Kiffmeister’s #Fintech Daily Digest (02/16/2021)*

Yesterday was the first day in a very long time that there was no fintech news worth reporting. Hence the absence of a post. However, we’re back in business today, as Bitcoin hits another all-time high price of $50,585 before drifting lower to trade between $48,000 and $49,000.

Central Bank Digital Money Won’t Replicate Cash, Sweden’s Riksbank Says

According to a Sveriges Riksbank staff memo, it would be misguided to expect cash-like features of a central bank digital currency (CBDC). In order for a CBDC to be cash-like, it would need to be both anonymous and usable off-line, but the paper claims that the technical construction of digital currencies requires that they be verified by a remote ledger, in order to avoid double spending. It dismisses the possibility of using local devices that cannot be tampered with and program them such that a token cannot be spent more than once, claiming that such 100% tamper-proof devices do not exist. However, this is untrue. Mondex used tamper-resistant hardware to do exactly what the paper says is impossible. It failed due to a flawed business model, and not any technical shortcomings.

Diem Stablecoin Prepares for Liftoff With Fireblocks Custody Partnership

Crypto custodian Fireblocks and payments platform First Digital Assets Group are providing connectivity and support to Diem, the global stablecoin and payments system formerly known as Libra. They will provide the digital plumbing to allow financial service providers such as banks, exchanges, payment service providers (PSPs) and eWallets to plug into Diem on day one. Diem plans to emerge around the end of this quarter, with a modest minimum viable project based around a U.S. dollar stablecoin.    

MicroStrategy Announces Proposed Offering of $600 Million Convertible Senior Notes to Buy More Bitcoin

MicroStrategy intends to offer, subject to market conditions and other factors, $600 million aggregate principal amount of convertible senior notes due 2027 in a private offering to qualified institutional buyers. MicroStrategy intends to use the net proceeds from the sale of the notes to acquire additional bitcoins. 

Ripple, SEC Say Settlement Unlikely Before Trial Over Alleged Securities Violations

The U.S. Securities and Exchange Commission (SEC) and Ripple said that there’s little chance of settlement ahead of the expected trial over alleged securities infractions. In a discovery letter addressed to Federal Judge Analisa Torres at the U.S. District Court for the Southern District of New York, the parties said that having previously discussed the matter, they “do not believe there is a prospect for settlement at this time.” They further noted that previous settlement discussions took place under the Trump administration and were mainly conducted with division directors who have since left the SEC.  

Osprey Fund’s Bitcoin Trust Is Now Available to Retail Investors via OTC

Osprey Fund’s bitcoin trust is now available to retail investors via the over-the-counter (OTC) market. The fund was formed two years ago, and Osprey applied to register the trust with the U.S. Securities and Exchange Commission (SEC) in the middle of last year. This fee structure makes the fund cheaper than Grayscale Bitcoin Trust but more expensive than other new funds like CrossTower’s master-feeder bitcoin fund.  

CrossTower Launches Bitcoin Fund to Compete With Grayscale’s GBTC

CrossTower, based in Bermuda, is launching a hedge fund in a bid to compete with Grayscale’s Bitcoin Trust (GBTC) and other bitcoin funds for accredited investors. The minimum investment amount is $100,000 and CrossTower has $20 million in AUM from early investors to start. The product has seen the most interest from family offices. 

Crypto Trust Supply Sinks

A key feature of Grayscale trusts is that there is no way to redeem the underlying crypto, at least for now. So when BTC or ETH is deposited into the trusts it stays there indefinitely. The lack of redemption options plus high institutional demand has created an interesting side effect: crypto trusts are becoming large supply sinks that lock up crypto-assets and effectively take them out of circulation, reducing the overall liquid supply. 

BitPay Adds Support For Apple Pay

BitPay Mastercard holders can now add Apple Pay as an option to pay for goods and services, and the Bitcoin payments firm say they will be adding Google Pay and Samsung Pay later this quarter. BitPay cardholders will be able to make online and in-store purchases and spend BTC wherever Apple Pay is accepted. 

Further details on South Africa’s launches second wholesale CBDC trial

The South African Intergovernmental Fintech Working Group (IFWG) launched ‘Project Khokha 2’ to explore the use of tokenized money, blockchains and wholesale central bank digital currency (CBDC) in South Africa. The CBDC will use R3’s Corda enterprise blockchain, and the settlement token and debenture will use a variant of Cosmos blockchain interoperability solution. Accenture will be responsible for tokenizing the wholesale CBDC on Corda. Block Markets Africa will help with distributed ledger technology, tokenizing the bonds and the wholesale payment token using its custom Cosmos-based solution. And Deloitte will document the insights. Other participants in the trials will include commercial banks Absa, FirstRand, Investec, Nedbank, and Standard Bank, the Johannesburg Stock Exchange (JSE), and Strate, South Africa’s central securities depository. 

Bitcoin miners are hodling while long-term investors take profits

According to Glassnode data Bitcoin miners are accumulating while long-term investors are taking profits. Despite January seeing heavy selling from miners, Glassnode’s report shows that miner outflows have dried up during February so far. 

Verge of disaster: 200 days transactions wiped from blockchain

Privacy-focused blockchain network Verge (XVG) has experienced a significant block reorganization, replacing transactions dating as far back as July 2020. Despite being described as potentially “the deepest reorg that has ever taken place in a top 100 cryptocurrency,” analysts are yet to confirm that the incident comprised a coordinated attack. As a result of this roll-back, any user who received or purchased XVG tokens since July 2020 may have lost their entire balance, with Deribit Insights’ researcher “Hasu” tweeting that “thousands of balances have simply evaporated.” 

* 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.