Kiffmeister’s #Fintech Daily Digest (11/21/2020)

Bitcoin Shortage?

According to analysis by crypto fund Pantera Capital, the recent crypto-asset rally has likely been driven by an influx of retail investors buying Bitcoin. The main trigger is the October launch of PayPal’s new service that enables customers to buy, sell, and hold crypto-assets directly from their PayPal accounts. According to Pantera’s projections, PayPal users alone may soon acquire more Bitcoin than there are being mined. Square launched similar capabilities in its cash app in June 2019, but it only gives access to Bitcoin, whereas PayPal’s offering supports Bitcoin, Ethereum, Bitcoin Cash, and Litecoin.  

Bitcoin Is the Biggest Big Short

Bitcoin’s core value lies in its decentralized governance design being divorced from the political system, a feature no other asset of its size and liquidity can claim, perhaps with the exception of gold. If people lose confidence in their government’s capacity to sustain the trusted, social covenant on which fiat money is founded, the value of that money collapses, resulting in hyperinflation. Because of its depoliticized status, bitcoin gains in value in that environment. So if you’re long bitcoin, you are positioned to benefit if the system of governance on which the entire world depends for security and well-being collapses. 

US Government to Use USDC Stablecoin to Bypass Venezuela’s Maduro

Circle, which along with Coinbase issues the USDC stablecoin, is coordinating with the US government and Latin America crypto exchange Airtm to route aid for Venezuelan healthcare workers through the Latin American country’s government in exile. The US Treasury and Federal Reserve releases seized funds to the exiled government’s account at a US bank. The exiled government then uses those funds to mint USDC. The USDC is then sent to Airtm Once the USDC stablecoins hit Airtm wallets, they go to Venezuela healthcare workers in the form of AirUSD, Airtm’s own fiat-backed stablecoin. Recipients can then withdraw at banks, send the funds, or spend them online. 

Update: JP Koning wonders whether this is just hype as USDC wasn’t really necessary to execute this transaction.

Argentina and Brazil Get Their Own Stellar Stablecoins

Settle Network and Stellar are issuing two stablecoins in Latin America. The ARST is tied to the Argentine peso (ARS), while the BRLT is tied to the Brazilian real (BRL). The new stablecoins allow users to virtually send ARS and convert them to BRL in a matter of seconds, opening a new possibilities for international remittances and cross border payments. 

$3 billion blockchain bond sale delayed ‘until further notice

The listing of China Construction Bank’s blockchain-based debt issuance bonds, first reported on November 11, 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.

Private Bank Money vs Central Bank Money: A Historical Lesson for CBDC Introduction

In this paper, a unique event is studied: the opening of Bank of Canada in 1935, the central bank note issuance monopoly and its impact on the note issuing chartered banks. Between 1935-1950, Canadian chartered banks had to gradually withdraw their notes from circulation. In a difference-in-differences analysis, it shows that chartered banks constrained by new issuance limits experienced higher volatility of return-on-equity in the short run and lower Z-scores and return-on-assets in the longer horizon, suggesting that note issuance was an important source of revenue for private banks and allowed them to smooth the profits. The effect on lending is either non-significant or ambiguous. This study of central bank cash implementation can offer lessons for the current debates on a new form of central bank money – central bank digital currencies – and their potential impacts on commercial banks.