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This document reports on the work done by an internal Banque de France central bank digital currency (CBDC) taskforce led by Christian Pfister.
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WhatsApp will finally be able to roll out its payments services in a phased manner in India after it submitted a revised proposal regarding compliance in January, according to sources.
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Kraken Security Labs, part of the San Francisco-based Kraken bitcoin and cryptocurrency exchange, has warned the widely-used Trezor bitcoin hardware wallet has a “critical” flaw—with hackers able to extract the wallet’s private keys in just 15 minutes.
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Mobile banking firm Varo Money is now set to receive the first “de novo national bank charter” ever given to a fintech startup, with approval from the Federal Deposit Insurance Corporation for deposit insurance. The Office of the Comptroller of the Currency first awarded Varo preliminary approval in September 2018. Varo Bank is now on track to obtain its final national bank charter pending completion of organizational requirements and meeting the conditions of both the OCC’s and FDIC’s Federal Reserve membership. Upon full charter approval, Varo plans to expand to additional types of services including credit cards, loans, and additional savings products. https://www.fdic.gov/regulations/laws/bankdecisions/depins/varo-bank-na-draper-utah.pdf
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The real question is whether any P2P lender can overcome a key problem that plagues unsecured consumer lending in a competitive market: adverse selection. As the probability of default rises, a lender will require a higher interest rate to compensate for the risk. But, higher interest rates attract borrowers who are worse risks. Put differently, the pool of willing borrowers at a high interest rate shifts adversely relative to the universe of those wishing to borrow at a rate they expect to pay.
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“Improving the experience of an extinct (or soon-to-be extinct) product is like installing an escalator on a horse buggy. It may add convenience for existing users, but there are better places to put your money. Yet, that’s exactly what banks and credit unions are doing.”tags: Fintech PaymentSystems
Month: February 2020
Kiffmeister’s Fintech Daily Digest 02/09/2020
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Cryptocrime is expanding. Ponzi schemes and other frauds involving bitcoin and cryptocurrencies lured at least $4.3 billion from investors in 2019, according to Chainalysis. That was a bigger haul than the combined $3 billion in 2017 and 2018.
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Cointelegraph is rolling out a list of who it believes to be the most important and influential people in the cryptocurrency and blockchain world. They’re rolling it out 10 people per day, starting with #100 so it will be a few weeks before #1 is known. As of February 9 they had covered the top 30 which didn’t include @Kiffmeister so the big question is, does he make the top 70 or not!
Kiffmeister’s Fintech Daily Digest 02/08/2020
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This is one commissioner’s proposal. On previous crypto proposals, such as Bitcoin ETFs, Peirce has typically been the sole commissioner in favour — with the others opposed to the obviously terrible nonsense.
Kiffmeister’s Fintech Daily Digest 02/07/2020
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SEC Commissioner Hester Peirce has unveiled her proposal to implement a “safe harbor” for crypto startups, allowing them a three-year grace period after their initial coin offerings to reach a level of decentralization sufficient to pass the Howey test.
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The Australian government has today released a national blockchain roadmap. The 52-page roadmap lists a 12-step approach the government said it will take to help Australia progress towards “a blockchain empowered future.”tags: Fintech
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Tax Friendly Saint Kitts and Nevis Approves Progressive Crypto Bill, Lenient Capital Gains ExemptionThe island country of Saint Kitts and Nevis, located in the West Indies, recently passed a bill that legalizes digital currency assets like bitcoin cash. The act is cited as the Virtual Asset Bill 2020 and it aims to provide the regulation of cryptocurrencies for Saint Kitts and Nevis businesses and residents.
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Bakkt, the bitcoin futures exchange that launched last year, wants to integrate reward points, game tokens, and cryptocurrency into a mobile wallet that will allow consumers to spend them as dollars. Intercontinental Exchange has agreed to acquire loyalty program provider Bridge2 Solutions, whose ownership it will later transfer to its majority-owned subsidiary Bakkt.
Kiffmeister’s Fintech Daily Digest 02/06/2020
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Under Peirce’s proposal, unveiled during a speech at the International Blockchain Congress in Chicago Thursday, crypto startups would have a three-year grace period from their first token sale to achieve a level of decentralization sufficient to pass through the agency’s securities evaluations, including the Howey Test, the famous U.S. Supreme Court assessment.
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The Federal Reserve is looking at a broad range of issues around digital payments and currencies, including policy, design and legal considerations around potentially issuing its own digital currency.
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“Libra’s current trials may mean that its introduction has been delayed. Many consider that it is by no means guaranteed to operate at all. But central banks are well aware that even if Facebook does not manage to bring its project to fruition, sooner or later someone else will succeed, and will introduce a private sector digital payment system. And the issues and implications for central banking, the commercial banking system and the wider economy that their current research has highlighted will not go away.”
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Citigroup and Goldman Sachs have quietly conducted the first equity swap on a new blockchain built using tools originally designed for ethereum. While this first transaction, a total return swap in which one bank agreed to make a payment based on the returns of an underlying asset, and the other based on a set rate, involved only the two counterparties, another 13 are waiting in the rafters.tags: Fintech Blockchain
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This column finds that an economically sustainable network will involve the same cost, regardless of whether it is proof of work or proof of stake. It also suggests that permissioned networks will not be able to economise on costs relative to permissionless networks.tags: Fintech CryptoAssets
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Telegram, the messaging app company currently facing a legal fight with the U.S. Securities and Exchange Commission over its $1.7 billion token sale, revealed more details about the technical specifications underpinning its TON blockchain Wednesday.
Kiffmeister’s Fintech Daily Digest 02/05/2020
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This OMFIF report centres on the findings of a global opinion poll on public trust in monetary institutions, payment characteristics and digital currency. The poll was conducted by Ipsos MORI across 13 advanced and emerging countries. Our findings suggest that central banks are well-positioned to issue digital currency. In almost all countries, respondents indicated that they would feel most confident in digital money issued by the domestic monetary authority. Respondents globally expressed a lack of confidence in digital money issued by a tech or credit card company, particularly respondents from advanced economies.
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Ripple has partnered with Intermex, which will leverage RippleNet to develop faster, transparent cross-border remittance services between the U.S. and Mexico. It will also give Intermex access to Ripple’s XRP-based On-Demand Liquidity (ODL) service as a real-time bridge between sending and receiving currencies.
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In richer developed nations almost 90% of people are online, but this number is less than 20% in the least-developed countries. This column presents the Pathways for Prosperity Commission’s final report, which offers pragmatic suggestions to help developing countries make the most of technological change. It proposes a ‘digital compact’, with countries working towards a shared vision for the future crafted with the input of industry, civil society, and other national leaders.tags: Digitalization Fintech
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Singapore has been named the world’s top nation in terms of digital adoption and which showcases the most favorable environment for digitalization, according to Cisco’s annual Digital Readiness Index. The index, which measures digital readiness of countries based on seven components: ease of doing business, human capital, startup environment, technology adoption and technology infrastructure, ranked Singapore as the world’s most well prepared country for digitalization.tags: Fintech
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WorldRemit has announced a partnership with Alipay, enabling consumers to use the WorldRemit app or website for cross-border remittances to the Alipay app. The international money transfer service to the Alipay app is now available from over 40 countries.
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Crypto businesses are figuring out how to comply with the Financial Action Task Force’s “Travel Rule,” where all crypto transactions above a certain amount must be accompanied by identifying information. Competing visions for the technical implementation have emerged, though there appears to be general agreement on the need for messaging standards. Legal and operational issues will be as challenging as putting technical solutions in place. The FATF is set to kick the tires of a range of proposed tech solutions in June 2020.
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“Welcome to our CBDC Hub! We’ve compiled a collection of quality information and insights related to central bank digital currencies and the future of financial technology.”
Kiffmeister’s Fintech Daily Digest 02/04/2020
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This paper analyzes high-frequency data of the six largest stablecoins by market capitalization and finds strong evidence of excess price variations. It identifies Bitcoin as a source of this excess volatility as stablecoin returns, volatility and volumes are highly correlated with corresponding Bitcoin time-series. Importantly, it also finds evidence that stablecoins contribute to the excess volatility of Bitcoin.
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Fintech is being adopted across markets worldwide – but not evenly. Why not? This paper reviews the evidence. In some economies, especially in the developing world, adoption is being driven by an unmet demand for financial services. Fintech promises to deliver greater financial inclusion. In other economies, adoption can be related to the high cost of traditional finance, a supportive regulatory environment, and other macroeconomic factors. Finally, demographics play an important role, as younger cohorts are more likely to trust and adopt fintech services. Where fintech helps to make the financial system more inclusive and efficient, this could benefit economic growth. Yet the market failures traditionally present in finance remain relevant, and may manifest themselves in new guises.
