Kiffmeister’s #Fintech Daily Digest (05/18/2021)*

Central Bank Digital Currency (CBDC) Privacy and Transparency: Not So Black and White

Don’t forget to check out the new blog post I wrote with Sonja Davidovic on the nuances of managing privacy trade-offs in central bank digital currency (CBDC) design. It’s not so black and white! For example, the recent digital euro public consultation found that, although potential users place a high value on transaction privacy, they don’t support full anonymity. Ultimate design choices will depend on the motivation for CBDC issuance, country specific circumstances and user preferences. 

China bans financial, payment institutions from cryptocurrency business

According to a notice posted on the People’s Bank of China’s WeChat account, Chinese financial institutions and payment companies have reportedly been banned “from providing services related to cryptocurrency transactions, and warned investors against speculative crypto trading. Under the ban, such institutions, including banks and online payments channels, must not offer clients any service involving cryptocurrency, such as registration, trading, clearing and settlement.”

Francis Coppola on Tether’s Smoke and Mirrors

According to Tether’s General Counsel, Stuart Hoegner, the commercial paper held as USDT reserves are mostly investment grade, but with no independent verification of his statement. However, Tether’s terms of service says that if Tether is unable to raise the cash to meet USDT redemption requests, it can either delay redemption or redeem USDT by in-kind redemptions of securities and other assets held as reserves. So the liquidity or quality of reserve assets doesn’t matter since Tether will never have any significant need for cash.  

BofA Joins Paxos Blockchain Stock-Settlement Network

Bank of America joined Credit Suisse and Nomura’s Instinet on Paxos Trust’s blockchain-based stock-settlement network that settles trades in minutes rather than days. Paxos Settlement Service is a private, permissioned blockchain solution designed to allow two parties to bilaterally settle securities trades directly with each other. The platform is interoperable with the legacy clearing system and can facilitate settlement on any time cycle. Bank of America has been conducting internal transactions for the past few months and, if approved as a clearing agency, will offer the service to clients next. 

The FDIC wants to know more about use cases for crypto at US banks

The US Federal Deposit Insurance Corporation (FDIC) put out a request for public feedback on depository institutions holding digital assets. The announcement calls for information on digital assets in payments, settlement, reserve holdings, custody and investing at member banks. The questions involved are notably open-ended, including: “Are there any unique aspects of digital asset activities that the FDIC should take into account from a supervisory perspective?”  

Polkadot announces Kusama is ‘finally ready to host parachains

Polkadot is entering the fourth and final phase of its mainnet launch, which involves deploying parachains to the Kusama network. Polkadot is a platform that allows different blockchains to transfer value in a trustless fashion and share their unique features while using one secure channel. It was developed as an alternative to Ethereum’s 2.0 network upgrade currently under development. 

*For those interested in intra-day updates and news that didn’t make the Daily Digest cut, please check out my Diigo fintech bookmarks: