Month: December 2020

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

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XRP Price Crashes By 8% After Flare Network Airdrops Free Crypto

The price of XRP crashed following a huge airdrop that will credit all XRP holders who hold funds in participating exchanges and wallets with free Spark (FLR) tokens. On the morning of December 12, immediately after the airdrop all of the top ten coins by market capitalization were up 2-4% but XRP was down about 10%. The FLR, to be distributed by Flare Network on a yet-unreleased blockchain, is a smart contract utility fork of XRP. The pair will attempt to challenge Ethereum’s dominance in decentralized finance (defi) and decentralized applications (dapps). Flare integrates with Ethereum’s Virtual Machine, allowing existing Ethereum dapps to be ported over to Flare to serve the XRP ecosystem. 

MicroStrategy completes $650 million bond sale to finance next Bitcoin purchase

Business intelligence firm MicroStrategy ended up issuing $650 million of 0.750% five-year convertible senior notes to qualified institutional buyers. It intends to invest the net proceeds from the sale of the notes in bitcoin in accordance with its Treasury Reserve Policy pending identification of working capital needs and other general corporate purposes. The conversion rate will initially be 2.5126 shares of MicroStrategy class A common stock per $1,000 principal amount of notes, which is equivalent to an initial conversion price of approximately $397.99 per share, roughly a 37.5% premium over the current market price. 

Designing CBDC Using the Delphi-Analytic Network Process

The emergence of stablecoins is a growing concern for authorities worldwide including Indonesia as it could affect financial stability. Thus, if a central bank chooses to develop a central bank digital currency (CBDC) to tackle this problem, the design should conform to the country’s characteristics and consumer needs. This study draws on experts’ opinions from various economic agents and utilises an amalgamation of the analytic network process (ANP) and the Delphi method to show that the cash-like CBDC model is the most appropriate digital currency design for Indonesia, since it could enhance financial inclusion and reduce shadow banking in Indonesia. 

FinCEN Encourages Banks to Share Customer Information With Each Other

The Financial Crimes Enforcement Network (FinCEN), a bureau of the U.S. Treasury Department, issued a fact sheet spelling out that the information that institutions are permitted to share under the 2001 Patriot Act. Overall, the sheet seemingly lowers the obstacles for further sharing of personal customer information among banks, the threshold of what qualifies as “suspicious” activity and whether the entities sharing customer information even need to be financial institutions.  

How to Sue A Decentralized Autonomous Organization

This article discusses decentralized autonomous organizations (DAOs) and the potential legal liabilities that could be raised by this application of blockchain technology. A DAO is an organization that’s self-governing and that isn’t influenced by outside forces: its software operates on its own, with its bylaws immutably written on the blockchain, not controlled by its creators. DAOs are formed by groups of like-minded individuals with specific projects and goals in mind… A DAO purely manages funds: in itself it does not have the capabilities to build a product, write code or develop hardware. 

The Fiat Standard and Debt Slavery

This article examines how the fiat network’s native tokens come into existence, using fiat’s haphazard version of mining. As fiat money is credit, credit creation in a fiat currency results in the creation of new money, which means that lending is the fiat version of mining. Fiat miners are the financial institutions capable of generating fiat-based debt with guarantees from the government and/or central banks. Unlike with bitcoin’s difficulty adjustment, fiat has no mechanisms for controlling issuance. Credit money, instead, causes constant cycles of expansion and contraction in the money supply with eventual devastating consequences. 

Kiffmeister’s #Fintech Daily Digest (12/11/2020)

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Sweden Explores Moving to a Digital Currency

Sweden’s government launched an inquiry that will explore the feasibility of the Riksbank issuing an e-kronor central bank digital currency, and review the meaning of the concept of legal tender. More broadly, the inquiry’s assignment includes mapping what the payment market looks like and may look like in the future, based on developments in Sweden and in other countries. In that regard, it will map the division of roles between the state and the business community in the payment market and take a position on the state’s future role. The inquiry is expected to be completed by the end of November in 2022.  