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Ethereum is the world’s dominant network for stablecoins and it is still growing. However, with more transactional value taken up by them than ETH itself, is this such a good thing?
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The MOU aims to provide a framework for closer cooperation between the Philippine and Indonesian central banks to achieve enhance their payment systems and promote digital financial innovation.
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Visa Inc. is planning the biggest changes in a decade to the rates U.S. merchants pay to accept its cards, hoping to persuade more people to abandon checks and adjusting its fees for new businesses such as ride-hailing services.tags: Fintech
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Worldline SA agreed to buy rival Ingenico Group SA in a 7.8 billion-euro ($8.6 billion) deal the French technology companies say will form one of the largest payment-services providers.tags: PaymentSystems Fintech
Kiffmeister’s Fintech Daily Digest 02/03/2020
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Central banks already issue digital money, but only to a select group of financial institutions. Central bank digital currency would extend this to households and firms. This column examines the proposal for such currency and assesses the opportunities and risks. It argues that while preparations for the launch of Libra have not proceeded according to plan, it has become clear that for central banks, maintaining the status quo is not an option.
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Compliance appears to have been the primary cause for MasterCard’s decision to leave Libra. The Libra association’s key members reportedly refused to commit to “not do anything that is not fully compliant with local law.” Specifically, Banga pointed to anti-money laundering, know your client and data management regulation. Another concern was Libra’s business model. The association does not make it clear how it would make money, with Banga noting that “when you don’t understand how money gets made, it gets made in ways you don’t like.””
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This paper by Katharina Pistor calls attention to emergent forms of digital sovereignty in the hands of private entities. The major focus of this paper will be monetary sovereignty, but it uses this example to draw general implications for statehood in the digital age.
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“Venezuelan customers say that making their payments for Zelle in dollars is “easy and fast” in a context of economic crisis and current service failures.”
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Goldman Sachs is close to striking a deal with Amazon to offer small business loans to its US customers as the Wall Street bank turns to Big Tech to extend a push on to Main Street.
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“A complete analysis of token definitions, their main uses, the future of decentralized applications and token-economy, in an evolutionary path that goes beyond the 3.0 paradigm, crosses that of Industry 4.0, to attain a Society 5.0 concept. These are the contents of this article that, starting from the examination of the term “token”, very often confused in its own meaning, wants to offer the reader a scenario vision, supported by an analysis of the fundamental principles.”
Kiffmeister’s Fintech Daily Digest 02/02/2020
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“The Global Consortium for Digital Currency Governance will aim to increase access to the financial system through innovative policy solutions that are inclusive and inter-operable Opportunities for financial inclusion will be only unlocked if the space is regulated properly and includes public-private cooperation across developed and high-growth markets.”
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“Although this paper does not assess which method of regulation of ICOs and cryptocurrencies can ultimately be qualified as best strategy, we conclude that a positive and facilitating approach offers more opportunities for investors and innovative companies. However, this approach requires a clear and detailed legislative and regulatory framework for all parties involved in the establishment, issuing, storing or trading of cryptocurrencies and ICOs. Such a framework should at least provide boundaries with regard to money laundering and other common forms of cybercrime. Moreover, it should provide some sort of consumer/investor protection and clarity when it comes to tax liability. A legislative and regulatory framework that provides all these aspects will prevent abuse and may enable governments to intervene when issues occur.”
Kiffmeister’s Fintech Daily Digest 02/01/2020
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Denis Beau, First Deputy Governor of the Bank of France, addressed the “What Ambitions For Europe” Stablecoin Conference. Paris Europlace and ConsenSys organized the event this January. Mr. Beau talked about the good and the bad. He outlined three tasks for regulatory authorities working on stablecoin adoption policies.
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Transactions on the Bitcoin network are processed by so-called miners — mostly companies operating vast arrays of computers. As competition increased, many smaller participants became unprofitable and dropped out, while the larger operations have entered into various partnership agreements. As a result, five mining entities — all of them based in China — control 49.9% of all computing power on the network, the highest concentration of mining power ever, a new analysis from TokenAnalyst found.
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Japan’s Line social network, the largest in the country, has announced the launch of its digital currency ‘Link’ in the Japanese market from April. The token has previously been available in all countries except Japan and the US.