Kiffmeister’s #Fintech Daily Digest (20220325)

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.