Month: December 2021

Kiffmeister’s #Fintech Daily Digest (12/17/2021)

~ kiffmeister

Revisiting the Monetary Sovereignty Rationale for CBDCs

The Bank of Canada published a paper on the potential role of central bank digital currency (CBDC) in protecting a country’s monetary sovereignty. According to the monetary sovereignty argument, private and foreign digital currencies could displace domestic currencies (“currency substitution”), threatening the central bank’s ability to conduct monetary policy and act as a lender of last resort. The paper concludes that CBDC may be a useful defense mechanism for countries with strong monetary systems where currency substitution is driven more by the attractiveness of new digital currencies than by fundamental economic weaknesses in the country. However, for countries that have deeper macroeconomic and financial issues, CBDC issuance is unlikely to prevent currency substitution. [Read more]

CBDC and Banking: Macroeconomic Benefits of a Cash-Like Design

Another Bank of Canada paper shows that an interest-bearing cash-like CBDC is more effective than a deposit-like CBDC in promoting consumption and welfare. It can also increase bank intermediation, even in the absence of bank market power. The cash-like CBDC’s interest rate makes payments more efficient, which increases demand and generates positive spillovers on other types of transactions. As a result, deposit taking and lending, and thus intermediation, increase. The theoretical model used to draw these conclusions introduces new general equilibrium linkages across different types of retail transactions (including cash, deposits and credit) as well as feedback effects from transactions to deposit creation. [Read more]

US CFPB Opens Inquiry into “Buy Now, Pay Later” Credit

The US Consumer Financial Protection Bureau (CFPB) issued a series of orders to five companies offering “buy now, pay later” (BNPL) credit. The orders to collect information on the risks and benefits of these fast-growing loans went to Affirm, Afterpay, Klarna, PayPal, and Zip. The CFPB is concerned about accumulating debt, regulatory arbitrage, and data harvesting in a consumer credit market already quickly changing with technology. [Read more]

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Kiffmeister’s #Fintech Daily Digest (12/16/2021)

~ kiffmeister

Banque de France Completes First Stage of Its CBDC Experiments

The Banque de France successfully completed the last experiment of its program for interbank settlements in wholesale central bank digital currency (CBDC), launched in March 2020. This final experiment involved the issuance of a digital bond on a blockchain and subscription with settlement in It successfully tested an end-to-end digital asset transactional lifecycle, through issuance, subscription by several actors, and coupon payment involving a conversion into another currency. All those transactions occurred across different blockchain environments operated by HSBC for the custody of the assets, and by the Banque de France for the securities settlement and the CBDC. The next phase of the Banque’s CBDC experiments will be mainly dedicated to cross-border transactions. [Read more]

Central bank digital currency, loan supply, and bank failure risk: a microeconomic approach

This paper uses a microeconomic banking model to investigate the effects of introducing an economy-wide, account-type CBDC on a bank’s loan supply and its failure risk. Given that a CBDC is expected to lower the cost of liquidity circulation and become a strong substitute for demand deposits, both the loan supply and the bank failure risk increase. These increases are countered by subsequent increases in the rates of return on term deposits and loans, which, in turn, reduce the loan supply and thus bank failure risk. These offsetting forces lead to no significant change in banking, as long as the rate of return on loans is below a certain threshold. However, once the rate is above the threshold, bank failure risk increases, thereby undermining banking stability. The problem is more pronounced when the degree of pass-through of funding costs to the loan rate is high and the profitability of a successful project is low. Our results imply that central banks wishing to introduce an economy-wide, account-type CBDC should first monitor yields on bank loans and consider policy measures that induce banks to maintain adequate liquidity reserve levels. [Read more]

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Kiffmeister’s #Fintech Daily Digest (12/15/2021)

~ kiffmeister

CBDCTracker.org has updated its searchable central bank digital currency (CBDC) database to include about 15 updates of both retail and wholesale CBDC projects. Furthermore it includes a new “technology” search filter. [More here]

Kazakhstan’s central bank publishes update on its CBDC deliberations

The National Bank of the Republic of Kazakhstan published the results of the first phase of its digital tenge (DT) retail CBDC pilot project. The first phase included proof-of-concept (PoC) testing based on R3’s Corda distributed ledger technology-based platform. The PoC tested basic DT life cycle scenarios, from emission/distribution to purchases and transfers. Also, potential DT users were surveyed and interviewed to clarify priorities and needs in the development of new payment instruments. [Read more]