Safe Payments

This Bank of Canada paper asks, as the economy becomes increasingly cashless, can we rely on the private sector to invest in the optimal level of safety in the electronic payment system? It tries to answer this question by modelling private incentives to invest in safety in a deposit-based payment system. Depositors can mitigate the risk in the system through monitoring to reduce the risk of default before it happens (ex ante) or through monitoring for timely detection of defaults after they’ve occurred (ex post). In addition, they can also set up a separate, safe account as a backup to receive funds from the risky account in a crisis situation. The paper finds that because depositors do not internalize the externalities in the payment system, the private sector can over- or under-adopt the use of safe accounts. However, governments could use taxes or subsidies to correct private incentives and restore the optimal adoption of safe accounts. 

Kiffmeister’s #Fintech Daily Digest (12/10/2020)

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Paxos and BitPay Become Latest Crypto Firms to File for Federal Bank Charters

Bitcoin payments company BitPay has filed paperwork with the U.S. Office of the Comptroller of the Currency (OCC) to establish BitPay National Trust Bank to be headquartered in Alpharetta, Georgia. A national trust bank is a limited purpose national bank that engages in trust activities. Also, Paxos filed an application with the OCC to create the Paxos National Trust that would operate out of New York. The company, which already has a New York trust charter and a slew of licenses, currently offers cash custody, gold custody, cryptocurrency services, digital asset issuance, securities clearing, commodities trading and other services.

JPMorgan just conducted a blockchain-based repo transaction using its eponymous JPMCoin

JPMorgan executed a blockchain-based repo transaction using its JPMCoin wholesale stablecoin and atomic trade settlement that links the two legs of the transaction to ensure that the transfer of one asset occurs if and only if the transfer of the other asset also occurs. “The repo market provides a widely used form of secured financing, however, current operational limitations prevent the meaningful use of such financing to meet intraday liquidity needs. Using blockchain enables borrowers and lenders to execute shorter-term, intraday repo transactions with real-time, simultaneous transaction settlement, creating new ways to access intraday liquidity.” 

The first live trades JPMorgan conducted were between the bank’s broker-dealer and banking units, using the Onyx blockchain platform. In a test environment, JPMorgan has also traded with Goldman using Bank of New York Mellon Corp. as the triparty agent. Goldman is expecting to join Onyx for intraday repo trading as soon as January. 

Euro stablecoin launched on Stellar by one of Europe’s oldest banks

Germany’s Bankhaus von der Heydt (BVDH) has issued a Euro stablecoin (EURB) on the Stellar network with the collaboration of Bitbond, a German tokenisation and digital asset custody technology provider. With the go-live on Stellar, Bitbond also integrates the stable coin into the securitization platform developed for BVDH, including the automatic mining and burning of tokens.  The Federal Financial Supervisory Authority (BaFin) has already provided their approval for Bitbond to issue tokenized bonds on Stellar. 

Bitwise Crypto Index Fund Provides New Way to Invest in Bitcoin

Trading in Bitwise Asset Management’s 10 Crypto Index Fund is live. It tracks the 10 largest crypto-assets and allows investors to buy shares that represent them. It is billed as the first publicly traded crypto index fund in the United States. The Fund debuted with $120 million in assets under management. 75% of the assets are Bitcoin, 13% in Ether and the remaining 12% split between XRP, Litecoin, Chainlink, Tezos, Bitcoin Cash, Stellar, and EOS. 

Illegal Bitcoin use is down, but privacy wallet laundering is up, says analytics firm

Blockchain analytic firm Elliptic has found that the proportion of Bitcoin (BTC) transactions linked to criminal activity is way down. However, as a result of heightened know your customer (KYC) requirements, exchanges have lost ground as a destination for illegal crypto and the use of privacy wallets has increased. At least 13% of Bitcoin crime proceeds are now laundered through privacy wallets, up from just 2% in 2019. Privacy wallets aim for greater anonymity on the blockchain, facilitating coin “mixing” processes that obscure transactions’ origins. 

