Day: May 13, 2021

Kiffmeister’s #Fintech Daily Digest Update (05/13/2021b)*

~ kiffmeister ~ 3 Comments

Tether’s First Reserve Breakdown Shows Token 49% Backed by Unspecified Commercial Paper

For the first time, Tether revealed the breakdown of its reserves that back its USDT stablecoin. As of March 31, 2021 they were composed of 49.6% commercial paper, 18.4% fiduciary deposits, 12.6% secured loans (none to affiliates) and 10% in corporate bonds and precious metals. The remaining 9% was held in the form of various cash equivalents (see below).  

The new report is part of Tether’s efforts to stay in compliance with a settlement agreed to with the New York Attorney General (NYAG) after the prosecutor investigated it and its sister crypto exchange Bitfinex over the cover-up of some $800 million in losses. Bitfinex and Tether paid an $18.5 million dollar fine and agreed to provide quarterly breakdowns of its reserves as part of the settlement. 

Hong Kong Looks to Expand Cross-Border Tests of Digital Yuan

The Hong Kong Monetary Authority (HKMA) and the People’s Bank of China (PBOC) recently tested cross-border digital yuan (e-CNY) transactions, involving a PBOC-designated bank, as well as merchants and bank staff. Following up on that, the HKMA is “discussing and collaborating with the PBOC on the next phase of technical testing, including the feasibility of broadening and deepening the use of e-CNY for cross-boundary payments. 

DeFi and the Future of Finance

According to this paper co-authored by Campbell Harvey, decentralized finance (DeFi) offers a number of potential solutions to the problems inherent in the traditional financial infrastructure. While there are many fintech initiatives, the paper argues that the ones that embrace the current banking infrastructure are likely to be fleeting. It argues those initiatives that use decentralized methods – in particular blockchain technology – have the best chance to define the future of finance. 

*For those interested in intra-day updates and news that didn’t make the Daily Digest cut, please check out my Diigo fintech bookmarks: https://www.diigo.com/user/kiffmeister/Fintech

Kiffmeister’s #Fintech Daily Digest (05/13/2021)*

~ kiffmeister

Tesla Suspends Accepting Bitcoin Citing Environmental Issues

CEO Elon Musk announced Tesla has suspended accepting bitcoin for vehicle purchases. The company cited concerns “about rapidly increasing use of fossil fuels for bitcoin mining and transactions, especially coal, which has the worst emissions of any fuel.” As a result crypto-asset markets tanked, with Bitcoin’s price plummeting from $54,800 to a low of $46,294, before rebounding slightly to trade around the $50,000 level.

Diem Announces Partnership with Silvergate and Strategic Shift to the United States

Facebook’s Diem project is shifting its main operations from Switzerland to the United States, and withdrawing its application for a license from Switzerland’s Financial Market Supervisory Authority (FINMA). Diem will partner with California state-chartered Sivergate Bank who will become the exclusive issuer of Diem’s USD stablecoins and will manage the USD reserve. And Diem Networks US will register as a money service business (MSB) with the U.S. Financial Crimes Enforcement Network (FinCEN). Novi, which is the operating arm of Diem, will also need to have a money transmitter license in all of the U.S. states in which it wants to operate. So far it has 37 (see table below) but their are notable gaps (e.g., California, Florida, New York, etc.).

Hybrid Banknotes Can Bridge Cash and Crypto

It seems only logical that an ideal payment instrument would combine the advantages of banknotes and digital currencies. A hybrid banknote would use a universally accepted and robust payment technology – cash – to deliver the cutting-edge benefits of digital money. A hybrid banknote – for instance, a bill with a chip embedded – could routinely function as a banknote does currently, but have the ability to access an electronic network to transfer value. 

*For those interested in intra-day updates and news that didn’t make the Daily Digest cut, please check out my Diigo fintech bookmarks: https://www.diigo.com/user/kiffmeister/Fintech