UST Stablecoin Falls Below Dollar Peg for Second Time in 48 Hours
TerraUSD (UST), the the third largest stablecoin by market capitalization and the largest algorithmic stablecoin, has lost its dollar peg. The first depeg took place on May 7 (Saturday) and after recovering the next day, the peg broke again today (Monday, May 9). This isn’t UST’s first depeg, nor its largest, but it marks the first time it has lost its peg since it started building out Bitcoin and Avalanche reserves. Today’s depeg comes after the Luna Foundation Guard announced Sunday night that $1.5 billion of its massive bitcoin reserves would be “loaned” out to professional market makers to proactively defend UST’s dollar peg. [Read more]
Bank of Israel still unsure on digital shekel but garners public support
The Bank of Israel has received public support for its plans to possibly issue a digital shekel on grounds it would help the economy by supporting innovation in the payments system, reducing the amount of cash and bolstering the fintech sector. Although the central bank has not made a final decision on whether it will issue a digital shekel, all of the responses to the public consultation indicate support for continued research regarding the various implications on the payments market, financial and monetary stability, legal and technological issues, and more. Some want full anonymity like cash, while others believe a digital shekel should be subject to money laundering rules and helping the war on the “black economy.” Also, a digital shekel should also come at a zero or low costs to business owners and consumers and be easy to use for all, including the elderly. [Read more]
The Bahamas’ Sand Dollar Needs Improved Cybersecurity, IMF Says
The International Monetary Fund (IMF) said that the Bahamas’ Sand Dollar central bank digital currency (CBDC) needs better reach and more security to achieve its aims. The IMF noted the Sand Dollar represents only 0.1% of currency in circulation. The country’s central bank “should continue strengthening internal capacity – including on cybersecurity and the resilience of systems associated with the Sand Dollar,” adding that there are currently “limited avenues to use the Sand Dollar.” [Read more]
Indian central securities depository to back up its monitoring of bonds by blockchain
The National Securities Depository (NSDL), India’s central securities depository, launched a blockchain-based security and covenant monitoring platform. The platform is expected to strengthen the monitoring of security and governance in the corporate bonds market to bring “further discipline and transparency to the market.” The network will be maintained by two nodes, whom the NSDL and the Central Depository Services Ltd. (CDSL), a division of the Securities and Exchange Board of India, will control. [Read more]
Cryptocurrencies and Decentralized Finance
The U.S. National Bureau of Economic Research (NBER) published a paper that provides an overview of cryptocurrencies and decentralized finance (DeFi). The discussion lays out potential benefits and challenges of the new system and presents a comparison to the traditional system of financial intermediation. Our analysis highlights that while the DeFi architecture might have the potential to reduce transaction costs, similar to the traditional financial system, there are several layers where rents can accumulate due to endogenous constraints to competition. [Read more]
Upcoming events I’m affiliated with:
Satoshi Capital Advisors is hosting a virtual workshop on wholesale CBDC, stablecoins and digital capital markets on May 24 (starting at 08:00 EST). [Register here with the passcode: CBDC]
The CBDC Think Tank is hosting a CBDC Papers Lecture Series on June 17 and 24, each session starting at 7am EST and running for 3 hours. [View list of papers and register here]