Kiffmeister’s #Fintech Daily Digest (10/19/2021)

Quote of the day from Noelle Acheson, Head of Market Insights at Genesis Trading: “digital money is great except for when they decide to switch it off for a while”, as M-Pesa shuts down for four hours for scheduled maintenance! Systemically important payment systems must have offline rails!  

ProShares Bitcoin-linked ETF launches on NYSE

ProShares’ Bitcoin Strategy ETF, the first Bitcoin U.S. futures-linked exchange-traded fund (ETF) began trading on the New York Stock Exchange. The addition of the crypto fund to a major stock exchange follows years of deferred decisions from the Securities and Exchange Commission (SEC). [Read more]  Also, Grayscale Investments announced that NYSE Arca has filed with the SEC to convert its Grayscale Bitcoin Trust flagship product into a Bitcoin Spot ETF. However, despite the SEC’s allowance of a futures-based ETF, it has yet to let a spot ETF through, citing concerns of market manipulation in spot venues. But Grayscale argues that if a regulator is comfortable with a derivative, it follows that it must be comfortable with the underlying asset. 

Pilot version of Facebook’s Novi digital wallet app now available

Facebook’s Novi digital wallet app is being rolled out a small pilot in the United States and Guatemala. With it, people can send and receive money instantly, securely, and with no fees. It will use the Pax Dollar (USDP) stablecoin through partnerships with Paxos and Coinbase. A small cohort of users in both countries will be able to download the Novi app on iPhone or Android devices, sign up with valid government-issued ID, and add money to their accounts with a debit card. According to CEO David Marcus, USDP was chosen because it’s been operating successfully for over three years and has important regulatory and consumer protection attributes. He also made it clear that Novi’s support for the larger-scale Diem project hasn’t changed and they intend to launch Novi with Diem once it receives regulatory approval and goes live. [Read more]

Tether’s bitcoin-backed lending clashes with dollar promise

“The CEO of crypto lending platform Celsius Network has said that Tether lends out new USDT stablecoins in return for cryptocurrencies — a claim that calls further into question Tether’s founding promise that it uses only real dollars to issue its tokens. Celsius borrows USDT from Tether in return for well-known cryptocurrencies. New USDT is issued for such loans and later destroyed when the loan is closed so it does not permanently increase USDT in circulation. This flies in the face of the Tether operating model described in its whitepaper – issuance of USDT is supposed to be on a one-for-one basis against dollars. However a primer published in May 2021 says only that that ‘newly issued [USDT] must be backed by collateral’ and that ‘redeemed [USDT] tokens are not released back into circulation unless new collateral has been provided’.” [Read more]  

NYAG in open war with crypto lenders

The New York Attorney General (NYAG) has sent two platforms cease and desist (C&D) orders and three other lenders inquiry letters this week. The NYAG appears concerned that New Yorkers can buy, sell, and loan crypto products illegally offered via various platforms. Two unnamed crypto lenders issued C&Ds will have a brief period of time — 10 to 14 days — to ensure that New Yorkers no longer have access to their products. [Read more]  

 China’s crypto investors get creative to bypass domestic trading ban

As more and more crypto exchanges have announced plans to stop registering mainland Chinese users and phase out existing users there, many investors on the mainland are reportedly making efforts to register companies overseas to bypass the know-your-customer (KYC) checks, which could allow them to trade crypto as corporations. Many vendors on Taobao, China’s major e-commerce marketplace owned by Alibaba, are taking the chance to provide intermediary services for those mainland investors. [Read more]  

U.S. Treasury Says Crypto, Rival Currencies Risk Eroding Sanctions

The U.S. Department of the Treasury reported that U.S. adversaries have increasingly turned away from the U.S. dollar to facilitate their transactions as American sanctions seek to target everything from Iranian oil sales to individuals accused of human rights abuses. The report cited rising risks from new payment systems, and the advent of digital assets, and called for a more multilateral approach to sanctions policy at the Treasury, in order to keep up with changes in the global financial system. [Read more]  

France tests CBDC issuance in treasury bond blockchain trial

A consortium of institutions led by Euroclear have completed a test run of the use of wholesale central bank digital currency (CBDC) for settling French treasury bonds on a blockchain. The experiment, using technology from IBM and commissioned by the Banque de France included Agence France Trésor, BNP Paribas CIB, Crédit Agricole CIB, HSBC, Societe Generale. The trial is part of a wider Banque de France initiative commissioned in March 2020, to test the integration of a central bank digital currency for the exchange and settlement of tokenised financial assets between financial intermediaries. [Read more

El Salvador removes BTC price feed from Chivo app to crack down on arbitrage scalpers

“El Salvador’s government has moved to prevent users of its Chivo digital wallet from gaming the app’s price freeze feature to glean risk-free profits through arbitrage. Wallet users will be no longer be able to see the reference price provided for trades executed using the price freeze feature — which allows traders to retain the Bitcoin (BTC) price quoted by the app for up to one minute. Opportunistic traders have been using the price freeze feature to scalp for arbitrage across other cryptocurrency trading platforms globally during periods of significant price volatility for Bitcoin.” [Read more]  

Ghana Seeks to Ensure E-Cedi Digital Currency Can Be Used Offline

The e-cedi, which the Bank of Ghana is set to pilot, reportedly seeks to facilitate transactions without the need for power or connectivity.” This is a core functionality of the Filia central bank digital currency (CBDC) platform of the Bank of Ghana’s technical partner G+D. [Read more]  

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