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

Central bank digital currencies: foundational principles and core features

The Bank of Canada, European Central Bank, Bank of Japan, Sveriges Riksbank, Swiss National Bank, Bank of England, Board of Governors of the Federal Reserve and Bank for International Settlements have collaborated on a report setting out common foundational principles and core features of a central bank digital currency (CBDC). These principles emphasise that, in order for any jurisdiction to consider proceeding with a CBDC, certain criteria would have to be satisfied. Specifically, authorities would first need to be confident that issuance would not compromise monetary or financial stability and that a CBDC could coexist with and complement existing forms of money, promoting innovation and efficiency. 

The Bank of Japan’s Approach to Central Bank Digital Currency

The Bank of Japan (BoJ) published its approach to retail central bank digital currency (CBDC). Although it currently has no plans to issue CBDC, from the viewpoint of ensuring the stability and efficiency of the overall payment and settlement systems, the Bank considers it important to prepare thoroughly to respond to changes in circumstances in an appropriate manner. 

Shenzhen to give out 10 million yuan ‘gift money’ in digital RMB

The People’s Bank of China and are reportedly going to hand out 10 million digital yuan as “red envelope” gifts to citizens. Red envelopes are a traditional way of gifting cash in China on holidays or for special occasions such as weddings. The money will be distributed equally to 50,000 recipients through lottery. Residents can use the money at 3,389 designated merchants, including restaurants, supermarkets, gas stations, metro stations, department stores, and other businesses in Luohu District within next week. 

DOJ states it has jurisdiction over foreign crypto companies that touch US servers

The U.S. Department of Justice (DoJ) released a report examining the dangers posed by cryptocurrencies and its framework for how to mitigate these risks. It stipulates a number of cases where it will exert its authority over foreign actors, such as “where virtual asset transactions touch financial, data storage, or other computer systems within the United States”, if they use cryptocurrency to import illegal products into the U.S. and if they “provide illicit services to defraud or steal from U.S. residents”. This also applies to foreign entities that engage in money transmission in the country even if they are incorporated abroad. Additionally, the DoJ claims to have the authority to prosecute any foreign actors who use cryptocurrency to support terrorist activities. 

Fund Instant Cross-Border Payments With a Line of Credit From RippleNet

Ripple launched Line of Credit on RippleNet that allows customers using On-Demand Liquidity (ODL) to source capital on demand to initiate cross-border payments at scale using the digital asset XRP. Those using ODL on RippleNet can purchase XRP from Ripple on credit. Customers are charged one fee on the amount borrowed, with no hidden fees, and can receive approvals faster than through traditional means. RippleNet customers simply take advantage of one simple XRP-based arrangement everywhere that ODL is available, regardless of sending destination or fiat currency and costs a lot less than most other available credit options. 

Dutch central bank approves first crypto service under AMLD5 regulations

De Nederlandsche Bank has granted AMDAX BV, an Amsterdam-based digital asset service company, the ability to operate under its jurisdiction. This marks the first time a digital asset company has been approved in the country following the introduction of the EU’s 5th Anti-Money Laundering Directive (AMLD5) that saw many crypto related businesses close or leave the Netherlands.   

State of the Market: European alternative lending near-doubled in 2019

European originations among peer-to-peer (P2P) and marketplace lending platforms soared by 80% in 2019 to €6.6bn, up from €3.6bn the previous year. The data paints the stark difference between the U.K.’s mature lending platforms, which grew a moderate 10.7% to £6.2bn in 2019, and Europe where the market remains in high-growth territory. It also means that Europe appears on the verge of overtaking the UK’s P2P and marketplace lending, possibly as soon as 2020, with the combined value of the U.K. and EU figures being worth more than £12bn last year. Unlike the UK market however, nearly half of the European lending volume is dominated by a single player, with Latvian lending marketplace Mintos originating 45% of P2P loans in 2019 worth a combined €3bn. The caveat is that Mintos operates as a kind of “P2P of P2Ps” which inflates its figures. 

FSB report highlights increased use of RegTech and SupTech

The Financial Stability Board (FSB) published a report on the use of supervisory (SupTech) and regulatory (RegTech) technology by FSB members and regulated institutions. The report finds that technology and innovation are transforming the global financial landscape, presenting opportunities, risks and challenges for regulated institutions and authorities alike. The report includes 28 case studies giving practical examples on how SupTech and RegTech tools are being used. 

Accounting for and Auditing of Digital Assets

The Association of International Certified Professional Accountants (AICPA) Digital Assets Working Group added 13 questions and answers to its Accounting for and Auditing of Digital Assets Practice Aid. The Aid includes vital information for professionals on how to account for and audit digital assets. It is intended for those with a fundamental knowledge of blockchain technology, is based on existing professional literature and the experience of members of the Digital Assets Working Group and is specific to U.S. GAAP (for non-governmental entities) and GAAS. 

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