Kiffmeister’s FinTech Daily Digest (05/23/2020)

JPMorgan Says Central Bank Digital FX a Danger to U.S. Power
JPMorgan analysts don’t see the U.S. dollar being toppled as the world’s reserve currency anytime soon, but “more fragile” aspects of dollar dominance, including in trade settlement and the SWIFT messaging system, could be at risk. “Offering a cross-border payments solution built on top of a digital dollar would, particularly if designed to be minimally disruptive to the structure of the domestic financial system, be a very modest investment to protect a key means to project power in the global economy,” they said. “For high-income countries and the U.S. in particular, digital currency is an exercise in geopolitical risk management.”

CDBC should be blockchain-based, interoperable and programmable by design
“A CBDC 2.0 will be issued and decentrally governed either on a national or on a supranational level, across multiple jurisdictions. This implies a different set of legal, monetary, and fiscal policies, some of them automated, required to be codified and put in place across nations… Decentralized governance will result in fast and cheap cross-border transactions, pseudonymity, personal data protection, and international operability. CBDC 2.0 will be interoperable at the protocol level so that data exchange and functionality should be easily accessible and transferable… The currency should be interoperable on a supranational level, meaning that emerging economies could suffer less from purchasing power inequality.”

Chris Brummer on Ether Futures
ErisX launched the first U.S. futures contracts for ether. It’s the first time a futures product has been devised and sanctioned by the CFTC for a crypto-asset besides bitcoin. Equally notable is that the listing is happening with a product whose operational underpinnings are generally understood to be more complex than bitcoin’s. But perhaps the truly interesting thing about the launch is the relative absence of criticism concerning what is effectively the financialization of the risk of the (digital) asset.

Nearly $5 billion in Tethers were issued since January. Why?
Bitcoin’s price is determined by the total dollars, both fiat and Tether, in the system. Nicholas Weaver, a researcher at the International Computer Science Institute in Berkeley, believes that actual dollars in the system are depleted as Bitcoin miners need cash to pay their electricity costs. If the amount of real dollars in the ecosystem hits zero, Bitcoin will collapse, he argues. (Exchanges, typically those that lack links to traditional banking, use Tether in lieu of real dollars as a way to bring liquidity to the crypto markets and hedge against volatility.)

Full Reserve Banking, “Narrowbanks” for Digital Currency and the China Model
On May 26 (9am EDT) Jeremy Allaire (Circle), Michael Kumhof (Bank of England), Tommaso Mancini-Grinffoli (IMF), and Dr. Chuanwei David Zou (Wanxiang, PBOC) will discuss the concept of, “Full reserve money, the implications of a digital currency and the future of the international monetary system.”

Average Bitcoin transaction fees up over 2,000% in 2020
Average Bitcoin transaction fees increased 2,213% since January 1. Since the date of Bitcoin’s block reward halving, fees continued to increase by 144%. Over 94MB Pending transactions in the Bitcoin mempool means the network is now as clogged as it was in January 2018.

Posted from Diigo: