Month: September 2020

Kiffmeister’s #Fintech Daily Digest (09/11/2020)

~ kiffmeister

 Lagarde Says Euro Zone Will Reveal View on Digital Currency Soon

According to European Central Bank President Christine Lagarde, “the Eurosystem has so far not made a decision on whether to introduce a digital euro. But, like many other central banks around the world, we are exploring the benefits, risks and operational challenges of doing so… The findings of a Eurosystem task force are expected to be presented to the public in the coming weeks, followed by the launch of a public consultation.”  

Bank of France: stablecoins could impact EU financial sovereignty ‘for decades’

Banque de France Governor Villeroy de Galhau warned that Big Techs, capitalizing on their global market penetration, will build private financial infrastructures and monetary systems, competing with the public monetary sovereignty since they will position themselves as issuers and managers of a universal currency. Prospective central bank digital currency (CBDC) could then end up being issued at the ‘backend of a future Big Tech stablecoin. Individual jurisdictions could then respond to the overwhelming pressure of private payments assets by issuing their own CBDCs, both domestically and globally — but without sufficient coordination in the global financial community. The articulation of these multiple CBDCs with private sector initiatives would risk sidelining input from other central banks. He stressed that the European Central Bank (ECB) and the Eurosystem as a whole cannot allow itself to lag behind on a CBDC.  

Emirates Digital Wallet debuts digital cash platform

Emirates Digital Wallet, along with First Abu Dhabi Bank, FAB, Mashreq Bank, National Bank of Fujairah and Mastercard launched the klip Digital Cash Platform. Klip offers a simple way for users to transfer money to others via a mobile number and allows users to seamlessly pay for goods in-store using the existing merchant reach offered by its partner banks. It further enables small businesses to start accepting digital payments via mobile phones, meaning more businesses can tap into the digital economy. It is available whether or not the user has a bank account – there is no minimum requirement, other than being a resident of the UAE and having a SIM card. klip is instant, and when a klip transaction is made no personal financial data is transferred.  

‘Pay later’ products take off this year as PayPal, Microsoft allow customers to delay the bill

“Buy now, pay later” is no longer for big-ticket items like furniture. It’s becoming increasingly popular for smaller items online, and is being quickly adopted by merchants and payment companies. Point-of-sale loans lets consumers buy something in increments, often without interest. Companies may eventually charge interest down the road, as well as late fees or processing fees. Similar to a credit card issuer, they may also get a percentage of the transaction price. Microsoft will let consumers finance the new $499 XBox in monthly payments, and PayPal launched its Pay-in-4 installment product.  

USDC Stablecoin Supply Is up 250% in 2020. Here’s Why

The total supply of USDC has topped $1.8 billion, rising more than 250% since the beginning of 2020, likely spurred on by the explosion in DeFi’s yield farming popularity (where liquidity providers are rewarded for staking stablecoins and other digital assets in DeFi protocols for use in loan issuance and other financial activities.) The acceleration in USDC issuance also may be powered in part by the August 27 release of USDC version 2.0, an upgrade that improved security by transitioning some administrative USDC-related tasks to on-chain processes and allowed integrated projects to pay gas fees for users when transacting with USDC. Also, it’s supported by and easily obtained on Coinbase. 

Bank of Thailand launches DLT-based bond issue platform

Under its DLT Scripless Bond Project, the Bank of Thailand (BOT) has successfully launched a new blockchain-based platform for government savings bond issuance. It aims to enhance investors’ buying experience, improve operational efficiency and reduce overall cost. It is a collaborative effort among eight institutions, which are BOT, Public Debt Management Office, Thailand Securities Depository Co., Ltd, Thai Bond Market Association and selling-agent banks, including Bangkok Bank, Krungthai Bank, Kasikorn Bank, and Siam Commercial Bank. In the next phase, the infrastructure will expand to support all government bonds, both retail and wholesale. 

Blockchain may break EU privacy law—and it could get messy

Blockchain technology may offer greater levels of security than the internet at large, but a new research paper claims its approach to privacy may be in violation of European “right to be forgotten” laws. Once someone’s details are embedded in a blockchain, the system never forgets. Those details might be encrypted, but they are also part of an irreversible ledger, and one that’s on the cloud. As long as a blockchain is in existence, it clashes with the European ruling that people have the right to retract data. All of this leaves the blockchain industry in a massive quandary, because the technology’s transparency and immutability is one of its biggest selling points.  

Liquidity Usage and Payment Delay Estimates of the New Canadian High Value Payments System

As part of modernizing its core payments infrastructure, Canada will replace the Large Value Transfer System (LVTS) with a new Real-Time Gross Settlement (RTGS) system called Lynx. An important question for policy-makers is how Lynx should be designed. This paper presents simulation results to aid in the design of Lynx. The main interest of policy-makers is to measure the liquidity demands of the system and the corresponding amount of time it takes to settle the value and volume of transactions typically observed in LVTS. To assess this, we developed a simulation environment of the Lynx system using the description of its vendor. We evaluated a variety of configurations of Lynx under several payment demand scenarios. With an initial liquidity comparable to one pledged in LVTS today, Lynx with a first in, first out (FIFO) bypass configuration would require a higher level of liquidity than LVTS or a plain-vanilla RTGS with pooled liquidity. This suggests Lynx could be made significantly more efficient, warranting further research. 

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Kiffmeister’s #Fintech Daily Digest (09/10/2020)

~ kiffmeister

China’s DC/EP central bank digital currency — what we know

The People’s Bank of China (PBOC) says it’s been working on a central bank digital currency (CBDC) since 2014, and they announced in July 2019 that they were moving the CBDC project to active status — to turn it into something releasable to the public. But there have been no official source hard details from the PBOC about the project. The PBOC seems reluctant to promote DC/EP. In this post David Gerard provides a nice summary of what we do and don’t know. 

Major Bank-Led Digital Cash Settlement Project Gets Delayed

Technological development work on the Fnality‘s “Utility Settlement Coin” initiative has progressed, but it still needs regulatory approval. It hopes to receive that approval by the first quarter of 2021. Initially spearheaded by UBS Group AG, the project has been in the works for more than five years and seeks to create a more efficient way for banks to settle financial transactions. In June 2019 banks including Barclays Plc, Banco Santander and Credit Suisse Group AG announced the creation of Fnality. The company had said it expected the project to be commercialized by 2020. The project is looking to replace some of the cumbersome processes and paperwork involved in transferring value between financial organizations by using wholesale stablecoins denominated in U.S. dollars, yen, euro, sterling and Canadian dollars, and backed by deposits at central banks (ie “synthetic” wholesale central bank digital currency). 

Fintech Can Come Out of the Shadows

In a case pending in the Second U.S. Circuit Court of Appeals, New York financial-services superintendent Linda Lacewell claims a company can’t be a bank unless it accepts deposits, no matter that it offers other traditional bank services. According to the U.S. Office of the Comptroller of the Currency (OCC) this claim is legally and historically wrong, as well as risky. The OCC determines which companies qualify for charters as national banks or federal savings associations and supervises their activities. It contends that consumer protection and the safety and soundness of the U.S. financial system are at risk if the lawsuit succeeds, as services that formerly were subject to federal supervision are increasingly occurring in the shadow banking sector, outside the OCC’s regulatory oversight. 

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Kiffmeister’s #Fintech Daily Digest (09/09/2020)

~ kiffmeister

Mastercard Launches Central Bank Digital Currencies (CBDCs) Testing Platform

Mastercard announced a proprietary virtual testing environment for central banks to evaluate central bank digital currency (CBDC) use cases. The platform enables the simulation of issuance, distribution and exchange of CBDCs between banks, financial service providers and consumers. Central banks, commercial banks, and tech and advisory firms are invited to partner with Mastercard to assess CBDC tech designs, validate use cases and evaluate interoperability with existing payment rails available for consumers and businesses today. 

The Eastern Caribbean Central Bank DCash is coming soon!

The Eastern Caribbean Central Bank (ECCB) will soon launch its DCash digital version of the EC Dollar. The central bank digital currency (CBDC) will be rolled out initially in Antigua and Barbuda, Grenada, Saint Kitts and Nevis, and Saint Lucia. With it, for example, folks who live in Grenada will be able to send DCash to family and friends in Saint Kitts and Nevis. Those who shop in Saint Lucia but live in Antigua or Barbuda will be able to send DCash from Antigua Barbuda to pay merchants for goods and services in Saint Lucia. 

Maker seemingly gives up on Dai peg as interest rates are raised above 0%

MakerDAO (MKR) set interest rates on most assets, with the notable exclusion of Ether (ETH), back above 0%. Lowering interest rates is generally seen as a way of stimulating DAI creation, which is supposed to lower its price to its intended $1 peg, but DAI is trading at $1.03, significantly above its intended price. Maker has yet to find a satisfactory mechanism to entice arbitrageurs to bring the price down to $1. Several proposals based on strong-handed market interventions are being discussed, while external observers often bring up the idea of setting negative interest rates. The Maker community appears to be unwilling to cross that line for now, however. 

Top U.S. regulator pushes ahead with plan to reshape banking, sparking clash with states

The U.S. Office of the Comptroller of the Currency will start processing applications for charters from payments companies, including fintech firms and crypto-asset exchanges. A charter would give these companies the ability to operate across state borders with a single set of rules, as well as to expand the suite of financial services they offer. The push to broaden who receives bank charters touches on hot-button debates such as whether non-depository institutions should have direct access to the U.S. payments rails — giving them the ability to transfer money without going through a bank — and what the proper separation is between banking and other types of commerce. 

Evidence-Based Blockchain:Findings from a Global Study of Blockchain Projects and Start-up Companies

An evaluation was conducted of 517 blockchain firms against PCIO framework of evidence-based practice: Problem – Comparison – Intervention and Outcomes. It concluded that almost half of the blockchain firms show no explicit evidence of the problem to be solved. Approximately one-third fail to cite a comparison and intervention analysis, and less than 2 per cent demonstrate evidence of outcomes backed by filtered (critically appraised, peer reviewed) information. 

Deloitte’s 2020 Global Blockchain Survey

Deloitte’s 2020 Global Blockchain Survey called on over 1,500 executives to gauge changing attitudes and skepticisms towards blockchain technology. 83% see digital assets as an alternative to or complete replacement for fiat currency sometime in the near future. 90% cite digital identities as playing a significant role in upcoming strategies. 

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Kiffmeister’s #Fintech Daily Digest (09/08/2020)

~ kiffmeister

Sistema de Dinero Electrónico (2014–2018) — Ecuador’s sort-of CBDC

Ecuador’s Sistema de Dinero Electrónico (SDE) had a limited launch in late 2014, and a full public launch in 2015, but the system failed to take off and was shut down in March 2018. This was arguably a central bank digital currency (CBDC), because it was issued by the Banco Central del Ecuador (BCE). However, the currency was the U.S. dollar, which has been the national currency since March 2000. Ecuadorians could get an account at the BCE with an identity card and a mobile phone, after which they could go to an authorized outlet and deposit cash into the account. Each dollar in SDE was backed by a dollar stored at BCE, so this was more like e-money or a central bank-backed stablecoin. 

On the other hand, it does seem to fit the definition of a central bank digital currency (CBDC) that I use as eligibility for my running tabulation of CBDC explorers: 

Central bank digital currency (CBDC) is a digital representation of sovereign currency that is issued by a jurisdiction’s monetary authority and appears on the liability side of the monetary authority’s balance sheet.

Bank of Canada 2019 Cash Alternative Survey Results

The Bank of Canada’s latest Cash Alternative Survey (CAS) found that Canadians’ cash holdings remain stable, and crypto-asset adoption remains limited and concentrated among few demographics. It found that only 5% of Canadians own crypto-assets (5%), though 85% had heard of them. 8% of people classed as having low financial literacy said they own crypto-assets, compared to 4% among those classed as having high financial literacy. But 90% of people with high financial literacy are aware of crypto-assets, versus only 72% of those with low financial literacy. 

Tracking Mobile Money Regulatory Responses to COVID-19

The GSMA has updated its analysis of the impact of COVID-19 regulatory responses on mobile money operators. Countries that have established emergency COVID-19 social cash transfer schemes are increasingly using mobile money to distribute money to vulnerable groups. There is also a preference for mobile money as a distribution tool for donor agencies involved in COVID-19 related social cash transfers. However, COVID-19 regulatory measures have since lapsed for a majority of the countries in accordance with the official communication issued by the regulatory authorities, particularly the waiver of mobile money fees. However, many regulators are moving to permanently maintain higher transaction and balance limits, and more flexible know-your-customer (KYC) and on-boarding. 

