Kiffmeister’s FinTech Daily Digest (07/26/2020)

Design choices for central bank digital currency: Policy and technical considerations
This Brookings paper enumerates the fundamental technical design challenges facing CBDC designers, with a particular focus on performance, privacy, and security. Through a survey of relevant academic and industry research and deployed systems, it discusses the state of the art in technologies that can address the challenges involved in successful CBDC deployment. It also presents a vision of the range of functionalities and use cases that a well-designed CBDC platform could ultimately offer users.

Digital Dollar Project In Light Of Recent Congressional Hearings
Recent U.S. House Finance Committee hearings expose the views of some of the principal players on retail central bank digital currency (CBDC) in the United States. In particular, it was evident from Fed Chair Jay Powell’s remarks that the Fed would not be open to private operators creating the digital dollar infrastructure. He said he believed private entities should not have a role in designing a digital dollar: “The private sector is not involved in creating the money supply, that’s something the central bank does.”

It is notable that the Digital Dollar Project (DDP) whitepaper doesn’t touch on digital identity. Without a firm notion of digital identity and its anonymous expression, a digital wallet functioning in multiple capacities is impossible to construct. However, in the United States, there is a perception that a national identity scheme would be antithetical to privacy and anonymity. This has led to the creation of an ad-hoc system of digital identity patched together from social security numbers, tax id numbers, biometrics, drivers licenses, utility bills, passports, and birth certificates. There is a lack of a national privacy law with teeth. This will present a major challenge for retail CBDC and secure digital wallets.

Prime Brokerage Enters Crypto Market, Sort Of
Ultimately, for all of the crypto prime brokers’ valiant efforts, the Tower of Babel of state regulations and the lack of oversight under longstanding traditional securities laws could stymie cryptofund managers, particularly registered investment advisers from using a third-party service provider. The maze of state laws that apply to trust companies and money service companies is a major impediment to the development of a coherent model for trading and custody of digital assets. For now cryptofund managers will likely have to balance their operational and liquidity needs with asset safety and legal uncertainty.

GNU Taler — ‘Digital Cash’ that is socially responsible
GNU Taler is a privacy-preserving payment system. Customers can stay anonymous, but merchants can not hide their income through payments with GNU Taler. This helps to avoid tax evasion and money laundering. Payments are always backed by an existing currency. Payments are made after exchanging existing money into electronic money with the help of an Exchange service, that is, a payment service provider for Taler. When making a payment, customers only need a charged wallet. A merchant can accept payments without making their customers register on the merchant’s Website. Taler is based on blind signatures.

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