Kiffmeister’s #Fintech Daily Digest (10/16/2020)

The flipside of Chinas central bank digital currency

This Australian Strategic Policy Institute policy brief aims improve baseline understanding of the Peoples’ Bank of China’s e-yuan’s structural mechanics and place the project in its political and bureaucratic context. The e-yuan is being developed and implemented domestically first, but could allow China to shape global standards for emerging financial technologies. It also creates opportunities for China to bypass the U.S.-led financial system, which it perceives as a threat to its security interests, potentially disrupting existing systems of global financial governance. Through e-yuan, Beijing could over time move away from the SWIFT system and bypass international sanctions.

A proposal for an Asian digital common currency

This column advocates the introduction of an Asian digital common currency as a multilateral synthetic currency comparable to the euro. It argues that the benefits it would bring – such as a deepening cooperation within multilateral frameworks and the protection of the rights of small and medium-sized countries – are greater than the disadvantages of inefficiencies in multilateral frameworks. See also the following papers by the same authors:

OKEx Suspends Withdrawals, Says Key Holder Not Available Due to Cooperation With Investigation

OKEx, one of the world’s biggest cryptocurrency exchanges, halted withdrawals after revealing it has lost contact with one of the exchange’s key holders who was “co-operating” in a Chinese government investigation. Meanwhile, one of OKEx’s founders, Mingxing “Star” Xu, had reportedly been taken by police at least a week ago and hasn’t been seen since. OKEx CEO Jay Hao claimed the key holder’s cooperation with officials was due to a “personal issue” and the investigation would not affect the business. OKEx said that the security of its customers’ assets “will not be affected” by the events. 

OECD Encourages Regulators To Form Uniform Crypto Tax Regulations

Prepared with the participation of over 50 jurisdictions, the OECD Taxing Virtual Currencies report is the first comprehensive analysis of the approaches and policy gaps across the main tax types (income, consumption and property taxes) for such a large group of countries. This report also considers the tax implications of a number of emerging issues, including the growing interest in stablecoins and ‘central bank digital currencies’; as well the evolution of the consensus mechanisms used to maintain blockchain networks and the dawn of decentralised finance. 

Legal and Regulatory Considerations for Digital Assets

A University of Cambridge Centre for Alternative Finance report examined legal and regulatory challenges arising from the emergence of digital assets. The aim is to frame future legal and regulatory discussions around digital assets, as well as to identify general trends and concepts across jurisdictions rather than to provide granular analysis of any given jurisdiction’s legal position. It found that existing taxonomies of digital assets have failed to fully capture the relevant features of digital assets and the true novelty introduced by crypto-assets. Also, digital assets, for the most part, pertain to existing and well-known legal concepts: they effectively represent a set of rights embodied in a new digital form. Consequently, the regulatory perimeter for regulating digital assets and associated activities should be determined by identifying the legal concept(s) behind a given digital asset. However, digital assets may warrant adjustment or revisions to existing legislation, in particular whether digital assets are fitting objects of property rights. 

NYDFS invites digital asset firms to ‘techsprint’ aimed at digitizing financial reporting

The New York State Department of Financial Services announced a techsprint initiative to convene regulators and industry stakeholders to work towards a common goal of Digital Regulatory Reporting, which aims to give regulators instant access to data provided by firms under their supervision. The techsprint’s first area of focus is virtual currency companies due to their advanced digital capabilities operating in this space. This techsprint will be the first of its kind in the virtual currency space. 

U.S. NSC Calls Distributed Ledgers ‘Critical’ in US-China Tech Arms Race

Distributed ledger technology (DLT) is one of 20 focus areas on the U.S. National Security Council (NSC) shortlist of critical and emerging technologies. The NSC’s strategy calls for investing in, developing, adopting and promoting the priority technologies. Also on the shortlist: AI, data science, quantum computing and “space technologies,” weapons of mass destruction mitigation technologies, and others.