Hyperledger Capital Markets SIG

The Hyperledger Capital Markets Special Interest Group (CMSIG) represents industry professionals working together to study how Hyperledger DLTs interact with Capital Markets use cases. This covers issuance and trading of instruments to continued market-making, management of risk, program-trading, regulations, capital requirements, traceability, post trade settlement, custody including corporate actions and more. This group also explores architecture, identity and performance related considerations specific to Capital Markets and DLTs. 

Citibank/Imperial College London Digital Money Index

The adoption of digital money has tangible benefits for governments, businesses and consumers alike. To understand these opportunities, Citi and Imperial College London developed a Digital Money Index six years ago to track the development of digital money readiness across 84 countries. It measures readiness across four pillars; supportiveness of institutional environment, financial and ICT infrastructure, digital money solutions from government and private sector, and enthusiasm from consumers and businesses.  

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Kiffmeister’s #Fintech Daily Digest (09/07/2020)

~ kiffmeister

Opium Protocol launches first? CDS derivative contract on USDT

Decentralized derivatives exchange Opium has introduced credit default swaps (CDS) on Tether (USDT). In this case, a sharp drop in USDT’s price from the usual $1 is used as a proxy for Tether turning out to be insolvent. So if the token fell to 70 cents, the writer of the contract would pay the buyer 30 cents at maturity. The CDS seller provides insurance through posting collateral in USD Coin (USDC), which is locked in a smart contract until maturity of the CDS contract.   

A comparison of key derivatives protocols in DeFi

Although the past months have seen an increase in attention for decentralized derivatives in DeFi, the space is still absolutely tiny compared to the traditional derivatives market and is expected to grow exponentially to the total growth of DeFi. Let’s take a closer look at some of the derivative protocols available in DeFi today. Most of the protocols available today are limited to offering options, however some protocols stand out due to novel mechanisms or advanced features. In this piece we will compare the protocols on some key facets that will help traders find their ideal protocol and investors find investment opportunities in decentralized derivatives. 

Fishy Business: What Happened to $1.2B DeFi Protocol SushiSwap Over the Weekend

SushiSwap, created by animated and anonymous character Chef Nomi, is a fork of VC-backed UniSwap, a decentralized exchange. SushiSwap promised to take all of the best features of UniSwap and improve on its governance by creating a community owned fork using a voting token called SUSHI. Anyone who joined the community could become a liquidity provider by staking SUSHI and ETH on UniSwap, which would eventually be transferred to SushiSwap when it is launched. The combination of your liquidity stake, or voting power, is your *SUSHIPOWAH*. Chef Nomi swapped his Sushi LP tokens for some $13 million of Ethereum (ETH) worth about $13 million in what bears strong resemblance to an “exit scam.” 

Ethereum Is a Cartel-Controlled High Inflation Chain According to Block.one

Brendan Blumer, CEO at Block.one, the company behind the development of EOS, one of the largest platforms for building decentralized applications (dApps) claims that Ethereum is controlled by a 3 pool cartel that refuses to upgrade the scalability of the protocol, while taking billions per year in mining fees as well as $90 per transaction, and selectively reversing transactions. It’s worth noting that, last year, Block.one had to pay a $24 million fine to the US Securities and Exchange Commmission (SEC) for selling unregistered securities via its record-breaking, multi-billion dollar initial coin offering or ICO. Block.one has also been the subject of several lawsuits. 

UPI to launch NFC-based payments, to challenge Visa, Mastercard in India

The National Payments Corp. of India (NPCI), which operates the Unified Payments Interface (UPI), plans to add near-field communication (NFC) capabilities to its payments infrastructure and is in talks with payment aggregators to push the product across point-of-sale (PoS) devices. The move is expected to expand UPI’s reach to offline merchants by tapping the PoS ecosystem and thus trigger more peer-to-merchant transactions. The NFC capability will allow UPI to take on rival private payments networks, such as Visa and Mastercard, which have been expanding their contactless payments network based on NFC over the past year through tap-on-go payment systems.  

RTGS Global launches Stage One of its network in partnership with Microsoft

RTGS Global launched Stage One of its real-time gross settlement platform which it says could revolutionise cross-border bank payments. The platform RTGS allows commercial and central banks to settle transactions instantly, authenticating the exchange of funds and creating real-time liquidity between participants. Stage two this autumn will see RTGS Global integrate its technology as an automatic add-in to Microsoft Azure, as part of a partnership with Microsoft, and further lowering the barrier to adoption for many banks.  

Design choices for central bank digital currency

Users will need a secure way to hold their funds and send provably legitimate transactions. For cryptocurrency users, management of the secret keys needed for authentication has been unduly burdensome, resulting in heavy reliance on financial intermediaries. Unless central banks innovate a user-friendly secret-key-management system, CBDC users are likely to pursue the same route, potentially impeding the very financial inclusion that is a major goal of CBDC creation. Workable approaches to custody of funds and/or secret keys will be of pivotal importance in a CBDC. 

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Kiffmeister’s #Fintech Daily Digest (09/06/2020)

~ kiffmeister

Cornering the Ethereum fee market

Amber Group suggests a way to destroy the Ethereum economy. The Ethereum network is fit to burst – 97% of the network is currently used up, and the price of the “Gas” tokens that pay for smart-contract transactions on the network has soared – getting a transaction processed within 30 seconds now costs about $5. Amber Group postulates that a malicious actor could short ETH and then corner the market for Gas tokens and force their price to spiral upwards to the point that the whole Ethereum network collapses along with ETH prices. However, a major risk of this strategy is that software to scale Ethereum, potentially freeing up space on the network, may come out in the next couple of months. 

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Kiffmeister’s #Fintech Daily Digest (09/05/2020)

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Design choices for central bank digital currency

This article provides a summary of a recent Brookings working paper on considerations for central bank digital currency (CBDC) design. Much like the recent IMF working paper that covers similar territory, it finds that the benefits and risks of CBDC are complex, encompassing financial, legal, and technical considerations and the interplay among them. And each country will have to take into account its specific circumstances and initial conditions before deciding whether the potential benefits of introducing a CBDC outweigh the possible costs. It concludes that a two-layer infrastructure with central bank management of the digital ledger and existing financial institutions providing customer service is a likely choice, because it would maintain existing financial sector business models and avoid disintermediation of the financial system.  

What will China’s central bank digital currency mean for Alipay and WeChat Pay?

China’s digital currency will have two tiers, comprising the first level distributed by the central bank to commercial banks, and a second layer used by retail customers. The first-level design of the CBDC has been “basically completed” along with the formulation of technical standards and interoperability tests. The e-yuan will next be distributed to payment service providers and other private sector institutions, the central bank said in a July report published by the International Monetary Fund (IMF). To avoid such upsets, the Peoples Bank of China (PBOC) told the IMF that it is likely to limit e-yuan to small, retail transactions by setting maximum daily and yearly limits on payments and that it will only process large amounts by appointment. The PBOC said it may apply fees for large-sum or high-frequency transactions. It will also offer no interest on accounts. 

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Kiffmeister’s #Fintech Daily Digest (09/04/2020)

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How programmable digital assets may change monetary policy

The high velocity of digital assets as programmable money, and/ or as a security that can be pledged as collateral, offer a way for central banks to rely less on traditional money metrics as a monetary policy tool. 

A second U.S. startup becomes a bank

Jiko has obtained a bank charter by acquiring its partner bank, Mid-Central National Bank of Minnesota. Jiko has a very stripped-down vision of banking, with no maturity transformation and no credit risk. Instead of being held in deposits, customer money is swept into Treasury Bills, which are liquidated when a person uses a debit card or withdraws cash from ATMs. The start-up secured approval for the move from the Office of the Comptroller of the Currency and the Federal Reserve Bank of San Francisco. Since Jiko passes on the yield from investments and most of the swipe fees on an upcoming debit card to customers, it will likely charge a “Netflix-like” subscription fee. 

Ghana continuing central bank-issued digital currency planning

The Bank of Ghana, continues to explore central bank digital currency. The new digital currency will reportedly be named the ‘e-cedi’ and the Bank is in talks with key stakeholders to finalise the details of the project. In a recent keynote address at the 23rd Annual Banking Conference in Accra, Governor Addison reportedly described the move as a “pilot project” which will initially be trialled in a sandbox environment. 

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Kiffmeister’s #Fintech Daily Digest (09/03/2020)

~ kiffmeister

Bank of England Governor Bailey on Stablecoins and Digital Currency

Bank of England Governor Bailey: “Stablecoins need to offer coin-holders a robust claim, with supporting mechanisms and protections to ensure they can be redeemed at any time 1-to-1 into fiat currency… Some stablecoin proposals do not include a legal claim for coin-holders. And some stablecoins propose backing in instruments that may have material market, credit and liquidity risk, but do not have the money protections I have outlined. While this might be acceptable for speculative investment purposes, it would not be for payments widely relied upon by households and businesses…  Commercial bank money is only acceptable for wide scale use… if it is denominated in [the jurisdiction’s fiat currency,] convertible into [that] fiat money at par… on demand.” 

Norges Bank central bank digital currency project phase three status report

The Norges Bank central bank digital currency (CBDC) project is now in its third phase. The working group has reviewed different elements of the relevant technologies and solutions chosen for pilot testing in other countries. Validation work is being performed in three partly overlapping work streams; pecification of characteristics, meetings with outside parties, and analysis of relevant technological solutions. It has focused on how different variants and elements of DLT, but also variants where the actual CBDC register is not necessarily based on DLT, can contribute to the adequate fulfilment of necessary and desirable characteristics. The final report from phase 3 will contain a recommendation for a framework for pilot testing if a decision is made to move forward. 

Swiss Canton Zug to Accept Taxes in Bitcoin, Ether From Next Year

By some definitions, this move makes bitcoin (BTC) and ether (ETH) legal tender. From next February, citizens and companies based in Zug will be able to pay up to CHF100,000 of their taxes in either BTC or ETH. No partial payments in crypto-assets will be accepted. For the initiative, authorities have partnered with the Zug-based crypto broker and custodian Bitcoin Suisse, which will convert crypto-asset payments into Swiss francs and hand them over to the tax office. 

Ethereum Is Eating Bitcoin

Bitcoin can be wrapped onto the ethereum blockchain using a number of ethereum-based tokens, such as WBTC, which has surged in popularity since May, according to data from Dune Analytics. During some periods in August, more bitcoin was wrapped onto ethereum than was created by bitcoin miners. Bitcoin wrapped onto the ethereum blockchain using WBTC is backed 1:1 by bitcoin and minted by locking up bitcoin on the bitcoin blockchain. It’s thought that by wrapping bitcoin onto ethereum and making it compatible with smart contracts, users will be able to unlock tools such as lending, liquidity provision, and decentralized exchanges. 

Vitalik Buterin reveals why a 51% attack on ETH 2.0 ‘would not be fatal’

Ethereum co-founder Vitalik Buterin has dismissed concerns that a 51% attack on Ethereum 2.0 would be ‘fatal’.  The scenario emerged as a result of the burgeoning popularity of Yearn.finance’s yETH vault which has already amassed more than 137,000 ETH on its first day. Arcane Assets’ Chief Intelligence Officer Eric Wall suggested this mean the yETH vault admins will probably end up controlling enough Ether to theoretically launch an attack on Ethereum 2.0, a  Proof-of-Stake network. But Buterin asserts that the malicious actor “could attack once”, but would be quickly slashed or soft-forked and lose control over the coins needed to maintain the attack. 

RealT Market Coming to the Aave Protocol

RealT Allows investors to directly buy shares of LLC managing properties and each RealT Token holder regularly earns their share of the property revenues directly into their wallet with stablecoins. On the Aave RealT market users will be allowed to deposit their tokens into the Aave Protocol and use them as collateral to borrow stablecoins. Intrinsically RealT assets collect stablecoins on a regular basis, and this can be leveraged in these loans as “income” that can contribute to the repayment of the loans organically, creating loans that at least partially repay themselves. 

Bittrex lists Turkish stablecoin BiLira

The Turkish lira-backed stablecoin BiLira is now open for trading on cryptocurrency exchange Bittrex Global. Users can now use their ERC-20 BiLira tokens to buy Bitcoin (BTC) and USDT on Bittrex Global. There are currently 20 million BiLira tokens in supply. TRYB tokens are minted at the time of deposit, and an ID verification process takes place before the issuance. Users then redeem their tokens for fiat currency and transfer them on the network using the BiLira platform. 

Brazil Poised to Approve WhatsApp Pay, Central Bank Head Says

Brazil’s central bank chief says Facebook-owned WhatsApp will have its payment feature accepted during a normal regulatory process, as concerns about competition and data protection are mitigated. The company is seeking to have its partnership with Mastercard and Cielo green-lighted, even as the central bank discusses alternatives with other players. 