Circle CEO joins appeal against US Treasury self-hosted crypto wallet ban

Circle CEO Jeremy Allaire sent a letter to the U.S. Department of the Treasury, appealing for regulators to collaborate with the industry in adopting crypto regulations. He took particular aim at rumored proposed regulations that would prohibit unhosted or self-hosted wallets, claiming that they would significantly harm industry and American competitiveness and yield economic and industry advantage to Chinese firms. Allaire said that industry and regulators need some time to sort out best practices in regulating emerging technology together. Four members of the Congressional Blockchain Caucus also sent a letter to Treasury Secretary Mnuchkin defending the technology behind self-hosting wallets.  

Bitcoin price ‘bearish alert’ as 140K BTC from Mt. Gox may move for the first time

After multiple delays, creditors of Mt. Gox who lost money in its implosion in 2014 are set to know when they will receive BTC on December 15 — and the temptation to sell for profit may prove to be too great to avert a mass run on exchanges. Mt. Gox was the best-known cryptocurrency exchange until it was hacked for funds that included 860,000 BTC. After years of legal tussles, a rehabilitation scheme will see roughly 140,000 BTC distributed to creditors. 

Standard Chartered offers crypto custody

The venture investments unit of Standard Chartered, will begin offing crypt-asset custody services to institutional clients. It has partnered with Northern Trust to launch Zodia Custody, an institutional-grade crypto custodian targeting institutional and wealthy clients. Zodia’s launch is expected next year, pending approval of the UK Financial Conduct Authority. In July, U.S. Comptroller of the Currency Brian Brooks announced that American banks are allowed to offer custody services for digital assets. 

DBS Bank’s Digital Exchange to Begin Trading Crypto ‘Next Week’

DBS Digital Exchange, owned by DBS Bank of Singapore and the Singapore SGX stock exchange (10%) opened for digital asset trading. The DBS Digital Exchange will also provide tokenization of securities and other assets, as well as bank-grade custody for digital assets. The new exchange will facilitate spot exchanges from fiat currencies to cryptocurrencies and vice versa. The DBS exchange will only be open to institutional clients and accredited investors. 

Bridging the Governance Gap: Interoperability for blockchain and legacy systems

The World Economic Forum published a governance framework that proposes strategic pathways which can enable interoperability between legacy IT systems and distributed ledger systems. It proposes ways to integrate legacy IT systems with the capabilities of smart contracts without replacing them. This interoperability between these two disparate systems can spawn a new wave of experiments and pilots towards adoption of smart contracts in various applications. It recommends that businesses join open-source communities that build interoperability frameworks. 

Would the STABLE Act Make Running an Ethereum Node Illegal?

The plain text of the Stable Act presents the bizarre possibility, one which is apparently intended by the drafters, that node operation on any unlicensed chain that supported any stablecoin contracts would be unlawful and, pursuant to 12 U.S. Code § 1833a, would be subject to fines of up to $1,000,000. Criminal penalties might also be possible. This post deals with this point. 

Kiffmeister’s #Fintech Daily Digest (12/09/2020)

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Singapore and Thailand to Enable Cross Border Payments Using Only Mobile Numbers in 2021

The linking of Singapore’s PayNow and Thailand’s PromptPay national fast payments systems will go live in mid-2021. Anyone registered with PayNow or PromptPay will be able to instantly and securely send money between the two countries using just their mobile numbers 24/7 at “competitive” rates. It will start off with a small group of banks on both sides, and scale up participation to include more banks and non-bank providers over time. The Monetary Authority of Singapore is keen to partner other central banks in the region to expand the linkage.  

BDoS: Blockchain Denial of Service

This paper introduces an incentive-based blockchain denial of service (BDoS) attack that targets proof-of-work (PoW) crypto-assets. Unlike classical DoS, BDoS targets the system’s mechanism design: It exploits the reward mechanism to discourage miner participation. Previous DoS attacks against PoW blockchains require an adversary’s mining power to match that of all other miners, requiring that the attacker obtain at least 51% of the network’s mining capacity. In contrast, BDoS can cause a blockchain to grind to a halt with significantly fewer resources, e.g., 21% as of March 2020 in Bitcoin. We find that Bitcoin’s vulnerability to BDoS increases rapidly as the mining industry matures and profitability drops. 

Fidelity Digital to Hold Bitcoin as Collateral for Cash Loans

Fidelity Digital Assets will allow its institutional customers to pledge Bitcoin as collateral against cash loans in a partnership with blockchain startup BlockFi. The unit of Fidelity Investments will hold the digital asset and not make loans itself. The target is Bitcoin investors who want to turn their digital stash into cash without selling, and potential customers include hedge funds, crypto miners and over-the-counter trading desks. 

MicroStrategy Reveals Pricing Details for Its $400 Million Raise

Business intelligence firm MicroStrategy has provided further details of its $400 million raise that it plans to use to buy Bitcoin, according to a release today. Its plan is to sell $550 million in 0.750% five-year convertible senior notes to qualified institutional buyers. The conversion rate will initially be 2.5126 shares of MicroStrategy class A common stock per $1,000 principal amount of notes, which is equivalent to an initial conversion price of approximately $397.99 per share, roughly a 37.5% premium over the current market price.  

Long-Term Bitcoin Holders Are Selling Off Their Coins

A metric that tracks how much dormant Bitcoin has been recently moved, indicates that long-term Bitcoin holders are realizing profit on their Bitcoin. The Bitcoin Coin Days Destroyed metric measures when dormant Bitcoin is sold. The older, and the greater amount of Bitcoin, the higher the metric goes. And recently, it has been shooting up. According to Glassnode’s The Week On-Chain newsletter, “while so many long-term holders remain in a state of significant profit, sideways or downwards price movement can be expected as they realize these profits.” 

Dubai Economy launches Unified Payments Network to boost digital payments, cashless economy

Dubai Economy launched its Unified Payments Network, an inclusive platform that will bring together all payment service providers, and unbanked as well as underbanked merchants, to facilitate cashless transactions. The platform is a subsidiary of the flagship ‘EngageDXB’ initiative of Dubai Economy to promote engagement between the private and public sectors, and aims to empower the existing players in the payment ecosystem to accelerate the transition towards a cashless society. 

Kiffmeister’s #Fintech Daily Digest (12/08/2020)

~ kiffmeister

Facebook faces lawsuit over crypto project’s new name

Facebook could be in hot legal water after rebranding its upcoming crypto project to Diem — a name already taken by a London fintech. Finance app Diem is threatening to sue Facebook and its partners for copying the name, telling Sifted it is preparing to take action. The Diem app allows consumers to sell their possessions instantly, rather than waiting for bidders on eBay; offering a digital pawnbroker of sorts. Users also get their own DIEM debit cards and accounts, creating what the company calls a ‘Bank of Things.’  

Swiss Stock Exchange is launching an ‘Institutional Digital Asset Gateway’ next year to get banks into crypto

The Swiss Stock Exchange (SIX) is planning to give banks full access to digital assets through a partnership between its digital asset arm, SIX Digital Exchange, and Swiss custody firm Custodigit. The Institutional Digital Asset Gateway will enable banks to develop new financial services and products around crypto-assets and digital assets for their customers. This partnership will also build upon the recent SIX investment in Omniex. 

Coinbase crashes when Bitcoin soars – but why?

Coinbase is fast becoming notorious for its capacity problems and has repeatedly reported ‘connectivity issues’ during periods of peak Bitcoin volatility. This article claims it’s a “people problem” – not enough customer support people and not enough people who know how to maintain its servers. Basically, Coinbase has tried to scale too quickly and is cracking under the strain. Nevertheless, staffers uniformly credit the company’s focus on security and regulatory compliance as second to none. 

MicroStrategy will issue $400 million in securities to buy more Bitcoin

The world’s largest publicly traded business intelligence firm, MicroStrategy has announced plans to invest the proceeds from a $400 million convertible senior notes securities into Bitcoin. The securities will be issued under Rule 144 of the Securities Act, and will be available to qualified institutional investors only. 

Alliance for Affordable Internet (A4AI) Affordability Report

The Alliance for Affordable Internet (A4AI) published its Affordability Report – an in-depth annual research initiative that represents part of A4AI’s ongoing efforts to measure policy progress toward affordable internet. It calls for governments to develop effective national broadband plans to make internet access more affordable and enable more people to connect. It focuses on three steps to success when it comes to broadband plans: open consultations, clear targets, and committed funding. 

