Kiffmeister’s #Fintech Daily Digest (01/21/2022)

Binance kept weak money-laundering checks even as it promised tougher compliance

According to a Reuters report, Binance kept weak know-your-customer (KYC) checks and did not properly cooperate with authorities, despite its public promises about compliance. The report was based on interviews with dozens of former employees of Binance, advisers and business partners, as well as the review of hundreds of documents. According to the report, Binance has refused to answer regulators and partners’ questions about its operations, and ignored its own compliance advisor recommendations to avoid customers in countries with money laundering risk. [Read more]

SEC Rejects First Trust Advisors and SkyBridge Bitcoin ETF

The US Securities and Exchange Commission (SEC) rejected an application for a spot market Bitcoin exchange-traded fund (ETF) from First Trust Advisors and SkyBridge. The SEC said it didn’t meet “the requirement that the rules of a national securities exchange be ‘designed to prevent fraudulent and manipulative acts and practices’ and ‘to protect investors and the public interest’.” The SEC has yet to approve a spot market crypto ETF on concerns over potential price manipulation. [Read more]

When Bigtechs and Fintechs Own Banks – Benefits, Risks and Policy Options

The Bank for International Settlements (BIS) published a paper that assesses the merits of extending a banking licence to tech firms and explores their regulatory landscape in seven jurisdictions. To ascertain their risk characteristics, it categorises the universe of tech firms that provide financial services into three groups: standalone Fintechs, large diversified Fintechs and Bigtechs. Bigtechs and large diversified Fintechs pose the most significant supervisory concerns, with the former requiring more onerous prudential measures than the latter. To mitigate their perceived risks, authorities impose various quantitative and qualitative requirements during authorisation, but supervision and enforcement may pose formidable challenges. In this context, the paper outlines a range of policy options that are mapped to the risk profile of tech firms seeking a banking licence. [Read more]

ASIC embarks on regtech innovation initiative into poor market disclosure

The Australian Securities and Investments Commission (ASIC) will be working with five regulatory technology (regtech) entities for the Business Research and Innovation Initiative (BRII) Regulatory Technology (Regtech) Round. ASIC’s challenge in this latest round is to explore the potential of using technology to help identify and assess poor market disclosure by listed companies. [Read more]

The U.S. Dollar in the Age of Digital Transformation (re-posted for those who missed it yesterday)

The US Federal Reserve Board published a discussion paper that examines the pros and cons of a potential U.S. central bank digital currency (CBDC).  The paper summarizes the current state of the domestic payments system and discusses the different types of digital payment methods and assets that have emerged in recent years, including stablecoins and other cryptocurrencies. It concludes by examining the potential benefits and risks of a CBDC, and identifies specific policy considerations.

While a CBDC could provide a safe, digital payment option for households and businesses as the payments system continues to evolve, and may result in faster payment options between countries, there may also be downsides. They include how to ensure a CBDC would preserve monetary and financial stability as well as complement existing means of payment. Other key policy considerations include how to preserve the privacy of citizens and maintain the ability to combat illicit finance. [Read more]

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DC3 Conference – From Cryptocurrencies to CBDCs

The International Telecommunication Union (ITU) is organizing the “DC3 Conference – From Cryptocurrencies to CBDCs” scheduled to take place virtually from January 25 – 27, 2022. The Digital Currency Conference is organized by the Digital Currency Global Initiative (DCGI) which is a joint collaboration between the ITU and the Future of Digital Currency Initiative at Stanford University. I’ll be part of a “fireside chat” on the DCGI’s digital currency ontology work. [Register here]

Central Bank Digital Currency Workshop, Hosted by the CBDC Think Tank 

The CBDC Think Tank (CBDCTT)  is hosting an in-person CBDC Workshop in Washington DC on February 24. It’s an intensive and hands-on CBDC course for central bank leadership and staff that are looking to understand and position for CBDCs. The workshop is a mix of lectures from CBDC experts and hands-on exercises. Certification of completion will be provided by the CBDCTT. Note that it is open only to staff from the official sector, such as central bank and finance ministry staff! [Register here]