Month: July 2021

Kiffmeister’s #Fintech Daily Digest (07/09/2021)*

~ kiffmeister

I’m on vacation next week (the first time in years) so my updates may become a bit sporadic and come at odd times and in different formats (I’m experimenting with using Diigo to automatically post the daily updates. I’ll be fully back in business on July 19.

What Is and Isn’t a Retail Central Bank Digital Currency?

Meanwhile, I’ve updated my what is retail central bank digital currency post to account for the many helpful comments received. My base definition of a retail CBDC was a broadly available general purpose digital payment instrument, denominated in the jurisdiction’s unit of account, that is a direct liability of the jurisdiction’s monetary authority. However, I put forward a few other possibly key characteristics for discussion: 

  • I’m sympathetic to the Banque de France view that retail CBDC should be usable for peer-to-peer transactions. 
  • Everest’s Bob Reid has also suggested Everest’s adding the condition that it should be subject to the same rules and regulations as imposed on the jurisdiction’s other units of account.
  • Banco Central dos Brasil’s Marcelo Prates suggests that only monetary authorities that issue their own currency can issue retail CBDC, which precludes completely dollarized country central banks (eg Ecuador, El Salvador, Panama, and Zimbabwe) from issuing CBDC. A digital currency issued by the monetary authorities of such dollarized countries would be nothing more than a stablecoin. By this logic the same would go for individual countries in other currency unions.

Any others have thoughts on this?

Central bank digital currencies for cross-border payments

This report, prepared by the Committee on Payments and Market Infrastructures, the Bank for International Settlements, the International Monetary Fund and the World Bank, analyses how central bank digital currency (CBDC) could facilitate enhanced cross-border payments, and how practical efforts are taking these considerations forward. It concludes that facilitating international payments with CBDCs can be achieved through different degrees of integration and cooperation, ranging from basic compatibility with common standards to the establishment of international payment infrastructures. The analysis highlights both the need for multilateral collaboration on macro-financial consequences as well as the importance of interoperability between CBDCs. 

*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 (07/08/2021)*

~ kiffmeister

I’ve updated my tabulation of central bank digital currency (#CBDC) explorers. There are no new entries but some links have been updated (e.g., Australia, Brazil and New Zealand). 

New Zealand’s Reserve Bank consulting public on a potential CBDC

The Reserve Bank of New Zealand will open up public consultations regarding a central bank digital currency (CBDC) and the emergence of new digital forms of money including stablecoins. “The potential for a CBDC to help address some of the downsides of reducing physical cash use and services is something we want to explore for New Zealand.  A CBDC, similar to digital cash, might well be part of the solution, but we need to test our assessment of the issues and proposed approach before developing any firm proposals.” 

France, Singapore complete cross-border CBDC test

“The Monetary Authority of Singapore and the Banque de France successfully completed a wholesale cross-border payment and settlement experiment using multiple central bank digital currencies (mCBDCs). The experiment between the two central banks, supported by J.P. Morgan’s Onyx, simulated cross-border transactions and cross-currency transactions involving a Singapore dollar CBDC and a euro CBDC, and was conducted using a permissioned, privacy-enabled blockchain based on Quorum technology.”

Bukele’s Bitcoin Blunder

“El Salvador’s President Nayib Bukele blessed El Salvador’s Bitcoin Law, asserting that making bitcoin legal tender would reduce remittance costs. But as things currently stand, the cost of using bitcoin to send remittances to El Salvador is not, in fact, cheaper than traditional money transfer services. Remittances sent via traditional money-transfer services have a realized cost of only 2.85%. But, remittances sent via bitcoin will require Salvadorans to cough up much more than 5% to obtain the dollars they want. It’s clear that remittance costs are not the reason that Bukele is preaching from the bitcoin pulpit.” For more detail see: https://sites.krieger.jhu.edu/iae/files/2021/06/Bukeles-Bitcoin-Blunder-Final.pdf 

Visa’s crypto-linked cards see continued growth

Visa is currently partnering with 50 crypto platforms on card programs to allow users to convert and spend digital currency at 70 million merchants worldwide. These programs don’t require coffee shops, dry cleaners, or other businesses to directly accept cryptocurrencies at the checkout. The process uses ‘tap and go’ without the complexity of new acceptance points or cryptographic keys. Visa has been growing their relationships with digital currency platforms like FTX, Coinbase, Crypto.com, and CoinZoom. 

*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 (07/07/2021)*

~ kiffmeister

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. https://www.cbinsights.com/research-unicorn-companies 

*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 (07/06/2021)*

~ kiffmeister

Reserve Bank sees no ‘policy case’ for digital Aussie dollar just yet

The Reserve Bank of Australia (RBA) is continuing to closely monitor the case for a retail central bank digital currency (CBDC) and is engaging with some other central banks on possible use cases, including for cross-border payments. So far, the central bank does not consider that a policy case has yet emerged for issuing a CBDC. The RBA has also been conducting research on wholesale CBDC at its in-house Innovation Lab, and is close to finalizing a project with a number of external parties to explore the implications of delivery-versus-payment settlement on a distributed ledger technology platform as well as other programmability features of tokenized CBDC and financial assets. 

