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

Speculation on Avanti Bank’s Avit U.S. dollar stablecoin “disruptor

Wyoming recently awarded its second special-purpose depository institution (SPDI) charter to Avanti Bank. Avanti will issue an “Avit” tokenized programmable U.S. dollar stablecoin. This arguably makes Avit more reliable than nonbank-issued stablecoins because the deposits backing Avit are held in the same state-chartered financial institution that issued the instrument. Critically, if Avit is a bank note it is also exempt from regulation as a security by the SEC. One legal wrinkle is that Article 3 of the Uniform Commercial Code (UCC), which governs bank notes, has never before been directly extended to electronic negotiable instruments such as digital bank notes. Nevertheless, there is an argument that Article 3 provides the necessary legal framework for banks to issue a variety of electronic negotiable instruments, including digital certificates of deposits. One could argue that a bank issuing a product with features similar to a stablecoin is really just a new form of a traditional bank activity. 

China Construction Bank sells US$3 billion worth of debt on blockchain

China Construction Bank (CCB) launched the sale of $3 billion worth of debt backed by deposits at the bank’s Malaysian Labuan branch, on a blockchain. The three-month certificates of deposit, which are available as digital tokens, can be bought for as little as $100. The deal also allows investors to trade these CCB digital certificates using U.S. dollars and bitcoin, on Fusang Exchange, a digital exchange licensed by the financial regulator in Labuan. 

Update: According to CoinTelegraph: “The listing of China Construction Bank’s blockchain-based debt issuance bonds has been delayed “at the request of the issuer” until further notice, according to a Friday statement from Fusang Exchange where they were due to be traded.”

Inside the regulatory sandbox: effects on fintech funding

Using unique data for the UK, this BIS paper provides initial evidence on the effectiveness of the world’s first sandbox in improving fintechs’ access to finance. Firms entering the sandbox see a 15% increase in capital raised post-entry, relative to firms that did not enter; and their probability of raising capital increases by 50%. The results furthermore suggest that the sandbox facilitates access to capital through two channels: reduced asymmetric information and reduced regulatory costs or uncertainty.