Kiffmeister’s FinTech Daily Digest (06/12/2020)

Stimulus Payments Delivery During A Pandemic Using FedAccounts And Digital Tools
On June 11, 2020 the U.S. House of Representatives held an open hearing of the Task Force On Financial Technology. One of the focuses was on the idea of direct accounts provided by the Fed for citizens (FedAccounts) using post offices as the brick and mortar access points. The second focus was on the blockchain-based central bank digital currency (digital dollar) that would be distributed through a two tier system, similar to cash distribution today. And the Electronic Transaction Association advocated enhancing the current payment rails to solve the problem of the unbanked by the use of no-cost wallets and debit cards. For other coverage:

JPMorgan Says Bitcoin Crash Survival Shows It Has Staying Power
JP Morgan reports that the past few months saw the first real stress test for the cryptocurrency market and the results were mostly positive. However, rather than a store of value, cryptocurrencies have traded more like risky assets like equities — a significant change relative to the prior couple of years. And, rather than a medium of exchange, price action points to their continued use as speculative vehicles. Somewhat surprisingly, liquidity on major Bitcoin exchanges was more resilient in March than traditional macro asset classes like FX, Treasuries, Gold and equities. Stablecoins emerged largely unscathed as well, though their volatility is still high relatively a truly pegged token.

Eastern Caribbean Central Bank charts a digital future
The Eastern Caribbean (EC) Digital Cash six-month pilot will launch late July 2020 in Antigua and Barbuda, Grenada, Saint Lucia and St. Kitts and Nevis. Bitt’s experts are conducting online training of local teams within Licensed Financial Institutions (LFIs), Agencies and Merchants.The ECCU payment system will require a reexamination of the regulatory framework, the engagement framework and the currency framework and a pilot project using the blockchain based digital currency, dubbed DXCD will test and expose the issues that arise from turning the promise inherent in money from paper to bits.

Fnality adviser: wholesale CBDCs not in central banks’ DNA
Fnality, formed of a consortium of 14 major banks, is aiming is to create the means of payment on-chain for financial markets by use of its Utility Settlement Coin (USC). The USC is similar to JPMorgan’s JPM Coin, but backed by central bank deposits. Fnality is currently seeking approval for such deposits from several central banks, including the Federal Reserve, the Bank of England and the European Central Bank, with the intentions to receive its first green light in Q3 of 2020.

National Science Foundation Funds Research Into Crypto Dollars
The U.S. National Science Foundation awarded a $225,000 grant to blockchain startup Key Retroactivity Network Consensus (KRNC) to design crypto features for the dollar. The idea is that the digital currency would be distributed free of charge to users in proportion to their existing wealth, and uses a “proof-of-balance” protocol that is based on holders’ wealth. https://www.krnc.io/ https://arxiv.org/abs/1909.07433

Quadriga Downfall Stemmed From Founder’s Fraud, Regulators Find
An Ontario Securities Commission investigation has concluded that the collapse of crypto-exchange QuadrigaCX was the result of fraud by its founder Gerry Cotten. QuadrigaCX shut down in January 2019, weeks after Cotten died unexpected while on his honeymoon in India, leaving behind a mystery of what happened to the Bitcoin and other cryptocurrencies on the platform. The collapse caused at least C$169 million in losses for 76,000 investors in Canada and abroad.

Indian Government Again Proposes Blanket Ban on Cryptocurrencies
India is reportedly looking to introduce a law to ban crypto-assets, as the government sees a legal framework as being more effective than a circular from the Reserve Bank of India (RBI) in this regard. The spur for the draft cabinet note was apparently the March 4 decision of the Supreme Court to quash the April 2018 circular from the RBI that prevented banks from providing services in support of crypto-assets.

Malaysian Government to Encourage Consumers to Use Digital Wallets via RM 750 Million Adoption Plan
Malaysia’s COVID-19 “PEJANA” recovery plan includes an allocation of RM 750 million towards promoting the adoption of digital wallets by local consumers. RM 50 will reportedly be credited into the electronic wallet accounts of around 15 million residents. The RM 50 will also be matched with cashbacks, various discount schemes, and vouchers from digital wallet providers that take part in the program.

Algorand Integrates Tech for Anti-Money Laundering Compliance
Algorand has linked up with Chainalysis to help bake regulatory compliance into their blockchains. Chainalysis will provide a know-your-transaction solution, allowing its foundation to monitor large volumes of on-chain activity for the native ALGO token and report any suspicious transactions to the authorities. It will not provide a comprehensive solution to “travel rule” compliance, but it will help Algorand pick out transactions that trigger the rule, as well as identifying relevant senders and receivers.

Custody Battle Pits Institutional Boomers Against Crypto Upstarts
Crypto custodians are in a race to build the next State Street or BNY Mellon. There are only a handful of these types of large custody banks and most of them have been around for hundreds of years. But crypto is such a striking example of old world meeting new that it offers firms a rare opportunity to break into a market that would simply be impossible under normal circumstances.

Saudi Arabia goes blockchain! … maybe? Who knows
There’s a pile of countries that are really into press releases about “blockchain” — with zero verifiable evidence of anything in particular actually happening, even when you try to look into it. Saudi Arabia seems to be another one. Some crypto news stories speculated that Ripple Labs was involved, and others mentioned Saudi Arabia participating in IBM’s TradeLens supply chain blockchain pilot programme in 2019, both without any verifiable evidence.

InterWork Alliance Launches to Standardize Token-Powered Ecosystems Worldwide
The InterWork Alliance (IWA) today formally launched operations as a platform-neutral, non-profit organization dedicated to creating the standards frameworks needed to increase innovation across token-enabled ecosystems. The InterWork Alliance will set the standards for building distributed applications, including appropriate frameworks for tokenizing items of value, writing contracts over those tokens, and privacy-preserving analytics of multi-party data. It will provide the frameworks needed for businesses to create standardized token definitions and contracts in non-technical, business terms, and then turn them over to developers for coding on any platform of choice. Launch members include Accenture, Digital Asset, DTCC, IBM, ING, Microsoft,  Nasdaq, R3, SIX Digital Exchange, and UBS.

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