Month: January 2021

Kiffmeister’s #Fintech Daily Digest (01/23/2021)*

~ kiffmeister ~ 2 Comments

eCurrency and Crunchfish are partnering to offer an offline CBDC solution

eCurrency and Crunchfish are partnering to offer an offline central bank digital currency (CBDC) solution. The eCurrency retail CBDC platform enables central banks to issue  secure digital bearer instruments utilizing the Digital Symmetric Core Currency Cryptography (DSC3) technology and supporting tiered distribution through existing banking and fintech ecosystems. Crunchfish offers digital cash solutions where payments can be made completely offline without compromising personal privacy.  

Crunchfish’s Digital Cash Solutions are built on two-tier offline vs. online settlement architecture. The heart of the solution is an offline wallet that may either use the secure element provided by the mobile OS or run as a trusted applications in V-OS virtual secure element. The offline wallet securely maintains an offline balance that is utilised for offline transactions. The transactions are cryptographically signed by the payer, assigned to the payee and guaranteed as they are debited against the offline balance. The payee verifies the guaranteed offline payments in an application running on a mobile, card terminal or personal computer. Transaction logs are settled when either party goes online.

I highlight that last bit because the Crunchfish solution isn’t what I have in mind when I think about offline payment systems. What I have in mind is a stored value platform that would take the form of a card or a device on which prepaid values are stored locally and transferred peer-to-peer without ever having to be online. Such a platform would be of interest for countries or regions where large population segments are excluded from the formal financial sector or internet access. The concept is technically quite feasible – WhisperCash already offers such a credit card-sized device.

Attempts to implement such systems during the 1990s via rechargeable smart cards like MintChip, Mondex and VisaCash failed to develop enough customer acceptance to become viable (see Matonis, 2012 and Bátiz-Lazo and Moretta, 2016). Also, at the time, computer scientists argued that such smartcards could never be strong enough to support existing  currency schemes (Stalder, 2002). However, rapid technological progress since then is likely to have addressed some of these security concerns, such as the complex offline capable dynamic data authentication/combined dynamic data authentication security features for stored value cards.

In fact, the Bank of Canada is exploring such a custom universal access device (UAD) to securely store and transfer CBDC. Such a device would be manufactured at a low cost and issued by the Bank to ensure maximum inclusion, and be network-independent and operate for long periods on a local power source. If there is an infrastructure failure, a UAD may prevent the interruption of digital transactions.

Premium on Grayscale’s GBTC Drops

Following the recent bitcoin price pullback, the latest Skew data now indicates that the premium rate on Grayscale’s GBTC is under 10%. Institutional and accredited investors who placed an arbitrage trade on the premium (short the underlying bitcoin and buy GBTC) having to close out their positions (buyback bitcoin and sell GBTC) causing downwards pressure on the premium. Also, retail demand may be leveling off after the recent bitcoin dip, and competition is increasing (e.g., 3iq and Osprey’s Bitcoin Trust). 

Analysts warn of ‘institutional exhaustion’ with Bitcoin price back below $32K

Analysts at QCP Capital, a team of traders in Asia, see several signs of “institutional exhaustion.” They did a timezone analysis which broke down BTC moves into Asia hours vs. US hours (12 hours each). Since March last year, the clear pattern has been relentless US buying while Asian whales and miners have been on the offer. 

* 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.

Kiffmeister’s #Fintech Daily Digest (01/22/2021)*

~ kiffmeister

BIS Innovation Hub sets out annual work programme and launches Innovation Network

The Bank for International Settlements’ Innovation Hub (BISIH) set out its work program, focusing on six key areas; suptech and regtech, next-generation financial market infrastructures, central bank digital currency (CBDC), open finance, green finance, and cyber security. The CBDC theme will include a proof of concept platform using multiple wholesale CBDCs to explore the feasibility of faster and cheaper cross-border payments, and a technological research project and associated prototype(s) for tiered retail CBDC distribution architectures.

