Kiffmeister’s FinTech Daily Digest (06/25/2020)

Wirecard collapses into insolvency
Wirecard collapsed on Thursday as the once high-flying German payments service provider announced it would file for insolvency following revelations of a multiyear accounting fraud. The Aschheim-based technology company, which a week ago had a market value of €13bn, said in a regulatory statement that it faced “impending insolvency and over-indebtedness”.

Designing a CBDC for universal access
The Bank of Canada is exploring how a central bank digital currency (CBDC) could be designed for universal access. One potential concept the it is investigating is a custom universal access device (UAD) to securely store and transfer CBDC. The device could incorporate attributes of cash and take advantage of specialized technologies. Such a device should be manufactured at a low cost and issued by the Bank to ensure maximum inclusion. A UAD could embed a local, secure store of value, be network-independent and operate for long periods on a local power source. If there is an infrastructure failure, a UAD may prevent the interruption of digital transactions.

Security of a CBDC
This Bank of Canada paper explores the security aspects involved in constructing and deploying a central bank digital currency (CBDC). It proposes a taxonomy to categorize and analyze the many CBDC solutions available in the marketplace. It concludes that a public distributed ledger technology (DLT) platform remains unsuitable for CBDC. The integrity of a CBDC is a core risk and must be managed across all CBDC use cases. Local store-of-value solutions offer extreme resilience in times of crisis but carry local integrity risks. A hybrid system maximizes access across all CBDC use cases while remaining available during times of crisis. An operational CBDC system would be a prime target for organized crime and other nation states. Proper safeguards are required to minimize risks, and threats must be continuously monitored.

Telegram Agrees to Pay $18.5M Penalty in SEC Settlement Over Failed TON Offering
Telegram will pay $18.5 million and notify the U.S. Securities and Exchange Commission (SEC) if it plans to issue any sort of digital currency in the next three years in a proposed settlement with the securities regulator. The settlement ends a six-month court fight with the agency, and also indicates the messaging platform will be responsible for a $1.22 billion disgorgement that is offset by $1.19 billion paid as “termination amounts” in investors’ purchase agreements and the amounts that some investors loaned to Telegram earlier this year. Telegram has 30 days to pay the SEC penalty and up to four years to pay back investors under the settlement. 

The Digitization of Money and Payments
The U.S. Committee on Banking, Housing and Urban Affairs will meet remotely on June 30 starting at 10:00am ET to conduct a hearing entitled The Digitization of Money and Payments.  The witnesses will be: The Honorable J. Christopher Giancarlo, Senior Counsel, Willkie Farr & Gallagher LLP and former Chairman, U.S. Commodity Futures Trading Commission; Mr. Charles Cascarilla, Chief Executive Officer and Co-Founder, Paxos; and Professor Nakita Q. Cuttino, Visiting Assistant Professor of Law, Duke University School of Law.

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