Kiffmeister’s #Fintech Daily Digest (06/04/2021)*

Bitcoin Slips After Musk Tweets Broken-Heart Emoji for Token

Bitcoin slid after a cryptic tweet from Elon Musk apparently hinting at a potential split with the crypto-asset, the latest post from the billionaire to buffet the token’s price. 

E-cedi: Bank of Ghana to pilot digital currency

The Bank of Ghana is in the advanced stages of introducing a retail central bank digital currency (CBDC). The e-cedi will go through three phases before it goes into circulation. The first phase, which is now underway, is focused on the design of the CBDC, and the second phase will look at implementation. In the final stage, a pilot would determine whether the digital currency will be feasible before it goes into circulation. 

EC proposes a trusted and secure Digital Identity for all Europeans

The European Commission (EC) proposed a framework for a European Digital Identity which will be available to all citizens, residents, and businesses in the European Union. The proposed European Digital Identity wallets will enable holders to prove their identity and share electronic documents with the click of a button on their smartphone. They will be able to access online services with their national digital identification, which will be recognized throughout Europe. Very large platforms will be required to accept the use of European Digital Identity wallets upon request of the user, for example to prove their age. Use of the European Digital Identity wallet will always be at the choice of the user. 

Stablecoins and the crypto market liquidity crunch

According to the latest derivatives exchanges stablecoin outflows, people are scrambling to withdraw their stablecoins to convert them to real dollars, creating a liquidity crunch. Paul Santos lays out possible options; (i) exchanges shut down trading pairs, (ii) stablecoin issuers freeze blockchain transactions/funds, (iii) pairs break due to pegs falling apart, panic ensues as fiat redemptions vastly exceed cash reserves, (iv) exchanges issue IOU tokens or shut their doors. 

Binance may be in deep trouble with their margin lending platform

Binance recently announced that Margin Insurance Fund has been bled dry by liquidations, and they are now putting their own “profits” into the fund to try and replenish it. The Insurance Fund is designed to use the collateral from fees on non-bankrupt clients to cover losses when the client accounts go below 0 in value, to limit the occurrences of counterparty liquidation. During the recent flash crash billions was liquidated, probably bleeding the Insurance Fund dry. Binance has also reduced the interest rates on flexible savings on USDT/BUSD from 6.5% to 2%.   

Anchorage to Offer Ethereum-Backed Loans Through BankProv

Anchorage Digital is expanding its lending service with ethereum-backed loans through BankProv, a traditional Massachusetts-based bank formerly known as Provident Bank. Anchorage already provides bitcoin-backed loans through other capital providers, including Silvergate Bank, and is looking to provide institutional clients bank-grade loans on their ethereum as well. Anchorage maintains custody throughout, the custodian simply treats it as collateral in case a client is unable to repay the dollar loan (plus interest). 

OCC’s Hsu: Recent Approvals of Crypto Charters ‘On the Table’ for Review

As the Office of the Comptroller of the Currency (OCC) reviews recent interpretive letters on digital assets and trust charters, Acting Comptroller Michael Hsu reportedly said “everything’s on the table,” including reviewing provisional approvals already granted under prior acting agency leadership. “Charters that were in the pipeline as well as those that were conditionally approved” are “in the scope of the review.” For example, cryptocurrency firms Anchorage, Paxos and Protego have received conditional approvals for national trust charters to custody digital assets. 

Introduction to Privacy Economics

A Bank of Japan paper [sorry, it’s only in Japanese] surveys the literature on the economics of privacy.” The economics of privacy teaches that market mechanisms can address issues such as how to determine socially desirable levels of privacy protection and how to deal with privacy infringements caused by the “negative externalities” of personal information data. It’s difficult to solve. This perception can give important implications when considering how to proceed with the utilization of data while giving a sense of security to people who use digital payment systems. 

South Korea will tax overseas crypto assets starting next year

South Korea’s National Tax Service announced yesterday that Korean residents will be required to pay taxes if the aggregate amount of their account balances in overseas virtual asset businesses exceeds 500 million won, at the end of each month. The new tax rule will be applied to crypto holdings starting January 1, 2022, and the tax reporting will be required starting June 2023. Harsh penalties will be in place for violators.  

Central Bank Digital Currency and Stablecoin Monthly Monitor

On Tuesday I published my May Monthly Monitor which I’ve narrowed down to focus on just central bank and sovereign digital currencies, and stablecoins. The idea remains to summarize all of the month’s key events in these spaces. Comments welcome! 

Central bankers can sign up here: https://www.eventbrite.com/e/the-central-bank-digital-currency-workshop-tickets-152572742179

*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