Kiffmeister’s #Fintech Daily Digest (10/06/2020)

People’s Bank of China’s digital currency already used for pilot transactions worth 1.1 billion yuan

China’s Digital Currency Electronic Payment (DC/EP) central bank digital currency (CBDC) has been used for more than 1.1 billion yuan worth of transactions as part a series of ongoing pilot programs, according to People‘s Bank of China Deputy Governor Fan Yifei. 3.13 million transactions were processed using the currency, which has been undergoing tests for much of the past year in major cities, such as Shenzhen and Xiongan. Pilots also will be conducted at the coming Winter Olympics in 2022. The pilot programs made “positive progress”, with more than 6,700 use cases implemented as of late August for transactions ranging from bill payments and transport to government services, Fan said. 

What CBDC Is (Not) About – Part I

There is no reason at all why distributed ledger technology (DLT) should be any more suited than other technologies. In fact, there’s is little reason why a CBDC should run on DLT at all, as shown in early implementations which took place long before the blockchain hype, like the Bank of Finland’s Avanti smart card payment system in the 1990s). Irrespective of the exact design and implementation details, CBDC is about a power shift from the private sector (financial institutions) to the public sector (central banks). If implemented, it has the potential to fundamentally reshape our current monetary and financial systems, with implications not yet fully understood. 

FCA bans the sale of crypto-derivatives to retail consumers

The U.K Financial Conduct Authority (FCA) will ban the sale of derivatives and exchange traded notes that reference crypto-assets to retail consumers. The FCA considers these products to be ill-suited for retail consumers due to the harm they pose. These products cannot be reliably valued by retail consumers because there is no reliable basis for valuing the underlying assets, the prevalence of market abuse and financial crime in the secondary market, extreme volatility in crypto-asset prices, inadequate understanding of crypto-assets by retail consumers, and lack of legitimate investment need for retail consumers to invest in these products. 

ISDA and Digital Asset Launch CDM Clearing Pilot Using DAML

The International Swaps and Derivatives Association (ISDA) announced a pilot implementation of the Common Domain Model (CDM) for the clearing of interest rate derivatives using DAML, an open-source smart contract language created by Digital Asset. Using the CDM for clearing and deploying it on a distributed ledger with DAML will remove the burden of setting up connections to incongruous systems and services, facilitating interoperability, automation and straight-through processing. This pilot takes the CDM model for clearing and adds new features for the signing of state transitions, data ownership and privacy elements, which are necessary to put the CDM clearing model into production. 

BIS Innovation Hub and Saudi G20 Presidency announce TechSprint winners

The Bank for International Settlements (BIS) announced the three winners of the G20 TechSprint challenge. The hackathon-style competition was launched in April 2020 to highlight the potential for technology to resolve regulatory compliance (regtech) and supervisory (suptech) challenges. The winners, chosen by an independent panel of experts, addressed one or more of its three problem topics. FNA won the dynamic information-sharing category for their solution FNA Platform for Dynamic Information Sharing and Real-Time Analytics, Tookitaki won in the monitoring and surveillance category for their solution Crypto-currency AML Typology Repository Management and ISDA-REGnosys won the regulatory reporting challenge for their solution Consistent Regulatory Reporting via the Common Domain Model. 

DBS and Standard Chartered to launch blockchain platform to curb trade finance fraud

The Singapore-based DBS and Standard Chartered have completed the proof-of-concept (PoC) of their “Trade Finance Registry” blockchain trade finance platform, developed the PoC in collaboration with 12 other banks on top of the blockchain platform of DBS’s dltledgers. They plan to launch the platform for commercial use by central banks around the globe, starting with the Monetary Authority of Singapore. The platform uses the dltledger’s blockchain-based TradeDoc Validation Registry to help banks detect fraud in real-time and help reduce the chances of duplicate financing from different bank lenders for the same trade inventory. 

ECB to explore cross-currency instant payments

The European Central Bank (ECB) will investigate whether and how TARGET Instant Payment Settlement (TIPS) could support payment transactions across different currencies. The investigation will begin as of October 2020 in collaboration with Sveriges Riksbank.. TIPS is a service that settles payments in central bank money in real time and around the clock. It currently supports the settlement of instant payments in euro, but also has the functional capability to support other currencies. TIPS will start to settle instant payments in Swedish kronor as of May 2022. The ECB and Sveriges Riksbank will explore possible ways of enabling the TIPS platform to process cross-currency instant payments between euro and Swedish kronor. 

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