Month: March 2022

Kiffmeister’s #Fintech Daily Digest (20220331)

~ kiffmeister

BIS Innovation Hub and Monetary Authority of Singapore develop prototype supervisory analytics platform

The Bank for International Settlements (BIS) Innovation Hub Singapore Centre and the Monetary Authority of Singapore (MAS) have developed a new prototype platform that integrates regulatory data and analytics. Known as Project Ellipse, the platform successfully demonstrates how regulatory and other data, such as articles and news, can be integrated into a single platform to help regulatory authorities identify potential risks to individual banks and the banking system. The new prototype is the first to be published on BIS Open Tech, a new platform for sharing software as public goods for further testing, customizing and scaling. [Read more]

EU Launches Digital Finance Platform

The European Union (EU) launched its Digital Finance Platform, a new website designed to build dialogue between innovative financial firms and supervisors. Its main objectives are to overcome fragmentation and support the scaling up of digital financial services across the Single Market. It will initially consist of an Observatory offering interactive features such as a Fintech Map, events and a section where users will be able to share relevant research material, and a Gateway which will act as a single access point to supervisors, with information about national innovation hubs, regulatory sandboxes and licensing requirements. [Read more]

The Financial Stability Board sets out 2022 work program

The Financial Stability Board (FSB) published its work program for 2022. Priority areas of work and new initiatives, including key deliverables include continuing its work on enhancing cross-border payments, and continuing work on the financial stability and regulatory and supervisory implications of technological innovation, with a particular focus on various forms of crypto-assets, including decentralised finance (DeFi). [Read more]

Kiffmeister’s #Fintech Daily Digest (20220330)

~ kiffmeister

ECB publishes report on payment preferences as part of digital euro investigation phase

The European Central Bank (ECB) published the findings of its research on citizens’ payment habits and their attitudes towards digital payments in order to gain a deeper understanding of user preferences as part of the digital euro project. It found that citizens want universally accepted payment methods in online and physical stores across Europe, instant and contactless person-to-person payments, and a one-stop-solution that would incorporate all the current payment options into one system. Respondents, also sought guarantees against fraud and hacking, as well as secure and reliable payment authentication methods. Biometric methods of payment verification were widely supported by participants, while flexible and adjustable privacy settings were seen as desirable. [Read more]

Malaysia to explore both wholesale, retail CBDC

Bank Negara Malaysia laid out its central bank digital currency (CBDC) plans in its 2021 annual report. Beyond its current participation in the Bank for International Settlements (BIS) Innovation Hub’s Project Dunbar for cross border payments, it is also planning to explore a domestic wholesale CBDC later this year and a retail digital currency in 2024. [Read more]

Kiffmeister’s #Fintech Daily Digest (20220328)

~ kiffmeister

US Lawmakers Introduce ‘ECASH’ Bill in New Push to Create a Digital Dollar

A group of U.S. lawmakers introduced the “Electronic Currency And Secure Hardware (ECASH) Act” to direct the Treasury Secretary to develop and issue an electronic version of the U.S. dollar, with an eye to preserving privacy and anonymity in transactions. The electronic dollar would be a bearer instrument that would be held on phones or cards, and be functionally identical to physical bank notes. [Read more]

Bank of Japan enters second phase of CBDC experiments

The Bank of Japan (BoJ) completed the first phase of its central bank digital currency (CBDC) proof of concept (PoC) workplan. The initial stage that started in April 2021 explored issuance, distribution and redemption. The next phase will implement additional functions and test their feasibility. Based on the PoC, if the Bank judges it necessary to step things up further, it will also consider a pilot program that involves payment service providers and end users. [Read more]

ASX’s post-trade blockchain project faces another delay

The go-live data for the Australian Securities Exchange (ASX) distributed ledger technology (DLT) based securities settlement platform will be delayed again. This marks the latest in a long line of setbacks to the timeline of the project which has been planned since 2016 but wrought with delays. In September 2021 it was said to be on-track for go-live in April 2023, but now, due to a delay to the next software release for the project, there will likely be a knock-on effect to the go-live date. [Read more]

Kiffmeister’s #Fintech Daily Digest (20220327)

~ kiffmeister

Bank of England and MIT joint CBDC collaboration

The Bank of England announced that in February 2022 it had agreed to a twelve-month collaboration with the Massachusetts Institute of Technology Media Lab’s Digital Currency Initiative on central bank digital currency (CBDC) research. They will explore potential technical challenges, trade-offs, opportunities and risks involved in designing a CBDC system. [Read more]

Responses to the Bank of England’s Discussion Paper on new forms of digital money

The Bank of England published a summary of the responses to the June 2021 Discussion Paper on potential monetary policy and financial stability implications of new forms of digital money, including CBDC and systemic stablecoins. Respondents generally agreed that access to cash should be preserved, and any regulation for systemic stablecoins should be clear, proportionate, and risk-based. [Read more]

Financial Stability in Focus: Crypto-Assets and Decentralised Finance

The Bank of England published its views on crypto-assets and decentralized finance (DeFi). It concluded that, despite their potential benefits, “where crypto technology is performing an equivalent economic function to one performed in the traditional financial sector, this should take place within existing regulatory arrangements and that the regulatory perimeter be adapted as necessary to ensure an equivalent regulatory outcome.” [Read more]

Honduras’ Central Bank Continues to Study CBDC Feasibility

The Central Bank of Honduras debunked chatter about bitcoin becoming legal tender in the country. However, it continues to study the conceptual, technical and legal aspects that would determine the feasibility of issuing CBDC that would be recognized as legal tender. [Read more]

DeFi Eliminates Gatekeeping But Also ‘Investor Protection’: IOSCO

The International Organization of Securities Commissions published a report on DeFi, highlighting a wide array of risks associated with it. “As DeFi continues to expand, both a granular and holistic understanding of the DeFi market will improve authorities’ ability to understand the regulatory implications of this emergent market with respect to their own jurisdictions.” [Read more]

Kiffmeister’s #Fintech Daily Digest (20220325)

~ kiffmeister

Crypto-Assets Activity around the World : Evolution and Macro-Financial Drivers

The World Bank published a paper that sheds sheds light on the drivers behind crypto-asset market activity and offers support to the notions that crypto-assets are perceived as a risk asset, a potential macro hedge, and a potential tool to support cross-border transactions. However, the results come with caveats: a significant portion of the sample period includes extraordinarily loose global financial conditions; the crypto volume data have a short history, rely on important limiting assumptions, and do not represent all crypto-asset activity; and crypto-assets represent a fast-evolving, increasingly diverse asset class and industry. [Read more]

Abu Dhabi Global Market Regulatory Arm Unveils Document Proposing Changes to Virtual Asset Regulations

The Abu Dhabi Global Market (ADGM) Financial Services Regulatory Authority (FSRA) published a consultation paper proposing amendments to the regulatory framework that governs the use of virtual assets. It proposes changes to the requirements on the “use, sharing, and reuse of public keys,” as well as making amendments to risk disclosure requirements. The FSRA also wants to allow regulated Multilateral Trading Facility/Custodian groups within ADGM to conduct non-fungible token (NFT) activities. [Read more]

Introducing Disclosure NFTs, Disclosure DAOs, and Disclosure DIDs

Chris Brummer draws from his recent white paper on disclosure and decentralized finance (DeFi), to introduce some new concepts to the DeFi lexicon for building out disclosure delivery systems native to the crypto ecosystem. He imagines disclosure systems that are programmable, capable of evolving with technology — and which could provide the infrastructure for further tools for empowering participants in the Metaverse and beyond. If properly developed, the ideas could draw on DeFi’s strengths and provide more functionality and security than regulators’ legacy technology stack. Moreover, they could afford a new generation of developers and engineers a unique opportunity to reorient disclosure towards its original purpose: to be read. [Read more]

Blockchain: Financial and Non-Financial Uses and Challenges

The U.S. Government Accountability Office (GAO) has developed four policy proposals to help enhance the potential benefits and mitigate the challenges of blockchain technology (see below). The GAO found that blockchain is useful for some applications but limited or even problematic for others. For example, because of its tamper resistance, it may be useful for applications involving many participants who do not necessarily trust each other. But it may be overly complex for a few trusted users, where traditional spreadsheets and databases may be more helpful. Blockchain may also present security and privacy challenges and can be energy-intensive. [Read more]

  1. Policymakers could consolidate blockchain standards. This could help make it easier for organizations trying to use blockchain to integrate the technology with their existing systems.
  2. Policymakers could either clarify existing rules and regulations or create new ones around blockchain. This could reduce the current uncertainty around how different implementations of the technology might be regulated, which could help companies and others feel more comfortable about adopting blockchain solutions.
  3. Policymakers could support the development of blockchain educational materials. This could help users avoid common blockchain scams and companies be more able to find talent to help them implement the technology.
  4. Policymakers could consider using blockchain to meet their own specific goals. This could help public and private-sector institutions determine whether the technology could help resolve specific problems.

Kiffmeister’s #Fintech Daily Digest (20220324)

~ kiffmeister

Ukraine Digital Currency Is Progressing During Wartime: Stellar CEO

Stellar CEO Denelle Dixon has said that her company is still working with Bitt on Tascombank’s digital hryvnia  project despite the armed conflict between Russia and Ukraine. The last significant update on the project was published in December 2021, when it was stated that they would utilize Stellar to pilot a digital version of the Ukrainian hryvnia. To be clear, this is not a central bank digital currency (CBDC) project. The only connection with the National Bank of Ukraine (NBU) is that is being conducted under the supervision of the central bank. [Read more]

The last official update on the CBDC project was in July 2021 when Ukrainian President Volodymyr Zelenskyy signed a new payment services law, officially enabling the NBU to issue a digital hryvnia. The law also authorized the NBU to set up regulatory sandboxes for testing payment services and instruments based on emerging technologies. Prior to that, in June 2019, the NBU published the results on its CBDC proof-of-concept work. [Read more]

Central banks, the monetary system and public payment infrastructures: lessons from Brazil’s Pix

The Bank for International Settlements (BIS) published a paper on Brazil’s recent experience with the Pix retail instant payment system. Since launching in November 2020, Pix has signed up 67% of adults in Brazil, with free payments between individuals and low charges for merchants. The two key ingredients in the success of Pix are, first, the mandatory participation of large banks to kick-start network effects for users, and second, the central bank’s dual role as infrastructure provider and rule setter. Pix has also shown how central bank infrastructures can support interoperability and competition, promoting lower costs and greater financial inclusion. These features also have relevance for the possible adoption of retail CBDC. [Read more]

Kiffmeister’s #Fintech Daily Digest (20220323)

~ kiffmeister

Thailand Bans Use of Cryptocurrencies for Payments

“Thailand’s Security and Exchange Commission will implement a ban on crypto as a payment method starting from April 1, 2022. The regulator said that cryptocurrencies may affect the financial system’s stability, posing risks to the country’s economy. Other risks highlighted by the SEC include the loss of value due to price volatility, cyber ​​theft, and personal data leakage. The regulator added that cryptocurrencies such as Bitcoin may be used as a tool of money laundering.” [Read more]

Lemonade Is Working With Avalanche, Chainlink on Weather Insurance for Farmers

A newly formed decentralized autonomous organization (DAO) backed by the Lemonade Foundation will roll out permissionless weather insurance to African farmers later this year. The coalition is dedicated to building and distributing at-cost, instantaneous, parametric weather insurance to subsistence farmers and livestock keepers in emerging markets. The insurance program will be accepting stablecoin or local currency payments from farmers through a decentralized application on the Avalanche blockchain. An initial rollout in Africa is expected within the year, with flood insurance in Nigeria expected to be an initial offering, according to a person involved in the project. [Read more]

Kiffmeister’s #Fintech Daily Digest (20220322)

~ kiffmeister

BIS Innovation Hub and four central banks develop experimental multi-CBDC platform for cross-border settlements

The Singapore branch of the Bank for International Settlements (BIS) Innovation Hub, the Reserve Bank of Australia, Bank Negara Malaysia, the Monetary Authority of Singapore, and the South African Reserve Bank have completed prototypes for a common cross-border payments platform using multiple central bank digital currencies (mCBDCs). Project Dunbar proved that financial institutions could use CBDCs issued by participating central banks to transact directly with each other on a shared platform. This has the potential to reduce reliance on intermediaries and, correspondingly, the costs and time taken to process cross-border transactions. [Read more]

Euroclear invests in Fnality, blockchain-based synthetic CBDC

Euroclear has invested in Fnality, the blockchain payments consortium formerly known as the Utility Settlement Coin (USC) and owned by 16 major financial institutions. Euroclear operates Central Securities Depositories (CSDs) across Europe, including Belgium, Finland, France, Ireland, the Netherlands, Sweden, and the United Kingdom. In October, Fnality plans to launch its first payment currency with pounds sterling deposited at the Bank of England. That makes it a so-called wholesale synthetic CBDC where the purpose is for institutions to use it for settlement, especially for blockchain-based transactions. [Read more]

Galaxy digital facilitates Goldman Sachs’s first OTC crypto options trade

Galaxy Digital facilitated and executed the first over-the-counter (OTC) crypto-asset transaction with Goldman Sachs in the form of a Bitcoin cash-settled non-deliverable option (NDO), apparently the first such transaction by a major U.S. bank. [Read more]

Kiffmeister’s #Fintech Daily Digest (20220321)

~ kiffmeister

Australia Government Defines Crypto Assets, Proposes Regulations

The Australian government Treasury released a consultation paper, defining cryptocurrencies and outlining its plans to license crypto-asset secondary service providers (CASSPrs)
and set out crypto custody requirements. This regime would be separate from the existing Australia Financial Services (AFS) licensing, but CASSPrs, but entities operating as brokers – by forwarding clients’ orders to a third-party exchange for execution – would be licensed under the AFS licensing regime and comply with the associated obligations. [Read more]

How a solar storm could knock out the power grid and the internet

Here’s my regular reminder that it is only a matter of time before the Earth is hit by another major geomagnetic storm, which would arrive with only a few hours notice. If the storm is the size of the AD 774 Miyake Event, electrical and communication systems outages could last months. Even one the size of the 1859 Carrington would lead to outages lasting into the weeks. The good news is, you can at least protect your electronic equipment with Faraday cages. [Read more]