Kiffmeister’s Fintech Daily Digest 04/17/2020

“U.S. dollar-backed blockchain tokens are surging in popularity around the world, and this time much of the demand is for payments in normal business transactions, not just to move money quickly between cryptocurrency exchanges. Over the past several weeks, Circle have seen explosive interest and growth in USDC. There is clearly very significant global demand for digital dollars, and the use of digital dollars as a new payment medium.”

A main limitation blockchain faces is that it is deadly slow compared to centralized payment systems run by Visa Inc. and Mastercard Inc. While Ethereum is evolving to close that gap, a network like Ava could gain an advantage on Wall Street if its test numbers of processing 6,500 transactions per second can be replicated in a live environment. Visa says its network can handle more than 24,000 retail transactions per second, while Bitcoin currently processes about six and Ethereum 15.

“Due to the COVID-19 induced economic crisis, small and medium-sized businesses, as well as buyers, will benefit from the spread of digital payment systems based on QR codes. It is in these groups that the main costs of the cashless world are now born. Large retail chains always have lower commission costs than smaller stores around the corner. Buying terminals for a small business is also a greater financial burden than for huge corporations.

“The PBoC has no official document to elaborate systematically on DC/EP design. Several high-level officials, including former governor ZHOU Xiaochuan and current governor YI Gang, have discussed DC/EP in their public speeches and writings. After combing and comparing information from those public channels, I believe DC/EP should have the following key characteristics.”

P2P investors who want access to their money have been hit by withdrawal restrictions and additional fees as the coronavirus pandemic causes a crunch for the sector. Two of the country’s biggest platforms, Funding Circle and Assetz Capital, have introduced new limits for investors.


In the past month, the outstanding value of the top six dollar-linked tokens has surged by more than 25 percent to about $8 billion, according to CoinDesk Research.

“Our proposed digital dollar would be tokenized. Tokenization is the act of turning an asset, good, right or currency into a digital representation with properties sufficient to attest and transfer ownership. In today’s current world, cash is a physical token. To verify the transaction, you only need to confirm the authenticity of the bill. Because each bill is unique, it is impossible to spend the same bill more than once. This differs from account-based electronic money, which uses a reconciliation-intensive, message-based approach to adjust entries in a ledger.”

Rep. Sylvia Garcia, a member of the House Financial Services Committee, said Thursday that the consortium’s revised roadmap “does not address the concerns I raised” in the past. “I will continue to work to make sure that the SEC regulates any such asset as the security that it is under current securities laws,” Garcia said.

Using a rich dataset of signed trades and order books on multiple exchanges, we examine how peg-sustaining arbitrage stabilizes the price of the largest stable coin, Tether. We find that stable-coin issuance, the closest analogue to central-bank intervention, plays only a limited role in stabilization, pointing instead to stabilizing forces on the demand side. Following Tether’s introduction to the Ethereum blockchain in 2019, we find increased investor access to arbitrage trades, and a decline in arbitrage spreads from 70 to 30 basis points. We also pin down which fundamentals drive the two-sided distribution of peg price deviations: Premiums are due to stable coins’ role as a safe haven, exhibiting, for example, premiums greater than 100 basis points during the COVID-19 panic of March 2020; discounts derive from liquidity effects and collateral concerns.

This column argues that aggregate stable coin issuance does not drive crypto prices, in contrast to claims from previous studies. Instead, it claims that issuance behaviour can be explained as maintaining a decentralised system of exchange rate pegs and acting as a safe haven in the digital asset economy. The latter can be demonstrated by the significant stable coin premiums during the COVID-19 panic of March 2020.

Oracle has partnered with Vottun, a company that specializes in the certification and traceability of data on the blockchain, to release a digital health passport that could enable employees currently in lockdown to go back to work.  The digital credentials system — known as an ‘Immunity Passport’ — created by Vottun records your immunity status on the blockchain which can easily be checked.

South Africa’s financial regulators recommended that cryptocurrency “remain without legal tender status” in a roadmap outlining what could become the nation’s first comprehensive crypto laws.

Since miner variable costs are slow moving and fairly constant in fiat terms, miners are required to sell less of their block rewards to cover their expenses during periods of rising crypto prices. On the other hand, when crypto prices are falling, they are required to sell more. Under this theory, miners have a pro-cyclical effect on the market, in that they further exacerbate price increases.