Month: June 2022

Kiffmeister’s #Fintech Daily Digest (20220630)

~ kiffmeister

Grayscale Sues SEC Over Bitcoin ETF Application Rejection

Grayscale Investments’ application to convert its $13.5 billion Grayscale Bitcoin Trust (GBTC) into a spot-based bitcoin exchange-traded fund (ETF) was denied by the U.S. Securities and Exchange Commission (SEC), because the application failed to answer questions about preventing market manipulation, as well as other concerns. Consequently, Grayscale immediately launched a law suit asking the U.S. Court of Appeals for the District of Columbia Circuit to review the SEC’s rejection order, alleging that the SEC is failing to apply consistent treatment to similar investment vehicles that it has approved like futures-based bitcoin ETFs, and is therefore in violation of the Administrative Procedure Act and Securities Exchange Act of 1934. [Read more]

Targeted Update on Implementation of FATF’s Standards on VAs and VASPs

The Financial Action Task Force (FATF) published an update on implementation of its standards on virtual assets (VAs) and VA service providers (VASPs), with a focus on the travel rule, which requires VASPs to collect and share with each other personal data on both senders and receivers in transactions exceeding USD/EUR 1,000. In other words, the personal data of the transacting parties is supposed to “travel” along with their transfers. The report that notes only 11 of 98 surveyed jurisdictions are enforcing and supervising it. The also report highlights the continued need to monitor monitor the growth of, and illicit financing risks associated with decentralized finance (DeFi) and non-fungible token (NFT) markets and unhosted wallets. [Read more]

Prudential treatment of crypto-asset exposures – second consultation

The Basel Committee on Banking Supervision has published a second public consultation on the prudential treatment of banks’ crypto-asset exposures. It builds on the preliminary proposals set out in the June 2021 consultation and the responses received from stakeholders. The basic structure of the proposal in the first consultation is maintained, with crypto-assets divided into two broad groups; Group 1 including those eligible for treatment under the existing Basel Framework with some modifications, and Group 2 including unbacked crypto-asset and stablecoins with ineffective stabilization mechanisms,  which would be subject to a new conservative prudential treatment including an overall gross limit on such holdings. The updated proposals provide more detail on the proposed standard and include new elements such as an infrastructure risk add-on to cover the new and evolving risks of distributed ledger technologies.  [Read more]

The road to enhanced payments

In this March 31 speech that I overlooked, the Bank of England’s Victoria Cleland introduces Project Meridian, a joint initiative with the BIS Innovation Hub that will prototype and test end-to-end flow of real-time gross settlement (RTGS) platform synchronized settlement, which could be used for different trades such as securities and foreign exchange. Synchronization would enable the cash movements in RTGS to happen if and only if a corresponding asset on another ledger is transferred, which is something that wholesale central bank digital currency (WCBDC) aficionados imply requires a distributed ledger technology (DLT) platform. Ms. Cleland makes a point that I make frequently in webinars and workshops:

“I do wonder though whether the term “wholesale CBDC” is a misnomer. Electronic central bank money has been available to financial institutions for decades via RTGS systems. In the provision of central bank infrastructure the key is not the label, but who can access it and what functionality is provided.” [Read more]

Upcoming events I’m affiliated with:

The CBDC Think Tank, in partnership with the International Monetary Fund and George Washington University, is hosting a full-day in-person CBDC Masterclass on October 12 in Washington DC. The sessions are designed as instructional deep dives with full presentations and Q&A components.  [Register here]

Kiffmeister’s #Fintech Daily Digest (20220629)

~ kiffmeister

Taiwan completes trials of its prototype CBDC for retail use

Taiwan has completed trials of its prototype retail central bank digital currency (CBDC) in technical simulations. Taiwan started to study and test a retail CBDC in September 2020, and the central bank has engaged with at least Taiwanese five commercial banks in the proof-of-concept (POC) work. Next steps are to educate the public on purported benefits, draw up regulations and put in place a sound legal framework, before proceeding to a public pilot. [Read more]

Recent Technological Advances in Financial Market Infrastructure in ASEAN+3

This Asian Development Bank (ADB) report ascertains the current status of technology adoption, including wholesale CBDC applications, by its Cross-Border Settlement Infrastructure Forum member organizations. They include central securities depositories and central banks in the Association of Southeast Asian Nations (ASEAN) plus the People’s Republic of China, Japan, and the Republic of Korea (collectively known as ASEAN+3) region. [Read more]

Central bank provider SICPA to create CBDC venture with INX

“INX, the inter-dealer broker and digital asset trading platform, is planning a joint venture with central bank provider SICPA to develop a CBDC offering. While SICPA is best known for its secure inks that have been used on Euro notes, it also has extensive digital capabilities. The CBDC offering will be based on blockchain and aims to expand interoperability between different stakeholders across borders.” [Read more]

Upcoming events I’m affiliated with:

I’ll be joining the World Bank’s Harish Natarajan to discuss the historical and modern lessons that are shaping the future of central bank digital currencies (CBDCs) on Session #6 of the FNA’s CBDC Broadcast on June 30 at 09:00 EST. [Register here]

The CBDC Think Tank, in partnership with the International Monetary Fund and George Washington University, is hosting a full-day in-person CBDC Masterclass on October 12 in Washington DC. The sessions are designed as instructional deep dives with full presentations and Q&A components.  [Register here]

Kiffmeister’s #Fintech Daily Digest (20220628)

~ kiffmeister

Ripple Launches CBDC Competition to Encourage XRPL Innovation

Ripple has announced the CBDC Innovate challenge, with a total prize pool of $150,000. The Ripple CBDC Innovate challenge seeks to inspire programmers to build applications capable of running on the XRP Ledger and supporting retail central bank digital currencies (CBDCs), interoperability and financial inclusion. The deadline for the first batch of submissions is August 25. Competitors are expected to build or update a fintech or payment solution that makes use of CBDC and can run on the XRP Ledger, create a solution that can take advantage of CBDC’s advantages or create an interface that allows any human to engage with a CBDC. [Read more]

ANZ completes first A$DC stablecoin transaction

ANZ customer Victor Smorgon Group successfully purchased tokenized Australian carbon credits (BCAU) using the ANZ-issued stablecoin A$DC. This transaction is an important step for ANZ as the bank explores greater circulation of the stablecoin. In this transaction, Victor Smorgon Group used A$DC as a medium of exchange to purchase the BCAU carbon tokens from Zerocap, an Australian crypto asset investment platform. [Read more]

Upcoming events I’m affiliated with:

I’ll be joining the World Bank’s Harish Natarajan to discuss the historical and modern lessons that are shaping the future of central bank digital currencies (CBDCs) on Session #6 of the FNA’s CBDC Broadcast on June 30 at 09:00 EST. [Register here]

The CBDC Think Tank, in partnership with the International Monetary Fund and George Washington University, is hosting a full-day in-person CBDC Masterclass on October 12 in Washington DC. The sessions are designed as instructional deep dives with full presentations and Q&A components.  [Register here]

Kiffmeister’s #Fintech Daily Digest (20220627)

~ kiffmeister

Bank of Russia Accelerates Schedule for Digital Ruble Project

The Central Bank of Russia is continuing to step up efforts to test and issue the digital ruble, with a roadmap for full implementation now expected by the end of 2023, with pilot testing scheduled to begin in April 2023. In February (2022) the central bank had implied that it had started pilot testing already, but this new announcement makes the earlier efforts sound more like proof of concept work (“clients were able to exchange non-cash rubles in their accounts for digital ones, and then they transferred digital rubles between themselves”). [Read more]

Iran to roll out pilot version of Crypto-Rial digital currency soon

The Central Bank of Iran (CBI) is reportedly preparing a pilot launch of its Crypto-Rial central bank digital currency (CBDC) in August 2022. In the first phase, the pilot process will be launched in one region before it is extended to other areas of the country. [Read more]

HKMA Tech Baseline Assessment show extensive adoption of Fintech in the banking sector

The Hong Kong Monetary Authority (HKMA) announced the results of its Tech Baseline Assessment, a stocktaking of Hong Kong banks’ adoption of Fintech, and assessment of whether there may be Fintech business areas and technology types that would benefit from the HKMA’s support. Overall, the results of the Assessment indicate that the banking industry is supportive of the HKMA’s Fintech drive. And banks are prepared to dedicate healthy amounts of financial and talent investment to Fintech adoption, which is expected to increase across the board. [Read more]

Upcoming events I’m affiliated with:

The CBDC Think Tank, in partnership with the International Monetary Fund and George Washington University, is hosting a full-day in-person CBDC Masterclass on October 12 in Washington DC. The sessions are designed as instructional deep dives with full presentations and Q&A components.  [Register here]

Kiffmeister’s #Fintech Daily Digest (20220626)

~ kiffmeister

More African Central Banks Are Exploring Digital Currencies

The IMF published a blog that provides a summary of African central bank digital currency (CBDC) activity based on CBDCTracker.org data. It points to the need for governments to improve access to digital infrastructure such as a phone or internet connectivity, and the importance of offline access, for a retail CBDC to be effective, particularly if financial inclusion is a primary motivator. It also underscores the need for central banks to develop the expertise and technical capacity to manage data privacy and financial integrity risks, including strengthening national identification systems so know-your-customer requirements are more easily enforced. There is also a risk that users pull too much money out of banks to purchase CBDCs, affecting banks’ ability to lend. [Read more]

The Lightning Network: Turning Bitcoin into Money

The Cleveland Fed published an assessment of the relationship between Lightning Network (LN) adoption and reduced blockchain congestion, suggesting that the LN has improved the efficiency of bitcoin as a means of payment. It found that the improvement cannot be explained by other factors, such as changes in demand or the adoption of Segregated Witness (SegWit) (a change to the bitcoin transaction format activated on August 23, 2017 that improves the efficiency of blockchain storage. The paper found mixed evidence on whether increased LN centralization has improved its efficiency. [Read more]