SEBA Launches First Regulated Gold Token to Enable Digital Ownership of Physical Gold

Swiss digital asset banking platform SEBA is offering a stablecoin backed by physical gold for any-time on-demand delivery of the physical metal. It was developed in conjunction with Argor-Heraeus, a leading service provider in the precious metal industry, and aXedras, a blockchain-based precious metal platform. [Read more]

To get these updates sent to your inbox, please sign up here. Also, 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 (12/14/2021)

~ kiffmeister

Dogecoin Rockets 30% After Elon Musk Says Tesla Will Use for Payments

Elon Musk announced that Tesla will begin accepting Dogecoin as payment for “some” merchandise (swag?) to “see how it goes.”  The Tesla CEO has a long and well-established relationship with meme cryptocurrency Dogecoin. In May of this year—around the same time he reversed course on Bitcoin—Musk said that Dogecoin could beat Bitcoin “hands down.” Since today’s news broke, Dogecoin’s price surged from around $0.16 to over $0.21 at one point. [Read more]

Ukraine Electronic Hryvnia Pilot Launched by TASCOMBANK and Bitt on Stellar

Ukrainian commercial bank TASCOMBANK, and Bitt, the firm behind the Eastern Caribbean Central Bank and Central Bank of Nigeria central bank digital currency pilots, have launched a pilot project to issue an electronic hryvnia on Stellar. The pilot will test the digital currency on the use cases of programmable payroll for public employees at Diia, an IT solutions enterprise, as well as for peer-to-peer payments and merchant payments. The project is being implemented under the supervision of the National Bank of Ukraine and with the support of the Ministry of Digital Transformation. [Read more]

E-Money: Prudential Supervision, Oversight, and User Protection

The IMF published a paper on the evolving prudential frameworks for nonbank issuers of electronic money (e-money). Some jurisdictions take a relatively light-touch approach to regulating e-money issuers (EMIs). Others have sought to apply more stringent requirements to protect e-money users, as the sector has grown in importance. The paper ends with recommendations for policymakers, especially in those emerging market economies and developing countries wherein EMIs have reached a scale at which they could have a significant economic impact if they were to fail. [Read more]

BIS CPMI report highlights rapid development of retail fast payments

The BIS Committee on Payments and Market Infrastructures (CPMI) published a review of recent developments in retail fast payment systems (FPS). It notes that FPS can have significant implications for the operations and services of real-time gross settlement (RTGS) systems, including potential modifications to their access criteria and operating hours. The report also finds that FPS adoption rates are generally low in the early stages of implementation, but some recent ones have seen more rapid take-up. Also, FPS are increasingly settling obligations between banks and, where relevant, non-bank FPS participants on a gross (ie payment-by-payment) basis in real time, and most jurisdictions have either adopted or are moving towards ISO 20022 as the FPS messaging format. [Read more]

Contractual Standards for Digital Asset Derivatives

The International Swaps and Derivatives Association (ISDA) published a paper on the development of common legal standards and definitions for digital asset derivatives. The paper (i) identifies novel technology and market-driven events that could disrupt the operation of a digital asset derivatives transaction and provides a framework for dealing with these events; (ii) explores how digital assets (and the derivatives that reference them) can be valued and what happens when a valuation cannot be obtained; and (iii) analyzes how digital assets might interact with the existing ISDA documentation architecture, including the ISDA Master Agreement and industry standard collateral documentation. ISDA has also produced a supplement to the paper that sets out a granular, technical analysis of different ISDA product definitions and their potential applicability to digital asset derivatives. [Read more]

To get these updates sent to your inbox, please sign up here. Also, 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 (12/13/2021)

~ kiffmeister

Binance’s Singapore entity pulls license application for local crypto exchange

Binance Asia Services withdrew its application to the Monetary Authority of Singapore (MAS) for a license to operate a regulated crypto exchange in the country. Binance Asia Services was among about 170 firms that had applied to the MAS for a license to provide crypto services. The company had been operating under a temporary exemption during the licensing process.[Read more]

