Kiffmeister’s FinTech Daily Digest (07/28/2020)

Bank of Canada Deputy Governor Tim Lane said that CBDC should have limits on how much anonymity it gives users, there would need to be a trade-off in terms of privacy were a CBDC to act as a replacement or complement to cash. A central bank should not issue CBDC that would increase the scope for illicit transactions to take place. The Bank of Canada has been exploring different CBDC infrastructure models to find an optimal balance between regulation and privacy, but CBDC would not be able to offer the same cash-like degree of anonymity on an unlimited scale. 
This paper finds that central bank digital currency (CBDC) may not be widely accepted in the presence of a sizeable informal economy. Based on a two-sector monetary model, it shows an L-shaped relationship between the informal economy and CBDC. The CBDC can formalize
the informal economy but this effect becomes marginally significant in countries with significantly large informal economies. In order to promote CBDC adoption and improve its effectiveness, tax incentives and positive CBDC interest rates can be useful tools. It further finds that adjustments to the CBDC interest rate can trigger a reallocation effect between formal and informal sectors, that improves the effectiveness of both conventional monetary policy and fiscal policy. 
The Tel Aviv Stock Exchange is launching a Central Blockchain Securities Lending Platform to provide a single national market where Israeli institutions can lend securities directly to one another. This replaces a complicated and disjointed lending system and will allow the securities lending market to reach its full potential. It has been in the testing phase since March 2020 and is set to go live in November. 
Investments into insurtech funding rounds rebounded to reach $1.56 billion in the second quarter of 2020, a more than 71% increase on the first-quarter of the year, according to Willis Re. Global investments into insurtech start-ups fell at the start of the year, as the impacts of the Covid-19 pandemics in capital markets put some investors attention elsewhere. However, the second-quarter rebound was driven in part by later-stage investments, including four large investment rounds of US $100 million or greater.  
Mastercard expanded its crypto-asset Accelerate program, making it simpler and faster for partners to bring secure, compliant payment cards to market. The move comes as Wirex becomes the first native crypto-asset platform to be granted a Mastercard principal membership, allowing it to directly issue payment cards. Consumers can instantly convert their crypto-assets into fiat currency, which can be spent everywhere Mastercard is accepted, although currency will always enter Mastercard’s network as traditional fiat currency.  
The U.K. Financial Conduct Authority and the City of London will collaborate on the pilot of a digital sandbox to support innovative firms tackling COVID-19 challenges. It will supply relevant high-quality data sets and expertise in the areas of detecting and preventing fraud and scams, supporting vulnerable customers, and improving access to finance for SMEs financially affected by the pandemic. The Review’s main objectives are to ensure U.K. fintechs have the resources to grow, and to create the right conditions for continued widespread adoption of fintech solutions. 
The U.K. Treasury relaunched its independent Fintech Strategic Review. Originally announced in March but delayed due to Covid-19), it will aim to identify key priority areas for focus by the industry, policymakers and regulators in order to support the continued growth and mainstream adoption of fintech solutions in the UK.