Kiffmeister’s #Fintech Daily Digest (02/09/2021)*

ECB’s Panetta Floats 3,000-Euro Limit on Digital Cash

Euro-area residents’ holdings of a future digital currency could be limited to 3,000 euros to prevent bank runs, European Central Bank Executive Board member Fabio Panetta suggested in an interview with Germany’s Spiegel.

ETH represented 80% of last week’s institutional crypto inflows

“Crypto asset manager CoinShares has reported that investment inflows into institutional cryptocurrency funds surged last week, and the majority of it was Ethereum. The report states that of the $245 million crypto inflow last week, 80% of it or $195 million was invested into Ethereum ahead of the launch of the Chicago Mercantile Exchange Ethereum futures contracts on February 8. Comparatively, Bitcoin had $41.9 million of the weekly flows, with a year-to-date total of $2.02 billion.”

BlockFi Officially Launches the Bitcoin Trust with Fidelity Digital Assets as Custodian

BlockFi launched its new Bitcoin Trust that was registered with the US Securities and Exchange Commission (SEC) late last month. The Trust will issue shares through private placements, and the value of the shares will reflect the value of BTC held by the trust (minus expenses and other liabilities). Initially, trust shares will be made available to global institutions and other qualified investors. Later on, access will be expanded to include accredited individual investors in the United States. https://blockfi.com/the-blockfi-bitcoin-trust-offers-a-new-way-to-invest-in-bitcoin

Introducing the TerraUSD U.S. dollar-pegged algorithmic stablecoin

In my recent monthly, I talked about how USD-pegged Empty Set Dollar (ESD), launched in September 2020 and one of the first algorithmic stablecoins to come to market, briefly held the #6 position in the stablecoin league table. (An algorithmic stablecoin adjusts its supply to maintain its peg.) However, ESD broke its peg massively in January, and is now trading down around $0.20 and has dropped down to #13.

However, another very viable-looking USD-pegged stablecoin, TerraUSD which sits at #8, has been brought to my attention by @CptDig. The peg isn’t absolutely perfect, as it has occasionally spiked down to nearly $0.96 and up to $1.04, but since it launched in October 2019 it has spent most of its time within a $0.98 – $1.02 band, which is better than any other algorithmic USD-pegged stablecoin I’ve seen. TerraUSD is also part of the Terra family of products that seem to be seeing real use cases. 

Terra is a delegated proof of stake system that uses the LUNA token as collateral for the stablecoins it issues and it has several active use cases underway:

  • The South Korean CHAI decentralized app-based mobile payments system runs on Terra’s payment rail. The rail is built on two the native stablecoin of Terra for funds across the networks and the Luna token for small transaction fees for miners. CHAI has partnered with 15+ major local banks to facilitate convenient fiat on/off ramps, recently crossed 2 million monthly active users. Terra’s network also integrates with MemePay, a Mongolian e-wallet utilized by 1.5% of the online population. 
  • Terra’s Mirror synthetic assets protocol tracks the price of U.S. stocks, futures, exchange-traded funds, and other traditional assets. The Mirror Wallet kicked off with 12 of the top American technology stocks. The target market is users outside of the United States who seek 24/7 exposure to and fractional ownership of synthetic assets. 

FYI besides TerraUSD there are eleven other Terra-based stablecoins (AUD, CAD, CHF, CNY, EUR, GBP, INR, JPY, HKD, KRW, and SGD).

* 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.