Kiffmeister’s #Fintech Daily Digest (10/02/2021)

Crypto Boom Poses New Challenges to Financial Stability

A chapter from the IMF’s forthcoming Global Financial Stability Report concludes that tougher regulation is needed to prevent the rapid growth in crypto-assets leading to financial instability, defrauding of consumers and the funding of terrorism. The chapter drew particular attention to the widespread and rapid adoption of crypto-assets in emerging markets and developing economies (EMDEs), which could “pose significant challenges by reinforcing dollarization forces in the economy — or in this case cryptoization — where residents start using crypto-assets instead of the local currency, reducing the ability of central banks to effectively implement monetary policy… [In such cases] authorities should prioritize strengthening macroeconomic policies and consider the benefits of issuing central bank digital currency and improving payment systems. In some EMDEs, cryptoization can be driven by weak central bank credibility, vulnerable banking systems, inefficiencies in payment systems and limited access to financial services… [Also,] globally, policymakers should prioritize making cross-border payments faster, cheaper, more transparent and inclusive through the G20 Cross Border Payments Roadmap.” [Read more]

Ripple Releases Engineering Preview of Proposed Federated Sidechains System

Ripple’s development team is launching an engineering preview for an upgrade to the XRP Ledger (XRPL) that will enable “federated sidechains.” Ripple says these sidechains could unleash decentralized finance (DeFi) and smart contracts across the broader XRP ecosystem without decreasing XRPL’s efficiency. Each sidechain acts as its own blockchain, while federation enables value in the form of XRP and other tokens to move efficiently from the sidechain to the Mainnet, without compromising the speed, efficiency, and throughput of the public XRPL Mainnet. [Read more]

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October 4-6 CBDC Conference

On October 4 and 6 I’ll be providing an overview of international work on retail CBDC and evolving thinking on motivations, system design and safeguards at The CBDC Conference. You can register for this and the full three-day event here: