-
Central bank plans to create digital currencies receive backing
Global central banks may have to issue their own digital currencies sooner than expected, the general manager of the Bank for International Settlements has said, after Facebook recently unveiled plans to create its own stablecoin.
tags: Fintech CryptoAssets AltCoins Stablecoins CBDC Facebook
-
BIS to set up Innovation Hub for central banks
The Board of the Bank for International Settlements has approved the establishment of a BIS Innovation Hub to foster international collaboration on innovative financial technology within the central banking community.
tags: Fintech CentralBanking
-
Bitcoin, The Dollar And Facebook’s Cryptocurrency: Price Volatility Versus Systemic Volatility
Bitcoin has a systemic-stability, but not a price-stability, mechanism built into it. Bitcoin has a virtuous cycle that fiat currencies don’t have. As its price goes up, more hash power joins the network, the network’s security hardens, and it becomes more immune to attack – more systemically stable.
tags: Fintech CryptoAssets Bitcoin Stability
Month: June 2019
Kiffmeister’s Fintech Daily Digest 06/29/2019
-
IMF Predicts Central Banks to Issue Digital Currencies
According to the IMF paper, several central banks in different countries are considering implementing some form of CBDC. Uruguay has reportedly launched a pilot program already, while the Bahamas, China, Eastern Caribbean Currency Union, Sweden and Ukraine are on the verge of testing their systems.
tags: Fintech CryptoAssets AltCoins CBDC
Kiffmeister’s Fintech Daily Digest 06/28/2019
-
“Narrow banks would improve the competition in deposit markets, which would in turn would reduce the current subsidisation of incumbent banks, improve the transmission of monetary policy, raise deposit rates at other banks and reduce dispersion in money market rates,” McAndrews wrote in comments to the Fed.
-
Up to five new digital bank licences will be issued here, paving the way for non-bank players to break into a local financial services scene dominated by a handful of traditional providers.tags: Fintech Regulation
-
Dukascopy intends to issue ERC-20 stablecoins dubbed “Dukascash” pegged to the euro, Swiss franc, and U.S. dollar, and gradually increasing the list of Dukascash tokens’ base currencies depending upon customer demand.
-
The ‘travel rule’, which is currently applied to wire transfers in the US, would mean exchanges need to swap sensitive customer information when transferring funds — a policy that might not sound the death knell for cryptocurrency, but could introduce significant complications for platforms in jurisdictions that decide to introduce legislation reflecting the new guidance.
-
Global payment services provider Swift has said that its new cross-border payments platform is coping with greater consumer demand for speed and transparency. Swift launched its global payments initiative, or GPI, in 2017, in an attempt to speed up cross-border payments systems.
-
CME saw a record volume of USD 1.6 billion and record open interest for Bitcoin contracts of USD 373 million, on June 26, 2019. The value of BTC rose to almost USD 14,000, causing short traders to liquidate over half a billion dollars in a single day.
-
Ex-WBG Chief Economist Kaushik Basu: “Policymakers must urgently consider what kind of world private digital money could create. We may then need new laws and global treaties to mitigate potential negative fallout and curb the power of the organizations that run these new currencies.”
-
If the purpose of a stablecoin is to offer a new kind of payment instrument that uses fiat currency as the settlement asset, the question becomes, what added value, if any, such a product would bring to the everyday user. But Libra doesn’t even seem to have the intention of developing front-end solutions for everyday users. Instead, its core proposition is limited to becoming a new settlement asset, diluted by the fact that it will be patched together from other existing ones.
-
Libra, unlike other stablecoins, is intended to complement national currencies rather than replace them. This doesn’t mean, however, that Facebook understands monetary economics any better than my 24-year-old [Silicon Valley] luncheon companions.
Kiffmeister’s Fintech Daily Digest 06/27/2019
-
The IMF finds that “risks in Switzerland’s rapidly growing fintech space may not be well understood due to data gaps, resource constraints, and the authorities’ liberal approach.”tags: Fintech
-
The Swiss stock exchange SIX wants the Swiss National Bank to issue a wholesale central bank digital currency to settle payments on its new digital securities trading platform. The SNB has been cool on retail CBDC, but the proposed SDX stablecoin would apply only to inter-banks payments.
-
Binance and stablecoin issuer Paxos announced a partnership to integrate a new deposit gateway on Binance.com that will allow traders to exchange fiat directly for PAX on the Paxos platform and benefit from the stablecoin’s liquidity on the Binance exchange.
-
The Libra investment tokens will give founding members the right to a portion of funds from a future reserve as well as incentives in Libra coin. The Libra Association is clear that it intends for the Libra coin sold to users on its blockchain to be a currency. However, the intermingling of the Libra coin as incentives for the founding members may be viewed by the SEC as integrating the offerings of the Libra investment tokens and the Libra coin, making the Libra coin a security as well from the SEC’s viewpoint.
-
The unbanked do not have bank account numbers and they may not have credit cards, either. They have cash. There’s nothing in the Libra white paper about how Libra will lower fees to convert fiat cash into Libra, which is both the essential challenge of consumer banking and an explicit part of Libra’s problem statement.
-
For hundreds of millions of citizens across the world, digital currencies like Bitcoin, Ripple, and potentially even the Libra don’t pose a threat to financial stability. They offer an escape from chronic financial instability and high and variable rates of inflation that result from poorly managed government monies.
-
“I suspect that Libra is very much a work-in-progress. The current whitepaper seems to give only a hint of what the project might become. If so, one of the changes I suspect Facebook will have to make if it wants to get traction is to link the Libra network to already-existing units of account. A new unit of account is just too Utopian.”
-
The IMF and World Bank surveyed the authorities in 189 countries on a range of Fintech-related topics and received 96 responses. They suggest that countries are broadly embracing the opportunities of fintech to boost economic growth and inclusion, while balancing risks to stability and integrity.tags: Fintech
Kiffmeister’s Fintech Daily Digest 06/26/2019
-
Martin Wolf: “At worst, the world might have a Facebook-dominated mono-bank. The risks of that are huge: potential monetary and financial instability, concentrated economic and political power, lack of privacy and many other issues.”
-
The vast majority of money moving into bitcoin is coming from Tether, a stable coin used by traders to hold crypto at a stable value.
-
Over the past month, $600 million worth of “tethers,” a cryptocurrency supposedly pegged to the dollar, have been minted into existence. Seemingly in tandem, Bitcoin’s price has climbed up from $8,500 to $11,000. Are the two events connected?
-
TrueHKD is the first major expansion for TrustToken into the Asian market after launching TrueUSD, TrueGBP, TrueCAD, and TrueAUD with custody providers based in the US.
-
Square Cash App users will now be able to deposit bitcoins from external wallets into their app bitcoin address. According to Square’s announcement, deposits are limited to $10,000 worth of bitcoin in a seven day period.
-
Swiss-based fintech firm Amun AG has released plans to launch a new exchange-traded product (ETP) that will use the Bitwise 10 Select Large Cap Crypto Index as a benchmark. This is the fifth ETP the Swiss SIX Exchange has permitted.
-
The payment system remains one of the last true monopolies of a modern economy. Financial technology startups and cryptocurrencies have all sought to bust up that monopoly. With its new digital currency, Libra, Facebook may actually succeed by doing what none others have: by creating a de facto central bank to issue it.
-
Facebook’s Libra white paper includes a brief but potentially seismic nod to digital identity standards. With 2 billion users worldwide, Facebook may be able to succeed where others have failed in jump-starting a globally accepted digital ID. Some identity experts say this is even more important than the cryptocurrency, but others question how much control Libra would give users and find its approach overbearing.”
-
Facebook’s Libra cryptocurrency has taken a lot of criticism from Western government officials and media commentators – but it’s not meant for them. A major target market for the Libra is users in developing countries.
-
Facebook published plans for the Libra cryptocurrency in seven languages, including Indonesia’s Bahasa – a move that offers perhaps the clearest glimpse of what Facebook’s fintech ascent might look like.
-
“This article is about: 1) Understanding the investors and people around this project, 2) Understanding the technology of Libra, and 3) Some possible future implications in Bank, Crypto and Financial industries.
-
“We expect that the evolution of payment infrastructure will accelerate. All actors are grappling with what is at stake. For governments and central banks, regulating this transformation will be a prerequisite to avoiding a possible privatization of monetary policy, and for banks and other financial services providers, keeping up with evolving customer preferences and further adjusting the pricing of payments and transfers appears unavoidable.”
-
“Facebook need not create a new bank. And it might avoid banking regulation. But its goal would still be achieved: the power of the state to manage the economy of a nation could be critically undermined in those places where it still exists by the existence of its currency. And, I would suggest this is precisely what the goal of this policy is.
-
For now, PwC can audit eight tokens, including Bitcoin and Ethereum. Each cryptographic requires its own audit tool given the different blockchains they use, Weinberger said, one reason it took so long to design the technology.
-
The ITW Global Leaders’ Forum (GLF), which is a network of leaders from the world’s largest wholesale carriers, announced Monday the launch of a blockchain-based platform. Known as the Communications Blockchain Network (CBN), this will revolutionize the ICT Service Provider industry’s commercial settlement infrastructure, representing an opportunity worth billions to the global industry.tags: Fintech Blockchain
Kiffmeister’s Fintech Daily Digest 06/25/2019
-
“A wider use of new types of crypto-assets for retail payment purposes would warrant close scrutiny by authorities to ensure that that they are subject to high standards of regulation. The FSB and standard-setting bodies will monitor risks very closely and in a coordinated fashion, and consider additional multilateral responses as needed.”
-
François Villeroy de Galhau has announced the launch of a G7 task force that will investigate the impact of stablecoins. It will investigate issues such as the definition of “stable”, what constitutes a stable basket, and whether peg has to be fully fixed or flexible. It will also examine issues related to anti-money laundering, consumer protection and operational resilience, plus any possible impact on the transmission of monetary policy. De Galhau added it would be important to improve existing payment systems, especially where they operate across borders.
-
The Financial Services Committee will hold a hearing on Facebook’s Project Libra on July 17. The Senate Banking Committee will hold its own hearing on the social media giant’s crypto project the previous day.
-
Thomas Moser, alternate member of the Swiss National Bank governing board, suggested that Facebook’s recently announced cryptocurrency project, Libra, is not ruffling any feathers with the regulator (“I think it’s an interesting development and I’m pretty relaxed about it”).
-
Libra’s main stated mission is to service the world’s poor and unbanked. Facebook’s source for the 1.7 billion figure is the World Bank’s Global Findex Database 2017. Findex also believes that 1 billion of these have mobile phones and 500 million have internet access. However, Findex also says that over half of the 1.7 billion come from just seven countries: Bangladesh, China, India, Indonesia, Mexico, Nigeria and Pakistan. More than half of these are in places where cryptos are banned, Facebook can’t freely operate, the country is under heavy FATF restrictions, or it faces other limitations.
-
Fitch ratings believes that Libra represents a step toward a potentially viable cryptocurrency. It incorporates and improves upon elements of existing blockchain technology, while resolving certain inherent drawbacks, such as price instability and governance challenges. Libra also seems to be designed with regulatory acceptance and lawfulness in mind.
-
Economist Stephen Moore, who recently lost out on a bid to join the board of the Federal Reserve, is joining the “Decentral” algorithmic stablecoin team. Decentral bills itself as “the world’s decentralized central bank.”
-
La Banque de la République d’Haiti is considering a pilot to create a digital version of the Haitian Gourde, aiming to improve the domestic payments system and promote financial inclusion in Haiti.
-
JPMorgan Chase is to start trials of its “JPM Coin” cryptocurrency in conjunction with corporate clients.
-
The U.S. SEC is kicking off the public comment period for an exchange-traded fund (ETF) backed by bitcoin and Treasury bills proposed by Wilshire Phoenix Funds to be listed on the NYSE Arca exchange.
-
The U.S. CFTC has cleared LedgerX to offer physically settled bitcoin futures contracts. Unlike the cash-settled futures listed by the CME, when the contract expires, the buyer will receive bitcoin rather than the fiat equivalent.
-
While there have been incredibly successful crypto projects that have leveraged either a capped or uncapped sale, several prominent crypto projects such as the Algorand Foundation are turning to a Dutch Auction for their token distribution with the hopes of bringing more transparency to the process.
-
This book addresses core components of crypto-assets within the Maqasid al-Shari’ah to understand Shari’ah cryptocurrency and its practical mechanisms, and establishes a Halal alternative model of crypto-asset management within the Maqasid al-Shari’ah.
Kiffmeister’s Fintech Daily Digest 06/24/2019
-
Facebook’s announcement speaks to progress about private measures used to facilitate exchange, along with acknowledgement that money is best and most circulated when its value is broadly agreed to thanks to stability of the value. The Libra has the potential to mark the start of something because if widely used, it will open the eyes of the global population to a truth about money: it works best when its value is stable, plus it needn’t be a government creation.
-
The job description gives some specifics on Facebook’s ambitions regarding the future developments of Calibra, including expanding to online and offline commerce and eventually lending and personal financial management.
-
The BIS has cautioned that Libra’s misuse of that data could have “adverse economic and welfare effects”. Companies could, for example, exclude high-risk groups from socially desirable insurance markets, or price discriminate by working out the maximum rate a borrower would be willing to pay for a loan.
-
It is easy to imagine a scenario in which rescuing Libra could require more liquidity than any one state could provide. Recall Ireland after the 2008 financial crisis. When the government announced that it would assume the private banking sector’s liabilities, the country plunged into a sovereign debt crisis. Next to a behemoth like Facebook, many nation-states could end up looking a lot like Ireland.
-
The reserve isn’t quite as great as it seems, though. Like a money-market fund Libra has no capital and no deposit insurance, so any drop in the value of the reserves should mean the value of Libra falls. Losses from fraud, mismanagement or default within the reserve fall on Libra holders, unlike with a normal bank account or bank note.
-
While the initial design calls for 100% reserves in developed country currencies and government debt, that’s illusory, since Libra’s controllers can change the investments at any time. Any country that allows inflation or issues dubious debt can find its currency and debt dropped from reserves. Moreover, a successful Libra would likely switch to a fractional reserve system, with only enough national currency reserves for liquidity purposes, and currency backed either by loans and other risky assets, or nothing at all.
-
To understand how early investors in Facebook’s new Libra blockchain will make money over time, it helps to dig into a new lossless lottery called PoolTogether. Its similarity to Libra is not a completely one-to-one, but the key insight of both is the same: Earning interest on your own money is good, but it’s better to also earn interest on other people’s money.
-
The BIS report’s key point is that the entrance of big tech into finance promises all sorts of efficiency and financial inclusion gains — which is a good thing — but those gains mustn’t come at the cost of other things like privacy, financial stability and market competition.
-
SWIFT will allow blockchain firms to make use of its Global Payments Innovation (GPI) platform for near real-time payments, following a successful proof-of-concept with R3’s Corda platform. https://www.swift.com/future-of-payments
Kiffmeister’s Fintech Daily Digest 06/23/2019
-
The entry of large technology firms (“big techs”) into financial services holds the promise of efficiency gains and can enhance financial inclusion. Regulators need to ensure a level playing field between big techs and banks, taking into account big techs’ wide customer base, access to information and broad-ranging business models. Big techs’ entry presents new and complex trade-offs between financial stability, competition and data protection.
-
Big tech has moved into financial services extensively in China. These companies have also been expanding rapidly in other emerging market economies (EMEs), notably in East Africa, Latin America, and Southeast Asia, East Africa. In the UK and the U.S., fintech has more of a share in providing credit than big tech.
-
One of the most important areas that could be impacted by Libra is remittances, i.e. money transfers by migrants to their families back home, which have proven to be a crucial driver of economic development. According to the World Bank, remittances to low- and middle-income countries reached a record high of $529 billion in 2018, with total remittances climbing to $689 billion. The problem being that sending money to people without access to a financial system, especially in regions most reliant on remittances such as Sub-Saharan Africa, is difficult and costly.
-
To be a validator node and founding member, organizations will need to meet technical requirements and specific evaluation criteria. If the conditions are met, upon approval, the Enterprise will have to make an initial minimum investment of $10 million worth of Libra Investment Tokens issued by the Association. Nonprofits will not be required to make the initial investment. However, they will have to cover the costs to run its node. It is estimated that the price for running the validator node will run approximately $280,000.
Kiffmeister’s Fintech Daily Digest 06/22/2019
-
Libra’s Dirty Secret: Blockchain Firm Claims Facebook Stole its Crypto Model
Hedera executives believe that Facebook potentially hijacked their idea for a council of trusted companies to operate a blockchain, but that the company probably hasn’t broken the law in any way. Hedera hoped to strike a partnership with Facebook, and build their crypto project on a finished product.
-
QuadrigaCX traded millions in fake funds to fund luxury lifestyle
“According to details spelled out in Ernst & Young’s fifth monitor’s report released Wednesday evening, QuadrigaCX appears to have never operated as a legitimate business. By the time the dominoes fell, the exchange owed 76,000 users CA$214 million in fiat and crypto. Only CA$33 million has been recovered, which leaves CA$180 million still missing.”
tags: Fintech CryptoAssets CyberRisk Canada
Kiffmeister’s Fintech Daily Digest 06/21/2019
-
As expected, the Financial Action Task Force (FATF) standards released Friday include a controversial requirement that “virtual asset service providers” (VASPs), including crypto exchanges, pass information about their customers to one another when transferring funds between firms.
-
France is creating a G7 task force to study how central banks ensure cryptocurrencies like Facebook’s Libra are governed by regulations. Governor Francois Villeroy de Galhau said the task force would be led by Benoit Coeure, a ECB board member.
-
Were every Western depositor to move a tenth of their bank savings into Libras, its reserve fund would be worth over $2trn, making it a big force in bond markets. Banks that suddenly saw lots of deposits leave for Libras would be vulnerable to a panic over their solvency; they would also have to shrink their lending. And the prospect of huge sums flowing across borders will worry emerging countries with a fragile balance of payments
-
Individual Libra-holders face risks. One is currency fluctuations. If, say, the yen rises against the basket to which Libra is pegged, Japanese holders of Libra will lose out. The new currency will not yield interest (though neither do many bank deposits nowadays).
-
We need a product that fully disrupts the woefully inefficient global payments system and starts to break the power of the big banks. If Libra launches (the regulatory challenges are not small) and works as a frictionless, almost free and very fast global monetary transmission mechanism, it could be that product. However if it is, it won’t be because it is mimicking “real” cryptocurrencies. It will be because it isn’t.
-
One idea as to how officials might keep CEO Mark Zuckerberg’s dreams grounded in reality is to get under the hood of what goes into the digital currency in the first place. Given Libra wants to back every digital cent with a mix of real-world reserve currencies, that might be the best place to start. Bank of England boss Mark Carney hinted at this in his Mansion House speech on Thursday, proposing that tech firms and other non-banks be allowed to hold funds directly at the central bank.
-
In many respects, he says, Libra is like an ETF for a basket of currencies, except that Libra will not trade on regulated exchanges. In fact, it is so much like an ETF, the US SEC is likely to at least contemplate asserting jurisdiction over the tokens.
-
SWIFT: “We don’t think that cross-border payments challenges should be solved for with closed loop systems. Doing so would easily solve for a subset — or multiple subsets — of participants, but value needs to move everywhere — from every account, to every account. Loops create barriers and friction; they reduce fungibility and portability, they limit competition and they fragment liquidity.”
-
What happens if all users want to sell their Libra currency at once, causing the Libra Reserve to hold a fire sale of assets? If the Libra system becomes intertwined in our global economy in the way Facebook hopes, we would need to consider a public bailout of a privately managed system.
-
Simply put, the Libra Masterplan is a combination of the Bitcoin Playbook (to allow the currency to spread globally without regulatory responsibility) and the WeChat Playbook (to harvest as much data as possible and earn as much ad revenue as possible by introducing money into a popular chat app).
-
“What are they doing with the money, if I give them some dollars to buy the Libra, they’re kinda being fuzzy about that in their whitepaper…The strength of the collateral is a question I would have about it.”
-
“A liquid, stable currency would be attractive to many in emerging markets. So attractive, in fact, that if enough people trade out of their local currencies, they could threaten the ability of emerging market governments to control their monetary supply, the local means of exchange, and, in some cases, their ability to impose capital controls.”
-
Russian government-owned news agency TASS has reported that Russia will not legalize Libra.
-
Open X refers to a new operational age where the financial services industry is moved onto a shared ecosystem or marketplace. In this new paradigm, players leverage data extensively and collaborate with other players to provide customers with a seamless experience.tags: OpenBanking Fintech
-
Canada’s largest credit union and one of the world’s biggest banks, announced a security breach caused by a former employee. The bank said a bank employee had taken the data of 2.7 million home users and 173,000 businesses and associated contacts from its database, without authorization.