the financial system. [Read more at the Bank of Thailand]

ZB Exchange Loses Nearly $5M in Suspected Hack, Pauses Withdrawals

Crypto exchange ZB Exchange has paused user withdrawals, likely in response to a suspected hack that appears to have drained nearly $5 million in tokens from the firm’s hot wallet. The multimillion-dollar loss is the latest in a series of security breaches to hit crypto companies this year and the third multimillion-dollar hack reported this week. [Read more at CoinDesk]

PayTech and the D(ata) N(etwork) A(ctivities) of BigTech Platforms

The Bank of Canada published a paper that models the trade-off faced by BigTech payment platforms between costs associated with compensating users for their privacy concerns and revenues from the harvested data. The results of the modeling lead to two policy implications. First, data monetization is not necessarily inefficient from a social point of view because data are socially valuable and users are compensated for their privacy concerns with cheaper platform services. Second, when assessing BigTechs’ introduction of payment services, one needs to consider the bundling of data and payments and the implied complementarity. In economies with large payment frictions, data-driven payments tend to increase social surplus. In advanced economies, however, where payments are already fairly efficient, payment-driven data can lead to inefficient adoption by platforms that seek to generate data beyond what is socially efficient. [Read more at the Bank of Canada]

Upcoming events I’m affiliated with:

The CBDC Think Tank, in partnership with the International Monetary Fund and George Washington University, is hosting a full-day in-person CBDC Masterclass on October 12 in Washington DC. The sessions are designed as instructional deep dives with full presentations and Q&A components.  [Register here]

Kiffmeister’s #Fintech Daily Digest (20220804)

A pair of hacks rattle an already jittery crypto industry

Solana said that at least 7,700 wallets that held at least $5.2 million crypto-assets, including Solana tokens and USDC stablecoins, had been breached. Earlier in the week, Nomad, a blockchain bridge, acknowledged that about $190 million had been taken from it after a hacker infiltrated its system. (A blockchain bridge allows users to swap crypto from one blockchain to another making it vulnerable to “both sides” weaknesses on either blockchain.) The Nomad attack was a “free-for-all,” because the hacker’s original code allowed anyone to copy it and steal the crypto for themselves. [Read more at the Washington Post]

Slope wallet provider saved user seed phrases in plain text, Solana security researchers find

Solana also said that the closed-source Slope wallet may be responsible for the exploit. And security firm Otter reported that the Slope wallet app sent out users’ seed phrases to a centralized server. Slope hired this server from a company called Sentry. It added that seed phrases passed to Slope’s server were saved in the form of readable text. Since the phrases were not encrypted, anybody with access to this specific Sentry server could potentially access users’ private keys. [Read more at The Block]

Coinbase selected by BlackRock to provide Aladdin clients access to crypto trading and custody via Coinbase Prime

Investment manager BlackRock has formed a partnership with Coinbase to make crypto-assets directly available to institutional investors. Mutual customers of Coinbase and BlackRock’s investment management platform. The access will be granted through Coinbase Prime, an existing integrated trading platform for institutional crypto investors. Aladdin users will be able allow to manage their crypto-asset exposures directly in their existing portfolio management and trading workflows for a whole portfolio view of risk across asset classes. The platform integration and functions will be rolled in phases. [Read more at Coinbase]

Entity-based vs activity-based regulation: a framework and applications to traditional financial firms and big techs

The Bank for International Settlements (BIS) published a paper that proposes a framework for classifying regulatory measures with a financial stability objective as activity-based (AB) or entity-based (EB). AB measures constrain an activity on a standalone basis, whereas EB measures constrain a combination of activities at the level of entities. Since such combinations underpin much of financial intermediation, financial stability regulation features EB measures at its core, even though its ultimate objective is to make financial activities more resilient. In discussing the relative merits of AB and EB measures, the paper applies its framework to the regulation of banks, collective investment vehicles and big techs. When addressing systemic risk, neither AB nor EB regulation need be consistent with a level playing field, contrary to a widely held view. [Read more at the BIS]

An Illustrative Industry Architecture to Mitigate Potential Fragmentation across Central Bank Digital Currency and Commercial Bank Money

A paper by a couple of Barclays staffers aims to provide a mitigation to the risk that the adoption of central bank digital currency (CBDC) fragments payments markets and retail deposits. It introduces the concept of ecosystems providing a common programmability layer that interfaces with the account systems at both commercial banks and the central bank. The paper focuses on a potential U.K. CBDC, including industry ecosystems interfacing with commercial banks using open banking application programming interfaces (APIs). [Read more at Arxiv.org)

Upcoming events I’m affiliated with:

The CBDC Think Tank, in partnership with the International Monetary Fund and George Washington University, is hosting a full-day in-person CBDC Masterclass on October 12 in Washington DC. The sessions are designed as instructional deep dives with full presentations and Q&A components.  [Register here]

Kiffmeister’s #Fintech Daily Digest (20220803)

Japan abandons CBDC project (fake news alert)

There are misleading stories circulating that the Bank of Japan has shut down its central bank digital currency (CBDC) project. They seem to be triggered by an Asia Times story that rehashed the July 5, 2022 report from the BoJ’s Liaison and Coordination Committee on Central Bank Digital Currency, which reiterated its October 2020 position that “while the Bank of Japan currently has no plans to issue CBDC, from the viewpoint of ensuring the stability and efficiency of the overall payment and settlement systems, the Bank considers it important to prepare thoroughly to respond to changes in circumstances in an appropriate manner.” So the project lives on! [Read more at the BoJ]

ASX CHESS Replacement Schedule Delay Independent Review

The Australian Securities Exchange (ASX) has delayed its overhaul of its Clearing House Electronic Subregister System (CHESS) share trading software by up to 20 months, citing problems achieving “scalability and resilience”. The CHESS software enables ASX’s registry to manage settlement of transactions, and the exchange has strived since 2017 to replace it with Digital Asset‘s blockchain-based technology in a bid to cut costs. ASX has also engaged Accenture to provide an independent review. [Read more at the ASX]

RBI interoperable distributed ledger technology proof of concept

The Reserve Bank of India Innovation Hub (RBIH) conducted a successful interoperable distributed ledger technology (DLT) platform proof-of-concept exercise with 11 banks, DLT fabric partners, DLT application layer partners, and fintech startups. Inland Letter of Credit was chosen as the use case, because its end-to-end flows is paper intensive, time consuming, requires human intervention at multiple level, and prone to fraud. DLT allowed stakeholders to digitally share accurate and reliable trade information in real-time. Smart contracts supported by DLT, allowed for automated execution of payments on meeting pre-set conditions of the contract. [Read more at the RBIH]

Upcoming events I’m affiliated with:

The CBDC Think Tank, in partnership with the International Monetary Fund and George Washington University, is hosting a full-day in-person CBDC Masterclass on October 12 in Washington DC. The sessions are designed as instructional deep dives with full presentations and Q&A components.  [Register here]

Kiffmeister’s #Fintech Daily Digest (20220802)

Taking digital currencies offline

The IMF published an article of mine on offline central bank digital currency (CBDC) in their Finance & Development magazine. [Read more here]

China’s central bank to expand digital yuan pilot program

The People’s Bank of China (PBoC) has listed the “orderly expansion of the scope of the digital yuan pilot” as one of its key tasks in the second half of the year, according to the central bank’s work plan. [Read more at the PBOC]

Towards the holy grail of cross-border payments

The European Central Bank (ECB) published a paper that describes current visions of how to eventually find the holy grail of immediate, cheap, universal cross-border payments settled in a secure settlement medium. It focuses on six potential solutions; (i) modernized correspondent banking; (ii) emerging cross-border FinTech solutions; (iii) Bitcoin; (iv) global stablecoins; (v) interlinked instant payment systems with FX conversion layer; (vi) interlinked CBDC with FX conversion layer. For each, settlement mechanics are explained, and an assessment is provided on its potential to be the holy grail of cross-border payments. Several solutions are suitable for improving cross-border payments significantly, and some could even be the holy grail. [Read more at the ECB]

Crypto collapse: 3AC’s Grayscale two-step — and where in the world are Zhu and Davies?

Amy Castor and David Gerard have published another excellent crypto crash update, including how bankruptcy works and how administrative costs suck up hundreds of millions of dollars before creditors see a penny, why Tether may be required to return $840 million in assets to Celsius, and the FDIC and the Feds cease and desist statement to Voyager. [Read on David’s blog]

Upcoming events I’m affiliated with:

The CBDC Think Tank, in partnership with the International Monetary Fund and George Washington University, is hosting a full-day in-person CBDC Masterclass on October 12 in Washington DC. The sessions are designed as instructional deep dives with full presentations and Q&A components.  [Register here]

Kiffmeister’s #Fintech Daily Digest (20220801)

Israel puts the brakes on cash to spur digital payments

The Israeli Tax Authority has placed further restrictions on cash payments to allow authorities to more easily track tax evasion, black market activity and money laundering, and spur digital payments. Since January 2019, Israeli businesses and consumers have been subject to limits on cash payments under the Law for the Reduction in the Use of Cash. They have now been tightened to 6,000 shekels ($1,760) for business and 15,000 shekels ($4,400) for personal transactions. [Read more at CoinTelegraph]

Binance Compliance Officer: KYC Cost Exchange ‘Billions in Revenue’

Reuters recently published a series of investigative reports on Binance and its association with illicit activity, claiming that Binance has become a hub for criminal activity and that it overlooked several money-laundering red flags. In a CoinDesk interview, Tigran Gambaryan and Matthew Price, key members of Binance’s compliance team and former investigators at the U.S. Internal Revenue Service’s cybercrime unit, disputed a number of these claims. In particular, they claimed that proportional to trading volumes, illicit trading on Binance is no worse than on other exchanges. [Read more at CoinDesk]

Millicent Successfully Tests a General Purpose Full-Reserve Stablecoin

Millicent, a fintech company co-funded by the Innovate UK, has successfully performed a test of a full-reserve stablecoin aimed at the retail market. The reserves are held in a ringfenced account safeguarded by a regulated third party, directly at the Bank of England. Millicent runs on a hybrid Layer-1 distributed ledger network. A sandbox demonstration simulated fiat on-ramping via Faster Payments from a UK consumer bank, as well as the on-chain conversion and minting of GBP-pegged stablecoins, and a variety of payment and settlement scenarios. [Read more at Yahoo Finance]

European banking regulator ‘concerned’ about finding staff to oversee crypto

European Banking Authority Chair José Manuel Campa views the regulator’s ability to hire and retain specialized staff as a “major concern”, particularly in the areas of technology, anything related to crypto and digitization. “This is in high demand across society.” [Read more in Finextra]

Upcoming events I’m affiliated with:

The CBDC Think Tank, in partnership with the International Monetary Fund and George Washington University, is hosting a full-day in-person CBDC Masterclass on October 12 in Washington DC. The sessions are designed as instructional deep dives with full presentations and Q&A components.  [Register here]