Kiffmeister’s #Fintech Daily Digest (01/14/2021)*

Treasury backs down: Crypto monitoring rule will wait until new administration

In response to a deluge of comments, the U.S. Financial Crimes Enforcement Network (FinCEN) is reopening the comment period for its recent proposed rulemaking regarding certain crypto-asset transactions. The proposed rule would impose new know-your-customer requirements on crypto-asset transfers to personal (“unhosted”) wallets. Users would have to provide detailed personal information for transactions greater than $3,000, and exchanges would be required to report either individual or groups of transactions that add up to more than $10,000 during a day to FinCEN. The original comment period was only 15 days, most of which were holidays. Stakeholders now have an extra 45 days to comment on the first (“$3,000”) rule proposal, and 15 days on the second ($10,000) one.  

Anchorage Becomes First Federally Chartered Digital Asset Bank

The US Office of the Comptroller of the Currency (OCC) has conditionally approved crypto-asset custodian Anchorage’s application for a national trust charter, and the creation of Anchorage Digital Bank. With a banking charter, Anchorage can provide sub-custody services — like holding assets for a main custodian — for any financial institution. Anchorage is the first crypto company to receive a federal charter, though Kraken and Avanti have both received state charters for digital banking services in Wyoming. While the Wyoming charter enables both Kraken and Avanti to operate nationally, it comes with certain limitations. 

(Per the OCC: A state bank, including a state trust company, may convert into a national bank under 12 USC 35, with the approval of the OCC. Anchorage Trust is a non-depository public trust company organized under South Dakota law and is authorized to convert to a national bank under 12 USC 35 and 12 CFR 5.24.)

Brian Brooks to Step Down, Blake Paulson to Become Acting Comptroller of the Currency

Acting Comptroller of the Currency Brian Brooks stepped down on January 14, 2021, and Chief Operating Officer Blake Paulson became Acting Comptroller of the Currency. 

XRP Is A Cryptocurrency, Not A Security’ Says Japan’s Chief Securities Regulator

Japan’s Financial Securities Agency (FSA) reportedly confirmed that XRP is deemed a cryptocurrency under its laws and not a security. 

Grayscale Sucks up 2,000 Bitcoin on First Day Back

The Grayscale Bitcoin Trust has added another 2,172 Bitcoin to its reserves—worth roughly $82.5 million—in just one day. This amounts to nearly two and a half days’ worth of Bitcoin mining. Grayscale now has over $26 billion in crypto under its management. 

Gemini is launching a credit card with bitcoin rewards

Gemini is acquiring Blockrize and launching a credit card based on Blockrize’s work. The Gemini Credit Card will be available in the U.S. Customers will earn up to 3% in crypto-asset rewards deposited into the user’s Gemini account. BlockFi already announced its own card in December 2020, but hasn’t yet to launched it. BlockFi promises 1.5% rewards on fiat purchases. There’s a $200 annual fee but users gets $250 back if they spend at least $3,000 with the card in the first three months.  

Also, Gemini Trust Company now has more than $10 billion in total crypto under custody. Customers include BlockFi, CoinList, CI Global Asset Management, Eaglebrook Advisors, WealthSimple, and 3iQ Digital Asset Management. 

What Is A SPAC?

Though special purpose acquisition companies (SPACs) have been around for decades, the financial maneuver has gained traction in recent months as more private companies eye exit opportunities and as the Covid-19 pandemic creates uncertainty in the IPO market. In fact, the number of SPAC IPOs in 2020 has already more than doubled compared to 2019 full-year totals. 

A SPAC is essentially a “blank check” shell corporation designed to take companies public without going through the traditional IPO process. Investors give the SPAC money for up to two years while it looks for a merger target. In return, they get a unique right to withdraw their investment before a deal goes through that minimizes any loss on the trade. At the same time, the potential return for early investors is huge if the SPAC shares rise because they also initially receive shares and warrants giving them the right to buy more shares at a specified price in the future. 

The upsides to SPACs include speed (the typical IPO process can take 2-3 years from start to finish, while a SPAC only takes 3-4 months), additional profit opportunities (institutional investors can purchase additional shares at a discount through warrants) and significant upside for sponsors (who can stand to make hundreds of millions of dollars regardless of how well the acquired company does after it’s public). There are also some significant downsides to the SPAC structure, including expenses for the target company, time constraints, and the risk to retail investors. 

Nigeria’s central bank unveils sandbox and QR guidelines

The Central Bank of Nigeria (CBN) released new guidelines for quick response code (QR) payments and a regulatory sandbox. The sandbox will provide firms with a central bank-supervised environment to test new financial products and services. The new QR code framework will promote the use of electronic payments.

* The views expressed herein are those of the author and should not be attributed to the International Monetary Fund, its Executive Board or its management.