Kiffmeister’s #Fintech Daily Digest (02/18/2021)*

Public and Private Money Can Coexist in the Digital Age

According to this IMF blog, if and when countries move ahead with central bank digital currencies, they should consider how to leverage the private sector. Today’s dual-monetary system can be extended to the digital age. Central bank currency—along with regulation, supervision, and oversight—will continue to be essential to anchor stability and efficiency of the payment system. And privately-issued money can supplement this foundation with innovation and diversity—perhaps even more so than today. Where central banks decide to end up on the continuum between private-sector and public-sector involvement in the provision of money will vary by country, and ultimately depend on preferences, technology, and the efficiency of regulation.

Central Bank of Russia to present new concept of national digital currency

The Central Bank of Russia reportedly received detailed feedback from the banking community in its October report on the possible possible issuance of a digital ruble. new form of national currency. Most banks support a two-level business model that would  allow banks to open wallets for their clients on the central bank’s platform and conduct operations. The central bank will reportedly develop a more detailed concept and start discussing it with the public, market participants, and banks at the beginning of summer. The next step will be launching a proof of concept. 

Chinese bank tests biometric hardware wallet for digital yuan payments

The Postal Savings Bank of China has reportedly created a biometric hardware wallet for the People’s Bank of China central bank digital currency (CBDC) pilot. The new wallet enables easy identity verification for users via fingerprint sensors on the card to provide easier access to the CBDC and healthcare services for the elderly without needing to use smartphones. 

Proposed Legislation for the Regulation of the provision and use of Central Bank issued Electronic Bahamian Dollars

The Central Bank of The Bahamas (CBOB) has released a consultation paper setting out its proposals for legislation to regulate the provision and use of central bank digital currency (CBDC). It summarizes the key provisions of the draft Central Bank (Electronic Bahamian Dollars) Regulations 2021. These include qualification of wallet providers, interoperability, consumer protection, financial stability and financial inclusion. The CBOB is also proposing other consequential amendments to the Payment Systems Act (No. 7 of 2012) & the Computer Misuse Act (Ch. 107A). These legislative amendments are set out in the draft Payment Systems (Amendment) Bill 2021 and the draft Computer Misuse (Amendment) Bill 2021. The consultation period will end on 31st March, 2021.  

Swiss canton of Zug starts accepting tax payments in cryptocurrency

The Swiss canton of Zug now allows local companies and indivduals to pay taxes in crypto-assets Bitcoin and Ethereum. Local crypto broker Bitcoin Suisse enabled the new opportunity in partnership with the canton. Zug initially announced its plans to accept crypto for tax payment in September 2020.  

Robinhood announces plans to offer crypto deposits and withdrawals

Robinhood intends to implement crypto-asset deposits and withdrawals. While customers have been able to buy and sell crypto-assets via the platform for some time, they are unable to access the coins themselves to transfer them to other wallets.  

Clearing Infrastructure Is Under Scrutiny After The Robinhood GME Debacle; The Alternatives Include Various Flavors Of dFMI.

The most important facets of dFMI are the removal of systemic risk, a 24/7 market, confining risk to just the counterparties, resilient infrastructure, ambient legal and regulatory compliance, faster but liquidity preserving settlement, the preservation of anonymity and privacy and the removal of asset silos. Most projects focus on a subset of these facets. The choice is to do incremental transformation or a more radical change. It is evident that the dominant FMIs and market players are resistant to change as their very existence and fat margins are threatened by the new world and they will be compelled by a combination of forces to transform or be replaced. 

Survey Finds Many Finance Managers Are Not Planning to Hold BTC— Volatility Cited as Key Concern

A new poll of finance managers by Gartner Finance finds that a majority are not planning to hold bitcoin as a corporate asset. In their responses, most of the 77 finance leaders interviewed cite bitcoin’s volatility as one characteristic of the crypto asset that is “extremely difficult to mitigate.”

BlackRock has started to ‘dabble’ in crypto, says CIO

Chief investment officer Rick Rieder said Blackrock has “started to dabble a bit” into crypto investments. He described the volatility of cryptocurrencies like Bitcoin (BTC) as “extraordinary” but acknowledged that many investors were looking for “places that appreciate under the assumption that inflation moves higher as debts are building… Holding some portion of what you hold in cash in things like crypto seems to make some sense to me, but I wouldn’t espouse a certain allocation or target holding.” 

Algorithmic stablecoins aren’t really stable, but can the concept redeem itself?

Amid much fanfare, many algorithmic stablecoins have not been stable. For example, Empty Set Dollar’s all-time high and all-time low are $23.88 and $0.174, respectively. Ampleforth’s reading shows a high of $4.07 and a low of $0.1558. By contrast, Dai’s lifetime trading range has been between $0.90 to $1.22. Is the problem intractable, or it’s the just the algorithms that aren’t good enough?

* 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.