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While most digital assets have been suffering, stablecoins have been surging since the market downturn in mid-March and tether (USDT) is capturing more than 70% of BTC trades today. Besides tether, a wide range of other dollar-pegged cryptocurrencies have also benefited this month, as the market valuation of eight different stablecoins combined is well over $7 billion.
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The U.S. SEC has opposed Telegram’s request for clarity regarding the geographic scope of a court injunction barring the company from distributing its Gram tokens.
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The combined effects of the hash rate decrease and the ensuing outflow of miners from the market have resulted in arguably one of the biggest blows to the Bitcoin network since 2011. The negative impact is difficult to fully assess at this time. However, the reasons for the slump are disputable and are being attributed to a number of factors — from the upcoming BTC halving and the raging coronavirus pandemic to a worldwide recession causing miners to leave the market.
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Coinmetrics presented a framework for understanding miner economics and how to best navigate the upcoming block reward halving. It reasons from first principles rather than relying purely on empirical data. It applies this framework to the upcoming halving for Bitcoin, Bitcoin Cash, and Bitcoin SV.
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Coinbase reported that its customers typically buy 60% more than they sell, but during the crash, that figure jumped to 67%. It opined that ultimately, Bitcoin’s value prop should not be defined by extraneous market dynamics, but rather by its unique properties that make it a potentially attractive store of value.
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Thailand’s Siam Commercial Bank will be opening up its RippleNet-powered consumer cross-border payments app to companies.
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According deVere Group, the use of its fintech apps in Europe has risen 72% during the last week of March.
Month: March 2020
Kiffmeister’s Fintech Daily Digest 03/30/2020
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“It’s too late to create a CBDC for the current crisis. But as part of the exit strategy we should plan to create a CBDC as soon as possible and create a constitutional right to universal basic income, so that when the next disaster hits, people know that they will survive.”
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For now, it seems more likely that operators will try to build (and charge) adjacent businesses made possible by these stablecoins instead of passing on costs [of negative interest rates] to retail users, e.g. via inflating the token supply relative to deposits as a form of usage tax, or implementing an additional transaction fee (PAX already does this for its gold-backed token.)
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Microsoft has filed a patent application filed with the World Intellectual Property Organization for a system that can mine crypto-assets using data collected from humans as they exercise or read an advertisement. Sensors would detect activity associated with specific tasks and convert it into computer-readable data to solve computational problems, in much the same way as a conventional proof-of-work system. Microsoft suggested in its patent application that the system would be fully centralized.
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The Tron Foundation has launched its own MakerDAO-like stablecoin system called “Djed.” The USDJ stablecoin will be generated through decentralized smart contracts on the TRON network. Anyone can pledge TRX as collateral to generate USDJ, which is pegged to the US dollar through Collateralized Debt Positions using autonomous feedback mechanisms.
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Santander said the solution, One Pay FX, will be coming to Mexico “in early 2020.” Initially launched in 2018, One Pay FX is a money transfer solution and leverages RippleNet (formerly xCurrent) to settle cross-border transactions. It does not use XRP.
Kiffmeister’s Fintech Daily Digest 03/29/2020
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“Right now, though, speed is of the essence. There is no time to create entirely new payments infrastructure to deliver coronavirus relief. Ideally, Treasury will find a way to leverage the infrastructure of the enormously successful Direct Express program to avoid sending paper checks. ”
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The Banque de France is calling for applications to experiment with a wholesale central bank digital currency for interbank settlements.
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“If every token of value is a “security,” token distribution becomes extremely difficult. Up until the Telegram ruling, a project would initially sell their tokens in a securities law-compliant private or overseas offering. The purchasers then sit through the holding period mandated by the 1933 Act. Thereafter, those purchasers might resell the tokens, often through listing on an exchange. “
Kiffmeister’s Fintech Daily Digest 03/28/2020
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Going on the offense with a fresh filing on March 27, the lawyers representing Telegram claim that the preliminary injunction issued by Judge Kevin Castel only applies to US-based purchasers. They were reportedly only 39 participants who bought nearly 1 billion Grams when its $1.7 billion worth ICO raised $424.5 million from a group of US vetted investors.
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Ernst & Young, the trustee overseeing the bankruptcy case for the failed Canadian crypto exchange, will be turning over all of Quadriga’s user info and data to the country’s tax collector.
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The World Health Organization has partnered with major blockchain and tech companies to launch MiPasa, a DLT-based platform for sharing COVID-19 data to enable early detection of COVID-19 carriers and infection hotspots.
