Kiffmeister’s FinTech Daily Digest (07/21/2020)

SEC Commissioner Pierce Blasts Regulator’s Action Against Telegram
U.S. Securities and Exchange Commissioner (SEC) Hester Pierce criticized her agency’s decision to penalize Telegram’s initial coin offering. In her view, Telegram’s decision to sell Grams under a “Simple Agreement for Future Tokens” offering structure should have protected the project from securities violations. However, the SEC successfully convinced a court that the agreements for future Gram tokens counted as securities. She again called for a “safe harbor” to give certain token projects three years to experiment while regulators retooled their frameworks.

Russia to Treat Crypto as a Taxable Property
A new draft of Russia’s new crypto and digital asset legislation passed second reading. The previous draft would make any business issuing or trading crypto using Russia-based infrastructure illegal. There are three rounds of hearings for any bill to pass, but after the second one, the text of a bill is considered final. The new draft suggests that crypto is a kind of property that cannot be accepted as a means of payment. Any lawsuits related to crypto ownership can only be considered by the courts if plaintiffs report their crypto holdings and deals for tax purposes. 

Why coins are scarce and what government, banks are doing about it
US federal regulators and financial industry representatives are expected to release recommendations on how to jump-start the circulation of coins, which has slowed to a crawl during the coronavirus pandemic. Meanwhile, a number of banks are offering consumers bonuses for change brought in, stockpiling coins and strategically moving coins among branches. For example, the Community State Bank in Wisconsin has launched a Coin Buyback Program that pays a 5% premium for change.

Crypto Exchange Group Eyes ‘Bulletin Board’ System for FATF Compliance
A working group including U.S. crypto exchanges Bitgo, Bittrexis, Coinbase, Gemini and Kraken, are working on a joint solution for complying with Financial Action Task Force rules on sharing customer information via a peer-to-peer “bulletin board.” Participants would share addresses on the board and, if another member claims an address, the two entities could then share data P2P to keep personal information out of the reach of hackers.

The MAS proposes new stricter rules for the crypto sector
The Monetary Authority of Singapore (MAS) has proposed new stricter rules for crypto businesses, in line with the Financial Action Task Force (FATF) standards. The regulator wants to have enhanced powers to prohibit any unsuitable entity from conducting business in Singapore and wants to regulate and license crypto businesses that provide services outside of Singapore. The MAS will adopt a risk-proportionate approach, taking into account the nature, severity and impact of the misconduct. The MAS has also proposed raising the maximum penalty for contravening technology risk requirements to SG$1 million.

FDIC Seeks Input on Voluntary Certification Program to Promote New Technologies
The U.S. Federal Deposit Insurance Corp. is seeking comment about a potential set of standards and a certification program intended to make it easier and less costly for financial institutions to partner with technology firms. The request for information will address several matters. For instance, it seeks comment on the idea of the FDIC partnering with a standards-setting organization that would develop best practices for technology firms that want to work with banks. The standards-setter would focus on areas such as credit underwriting models. The FDIC is also exploring the possibility of a voluntary certification program that would assess a technology company’s compliance with the standards.

Philippines Launches Blockchain App to Distribute Government Bonds
The Philippine Bureau of the Treasury, UnionBank and the Philippine Digital Asset Exchange launched a blockchain-enabled mobile application for distributing government treasury bonds. The app will allow citizens to easily invest in retail treasury bonds for as little as 5,000 Philippine pesos. App users will be able to make instant payments using internet payment services such as InstaPay, GCash and Paymaya. They can also pay through internet banking or over-the-counter payment through their UnionBank accounts.

China Adds a New City to Their Fintech Pilot Initiative
The People’s Bank of China (PBOC) has reportedly added Chengdu to the list of regions carrying out fintech innovation supervision pilots. The city is reportedly focusing on big data, artificial intelligence, cloud computing, and blockchain technologies. The other eight regions participating in the pilot program are Beijing, Shanghai, Chongqing, Shenzhen, Xiongan New District, Hangzhou, Suzhou, Guangzhou.

The old and the new of fintech
This article reflects on the effects of technological change on financial intermediation, distinguishing between innovations in information (data collection and processing) and communication (relationships and distribution). Both follow historic trends towards an increased use of hard information and less in-person interaction, which are accelerating rapidly. The article point to more recent innovations, such as the combination of data abundance and artificial intelligence, and the rise of digital platforms. It argues that in particular the rise of new communication channels can lead to the vertical and horizontal disintegration of the traditional bank business model. Specialized providers of financial services can chip away activities that do not rely on access to balance sheets, while platforms can interject themselves between banks and customers. We discuss limitations to these challenges, and the resulting policy implications.

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