Kiffmeister’s #Fintech Daily Digest (07/20/2021)*

Circle Reveals Assets Backing USDC Stablecoin

Circle published a breakdown of the assets backing its USDC stablecoin in its latest attestation report. According to the report, on May 28 bout 61% of its tokens were backed by cash and money market funds. Yankee certificates of deposit (i.e., issued by non-US banks) comprise a further 13%, short-term U.S. Treasury securities account for 12%, unsecured commercial paper accounts for 9%, and the remaining tokens are backed by unsecured short-term municipal and corporate bonds. 

By “short-term” is meant a maximum term to maturity of three years, and the overall portfolio weighted average maturity is limited to 1.5 years. There are also credit rating limits based on S&P scales. The overall portfolio must main an average credit rating must of A or better, commercial paper holdings must be rated A1 on the short-term scale, and for bonds issued by corporations and financial institutions must be rated BBB+ or higher on the long-term scale.

Janet Yellen: We Must ‘Act Quickly’ on Stablecoin Regulation

U.S. Treasury Secretary Janet Yellen convened the President’s Working Group on Financial Markets (PWG), joined by the Office of the Comptroller of the Currency and the Federal Deposit Insurance Corporation, to discuss stablecoins. In the meeting, participants discussed the rapid growth of stablecoins, potential uses of stablecoins as a means of payment, and potential risks to end-users, the financial system, and national security. The Secretary underscored the need to act quickly to ensure there is an appropriate U.S. regulatory framework in place. The group also heard a presentation from Treasury staff on the preparation of a report on stablecoins, which would discuss their potential benefits and risks, the current U.S. regulatory framework, and the development of recommendations for addressing any regulatory gaps. The PWG expects to issue recommendations in the coming months. 

EU Proposes Ban on Anonymous Cryptocurrency Transactions

The European Commission is proposing to prohibit cash transactions higher than EUR10,000 and ban anonymous crypto-asset wallets, saying that crypto-assets should be governed by the same rules as regular bank wire transfers. The proposed rules would also oblige financial institutions that facilitate crypto-asset transfers to collect various personal data of senders and recipients, essentially expanding the so-called Financial Action Task Force (FATF) “travel rule” to crypto-asset transactions.

Bank of Korea selects provider for CBDC blockchain simulations

Ground X reportedly won the tender to lead the Bank of Korea’s central bank digital currency (CBDC) proof-of-concept work. Ground X, the blockchain subsidiary of Kakao, Korea’s largest social network, partnered with ConsenSys to create the Klaytn Ethereum-based public-permissioned blockchain that the PoC will be run on. Ground X will start work in August, with the first phase to be completed by December.   

Banque de France, Banque Centrale de Tunisie in wholesale cross border CBDC trial

An experimental wire transfer was carried out between two individuals, located respectively in France and Tunisia, in commercial bank money through transfer of wholesale central bank digital currency (CBDC) between Banque de France and Banque Centrale de Tunisie. The operation took place on the Instaclear interbank transaction solution based on the private distributed ledger operated by Prosperus, and both central banks have exchanged CBDC tokens in secured conditions. Bank Wormser Frères, la Banque Internationale Arabe de Tunisie and its French subsidiary BIAT France, were also part of this operation. 

BlockFi Hit With Cease and Desist in New Jersey

The Attorney General of New Jersey has ordered high-yield crypto lender BlockFi to stop accepting new customers. The order calls for BlockFi to stop accepting new [BlockFi Interest Account] clients residing in New Jersey beginning July 22, 2021,” although the company will be able to continue to serve existing customers in the state and other jurisdictions. BlockFi is accused of offering unregistered securities to its customers. 

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