To get these updates sent to your inbox, please sign up here. Also, 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 (12/10/2021)

~ kiffmeister

G+D/OMFIF report shows emerging market consumers ready to use CBDCs

G+D and the Official Monetary Financial Institutions Forum (OMFIF) surveyed consumers’ attitudes towards central bank digital currency (CBDC) in Germany, Indonesia, Nigeria, and the United States. The survey revealed sharp differences between consumers in developed countries, where consumers already have many established digital payment options, and developing countries, where there are fewer such options (see infographic below). In 91% of Nigerian respondents said they are likely to use CBDC, and 60% of Indonesians, versus 24% in the United States and 14% in Germany. CBDC awareness is also much higher in emerging markets. [Read more and download full report here]

ECB’s Fabio Panetta tries to make a case for a digital euro

ECB Executive Board member Fabio Panetta pushed back on the CBDC redundancy argument, pointing to the central role of public money in the economy, as the monetary anchor and by its fungibility with private money. Also, a digital euro would boost competition by making a free and easy to use digital means of payment available to everyone. In addition, the option to use CBDC would allow all European intermediaries, big and small, to offer products with a higher technological content at a competitive cost, making them better able to compete with global operators. [Read more]

Interoperability between payment systems across borders

The Bank for International Settlements (BIS) published a paper on cross-border payment system interoperability. It illustrates the public and private sector options using four stylized models, ordered in increasing complexity and cost but also greater efficiency – a single access point, bilateral link, hub and spoke or a common platform (see below). The BIS Innovation Hub is putting theory into practice with several innovative projects to foster interoperability across the four stylized models. [Read more]

Global Crypto Regulation Should be Comprehensive, Consistent, and Coordinated

An IMF blog post calls for a global crypto-asset regulatory framework that provides a level playing field along the activity and risk spectrum, and across borders. More specifically, crypto-asset service providers that deliver critical functions should be licensed or authorized, requirements should be matched to the main use cases, and authorities should provide clear requirements on regulated financial institutions concerning their exposure to and engagement with crypto-assets. [Read more]

To get these updates sent to your inbox, please sign up here. Also, 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.

Key Findings of G+D/OMFIF CBDC Survey

Upcoming Virtual Conferences at Which I’m Speaking:

ITU DC³ Conference: From cryptocurrencies to CBDCs

The January 25-27 DC³ Conference: From cryptocurrencies to CBDC, will highlight the work of the Digital Currency Global Initiative with a spotlight on emerging trends, innovations and initiatives shaping the future of digital currencies. The conference is organized jointly by the International Telecommunication Union (ITU) and the Stanford University Future of Digital Currency Initiative (FDCI). [The program is available here, and click here to register (it’s free).] 

Kiffmeister’s #Fintech Daily Digest (12/09/2021)

~ kiffmeister

I’ve updated my tabulation of wholesale central bank digital currency (CBDC) experiments. It includes new developments from the Reserve Bank of Australia (Project Atom) and the BIS Innovation Hub (Project Jura). [Read more]

Reserve Bank of Australia and Industry Partners complete Wholesale CBDC Research Project

The Reserve Bank of Australia, Commonwealth Bank, National Australia Bank, Perpetual and ConsenSys, with input from King & Wood Mallesons, today jointly released a report to mark the successful conclusion of Project Atom. The project involved the development of a proof-of-concept (POC) for the issuance wholesale CBDC to fund, settle and repay a tokenized syndicated loan on an Ethereum-based distributed ledger technology (DLT) platform. Integrating a wholesale CBDC on the same DLT platform enabled “atomic” delivery-versus-payment settlement of the drawdown, novation and repayment of the tokenized syndicated loan, demonstrating efficiency gains and operational risk reductions versus the normally highly manual and paper-based processes. [Read more]

China, Hong Kong Enter Second Phase of Cross-Border Digital Yuan Trials

The People’s Bank of China is reportedly working with the Hong Kong Monetary Authority on adding cross-border payment features to China’s e-CNY retail CBDC. They’ve run preliminary technical tests with a limited number of Hong Kong residents who could create e-CNY wallets with basic features, such as top-up, transfer and payments to certain merchants. And now they’re exploring approaches for interlinking the e-CNY and the Faster Payment System in Hong Kong. [Read more]

Kazakhstan to test national digital currency

The National Bank of Kazakhstan reportedly may soon launch a pilot of its digital tenge retail CBDC. The prototype platform has been completed and the final report on the results of the proof of concept work is set to be published on December 15, 2021. The final decision on whether to issue the digital tenge will be made in 2022. [Read more]

WhatsApp launches cryptocurrency payments pilot in the US

Meta’s WhatsApp has launched a pilot that lets a “limited number” of people in the US send and receive money instantly from within a chat using Pax Dollars (USDP) stablecoins. The feature is powered by Meta’s Novi digital wallet launched as a pilot six weeks ago. There are no fees for sending or receiving money, no limits on how often payments can be sent, and no fees to keep a balance in a Novi account or to withdraw it to a linked bank account. [Read more]

Australia Set for Massive Shakeup to Crypto Regulations: Treasurer

The Australian government will announce major reform to payment systems, including broadening the definition of services and products that can be regulated. Crypto exchanges will be brought within the regulatory perimeter, and the treasury will be working on a CBDC with the Reserve Bank. The proposed regulation will also take aim at “buy now, pay later” services. [Read more]

To get these updates sent to your inbox, please sign up here. Also, 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.

Upcoming Virtual Conferences at Which I’m Speaking:

ITU DC³ Conference: From cryptocurrencies to CBDCs

The January 25-27 DC³ Conference: From cryptocurrencies to CBDC, will highlight the work of the Digital Currency Global Initiative with a spotlight on emerging trends, innovations and initiatives shaping the future of digital currencies. The conference is organized jointly by the International Telecommunication Union (ITU) and the Stanford University Future of Digital Currency Initiative (FDCI). [The program is available here, and click here to register (it’s free).] 

Kiffmeister’s #Fintech Daily Digest (12/08/2021)

~ kiffmeister

I’ve updated my tabulation of retail central bank digital currency (CBDC) explorers, including adding Zimbabwe (see below).

Zimbabwe Central Bank Mulls Digital Currency, Spurns Crypto

Zimbabwe’s central bank is exploring the use of a CBDC rather than allowing cryptocurrencies as legal tender. Governor John Mangudya said that “we believe in central bank digital currency which is basically trying to say ‘how do we have an e-Zimbabwe dollar as opposed to cryptocurrency’.” The central bank plans to send a team to Nigeria to learn from their experiences in launching the first digital currency in Africa in October. [Read more]

Project Jura – Cross-border settlement using wholesale CBDC

The Bank for International Settlements, Bank of France and Swiss National Bank have shown that wholesale CBDC can be used to settle transactions between financial institutions across borders. The recently completed Project Jura explored settling FX transactions in euro and Swiss franc wholesale CBDC, and issuing, transferring and redeeming tokenized euro-denominated French commercial paper between French and Swiss financial institutions. Project Jura was conducted in collaboration with  Accenture, Credit Suisse, Natixis, R3, SIX Digital Exchange and UBS. [Read more]

Central Bank Digital Currency: A Payments Perspective

The World Bank published a guidance note to assist central banks and public authorities as they investigate the use of central bank digital currency (CBDC) as an instrument to strengthen or modernize their national payment systems. It articulates the analysis and decision-making process through five fundamental “W” questions (why, what, when, where and who) that should holistically determine whether to issue CBDC. [Read more] 

Amazon cloud outage hits major websites, streaming apps

A major outage disrupted Amazon’s cloud services on December 7, temporarily knocking out streaming platforms Netflix and Disney+, Robinhood, and a wide range of apps. The outage was related to network devices and linked to an application programming interface. Amazon has experienced 27 outages over the past 12 months, according to web tool reviewing website ToolTester. [Read more]

Visa Introduces Crypto Advisory Services to help Partners Navigate a New Era of Money Movement

Visa launched its Global Crypto Advisory Practice to help clients and partners advance their crypto journeys. Through their work with more than 60 crypto platforms, Visa’s global network of consultants and product experts have deep expertise to help financial institutions evaluate the crypto opportunity, develop concrete strategies, and pilot new user experiences and innovations like crypto rewards programs and CBDC-integrated consumer wallets. [Read more]

To get these updates sent to your inbox, please sign up here. Also, 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.

