Kiffmeister’s #Fintech Daily Digest (02/10/2021)*

Payments innovation beyond the pandemic

The Bank of Canada’s work to prepare its contingency plan for launching a central bank digital currency (CBDC) has accelerated, driven by a sharp decline in the acceptance of cash. If this trend continues beyond the pandemic and/or private digital currencies take hold as means of payment, the Bank could be pushed over the edge. Meanwhile, the Bank has been researching and experimenting with different technologies, and engaged three university project teams to independently develop proposals for what a digital currency ecosystem could look like. Their reports will be published on February 11. 

The conversation on general-purpose central bank digital currency

According to a Minneapolis Fed article, “the benefits of a central bank digital currency (CBDC) in the United States are not immediately obvious. Largely due to the legal and regulatory framework supporting the payments infrastructure, an end user’s buying power and ability to trust in the integrity of a transaction are the same for banknotes and bank account balances. Because the banking sector facilitates the exchange of funds between parties, the absence of central bank-issued digital money for general purposes is not currently an issue for most Americans.” 

And check out the CBDC Navigator and its nice curated library of resources on central bank digital currency.

Grayscale’s Crypto-Assets under Management Reaches $36 Billion

The total value of Grayscale’s crypto-assets under management reached $36.5 billion, of which $30.1 was in the Bitcoin Trust and $5.3 in the Ethereum Trust. Grayscale bought 116,174 Ethereum during the last 4 weeks, and 12,450 worth nearly $22.5 million on February 9.  

And bitcoin futures open interest smashes $15 Billion.

JPMorgan Sees Tesla Bitcoin Bet as Too Bold for Others to Follow

“Don’t count on other large companies to emulate Tesla’s decision to add Bitcoin to its balance sheet, according to JP Morgan. Corporate treasury portfolios are typically stuffed with bank deposits, money market funds and short-dated bonds, meaning that annualized volatility — or the range of swings during the course of a year — hovers around 1%. Adding a 1% Bitcoin allocation’“would cause a big increase in the volatility of the overall portfolio,’ wrote the strategists. Such an allocation could mean the portfolio’s volatility rises to 8% due to Bitcoin’s 80% annualized volatility, they said. 

* 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.