Kiffmeister’s #Fintech Daily Digest (12/24/2020)

Bank of Canada is Hiring Cryptographers for its Central Bank Digital Currency Research

It’s looks like the Bank of Canada is super serious about developing *CBDc* (central bank digital *cash*) as well as CBDC (*currency*).  The Bank of Canada aims to design a CBDC with cash-like properties in digital form. While not aiming for cash-like anonymity, CBDC should be highly private yet meet the obligation to be compliant with anti-money laundering and other regulations. Regardless of their circumstances, CBDC should be usable by all Canadians, even by those without a bank account or access to a cellular phone, in remote communities not well served by cellular networks, and/or those with sensory, motor and cognitive impairments. And the CBDC should continue to work even during electrical power and network outages. 

U.S. Warns Crypto Stablecoins on Money Laundering, Risk Controls

The President’s Working Group on Financial Markets provided an initial assessment of key regulatory and supervisory considerations for participants in significant retail stablecoin arrangements with a U.S. nexus. Stablecoins should be designed to be resilient enough to handle large-scale redemptions, including ensuring a 1:1 reserve ratio and adequate financial resources to absorb losses and meet liquidity needs. Their backers should also be able to obtain and verify the identities of all parties conducting transactions, including those involving so-called unhosted wallets. 

MoneyGram Clarifies its Relationship with Ripple

It looks like Ripple’s much ballyhooed relationship with MoneyGram was just for show. “MoneyGram has had a commercial agreement with Ripple since June 2019; this agreement represents the use of Ripple’s foreign exchange (FX) blockchain trading platform (ODL) for the purchase or sale of four currencies. MoneyGram has continued to utilize its other traditional FX trading counterparties throughout the term of the agreement with Ripple, and is not dependent on the Ripple platform to accomplish its FX trading needs. As a reminder, MoneyGram does not utilize the ODL platform or RippleNet for direct transfers of consumer funds – digital or otherwise.” 

And a spokesperson for Coinbase said it is currently “considering [its] options” when asked how it will respond to the SEC lawsuit against Ripple. While some exchanges, market makers and funds have already begun delisting XRP or exiting positions and transactions with the cryptocurrency, it may not be a black-and-white question for larger exchanges like Coinbase. 

A storm is brewing between state regulators and the OCC over fintech licensing

The U.S. Conference of State Bank Supervisors (CSBS) filed a complaint in the U.S. District Court for the District of Columbia opposing the Office of the Comptroller of the Currency’s (OCC) creation of a new national bank charter for nonbank companies and its acceptance and impending approval of a charter application from Figure Technologies. The complaint asserts that by creating a national bank charter for nonbank companies, the OCC has gone far beyond the limited authority granted to it by Congress under the National Bank Act and other federal banking laws.   

Tokens and accounts in the context of digital currencies

This Fed paper reviews how the cryptocurrency community has approached the concepts of tokens and tokenization, and discusses “tokens” in the context of CBDC. By highlighting how the terms “tokens” and “accounts” are used by the cryptocurrency community and the central banking community, this note seeks to inventory the subtly and sometimes obviously different ways these common terms are being used by different people to reference different concepts. Misalignment of this ambiguous terminology could create issues for legal frameworks and oversight regimes for digital currencies and so-called tokenized financial markets. 

For Money Burners and Other Destroyers of Currency

I run into some very interesting people on Twitter. For example, in a discussion on cash-like features of CBDC I came across a group that advocates money burning as a kind of religious/sacrifice thing. They think it’s important that digital currency holders have the right to “burn” it. They even submitted an official response to this effect to the BoE CBDC consultation.