Upcoming Virtual Conferences at Which I’m Speaking:

ITU DC³ Conference: From cryptocurrencies to CBDCs

The January 25-27 DC³ Conference: From cryptocurrencies to CBDC, will highlight the work of the Digital Currency Global Initiative with a spotlight on emerging trends, innovations and initiatives shaping the future of digital currencies. The conference is organized jointly by the International Telecommunication Union (ITU) and the Stanford University Future of Digital Currency Initiative (FDCI). [The program is available here, and click here to register (it’s free).] 

Kiffmeister’s #Fintech Daily Digest (12/07/2021)

~ kiffmeister

ECCB DCash Launches in the Commonwealth of Dominica and Montserrat

The Eastern Caribbean Central Bank (ECCB) DCash officially went live in The Commonwealth of Dominica and Montserrat, expanding the central bank digital currency (CBDC) pilot to seven of the eight member countries. [Read more]

Stablecoins to face new restrictions in Japan

Japan’s Financial Services Agency is reportedly planning a legislative proposal for the upcoming year to restrict the issuance rights of stablecoins to banks and wire transfer companies. [Read more]

To get these updates sent to your inbox, please sign up here. Also, 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.

Upcoming Virtual Conferences at Which I’m Speaking:

ITU DC³ Conference: From cryptocurrencies to CBDCs

The January 25-27 DC³ Conference: From cryptocurrencies to CBDC, will highlight the work of the Digital Currency Global Initiative with a spotlight on emerging trends, innovations and initiatives shaping the future of digital currencies. The conference is organized jointly by the International Telecommunication Union (ITU) and the Stanford University Future of Digital Currency Initiative (FDCI). [The program is available here, and click here to register (it’s free).] 

Kiffmeister’s #Fintech Daily Digest (12/06/2021)

~ kiffmeister

Bahrain central bank plans to offer digital Dinar

The Central Bank of Bahrain plans to offer a digital Dinar through a digital payments platform which will be available 24/7. The central bank digital currency (CBDC) announcement came as part of the central bank’s 2022-26 Financial Sector Development Strategy. [Read more]

US House to hold hearing on digital assets and the future of finance

The U.S. House of Representative’s Committee on Financial Services will hold a hearing entitled, “Digital Assets and the Future of Finance: Understanding the Challenges and Benefits of Financial Innovation in the United States” on December 8, 2021 at 10:00 a.m. ET. This hearing will have one panel with the following witnesses: Jeremy Allaire (Circle), Samuel Bankman-Fried (FTX), Brian Brooks (Bitfury), Charles Cascarilla (Paxos), Denelle Dixon (Stellar), and Alesia Jeanne Haas (Coinbase). [Read more]

Raiffeisen, Erste Bank in Austrian wholesale CBDC simulations

Oesterreichische Nationalbank is reportedly starting to work on the second phase of its wholesale CBDC Project Delphi. The first phase focused on simulating delivery versus payment for an Austrian Treasury Bond issued on a blockchain and settled by commercial banks on the same platform using CBDC. The second phase will explore more advanced functionality, business models as well as non-fungible tokens and DeFi. [Read more]

DeFi risks and the decentralization illusion

The Bank for International Settlements claims there is a “decentralization illusion” in decentralized finance (DeFi) since the need for governance makes centralization inevitable and structural aspects of the system lead to a concentration of power. If DeFi were to become widespread, its vulnerabilities might undermine financial stability. These can be severe because of high leverage, liquidity mismatches, built-in interconnectedness and the lack of shock absorbers such as banks. [Read more]

To get these updates sent to your inbox, please sign up here. Also, 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.

Upcoming Virtual Conferences at Which I’m Speaking:

ITU DC³ Conference: From cryptocurrencies to CBDCs

The January 25-27 DC³ Conference: From cryptocurrencies to CBDC, will highlight the work of the Digital Currency Global Initiative with a spotlight on emerging trends, innovations and initiatives shaping the future of digital currencies. The conference is organized jointly by the International Telecommunication Union (ITU) and the Stanford University Future of Digital Currency Initiative (FDCI). [The program is available here, and click here to register (it’s free).]