The GSMA Mobile Connectivity Index

The GSMA Mobile Connectivity Index measures the performance of 170 countries – representing 99% of the global population – against key enablers of mobile internet adoption: infrastructure, affordability, consumer readiness, and content and services. This data can help the mobile industry and other stakeholders understand where to focus action in order to drive increased mobile internet adoption. It now includes data from 2014 to 2019. A report accompanies the 2020 update to the Index which highlights the key findings and trends. 

Enabling open finance through APIs

This Bank for International Settlements (BIS) report explores the development of an identification and authentication application program interface (API) that could be used to implement privately and publicly administered open finance solutions with seamless scalability. It analyzes an API scheme based on the establishment of a central validator (CV) that allows secure relationships to be created between financial institutions and third parties, without the need for them to come into direct contact with each other. It provides the necessary elements to guarantee that each party involved accesses only the user information strictly necessary to allow the provision of a specified financial service. 

Kiffmeister’s #Fintech Daily Digest (12/07/2020)

~ kiffmeister

Bittrex Global Launches Tokenized Stock Trading

Bermuda-based Bittrex Global will be listing tokenized stocks on its digital asset exchange in cooperation with DigitalAssets.AG. This product will allow traders and investors direct access to listed companies without having to use an external broker or pay additional fees. Shares can be purchased using either US dollars (USD), Tether (USDT) or Bitcoin (BTC), twenty-four hours a day, seven days a week. The tokenized stocks available through Bittrex Global will allow customers to purchase a fraction of a stock without needing to purchase entire shares. https://bittrex.com/ 

StanChart completes blockchain bond project in Philippines

A blockchain proof of concept for the digital issuance of retail bonds in the Philippines has been successfully completed by Standard Chartered. The global bank partnered with Union Bank of Philippines (UB) for the project which involved a 3 and 5.25 dual tranche issuance totalling PHP9bn ($187m) being successfully mirrored on the platform created by UB and SC Ventures, the innovation arm of the Standard Chartered. 

Ukraine’s Draft Crypto Bill Passes First Parliamentary Hearing

Ukraine’s Draft Bill on Virtual Assets had a successful first hearing in the nation’s parliament, and after two more hearings could become law. The bill defines virtual assets as “a set of data in electronic form,” which “can be an independent object of civil transactions, as well as certify property or non-property rights.” The law suggests not considering virtual assets as legal tender in Ukraine. The ownership of virtual assets is considered as being the entity holding the private keys, unless they are held with a custodian, forfeited by the court decision or acquired illegally. Virtual assets would be regulated by Ukraine’s Ministry of the Digital Transformation, and crypto service providers must register to be able to operate in the nation. 

Comienza a operar Pagos con Transferencia

It looks like Banco Central de la República Argentina launched a retail QR code-based instant payments system although I don’t see anything about P2P functionality. 

Retail payments in Latin America and the Caribbean: present and future

This Bank for International Settlements article finds that initiatives that central banks and other authorities are taking in a number of LAC countries to make payments more affordable, more convenient and more inclusive are proving very timely. The Covid-19 crisis has led to a sharp increase in the use of digital payments, prompting many new users to appreciate their convenience. For this reason, much of this increase may not be reversed after the pandemic ends. While this puts a premium on further improvements to payment systems, progress remains quite uneven in the region. Much progress is also needed to improve the efficiency of cross-border payments, which remain slow and expensive. 

Kiffmeister’s #Fintech Daily Digest (12/06/2020)

~ kiffmeister

China’s newest larger-scale digital yuan lottery to test offline P2P payment functionality

The city of Suzhou will give away 20 million DC/EP central bank digital currency (CBDC) via lottery, which is similar to the first one conducted in Shenzhen. However, for this pilot some of the 100,000 lottery winners (up to 1,000) will be slected to test an offline payment feature based on near-field wireless technologies. These DC/EP wallets will be capable of sending transactions between two smartphones or hardware devices even without an internet connection. 

“The Peoples Bank of China (PBOC) Digital Currency Research Institute was granted a patent for ” a method and system of using digital currency chip cards to complete offline transactions” in October. The authorized patent details how the invention relies on either Near Field Communications or Bluetooth to initiate offline transactions. However, once a party that receives the offline transaction is connected to the internet, it will sync up with the central bank’s private ledger and provide the transaction information.”

Coinbase to Support Airdrop That Gives All XRP Holders Free Crypto

Coinbase will support FlareNetworks’ Spark airdrop. Customers in approved jurisdictions who hold XRP in their accounts on the snapshot date of December 12 will qualify to receive Spark tokens. However, Coinbase cannot guarantee when or if Spark will be available for distribution in any specific jurisdiction until it completes “significant” technical and compliance review. Other exchanges supporting the airdrop include Kraken, Binance, Bitfinex, Bithumb, Bittrex, eToro, Huobi, OKEx and Poloniex. 

Kiffmeister’s #Fintech Daily Digest (12/05/2020)

~ kiffmeister

A New Trend for Fintech – Cross-border Payment

The Hong Kong Monetary Authority (HKMA) is working with the People’s Bank of China (PBoC) on a pilot program to use the digital yuan (e-CNY) for cross-border payments. According to the HKMA, as the renminbi is already in use in Hong Kong and the status of e-CNY is the same as cash in circulation, it will bring even greater convenience to Hong Kong and Mainland tourists. 

Crypto’s New Villain: Meet the Legal Scholar Behind the STABLE Act

Rohan Grey, the legal scholar who helped draft the controversial Stablecoin Tethering and Bank Licensing Enforcement (STABLE) Act with Congresswoman Rashida Tlaib, wants you to know that he cares about anonymous digital cash—but he’s not about to give a free pass to those who he believes pose a systemic risk to the US monetary system. 

Waters Seeks Rescission of OCC Guidance

U.S. Representative Maxine Waters, who chairs the House Financial Services Committee, wants President-elect Joe Biden to rescind or monitor all of the crypto-asset-related guidance issued by the Office of the Comptroller of the Currency (OCC). She called on Biden to rescind guidance by the OCC that national banks may hold stablecoin reserves as a service to bank customers, along with similar guidance that allowed federally chartered banks and federal savings associations to provide crypto-asset custody services for customers.  

Dangers Posed by the Shadow Payment System and Shadow Digital Money

A payments revolution has prompted a proliferation of shadow digital money. This money is unsound. It is not insured by the government, nor is it backed by safe assets. Federal regulation is needed to guarantee safety and soundness, to restore full monetary control to the Federal Reserve, and to prevent a race to the bottom between competing state and federal regulatory regimes. The OCC should recommend that Congress enact new legislation that requires MSBs to back their monetary liabilities 1:1 with bank deposits. With this change, innovation in payments would be just that—innovation in payments—and not also unauthorized and unsound money issuance. 

Kiffmeister’s #Fintech Daily Digest (12/04/2020)

~ kiffmeister

Chinese city of Suzhou to give away $3 million in digital yuan via lottery

Suzhou will give away 100,000 red packets of 200 yuan worth of DC/EP to city residents via a lottery, as part of the Peoples Bank of China central bank digital currency (CBDC) pilot. Local citizens can register for the lottery on December 5 and 6 and the results will be announced the day before the annual Double 12 online shopping festival. Lottery winners can spend the free digital yuan from December 11 to 27 at shops that support the DC/EP payment as well as at selected online shops on e-commerce giant JD.com. In addition, the government said selected winners from the lottery will be invited to test out the offline payment feature that’s built into a DC/EP wallet.

Stripe to Offer Banking Services in Deal With Goldman Sachs, Citigroup

Stripe, which processes payments for millions of online businesses and e-commerce platforms, is teaming up with banks including Goldman Sachs and Citigroup to offer checking accounts and other business-banking services. It will soon give its customers the option of offering insured, interest-bearing bank accounts, debit cards and other cash-management services. These products aren’t meant for consumers. Rather, they are designed for the merchants and vendors that do business with Stripe’s customers. 

Singapore doles out four digital bank licences

The Monetary Authority of Singapore has awarded full virtual banking licences to a Grab-Singtel consortium and tech giant Sea, and digital wholesale bank licences to Ant Group and a coalition comprising Greenland Financial Holdings Group, Linklogis Hong Kong, and Beijing Co-operative Equity Investment Fund Management. The central bank announced the digital bank framework in June 2019 with the aim of enabling non-bank players with innovative business models to offer digital banking services.  

Kiffmeister’s #Fintech Daily Digest (12/03/2020)

~ kiffmeister

US Lawmakers Introduce Bill That Would Require Stablecoin Issuers to Obtain Bank Charters

A new U.S. Congressional bill would require prospective stablecoin issuers to obtain a banking charter, and notify and obtain approval from the Federal Reserve, Federal Deposit Insurance Corporation (FDIC), and the appropriate banking agency 6 months prior to its issuance. Such issuers would also be required to conduct an ongoing analysis of any systemic risk; and have FDIC insurance or maintain reserves at the Federal Reserve for easy conversion back into U.S. dollars, on demand.  

Getting ahead of the curve on preventing cryptocurrency providers from repeating the crimes against low- and moderate-income residents of color that traditional big banks have is — and has been—critically important. Facebook has attempted  to take advantage of the financial exclusion and gap in the market—just one of the actors that have pursued issuing stablecoins by pegging them to a basket of major conventional currencies. JP Morgan, Apple, and Paypal/Venmo have also considered issue their own stablecoin variants that also have the potential to take advantage of unbanked and underbanked communities.

Project Helvetia: Settling tokenised assets in central bank money

Project Helvetia, an experiment between the Bank for International Settlements Innovation Hub Swiss Centre, the Swiss National Bank (SNB) and the financial market infrastructure operator SIX, successfully shows the feasibility of integrating tokenised assets and central bank money. The project demonstrates the functional feasibility and legal robustness of settling tokenised assets with a wholesale CBDC (PoC1) and with linking a DLT platform to existing payment systems (PoC2) in a near-live setup. However, the experiment should not be interpreted as an indication that the SNB will issue a wholesale CBDC. 

S&P Dow Jones Indices Builds Crypto Indexing Capabilities with Lukka

S&P Dow Jones Indices (S&P DJI) is launching global crypto-asset index capabilities with Lukka, a New York City-based crypto asset software and data company. S&P DJI will provide S&P DJI-branded and customized indexing and benchmarking solutions supported by Lukka’s proprietary crypto asset pricing data. 

CCAF, World Bank, WEF: Covid-19 caused uneven growth across fintech

A joint report by The Cambridge Centre for Alternative Finance, the World Bank and the World Economic Forum, has found that while 12 out of 13 fintech sectors reported year-on-year growth during the first half of 2020, significant discrepancies between sectors and regions remain. Digital banking, digital identity and regtech sectors showed a more modest growth increase of 10% compared to their counterparts in digital payments, digital savings, wealthtech and digital asset exchanges which saw transaction volumes grow in excess of 20%. Procyclical digital lending fintechs saw an average 8% decrease in transaction volumes. Fintechs based in Emerging Markets or Developing Economies saw higher average growth in transaction numbers and volumes (15% and 12% respectively) than those in Advanced Economies. 

Asia’s Crypto Derivatives Market Overview and Infographic 2020

95% of trades in the crypto derivatives market happen across futures based on 3 main crypto currencies: BTC, ETH and EOS. At the same time, the top 6 exchanges currently take approximately 83% of all derivatives trading volume. This dominance by large exchanges is however increasingly challenged by new market entrants that specialise on new products such as options and derivatives on alternative crypto currencies. Unlike in traditional finance, where most volumes are concentrated in Western economies, crypto derivatives are overwhelmingly traded on exchanges based in Asia. Singapore especially has been chosen by many companies as its operational base due to its reputation in the financial industry and its openness for innovation by regulatory bodies. 

On the risk-adjusted performance of machine learning models in credit default prediction

This paper proposes a new framework for supervisors to measure the risk-adjusted performance of machine-learning (ML) credit assessment models, harnessing the process for validating internal ratings-based systems for regulatory capital to detect ML’s limitations in credit default prediction. From a supervisory standpoint, having a structured methodology for assessing ML models could increase transparency and remove an obstacle to innovation in the financial industry.