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Dai is minted by users taking on collateralized debt positions, where collateral is deposited in an Ethereum smart-contract, with a percentage of the asset’s value being paid out in Dai. The collateral then gets released once the tokens are repaid, and the Dai are destroyed. Loans that can’t be supported by their collateral are placed into liquidation proceedings, in which the collateral is auctioned for Dai to repay the debt. But the price drop allowed bidders to win liquidation auctions for 0 DAI — further worsening Maker’s crisis.
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A number of crypto firms, including Ripple, Coinbase and Binance, have been granted an exemption from holding a license under the Payment Services Act for digital payment token services until July 28, 2020.
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“Many [stablecoin] white papers are obfuscated with jargon—terms left undefined and used inconsistently across other projects and the financial literature. In other cases, system components appear to be mislabeled. For example, a component that clearly meets the definition of a security or a derivative might instead be labeled a bond or a loan. “
Kiffmeister’s Fintech Daily Digest 03/27/2020
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It’s no surprise that the digital dollar was removed from the relief package. Setting up the FedAccounts system would be “really complicated,” says Davis Polk & Wardwell’s Jai Massari. “That is a big tech build, it raises lots of legal questions of all sorts, and it is not practical as a way to get immediate stimulus payments out to individuals.”
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Bitcoin rose from $3,867 to $7,000 in the 13 days to March 25. Yet, throughout the 81% recovery rally, miners sold more coins than what they generated, according to the miner’s rolling inventory (MRI) figure, a measure created by crypto data company ByteTree to track the changes in inventory levels held by miners.
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This BNC report explores bitcoins’ emerging resilience due to its exposure to contagious narratives and the macroeconomic drivers for store of value assets during this recession. From there we assess what the strength of both gold and bitcion is to adapt and recover to a new economic paradigm after COVID-19 and whether this is the shock that proves bitcoin is antifragile?
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According to data from Skew, aggregated open interest for all Bitcoin futures contracts — which include CME, BitMEX, Binance, OKEx and Huobi — fell from more than $4.2 billion to just $2 billion since March 1.
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The plaintiff’s primary argument in this case has been that Ripple Labs advertises the XRP token as a utilitarian tool to further greater business interests. They assert that the company instead uses the sale of XRP as its primary source of revenue, having no real interest in using the token for any other purpose. They have presented as evidence the fact that XRP is not needed for Ripple’s key services, such as xVia and xRapid (now RippleNet). Ripple Labs denies this claim, and insists that it has always been transparent about its use of XRP.
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Negative interest rates can potentially pose a challenge to the ability of USD-backed stablecoins to operate as-is,” Garrick Hileman, head of research at Blockchain.com, told The Block. “Specifically, the types of backing assets held by a stablecoin operator may need to be adjusted in a negative rates environment, and such changes may introduce additional risk to maintaining the 1:1 redemption peg.
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The ruling against Telegram’s Gram token plans may be the death knell for SAFT—the “simple agreement for future tokens”—a once popular idea for launching an initial coin offering. That’s according to what Gary Gensler, former Commodity Futures Trading Commission chairman.
Kiffmeister’s Fintech Daily Digest 03/26/2020
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Some investors in the Telegram Open Network (TON) are reportedly ready to get their money back. In October, TON investors rejected the option to get around 77% of their money back and agreed to postpone the launch of TON to April 30, 2020.
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First conceived earlier this year, eThaler gets its name from the thaler, a silver coin used throughout Europe for hundreds of years, from which the word “dollar” is derived. A group of professionals from consulting firms Accenture and InfoSys and the Itau Bank in Brazil, have been working on the open-source project in their free time for the past six months to explore the future of central bank currency issued on a blockchain.
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The Bank of Uganda is encouraging banks and mobile network operators to further reduce fees on mobile money transactions and other digital payment charges to limit the use of cash and bank branch visits, increase daily transaction and wallet size limits for mobile money transactions, to make the cost of money for the business community and commercial banks low.
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The Bitcoin network hash rate has just taken a steep plummet and is now down almost 45% from its 2020 peak. The hash rate measures the number of calculations that the network can perform each second. A higher hash rate means greater competition among miners to validate new blocks; it also increases the number of resources needed for performing a 51% attack, making the network more secure.
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March 27 will see the expiry of Bitcoin options open interest worth 49,400 BTC ($328 million). By far the largest expiry from now until the end of June, the event may already be pressuring BTC/USD.
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While physical delivery of Bitcoin upon contract expiry has significantly increased, other metrics for Bakkt in March — the volume of traded contracts and open interest — are both significantly down.
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The TON Community Foundation, a group of more than two dozen software developers and investors, who are now discussing possible ways to launch the Telegram Open Network (TON) without the messaging platform’s participation.
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The Maker Foundation has handed governance over the smart contract that underpins the MakerDAO (MKR) protocol to MKR token holders.
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The transfer of MKR token control from it to the Maker governance community is now complete. The MKR token contract is now 100% in control of MKR holders. With MKR holders now in full control of that contract, decentralized governance is the only avenue for changing MKR token authorizations.
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It appears that the auction has helped MakerDAO to achieve its objective. Over 4.3 million DAI stablecoins have been raised to cover the bad debt across a total of 86 auctions. However, because it was formatted as a reverse auction in which all bids were a fixed 50,000 DAI, participants “bid” by lowering the number of MKR tokens they would accept.
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The Global System for Mobile Communications reported that the number of registered mobile money accounts surpassed one billion. It found that regulation that enables low-cost services for the financially excluded has been crucial to reaching that milestone. However, certain policy interventions, such as sector-specific taxation and data localization requirements, are putting pressure on the industry and may have long-term negative impacts on financial inclusion gains, innovation and achieving sustainable development goals.tags: Fintech MobileMoney
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A virtual card is a digital alias of a credit or debit card. Rather than being embodied in the form of a plastic card, a virtual card is just a number in a database. Once you’ve successfully applied for a regular debit or credit card, the bank will let you create virtual cards that are associated with that card. By using a virtual card to make a payment, users can protect their main card number from being exposed to the merchant. Whereas regular credit and debit cards are permanent, a virtual card can be configured for single-use or set to expire after a fixed amount of time has passed.
Kiffmeister’s Fintech Daily Digest 03/25/2020
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Telegram is seeking to appeal a United States federal court’s recent ruling in favor of the Securities and Exchange Commission to halt distribution of GRAM tokens.
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Judge Castel found that the 175 initial investors, “expected to profit from Telegram’s continued support for Grams and the underlying TON Blockchain through the distribution of Grams by the Initial Purchasers to the public.” That fits the four-part Howey test that defines what is and is not a security, he said.
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Global stablecoin initiatives may, depending on their structure, present features that are typical of regulated securities or other regulated financial instruments or services. This paper identifies possible implications that global stablecoin proposals could have for securities market regulators.
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According to Coin Metrics data, stablecoins gained market share, spreads on spot and futures markets widened, and transfer fees spiked as people rushed to deposit coins. Crypto holders may have been turning to stablecoins in an attempt to preserve their capital while the market experienced a major downturn.
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The Australian Securities Exchange (ASX) has indefinitely postponed the launch of its blockchain-based alternative of its equities clearing and settlement system. Originally set for a launch by the end of 2020, the exchange earlier delayed it till April next year. Now, however, there is no specified timeline for the launch.
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The Commodity Futures Trading Commission on Tuesday laid out its view on what it means to take “actual delivery” of a digital asset. The long-awaited guidance is significant because it means that there could be penalties for trades that don’t let the buyer take physical possession and control of a coin within 28 days — the cut off line for when trades in commodities like wheat and oil start to be considered futures contracts.
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Improvements in distributional efficiency and increased access are just part of the “digital dollars” appeal. They could also allow for a more innovative transmission of fiscal and monetary policy, especially in times of crisis.
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Pioneering Swiss crypto bank Sygnum unveiled a stablecoin pegged to the Swiss franc on March 20. Sygnum’s ‘DCHF’ “settlement token” is backed 1:1 by funds held with the Swiss National Bank.
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A payments revolution has prompted a proliferation of shadow digital money. This money is unsound. It is not insured by the government, nor is it backed by safe assets. Federal regulation is needed to guarantee safety and soundness, to restore full monetary control to the Federal Reserve, and to prevent a race to the bottom between competing state and federal regulatory regimes. Congress should pass new legislation preempting state money service businesses (MSBs), offering federal MSB charters, and authorizing the OCC to establish a special regulatory regime for MSBs that restrict issuers to investing in cash and cash equivalents at banks or the Federal Reserve. With these changes, innovation in payments is just that — innovation in payments—and not also unauthorized and unsound money issuance.
Kiffmeister’s Fintech Daily Digest 03/24/2020
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The bill, introduced by Senator Sherrod Brown (D-Ohio), is not proposing a crypto dollar but a digitized version of the existing dollar, a process advocates including former Commodity Futures Trading Commission Chairman Chris Giancarlo have called for to maintain U.S. financial hegemony.