Projects are to be spread across the three existing Hub Centres and new locations coming online in 2021. Priorities to be supported by the BIS Innovation Network, a network of experts drawn from the BIS’s 63 member central banks. They are chaired by Susan Slocum (Reserve Bank of Australia, Suptech & Regtech), Siritida P Ayudhya (Bank of Thailand, Next Generation FMIs), Marius Jurgilas (Bank of Lithuania, CBDC), Aristides Andrade Cavalcante Neto (Central Bank of Brazil, Open Finance), Tomer Mizrahi (Bank of Israel, Cyber Security) and Sharon Donnery (Central Bank of Ireland, Green Finance).

Bitcoin Is No Market Hedge, JPMorgan Strategists Say

JP Morgan analysts have concluded that the mainstreaming of crypto ownership is raising correlations with cyclical assets, potentially converting them from insurance to leverage. Over shorter intra-month and intra-quarter horizons, crypto-assets continue to rank as the poorest hedge for major drawdowns in global equities, particularly relative to the fiat currencies like the dollar which they seek to displace. 

Celo to Launch A Euro (cEUR) Pegged Stablecoin In March

Celo, a decentralized financial app, is adding a new stablecoin, backed by the Euro. The Euro stablecoin will be backed by a basket of cryptocurrencies that are algorithmically adjusted to maintain a stable price. The Celo Euro is the second stablecoin to launch on the platform after the Celo Dollar (cUSD), launched in June 2020. 

Avalanche Expanding Stablecoin Diversity in DeFi Ecosystem with Upcoming Launch of e-Money’s European Stablecoins

Stablecoin issuer e-Money is launching its suite of European-currency stablecoins on Avalanche’s Contract Chain (C-Chain), including digital Euros, Swiss Francs, Norwegian Krone, Swedish Krona, and Danish Krone. They will be bought and sold through the e-Money wallet with either a credit card or bank transfer. TrueUSD (TUSD) and BiLira (TRYB) are also issued in Avalanche’s DeFi ecosystem.  

Bitcoin’s biggest mining pool may be behind the BTC price drop

According to data fetched by CryptoQuant, Bitcoin miners at Chinese mining firm F2pool started the massive sell-off that crashed the BTC/USD exchange rate by almost 20% in just less than 24 hours on January 21. Beginning January 15, outflows from F2Pool — currently the largest mining pool comprising roughly 15% of total hash rate — began to rise. By the 17th, daily outflows had reached 10,000 BTC, these continuing for three days in a row before returning closer to normal levels. 

On the other hand, Grayscale’s Bitcoin Trust (GBTC) has seen a $1.2 billion influx of fresh funds from investors since January 15, according to its latest filing with the SEC. This is a record number for GBTC, which saw an average of $217 million raised on a weekly basis in Q4 of 2020.  

Grayscale Investments, via its “statutory trustee” Delaware Trust Company, filed for five digital asset trusts with Delaware’s corporations registry: Chainlink, Basic Attention Token, Decentraland, Livepeer and Tezos. 

And while Bitcoin has plunged by 15% on a seven-day period, dragging most of the cryptocurrency market along with it, some altcoins have survived the drop and massive price correction: Chainlink (LINK), Uniswap (UNI), and Polkadot (DOT) have recorded gains of 11%, 21%, and 20% over the same seven-day period. 

France to Shut Almost 40% of Cash-Handling Centers

The Bank of France will shut down more than a third of its cash handling centers by the end of 2022 as the Covid-19 pandemic accelerates a decline in the use of notes and coins. Operations will cease at 14 of the 37 centers that stock currency and replace damaged notes and coins. The central bank estimates the network would be 40% underused if it remained as expansive as it is now. 

Nine-in-ten of all UK in-store card payments made with contactless

The Coronavirus pandemic has cemented the role of contactless as the preferred way to pay in the UK, accounting for nine-in-ten of all eligible card transactions in 2020, according to figures from Barclaycard. In a survey of 2,000 people conducted by Which?, 34% reported being unable to pay with cash at least once when trying to buy something since March, when coronavirus restrictions were first introduced. 

Spacs/incentives: skewed dudes

Three weeks into the new year and 57 so-called “blank cheque” companies have floated on US exchanges, raising $15.7bn, according to Refinitiv. 

Kiffmeister’s #Fintech Daily Digest (01/21/2021)*

~ kiffmeister

Bitcoin Plunge Has Newbies Scrambling to Google Double-Spend

A report from BitMEX Research suggested that a “double-spend” had occurred in the Bitcoin blockchain. However, it was a false alarm. Double-spend *attempts* happen frequently, which is why transactions need to be confirmed via multiple blocks. In this case, a slowing of transaction confirmations opened up the potential for someone to try to double spend their coins. What likely happened is that two blocks had the same transaction from the same address but that one entire block was ultimately excluded. The need for transactions to be confirmed via multiple blocks are a design feature of Bitcoin, rather than a bug. Six confirmations (blocks) are often considered “secure.” The need for multiple confirmations slows Bitcoin transactions and, at the margin, undermines the idea of it becoming a dominant currency of exchange.  

President Biden freezes FinCEN’s proposed crypto wallet regulations

U.S. President Joe Biden has frozen all Federal regulatory processes, including the self-hosted crypto wallet regulations proposed by former Administration. The announcement came in a White House memorandum for the heads of various federal agencies, the Financial Crimes Enforcement Network (FinCEN) included. The edict doesn’t specify the crypto wallet proposal, but places a general freeze on all agency rulemaking pending review, effective for 60 days from the date of the memorandum. 

Grayscale Continues to Buy the Dips

Grayscale continues with its massive Bitcoin (BTC) purchasing program. So far this week they have purchased 25,000 BTC which is nearly 7x of the amount of BTC mined this week and brings its total portfolio to 641,520 BTC, representing more than 3.4% of BTCs’s circulating supply. Meanwhile, the premium on Grayscale Bitcoin Trust has come down from the December 22 high of 40.2% to 6.3% more recently. However, Grayscale hasn’t bought any Ethereum since December 9 but continues to add some Ethereum Classic, Bitcoin Cash, Litecoin, Stellar, and Horizen. 

BlackRock Gives Funds Go-Ahead to Invest in Bitcoin Futures

BlackRock is adding cash-settled Bitcoin futures as an eligible investment to three funds. It filed updated prospectuses with the U.S. Securities and Exchange Commission that included cash-settled Bitcoin futures among the assets they can buy. The three funds are the Global Allocation Fund, Strategic Income Opportunities Portfolio, Emerging Markets Flexible Dynamic Bond Portfolio.

Shenzhen to issue 20 million digital yuan in Spring Festival red envelopes

Shenzhen will issue 20 million digital yuan as part of a pilot program to promote the application of the new form of currency. This is the third time the city will issue the currency in “red envelopes,” worth 200 yuan each, via a random draw. In the previous rounds, 10 million yuan and 20 million yuan were issued in October 2020 and early January, respectively. The money can be used for shopping in over 3,500 designated businesses with a digital currency transaction system in place in Longhua District from February 1 to 9. 

Sweden is reportedly working with DLT for its CBDC proof-of-concept

Sveriges Riksbank Deputy Governor Cecilia Skingsley reportedly confirmed during a CfC St. Moritz conference panel that the central bank is investigating Corda’s distributed ledger technology for its central bank digital currency (CBDC) proof-of-concept.  

RBI announces Working Group on digital lending

The Reserve Bank of India (RBI) has announced the establishment of a working group to study digital lending activities in the regulated financial sector as well as by unregulated players so that an appropriate regulatory approach can be put in place. 

* 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.

Kiffmeister’s #Fintech Daily Digest (01/20/2021)*

~ kiffmeister

The False Narrative of Bitcoin’s Role In Illicit Activity

New U.S. Secretary of the Treasury Janet Yellen has said that crypto-assets are “a particular concern” when it comes to criminal activity and terrorist financing, going on to say that they “are used, at least in a transaction sense, mainly for illicit financing.” In fact, identified cases of laundering through crypto-assets are tiny compared to the volumes of cash laundered through traditional methods. According to the United Nations, the estimated amount of money laundered globally in one year is $800 billion – $2 trillion, whereas, according to Chainalysis, in 2019, criminal activity represented only 2.1% of all crypto-asset transaction volume (about $21.4 billion).   

The European Commission and the European Central Bank cooperating on a digital euro

The European Commission and the European Central Bank (ECB) are jointly reviewing at the technical level a broad range of policy, legal and technical questions emerging from a possible introduction of a digital euro. Following the conclusion of the public consultation on January 12, 2021 and a period of preparatory work, the ECB will consider whether to start a digital euro project towards mid-2021. Such a project would answer key design and technical questions and provide the ECB with the necessary tools to stand ready to issue a digital euro if such a decision is taken. 

Tether and Bitfinex seek further 30 days to produce critical trial documents

iFinex Inc, the parent company of Bitfinex and Tether, has asked the New York Supreme Court to push back its trial date again, and another 30 days to produce the documents demanded by the Office of the Attorney General (NYAG). The document production process was originally supposed to be completed by December 16, 2020, which was subsequently extended to January 15. The new request noted that a “substantial volume” of material had already been handed over to the OAG, but that there remained “supplemental agreed-upon items” that still had to be sourced. The legal battle extends back to April 2019, when the NYAG alleged that Bitfinex had attempted to cover up the loss of $850 million of customers’ funds by taking illegal loans from Tether.  

On January 10, Bitfinex and Tether CTO Paolo Ardoino said that the two companies have so far “produced more than 2.5m million documentation pages in response to requests from NYAG.” 

Coinbase Acquires Blockchain Infrastructure Firm Bison Trails

Coinbase has bought blockchain infrastructure startup, Bison Trails, which provides an easy-to-use platform to launch and run nodes on any blockchain network. Bison Trails will serve as a foundational element within Coinbase’s ecosystem suite of products, while continuing to operate as a standalone product and provide its “infrastructure as a service” to its current customers. It enables holders of digital tokens to run their own validators or simply custody their holdings offline and delegate the stake to another company’s validator. 

* 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.

Kiffmeister’s #Fintech Daily Digest (01/19/2021)*

~ kiffmeister

Criminal Activity in Crypto Transactions Fell Sharply in 2020, Says Chainalysis

Chainalysis reported that criminal activity represented 0.34% of all 2020 crypto-asset transaction volume (versus 2.1% in 2019). One of the reasons for the decline is due to overall economic activity nearly tripling between 2019 and 2020. Scams made up the majority of such flows at 54% of funds received for illicit activity, followed by darknet markets (35%). Although ransomware accounted for only 7% of all funds received by criminal addresses, it was up 311% from 2019. 

Grayscale Purchases $600 Million Bitcoin in 24 Hours

Grayscale accumulated 16,244 Bitcoin (BTC) worth more than $600 million on January 18, 18 times more than miners added to the supply that day. According to Bybt.com data, Grayscale’s total crypto assets under management exceeds $27 billion when BTC crossed $37,000. In Q4 2020 institutional investors accounted for 93% of capital inflows, or $3.0 billion. Grayscale is also slowly accumulating other digital assets including Bitcoin Cash and Litecoin. 

So far in January, Grayscale bought 26,150 BTC, during which time only 16,200 BTC were mined, at a rate of 900 BTC per day. This means, in the first half of January, Grayscale’s Bitcoin Trust purchased 161% of all the Bitcoin that was mined.

Canadian Retail Central Bank Digital Currency Considerations

Payments Canada has published Central Bank Digital Currency (CBDC): Retail Considerations, the latest in a series of educational papers on CBDC. This paper explores the design considerations for implementation of a retail CBDC in the Canadian payments environment. A retail CBDC is aimed to take on traditional attributes of physical cash and would be used by consumers and businesses (relative to wholesale CBDC, which would be used by financial institutions). 

Banque de France continues wholesale central bank digital currency experiments

The Bank of France continued its securities settlement experiments with wholesale central bank digital currency (CBDC). In December it successfully settled EUR2 million of simulated equity shares with French investment firm IZNES on a distributed ledger technology CBDC platform provided by U.K.-based SETL.  

* 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.

Kiffmeister’s #Fintech Daily Digest (01/18/2021)*

~ kiffmeister

It’s a slow news day so I thought I’d plug a few blogs worth following if you want your crypto and blockchain assumptions and beliefs challenged (and have a chuckle or two). No matter how bullish you are on these topics, it’s always good to be aware of the risks! Here they are in no particular order (they’re all great!):

New York Fed Launches Search for Head of New York Innovation Center

The NY Fed is looking for a Director of its NY Innovation Center, an office within the NY Fed that harnesses expertise and resources from across the Federal Reserve to collaborate globally with private and public sector institutions on projects, initiatives and activities that promote financial sector innovation. A principal function will be to collaborate with the Innovation Hub of the Bank for International Settlements on Fintech issues of importance to the central banking community. 

* 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.

Kiffmeister’s #Fintech Daily Digest (01/17/2021)*

~ kiffmeister

Does Tether Printing Cause Bitcoin Price Movement?

It has been speculated that Bitcoin price is manipulated by Tether issuance printing itself into existence. This results of this empirical study based on daily data indicates that, whilst the Tether printing and Bitcoin price series are cointegrated (and thus tied together intrinsically), Tether printing does not Granger cause Bitcoin price movement. However it does provide evidence to show that Bitcoin price does Granger cause Tether printing, which is a reasonable alternative hypothesis for the apparent relationship. 

China’s blockchain project BSN to pilot global CBDC system in 2021

China’s government-backed Blockchain Service Network (BSN) is building a universal digital payment network (UDPN) to integrate various countries’ central bank digital currencies (CBDC). Currently at the design stage, the beta version of UDPN is expected to launch in the second half of 2021. The BSN plans to complete the UDPN development in five years. With the UDPN, the BSN aims to enable a standardized digital currency transfer method and payment procedure. The new system intends to bring together systems like banking, insurance, enterprise resource planning and mobile apps through APIs to provide a cost-effective global payment solution. 

Alipay and other platforms are no longer allowed to sell internet deposit products 

The China Banking and Insurance Regulatory Commission and the People’s Bank of China jointly issued the “Notice on Regulating Commercial Banks to Carry Out Personal Deposit Business Through the Internet”. It clarified that commercial banks shall not carry out fixed deposit and fixed-activation deposit business through non-self-operated online platforms, including but not limited to non-self-operated online platforms to provide marketing promotion, product display, information transmission, purchase entrance, interest subsidy And other services.  

* 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.

Kiffmeister’s #Fintech Daily Digest (01/16/2021)*

~ kiffmeister

Uganda orders internet blackout until further notice – MTN

I wonder how the Uganda internet shutdown affects digital payment rails? It surely shuts down crypto trading but what about mobile banking and payment rails? Perhaps another reason to favor pure offline P2P digital currency (eg CBDC)? 

Bitcoin Fee Wars Erupt as Upstart Targets Grayscale’s Billions

The Osprey Bitcoin Trust will launch in the over-the-counter markets with a 0.49% management fee, versus the 2% that Grayscale Bitcoin Trust charges. Fidelity Digital Assets will provide custody services. Accredited investors face a $25,000 minimum to buy directly into the trust, and shares have a lock-up period of one year before they can be sold in the secondary market. In the absence of a Bitcoin exchange-traded fund (ETF) — which U.S. regulators have yet to approve — these are seen as one of the easiest and safest ways for investors to get Bitcoin exposure.  

Return of the DEX: Trading Volumes Poised to Set New Record

Decentralized exchanges (DEX) are on track to surpass previous all-time high volumes. They have already transferred more than $27 billion in transaction volume so far in January, the second-highest total since September 2020’s $29 billion. DEX use smart contracts on blockchain networks like Ethereum to let users swap between digital assets without transferring tokens to an exchange wallet or verifying their identity. Uniswap is the most popular DEX, responsible for more than 45% of volume in the last week, with Sushiswap accounting for more than 22%. 

Ant Financial quietly conducted a digital yuan test in Shanghai via AliPay

Ant Financial has reportedly quietly conducted a small-scale limited-time test of digital yuan via its AliPay mobile payment app in two tea stores at a shopping mall next to its Shanghai headquarters. This is the first known instance where China’s digital yuan was tested inside a mobile app that’s developed by a non-state-owned entity. 

Ant Group kicks off the overhaul of its fintech operations

Ant Group has set up a working group to rectify its business practices under the close watch of Peoples’ Bank of China and other financial regulators. The regulators will tell Ant Group which parts of its fintech platform need to be regulated as financial institutions, and the portions of the business that need new operating licences. The licenced financial services businesses will then be moved into a holding company and subjected to regulatory scrutiny. China’s State Council has laid out guidelines for establishing a financial holding and said companies must apply to the PBOC to do so by November 1, 2021. 

Anchorage’s OCC Charter Won’t Change Wyoming Plans for Kraken, Avanti

Avanti CEO Caitlin Long said that Wyoming special purpose depository institutions (SPDIs) rank above OCC trust charter companies in the US banking “pecking order” because OCC trust companies can’t take customer deposits. Special purpose depository institutions can.  

3iQ’s Canadian Bitcoin Fund Hits C$1B in Market Cap

The bitcoin fund from Canada’s 3iq Corp (QBTC), listed on the Toronto Stock Exchange, has reached over C$1 billion in market capitalization. https://3iq.ca/the-bitcoin-fund/ 

* 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.

Kiffmeister’s #Fintech Daily Digest (01/15/2021)*

~ kiffmeister

Bitcoin securities trading surges as investors seek crypto exposure

Investor interest in crypto-linked exchange-traded products (ETPs) is running high. BTCetc Bitcoin Exchange Traded Crypto (BTCE) recorded average daily trading of EUR57 million on the Deutsche Bourse in the first 11 days of January, including a record of $100 on January 4. BTCE has also surpassed $375 million assets under management (AuM). 

Tether’s Bank Says It Invests Customer Funds in Bitcoin

Deltec, Tether’s Bahamas-based bank, is investing customer funds in bitcoin, which raises new questions about whether the dollar-pegged USDT stablecoin, which is in theory backed by cash and “cash equivalents,” as well as “other assets and receivables made by loans,” is actually backed in any way by bitcoin. However, Deltec hasn’t divulged which clients it’s holding Bitcoin for, as Tether isn’t Deltec’s only customer. In fact, at least one other crypto company seems to use it as well, crypto derivatives exchange FTX. 

Bitcoin Miners Aren’t Responsible for Recent Price Dips, Data Shows

“Miners are selling” is a popular trope used to explain bitcoin’s occasional downward price action. But on-chain data doesn’t support this narrative, according to analysts and mining pools themselves. After bitcoin’s correction earlier this week to the tune of nearly 30%, miners were a popular scapegoat. But miners have been extremely consistent in their selling habits for months, according to network data collected by Glassnode and analyzed by CoinDesk. 

* 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.

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

~ kiffmeister

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.