Vietnam plans to pilot central bank digital currency?

“Several news outlets in Vietnam have reported that country’s prime minister has instructed the State Bank of Vietnam to pilot a national digital currency based on blockchain. While it seems this will be a central bank digital currency (CBDC), some have reported that it will be a cryptocurrency. That may in part relate to the semantics of the terms “virtual” or “digital” currency.” However, I can find nothing about it on the prime minister’s website so Viet Nam doesn’t go onto my CBDC explorer tabulation just yet.

The Mobile Gender Gap Report 2021

The GSMA Mobile Gender Gap Report 2021 highlights, so far the pandemic does not appear to have negatively impacted the overall gender gap in mobile ownership, which has remained relatively flat, nor the gender gap in mobile internet, which has improved this year – driven mostly by South Asia. Across low- and middle-income countries, 58 per cent of women now access mobile internet, with an estimated 112 million women going online for the first time in 2020. But access and use of mobile remains unequal; women are 7 per cent less likely than men to own a mobile and 15 per cent less likely to use mobile internet.

*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 (07/05/2021)*

~ kiffmeister

Fintech and payments: regulating digital payment services and e-money

This Bank for International Settlements (BIS) paper explores how non-bank payment service providers (NBPSPs) are regulated and provides a cross-country overview of the regulatory requirements for digital payment and e-money services offered by NBPSPs. It benefited from responses to a CPMI survey of 75 jurisdictions conducted in early 2021. 

The paper also has a box that discusses e-money definitions. As an aside, there was a fierce Twitter debate around e-money and stablecoins involving, among others, Rohan Grey, Marcelo Prates. The BIS paper keeps things pretty simple, defining “e-money” as debt-like instruments that an entity issues on receipt of funds for the purpose of facilitating payment transactions. More, specifically, from a:

  • Balance sheet perspective, e-money is a fixed value claim on the balance sheet of the entity issuing it. That claim (ie the e-money the user receives) is (i) typically redeemable in fiat currency at a pre-established face value upon demand, which makes it similar to sight deposits held by banks; and (ii) denominated either in the same currency as the underlying balance sheet liability or in a fictitious unit of account that is tied to a sovereign currency.
  • Risk perspective, e-money is a transaction device that offers stability of value through redemption guarantees provided by the issuer. To avoid breaking this promise, an issuer needs to ensure that it holds enough assets that are sufficiently liquid to meet all redemption requests upon demand at all times. Unless these assets are held as deposit at a central bank, which is possible or mandated only in few jurisdictions, they are subject to risks that could reduce their value.

But take a look at the aforementioned Twitter discussion if you want to go deeper into rabbit holes!

Liquidshare, BNP Paribas, Euroclear in CBDC trial for securities settlement

On June 18th and 25th, the Banque de France successfully carried out a fifth experiment on central bank digital currency (CBDC) with a consortium of actors driven by LiquidShare as part of the experimental program launched in March 2020. The experiment involved the simulation on a private blockchain of the issuance and settlement of unlisted securities and of the settlement of listed securities. Settlements of securities were simulated by CBDC issued on the blockchain. The experiment required the development and deployment of smart contracts so that the Banque de France could issue and control the circulation of CBDC tokens while ensuring that each transfer takes place simultaneously with the delivery of the securities.

Wyoming legally recognizes first DAO in the United States

“Wyoming has approved the first legally recognized decentralized autonomous organization (DAO) in the United States. The American CryptoFed DAO received notice from the Wyoming Secretary of State’s office on Tuesday recognizing it as a legal entity. The American CryptoFed DAO was established by mobile banking solutions provider mSHIFT on July 1, 2021. The project describes its mission as promoting a two-token economy that is immune from inflationary or deflationary influences.” 

*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 (07/04/2021)*

~ kiffmeister

Banco Central do Brasil launches digital Real webinar series

Banco Central do Brasil is running a series of public webinars to debate the general guidelines for a Brazilian central bank digital currency (CBDC), and discuss use cases that can benefit from a digital Real and the most appropriate implementation technologies. There will be seven sessions that will run from July 29 to November that will cover potential applications, identity and data issues, offline capacity, smart contracts, operational issues, cross border integration, platform technology and interoperability with existing payment rails.

*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 (07/03/2021)*

~ kiffmeister

Ukraine Puts CBDC On Par With Cash in New Payments Law

The Verkhovna Rada, the governing body of Ukraine, reportedly passed a law regulating payment methods that officially puts central bank digital currency (CBDC) on par with cash, bank accounts and electronic payments. The law mentions the “digital money of the National Bank of Ukraine – electronic form of a unit of account in Ukraine, emission of which is run by the National Bank of Ukraine.”

Binance Deploys Crypto Monitoring ‘Traveler’ System to Comply With FATF Travel Rule

Binance has deployed CipherTrace Traveler to enable the exchange’s compliance with global “travel rule” regulations. Traveler is designed to support Virtual Asset Service Providers (VASPs), including cryptocurrency exchanges, custody providers, OTC trading desks, banks and other financial institutions, to achieve compliance with the Financial Crimes Enforcement Network’s (FinCEN) and the Financial Action Task Force’s (FATF) travel rule regulations. 

The 2nd Global Alternative Finance Market Benchmarking Report

The 2nd Global AltFin Market Benchmarking Report shows that total global volume has notably decreased, falling 42% in 2019 and a further 35% in 2020 – from $304.5 billion in 2018 to $176 billion in 2019 and $114 billion in 2020. When Chinese volumes are excluded, the total volume grew 27% from 2018 to 2020 to $113 billion. China dominated the global online alternative finance market up until 2018, but local market developments and regulatory changes have led to a considerable decline in volumes and its global market share. In 2019, the Chinese market accounted for 48% of the global volume, and in 2020 for only 1%. The US and Canada is now the largest regional #AltFin market ($73.93 billion) followed by UK ($12.64 billion) and APAC (ex China) ($8.9 billion). 

Crypto owners are “generally more educated than the average,” according to a new BIS study

Fun fact: A recent Bank for International Settlements (BIS) paper analyzing correlations between crypto investment choices and the level of education and income, suggested that crypto owners are “generally more educated than the average,” especially XRP and ETH hodlers. 

*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 (07/02/2021)*

~ kiffmeister

Global Central Bank Digital Currency and Stablecoin Monthly Monitor (June 2021 Edition)

According to my real-time tabulation, 55 central banks are exploring or have recently explored retail central bank digital currency (CBDC) and the pace of development is accelerating. The Monetary Authority of Singapore launched a Global CBDC Challenge, to seek innovative retail CBDC solutions to enhance payment efficiencies and promote financial inclusion, partnering with the International Monetary Fund and World Bank, among others. Stablecoin market capitalizations continue to increase although not at the torrid pace of recent months.   

China’s new digital yuan test shows it can be programed to confine utility

The Chengdu government is issuing 12 million eCNY through a lottery to 100,000 residents as part of the ongoing central bank digital currency (CBDC) test. However, the free e-CNY embeds a pre-programed utility for paying for subway and bus tickets through Chengdu’s Tianfutong mobile app or for shared bikes on the Meituan mobile app, encourage users to take more public transportations. This appears to be the first time that eCNY programmability is being tested, in this case to ensure that the e-CNY can only be spent for specific purposes. 

Thai SEC and Cayman Islands regulator take action on Binance

Binance continues to face scrutiny from regulators regarding the legality of its operations in certain countries. Thailand’s Securities and Exchange Commission and the Cayman Islands Monetary Authority are the latest financial regulators to announce a regulatory crackdown on the crypto exchange. This follows increasing scrutiny by regulators in Canada, Japan, Singapore, the United Kingdom and the United States.

*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 (07/01/2021)*

~ kiffmeister

Global Central Bank Digital Currency and Stablecoin Monthly Monitor (June 2021 Edition)

According to my real-time tabulation, 55 central banks are exploring or have recently explored retail central bank digital currency (CBDC) and the pace of development is accelerating. The Monetary Authority of Singapore launched a Global CBDC Challenge, to seek innovative retail CBDC solutions to enhance payment efficiencies and promote financial inclusion, partnering with the International Monetary Fund and World Bank, among others. Stablecoin market capitalizations continue to increase although not at the torrid pace of recent months. Click here for more of the month’s news and details.

Crypto exchange Binance says sterling withdrawals reactivated after outage

Sterling withdrawals from Binance’s UK platform have been reactivated, with users also able to buy digital coins with debit and credit cards. Earlier in the week, the exchange’s customers unable to withdraw or deposit sterling via the Faster Payments network – which enables mobile, internet and other payments between British bank accounts – or bank cards. This was days after the Financial Conduct Authority had cracked down on some of its activities in the UK.   

Distrust or speculation? the socioeconomic drivers of U.S. cryptocurrency investments

Employing representative data from the U.S. Survey of Consumer Payment Choice, this Bank for International Settlements (BIS) paper disproves the hypothesis that cryptocurrency investors are motivated by distrust in fiat currencies or regulated finance. Compared with the general population, investors show no differences in their level of security concerns with either cash or commercial banking services. The paper finds that cryptocurrency investors tend to be educated, young and digital natives. In recent years, a gap in ownership of cryptocurrencies across genders has emerged. The paper examines how investor characteristics vary across cryptocurrencies and show that owners of cryptocurrencies increasingly tend to hold their investment for longer periods. 

Beijing and Suzhou Railways Now Accept Digital Yuan Payments for Ride Fares

Beijing subway now allows passengers to pay for rides with the eCNY central bank digital currency (CBDC). The subway system in East China’s Jiangsu province in the city of Suzhou also allows eCNY payments for subway fares. And thanks to the South China Morning Post (and hat tip to Juan Gutiérrez) here’s a nice summary of the eCNY pilot landscape:

House committee reviews cryptocurrency risks, regulations in hearing

The U.S. House Committee on Financial Services held a hearing for legislators and a panel of witnesses to discuss cryptocurrency regulation in the United States. 

*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