The Best of the Centralized and Decentralized Worlds*

Please check out this post about the potential convergence of decentralized finance (DeFi) and central banking by my colleague Sonja Davidovic on our new Global Fintech Intelligencer blog: 

There is a perception that DeFi and central banks are worlds apart. However, these two worlds should explore common ground that can unlock the best possible solution for the end-consumer – the transparency and efficiency of the DeFi space paired with safe and reliable liquidity and reduced compliance burden provided by central banks. After all, it should be about working towards one common goal – to provide the safest, most efficient, and reliable user experience in payments.
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* 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 (02/19/2021)*

Crypto markets continue to surge ahead with Bitcoin hitting new all-time highs ($54,828 so far today) and its total market capitalization spiked through the $1 trillion level!

Bermuda to Pilot Digital Dollar for Rum Sales

Canadian fintech firm Bidali has reportedly launched a pilot to test a digital Bermuda dollar with the support of the Bermuda government. Under the pilot program, popular local rum company Gosling’s Limited will be accepting digital Bermuda dollars through the Stellar network. From there it hopes to expand to other businesses in Bermuda. Bermuda is a British island territory that does not have a central bank and the Bermuda dollar is pegged one-to-one to the U.S. dollar – it’s effectively a non-digital government-issued stablecoin with one USD in reserve for every Bermuda Dollar that’s issued. Also, since 2019, Bermudans have been able to pay taxes with USDC stablecoins. 
DeFi Money Market (DMM), one of the earliest projects aiming to bring real-world assets on-chain, has ceased operations as a result of U.S. Securities and Exchange Commission (SEC) inquiries. Users deposit DAI, USDC, USDT, or ETH to the DMM smart contract in exchange for DMM mTokens that offered over 6% interest rates on the real-world car loans that backed them. DMM runs off a custom-built Chainlink oracle. The SEC subpoena requested information about the mTokens, the DMG governance tokens, and other details surrounding DMM’s operations and governance.     
According to David Gerard (Mr. “Attack of the 50 Foot Blockchain“) “the obvious comparison is when the SEC first started noticing that ICOs were unregistered offerings of securities, in late 2017 — in particular, the administrative order against Munchee in November 2017.” And we all know what happened to ICOs… 
And speaking of David Gerard, this post on 19th century stablecoins is pretty cool! “The U.S. wildcat banking era, more politely called the “free banking era,” ran from 1837 to 1863. Banks at this time were free of federal regulation — they could launch just under state regulation. Under the gold standard in operation at the time, these state banks could issue notes, backed by specie — gold or silver — held in reserve. The quality of these reserves could be a matter of some dispute. The wildcat banks didn’t work out so well. The National Bank Act was passed in 1863, establishing the United States National Banking System and the Office of the Comptroller of the Currency — and taking away the power of state banks to issue paper notes.” Read on here for more fascinating details!

Purpose Bitcoin ETF, North America’s first Bitcoin exchange-traded fund (ETF), got off to a stellar start in its debut on the Toronto Stock Exchange, with investors exchanging $165 million worth of shares. “The U.S. currently has several active filings for a Bitcoin ETF, including the ones from VanEck Associates and Bitwise Asset Management, but the price swings notorious in cryptocurrenies and allegations of industry manipulation remain hurdles to regulator approval.” 
* 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.