Senate Banking Committee chairman seeks clarity from OCC on crypto payments rules

The chairman of the U.S. Senate Committee on Banking, Housing, and Urban Affairs is pushing the Office of the Comptroller of the Currency (OCC) to craft policy on crypto payments. In a September 1 letter from Sen. Mike Crapo (R-ID) to OCC acting comptroller Brian Brooks, the lawmaker said it would be “prudent” to provide clarity on payments in light of the office’s recent announcement that national banks’ and federal savings associations are eligible to custody cryptocurrency. 

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Kiffmeister’s #Fintech Daily Digest (09/02/2020)

~ kiffmeister

China’s Digital Currency May Come With Hardware Wallets as Well

CoinDesk grabbed a copy of the Terms and Services that users were required to agree to follow when signing up for the China Construction Bank (CCB) DC/EP central bank digital currency wallet, before it was pulled from the bank’s website. It showed that apart from DC/EP wallets within CCB’s mobile app that was offered, separate hardware wallets for DC/EP may also be in the works. It would be offered in a four-tier system; a user could only maintain a balance of up to 10,000 ($1,500) yuan in a tier-2 DC/EP wallet. The cap for a single transaction would be less than 5,000 yuan daily and annual accumulated spendings could not exceed 10,000 yuan and 300,000 yuan, respectively. Similarly, tier-3 and tier-4 DC/EP wallets would have tighter caps on wallet balances as well as daily and annual spendings but the Terms did not indicate if there will be any limit on tier-1 wallets. 

Trading volume surges on decentralized exchanges

Trading volume on decentralized crypto exchanges (DEXs) has surged in the last year — and is up over 1500% since January 1st. The growth has been driven by a rising demand to trade ERC20 tokens, accompanying a booming decentralized finance (DeFi) sector on Ethereum (ETH). The top 3 exchanges Uniswap, Balancer and Curve accounting for over 90% of all DEX volume. Of these, Uniswap, an open-source project developed by Hayden Adams that allows users to swap in and out of ERC-20 tokens, is far and away the leader with a market share of 67%. 

Crypto Users Apathetic About Privacy

According to Coinmetrics, the combined daily transactions of three privacy coins, Zcash (ZEC), Monero (XMR), and Grin (GRIN), equated to only 6% that of Bitcoin (BTC), despite the coins offering substantially more privacy. Moreover, those cryptocurrency holders who do use privacy coins aren’t necessarily maximizing those coins’ features. For example, despite Zcash having a fully private mode, fewer than 2% of transactions made with the currency use this method. The overwhelming majority of Zcash users choose to use transparent transactions or partially private transactions.  

Ethereum Network Needs ‘Drastic Increases in Scalability’ to Tackle the Skyrocketing Fees: Vitalik Buterin

On September 1, the average transaction fees on the Ethereum network climbed to a new peak at above $10, and gas prices went past 450 Gwei. In response, Tether, the second biggest guzzler of gas, is planning to add support for ZK-Rollups. In this technique, many transactions are bundled into a single one, after integrating with OMG Network. This will reduce the pressure on the Ethereum network, which is congested amidst growing usage. Ethereum co-founder Vitalk Buterin has also been advising using layer2 solutions like OMG Network and Loopring. 

DeFi users turn to USDC stablecoin to earn high-yield interest

Members of the decentralized finance (DeFi) ecosystem are turning to USD Coin USDC in order to interact with DeFi protocols either by earning high-yield income on lending protocols like Compound and Aave. Users are also providing liquidity to liquidity pools like Uniswap and Curve, the latter of which offers stablecoin to stablecoin trading. Following the launch of Curve’s governance token, CRV, on August 14, there was a surge in USDC on-chain activity. The launch of the token has also helped Curve earn the third place in terms of value locked, following Aave and Compound, with $1.27 billion locked. 

How blockchain could revolutionise bonds

HSBC has been working with the Singapore Exchange (SGX) and investors Temasek Holdings to explore the use of distributed ledger technology (DLT) in the country’s bond market. The partnership has just successfully simulated a fully digitalised bond issuance on SGX’s DLT-enabled platform. The trial operated in parallel to a traditional SGD400 million ($290 million) issuance on the SGX – and a follow-on SGD100 million reopening of the same issue – by Olam International, a food and agri-business company. 

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