Kiffmeister’s #Fintech Daily Digest (07/07/2021)*

BOJ to pilot digital currency roll-out in August

The Bank of Jamaica will reportedly commence its central bank digital currency (CBDC) pilot in August. The delayed roll-out of the system, which was supposed to have started in May, will commence with a National Commercial Bank pilot, followed by more banks in September to December. The pilot will then be gradually expanded into a full-fledged launch. 

Circle Isn’t Winning the Stablecoin Transparency Race

JP Koning writes about USD Coin transparency, focusing on the nature of its “approved investments.” “What are these investments? How many does it own? Circle, USDC’s issuer, has never disclosed much information on them. Because Circle is regulated by 44 state licensing boards, and each board has its own permissible investment rules (some very lenient), it’s very difficult to reverse-engineer what USDC’s “approved investments” might be comprised of. 

Responding to an inquiry, Circle said that they own ‘cash, cash equivalents and short-duration investment-grade assets.’ This gives us a bit more of an idea about the nature of Circle’s approved investments. But why not get even more transparent? It would be a big win for stablecoin consumers if Circle provided descriptions of its approved investments in subsequent attestation reports, and broke down what proportion of customers’ funds are allocated to each bucket.”  

The article references Dan Awrey’s paper “Bad Money” for data on permissible investment rules. It finds that the rules are characterized by significant heterogeneity and they often fail to meaningfully enhance the credibility of the promises that these institutions make to the holders of their monetary liabilities. The proposes a National Money Act designed to strengthen and harmonize the regulatory frameworks governing these new institutions and promote a more level competitive playing field.

EBA assesses benefits, challenges and risks of RegTech use in the EU

The European Banking Authority (EBA) published a report on RegTech in the EU financial sector.  The report assesses the overall benefits and challenges faced by financial institutions and RegTech providers in the use of RegTech. It also identifies potential risks arising from RegTech solutions that supervisors will need to address and proposes actions designed to enhance knowledge and skills in competent authorities. These actions also aim to ensure technological neutrality in regulatory and supervisory approaches to RegTech, whilst addressing any inadvertent obstacles within the Single Market to facilitate the adoption of RegTech across the EU. 

Fintech Funding Sets New Records in 2021

Fintech firms are having a banner year 2021. During Q1 2021, venture capital-backed Fintechs secured $22.8 billion, which notably makes it the largest-ever funding quarter for Fintech companies since 2018, according to data from CB Insights. Mega-rounds of $100 million and more represented almost 70% of total funding internationally. 

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