Kiffmeister’s #Fintech Daily Digest (10/21/2020)

The Bahamas Launches Its Central Bank Digital Currency

The Bahamas Sand Dollar central bank digital currency (CBDC) became available to all residents of The Bahamas on October 20. This makes The Bahamas the first country in the world to officially roll out a CBDC. Residents of The Bahamas can use the blockchain-based digital currency at any merchant with a central bank approved e-Wallet on their mobile device and transaction fees are negligible. The central bank has authorized six financial institutions for the project: Omni Financial, Kanoo, SunCash, Cash N Go, Mobile Assist, and Money Maxx.   

See here for my updated tabulation of retail central bank digital currency (CBDC) explorers.

PayPal Granted New York’s First ‘Conditional BitLicense’ to Offer Crypto Services

The New York State Department of Financial Services (NYDFS) granted the first “conditional BitLicense” to PayPal for a partnership with Paxos Trust Company enabling customers to buy and sell crypto-assets. Now New York State-chartered Paxos will be able to provide trading and custodial services to PayPal to allow the latter’s 325-plus million customers to buy, sell, and hold crypto-assets. Four NYDFS-approved digital assets will be initially available: bitcoin, bitcoin cash, ether and litecoin. PayPal customers will also be able to use crypto-assets to shop at the 26 million merchants on its network starting in early 2021. The payments will be settled through fiat currencies, similar to many existing crypto merchant solutions like BitPay. This means that the merchants will be receiving fiat, as PayPal will take care of the conversion.   

ISDA Launches New Legal Papers on Smart Contracts and DLT

The International Swaps and Derivatives Association (ISDA) published four new whitepapers that analyze the legal issues associated with using smart derivatives contracts on distributed ledger technology (DLT). The four papers consider these issues from a French, Irish, Japanese and New York law perspective. An earlier paper published in January explored the topic from the perspective of English and Singaporean law. The analysis concludes that it is unlikely a local court would reject an express choice of law by the contracting parties, whether under ISDA documentation or in any other agreement between the parties and a platform provider. The papers also highlight potential challenges in identifying the precise location of digital assets, which could lead to uncertainty over which jurisdiction’s laws would apply. 

Tether Still Dominates Stablecoins, but USDC and Dai Are Winning DeFi

Tether (USDT), with a market cap surpassing $16 billion, continues to hold the lion’s share of stablecoins in circulation, but two smaller rivals are trouncing it in crypto’s hottest market this year, decentralized finance (DeFi). Measured by the total value locked in six of the most popular DeFi protocols – Compound, Maker, Uniswap, Curve, Aave and Balancer – USD coin (USDC) is in the lead among stablecoins followed by dai (DAI), the native stablecoin to MakerDAO. USDC and DAI have market caps of $2.74 billion and $608 million, respectively. 

Centre Consortium Announces Solana as Official Chain for USDC

The Solana blockchain has become an Official Chain for USDC, continuing the expansion of USDC as an open standard and protocol for fiat digital currency on blockchains. Solana offers significant scalability and speed, delivering upwards of 50,000tps, with block production and settlement finality in 400ms, while operating with extremely low cost transaction fees at a tiny fraction of a cent.  

Working group of U.S. crypto firms unveil their data-sharing solution to FATF ‘travel rule’ compliance

Twenty-five U.S.-based virtual asset providers (VASPs) have come together to publish a white paper on an industry-wide solution to travel rule compliance. The solution takes a centralized approach, setting up a “bulletin board” to locate counterparty information and point-to-point information transmission for the required data. In essence, the U.S. Travel Rule Working Group (USTRWG) is proposing a kind of hub through which they can identify customer information and use point-to-point communication channels to transmit that data.