Kiffmeister’s FinTech Daily Digest (07/07/2020)

The early history of “Central Bank Digital Currency
Central banks had talked about the idea of CBDCs for years — but with the Libra announcement, the economic astronauts went “this is our moment!” and dusted off their suddenly-popular old musings. But where did the idea of central bank digital currencies come from?

The potential effect of a central bank digital currency on deposit funding in Canada
This Bank of Canada paper looks at how deposit competition from a cash-like central bank digital currency would impact the income and liquidity of the six largest Canadian banks. In plausible scenarios, it finds that the banks could absorb the potential shock to net income and liquidity but experience temporary declines in profitability.

Unleashing the euro’s untapped potential at global level
According to Fabio Panetta, Member of the Executive Board of the ECB, if a euro CBDC is allowed to be used outside the euro area, the euro’s international role could be strengthened if the CBDC represented an attractive payment vehicle or store of value for non-euro area residents. It could have implications for capital flows and the exchange rate of the euro, with potential knock-on effects on euro area and global economic developments. It could amplify the real and financial cross-border spillovers of domestic monetary policy shocks by creating a new channel for their propagation. The magnitude of such effects would depend on the design of the CBDC.

COVID-19: accelerating digital health insurance take-up in China
China’s online health insurance market is growing strongly. All-sector online insurance premiums have grown at an average annual of 45% since 2013. In 2019, online health insurance premiums were up 92% from 2018, the fastest growing of all business lines. Swiss Re surveyed consumer attitudes towards insurance, finding that more than 60% of interviewees prefer to buy simple and cheap insurance covers online, and health insurance is among the top three product types that consumers prefer to purchase online.

Why Fixed Costs Matter for Proof-of-Work Based Cryptocurrencies
This Bank of Canada paper examines how the cost structure of crypto-asset mining affects the response of miners to price fluctuations and the immutability of crypto-asset ledgers that rely on proof-of-work. It shows that the amount of mining power supplied to crypto-assets that rely on application-specific integrated circuits (ASICs), such as Bitcoin, responds less to adverse price shocks than other crypto-assets respond to such shocks, a fact that is instrumental to avoiding double-spending attacks. These results weaken doomsday predictions for bitcoin and other crypto-assets with declining block rewards. However, smaller crypto-assets that rely on the same specialized hardware as larger ones may be less protected.

700,000 Expedia Hotels Can Now Be Paid With Cryptocurrencies via Travala
More than 700,000 Expedia Group hotels and accommodations are now available via crypto-friendly travel booking platform Travala. Bookings can be paid with more than 30 cryptocurrencies, including bitcoin. Despite covid-19, Travala saw a 170% increase in booking revenue from its 2 million properties in 230 countries. /

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