Kiffmeister’s FinTech Daily Digest (07/22/2020)

Banks in US Can Now Offer Crypto Custody Services, Regulator Says
According to the U.S. Office of the Comptroller of the Currency (OCC) national banks may provide cryptocurrency custody services on behalf of customers, including by holding the unique cryptographic keys associated with cryptocurrency. The OCC also reaffirmed that national banks may provide permissible banking services to any lawful business they choose, including cryptocurrency businesses, so long as they effectively manage the risks and comply with applicable law. JP Morgan is one such national bank which provides banking services to crypto companies (eg Gemini and Coinbase).

Visa Blog Post Hints at Future Digital Currency Projects
Three key values will now steer Visa’s digital currency playbook: maintaining robust data protection standards; remaining network and currency agnostic; and partnering with projects that align with the payments firm’s existing expertise. Already a crypto bridge for tens of millions of merchants, Visa cast its digital currency partnerships as critical to preserving what it said was six decades of innovation. Visa is also working directly with policymakers and non-governmental organizations to help shape the dialogue around digital currencies, including central bank digital currency.

Hot Money Credits to Kick-Start a Stalled Economy?
A “hot money credit” (HMC) program is like a regular cash transfer program, except that the money comes with an expiration date. The idea is not new – Silvio Gesell proposed the idea in the 1890s – and it is closely related to negative interest rate policy (NIRP). The goal of both policies is to incent a coordinated private spending effort to kick-start a stalled economy. The resistance against NIRP stems in large part from the fact that it constitutes a tax on accumulated money balances which, whereas an HMC policy’s “threatened tax” applies only to newly created money distributed as a gift. As such, a well-designed HMC policy implemented through U.S. Treasury authority would eliminate the need for NIRP implemented through the Federal Reserve.

The WFE calls to address development of global stablecoins with a taxonomy
The World Federation of Exchanges encourages global standard-setting bodies to generate a taxonomy for all global stablecoins (GSCs) and crypto-assets. In adopting the use of a global taxonomy, a common understanding would develop of whether a GSC or crypto-asset fits a certain classification or definition (eg do the features of the crypto-asset meet the definition/classification of a security) which would, in turn, reduce the variance in application of regulation, to GSCs/crypto-assets, between jurisdictions. Whilst differences might remain across the globe in securities regulation itself, the fragmented approach to the type of GSC/crypto-asset which falls under that regulation would potentially be reduced. This results in a more universal application of regulation, especially if the principle of ‘same business, same risk, same rules’ is applied and is focused on regulatory objectives and outcomes.

Vitalik Buterin Warns High Fees Threaten Ethereum’s Security
Vitalik Buterin has called for reform to the Ethereum’s fee system, warning that rising transaction fees could undermine network security. The idea is based on a paper that suggests miners’ increasing reliance on transaction fees may incentivize selfish mining practices in a bid to extract greater profits, risking disruptions to how transactions are processed. Buterin is advocating for the implementation of Ethereum Improvement Proposal (EIP) 1599 to reform Ethereum’s fees. It involves burning base fees to reduce miners’ reliance on transaction tariffs.

Pennies as state failure
A society with a broad range of opinions about the monetary system (many of which are erroneous conspiracies and lies) is going to be much harder to change than a society that is neutral or uninterested about the monetary system. In the U.S., a fix as simple and smart as removing the penny will inevitably be misinterpreted (often willfully so) by crowds of monetary populists. And so any wise bureaucrat or legislator who wants to remove the penny will have to expend huge amounts of extra time combating misinformation. So maybe they won’t bother. And thus the state has failed Americans, and they are stuck with the penny. But we trusting (and perhaps naive) Canadians have been saved.

Korean Government Proposes Tough New 22% Tax on Crypto Trading
The Korean Ministry of Economy and Finance tabled a proposal to introduce a 22% tax –including the 2% local income tax – on crypto trading profits above KRW 2.5 million. If approved by Korea’s National Assembly, the tax rule will come into force in October 2021.
The new tax rule will also apply to non-residents and foreign companies who trade on Korean exchanges.

Russian Lawmakers Finally Pass Country’s Major Crypto Bill
Russia’s new crypto and digital asset legislation passed third and final reading. It is expected to be officially adopted in Russia on Jan. 1, 2021. The bill provides a legal definition to digital assets and legitimizes crypto-asset trading in Russia. However, the bill prohibits the use of crypto-assets as a payment method.

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