Kiffmeister’s FinTech Daily Digest (06/14/2020)

The Reserve Stablecoin Project
The Reserve project is going through the initial testing stage for its Reserve (RSV) decentralized governance stablecoin. The first phase of its development is centralized, where it will be fiat-collateralized and pegged to the US dollar. To get rid of this dependence, RSV will have to make a contrary step towards decentralization and utilize a “basket of assets,” as of now to consist of three collateral tokens: USD Coin, TrueUSD and Paxos, while still keeping the USD peg until it’s finally abandoned. 

Consumer Payment Behaviour in Australia
The Reserve Bank of Australia’s 2019 Consumer Payments Survey provided further evidence that Australian consumers are increasingly preferring to use electronic payment methods. Many people now tap their cards, or sometimes phones, for small purchases rather than paying in cash. Consumers also have an increasing range of options available for making everyday payments. Despite this, cash still accounts for a significant share of lower-value payments and a material proportion of the population continues to make many of their payments in cash.

Paying interest on cash
In this 2018 post JP Koning discusses the idea of paying interest on cash, and explores three ways of doing this. The first way is to use stamping, but this means that banknotes are no longer fungible. The second way is for the central bank to sever the traditional 1:1 peg between deposit money and cash, and have cash slowly appreciate in value relative to deposits, but this imposes a calculational burden on merchants and users. Plus there may be taxation issues. The third way is to run lotteries based on banknote serial numbers, an idea proposed by Hu McCulloch and Charles Goodhart back in 1986, but it introduces the threat of bank runs (the day before the big lottery is set to occur, everyone will withdraw deposits for cash so that they can compete in the draw). JP also discusses Gesell’s “shrinking money” which has recently been proposed in a Celo C-Lab paper.

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