Kiffmeister’s #Fintech Daily Digest (11/20/2020)

Global Bitcoin Futures Reach Six-Month High Above $50 Billion

The global Bitcoin futures market has hit a six-month high of $52 billion, according to data on On October 18, 2020, the market total was at $4.5 billion, before increasing to $30 billion and $38 billion on October 21 and November 5 respectively. The share of this futures market is dominated by crypto exchange Binance, which holds a total of $16.1 billion worth of Bitcoin futures. In second place is crypto exchange Huobi’s futures platform HuobiDM, with a total share worth $12.7 billion. [BTW it looks to me like this doesn’t include the contracts that trade on the CME.]

Japan’s Banking Giant MUFG Plans to Launch Blockchain Payment Network in 2021

Mitsubishi UFJ Financial Group will launch its high-speed blockchain payment network with the U.S.-based tech firm Akamai in 2021. The Global Open Network (GO-NET) will integrate payment terminals from Seiko with the bank’s credit card company in February. GO-NET can reportedly process 100,000 transactions per second (tps), compared to VISA’s 70,000, and the platform can be expanded to reach as high as 10 million tps for small payments. GO-NET expects the payment services to be fully functional across Japan by the summer of 2022. 

Fintech and big tech credit markets around the world

Credit markets around the world are undergoing a transformation. Fintech and big tech firms are providing more lending to households and small businesses. Using a new BIS database, this column estimates that fintech credit flows reached $223 billion in 2019, while big tech credit reached $572 billion. Both forms of credit are larger where there is greater (unmet) demand for credit and where economic and institutional factors favour the supply of such lending. The Covid-19 pandemic represents an important test for these new business models. 

Seizing the Opportunities from Digital Finance

According to Bank of England Chief Economist Andy Haldane: “In principle, separating safe payments and risky lending activities could lead to a closer alignment of risk and duration on the balance sheets of those institutions offering these services. We would move closer to a bifurcated intermediation model of narrow banking for payments (money backed by safe assets) and limited purpose banking for lending (risky assets backed by capital-uncertain liabilities). In principle, this would reduce, at source, the intrinsic instabilities of the traditional banking model. Of course, there could be costs as well as benefits from such a functional separation, including the possibility of reduced credit provision due to reduced levels of liquidity and maturity-transformation, that need to be worked through. At the very least, however, these longer-term potential stability benefits of a very different functional model of intermediation need to be evaluated and weighed. And, so far at least, they have largely been ignored in discussion of the case for digital currencies.”