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In low-income areas where the Fed may not be able to have a branch, it will partner with postal retail facilities to carry out this mandate. For access to the digital cash, ATMs will be provided at U.S. Post Offices.
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Under the draft bills shared last week, dubbed the “Take Responsibility for Workers and Families Act” and the “Financial Protections and Assistance for America’s Consumers, States, Businesses, and Vulnerable Populations Act,” the Federal Reserve – the nation’s central bank – could use a “digital dollar” and digital wallets to send payments to “qualified individuals,” consisting of $1,000 for minors and $2,000 to legal adults.
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While bitcoin’s (BTC) price is rallying, traders have scaled back their open interest positions in bitcoin perpetual contracts listed on the crypto derivatives exchange BitMEX.
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As the cryptocurrency market faced one of its worst days on Mar. 12 dubbed “Black Thursday” following Bitcoin‘s crash to $3,600 USD, BitMEX was put in the spotlight following a crash on its system. In a blogpost published on the website, the largest BTC Futures exchange explained what transpired on Mar. 12 and Mar. 13, to give traders a much needed clarity.
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Open-source project Celo is calling on blockchain innovators to participate in CeloCamp, an entrepreneurial initiative that seeks to highlight the potential of global financial inclusion, mass adoption of digital money and the acceleration of blockchain startups.
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The CFTC published a 35-page document stating that in its view, “actual delivery” occurs when a customer has complete control over the asset and the offeror no longer has any control over the asset by the end of 28 days after the transaction.
Kiffmeister’s Fintech Daily Digest 03/23/2020
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A version of the US House emergency stimulus bill dated March 22 includes a passage that, if passed, would lead to the creation of a “digital dollar” to be used for providing stimulus payments. The digital dollar is defined as “a balance expressed as a dollar value consisting of digital ledger entries that are recorded as liabilities in the accounts of any Federal [R]eserve bank; or an electronic unit of value, redeemable by an eligible financial institution (as determined by the Board of Governors of the Federal Reserve System).” The text also refers to a “pass-through digital dollar wallet” that “means a digital wallet or account, maintained by a member bank on behalf of a qualified individual, where such qualified individual is entitled to a pro rata share of a pooled reserve balance that the member bank maintains at any Federal [R]eserve bank.”
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David Longworth, former Deputy Governor of the Bank of Canada on the major macro-level risks arising from current and future digital financial innovation and what the implications are for Canadian regulators. Regulators should enact a number of policies, including requiring the use of Explainable AI (XAI) in lending decisions, taking care not to rush into open banking regulations, extending the coverage of stress tests to include stresses relating to borrowing from non-bank financial intermediaries, and increasing the amount of data on lending and short-term financing from lenders, whether regulated or not.
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Bitcoin derivatives exchange BitMEX continues to field criticism after attempting to explain a mass liquidation event during which BTC/USD crashed 60%. In this blog post BitMEX addressed questions from traders about the event and how its “insurance fund” works.
Kiffmeister’s Fintech Daily Digest 03/22/2020
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The Italian Red Cross is now seeking Bitcoin donations to purchase emerging medical equipment after its first-crypto initiative surpassed its goal within three days.
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“Fintechs that help people do things remotely, like communicate about work, apply for a mortgage or make electronic payments, appear to be thriving, at least so far.”
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In its recently filed annual report to the U.S. Securities and Exchange Commission MoneyGram reports $11.3 million in revenue as a result of its Ripple partnership. Ripple Labs pays the remissions company as an incentive to use RippleNet in its operations.
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Several members of the Facebook-backed Libra Project have announced their alliance with a rival stablecoin project known as Celo. Since the middle of March, members that have joined the Celo Alliance for Prosperity include, among many others, Coinbase Ventures, Anchorage Mercy Corps, Andreessen Horowitz and Bison Trails Co.
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Clients of Silvergate, the popular San Diego-based bank known for servicing cryptocurrency firms, reported issues with certain money wires to the firm. Silvergate CEO Alan Lane said wiring issues were tied to an outage by its payment processor, Finastra, which sits between Silvergate and Fedwire, the real-time settlement network that connects the country’s banks.tags: Fintech CryptoAssets
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Embarking on an instant payment project after these three major economies have already done so may be an advantage for the Fed. While interconnectivity, fraud prevention and directory services might be something the Fed wants to solve at the initial launch – given its three objectives related to ubiquity, safety and efficiency – each approach faces a trade-off against time to market. The potential impact of Facebook’s libra may push timing higher up the pecking order. The Fed faces important choices ahead.