Upcoming events I’m affiliated with:

The CBDC Think Tank, in partnership with the International Monetary Fund and George Washington University, is hosting a full-day in-person CBDC Masterclass on October 12 in Washington DC. The sessions are designed as instructional deep dives with full presentations and Q&A components.  [Register here]

Kiffmeister’s #Fintech Daily Digest (20220624)

~ kiffmeister

New Types of Digital Money

Danmarks Nationalbank published a paper that summarizes the central bank’s thoughts on digital currency, including retail central bank digital currency (CBDC). At present, and with the associated costs and possible risks, the paper concludes that it is not clear how retail CBDCs will create significant added value relative to the existing solutions in Denmark. However, the central bank will continue to continuously assess the various reasons for issuing retail CBDC and their possible relevance in relation to the Danish financial system. [Read more]

Upcoming events I’m affiliated with:

The CBDC Think Tank, in partnership with the International Monetary Fund and George Washington University, is hosting a full-day in-person CBDC Masterclass on October 12 in Washington DC. The sessions are designed as instructional deep dives with full presentations and Q&A components.  [Register here]

Kiffmeister’s #Fintech Daily Digest (20220622)

~ kiffmeister

Using CBDCs across borders: lessons from practical experiments

The Bank for International Settlements (BIS) published an update on BIS Innovation Hub (BISIH) experiments showing how central bank digital currencies (CBDCs) could help deliver faster, cheaper and more transparent cross-border payments. Collectively, the projects show that platforms with two or more CBDCs are technically feasible and offer a range of benefits that can lead to faster, cheaper and more transparent payments across borders. However, questions remain unanswered related to policy considerations, legal and regulatory frameworks, and basic operational economics that might call into question the viability of multi-CBDC platforms. [Read more]

Mojaloop Foundation Launches the Mojaloop CBDC Center of Excellence in Singapore

The Mojaloop Foundation launched its Mojaloop Central Bank Digital Currency Center of Excellence in Singapore to advance financial inclusion in emerging markets. Mojaloop is an open source payment platform based on the non-blockchain-based  Interledger Protocol. [Read more]

Tether To Launch GBP₮, Tether Tokens Pegged to the British Pound Sterling

Tether will be launching Tether tokens (“GBP₮”) pegged to British Pound Sterling in July. No further details were provided, such as how and where it will be backed. It will join four other fiat-currency pegged tokens Tether has in the market: the U.S. dollar-pegged USD₮, the Euro-pegged EUR₮, the offshore Chinese Yuan-pegged CNH₮, and MXN₮, the Mexican Peso-pegged stablecoin. [Read more]

Amsterdam to launch its own digital currency to promote local economy

Amsterdam plans to launch its own digital currency in the next four years. The coin can only be used in Amsterdam at the local entrepreneurs with the idea of boosting the neighborhood economy. The city council was inspired by Sardinia’s Sardex. Amsterdam is still working out the exact interpretation, for example, how consumers will get the coin, what it will be linked to, and who will participate. [Read more]

BIS G20 TechSprint 2022 Shortlist Winners

Over the last few days I’ve reported that the BIS Innovation Hub and Bank Indonesia had apparently chosen the projects that will be invited to showcase prototypes in a July workshop for the CBDC-focused G20 Techsprint. The BISIH have yet to publish them, but I picked up four from vendors themselves: BitMint (quantum-safe offline-capable peer-to-peer digital currency (DC) platform), Dragonfly Fintech (blockchain-based DC platform), Fluency (blockchain-based offline-capable DC platform), and Giesecke+Devrient (multiple-media offline-capable DC platform). Then thanks to Gieseke+Devrient’s  Tanja Heßdörfer, we have three more; Bitt and IDEMIA (offline-capable DC platform),  Extolabs (offline-capable DC platform), and R3 (blockchain-based DC platform). Now, thanks to BitMint’s Amnon Samid, we can add five more; Crunchfish (offline-capable DC), Dragonfly Fintech (blockchain-based DC system), paywith.glass (blockchain-based DC platform), Ripple (blockchain-based DC platform), and Roxe (blockchain-based CBDC).

Upcoming events I’m affiliated with:

The second session of the CBDC Think Tank CBDC Papers Lecture Series will be held on June 24 starting at 7am EST and run for 4 hours. [View list of papers and register here]

The CBDC Think Tank, in partnership with the International Monetary Fund and George Washington University, is hosting a full-day in-person CBDC Masterclass on October 12 in Washington DC. The sessions are designed as instructional deep dives with full presentations and Q&A components.  [Register here]

Kiffmeister’s #Fintech Daily Digest (20220621)

~ kiffmeister

CBDCs, Not Crypto, Will Be Cornerstone of Future Monetary System, BIS Says

According to a 42-page chapter in the Bank for International Settlements (BIS) 2022 Annual Economic Report crypto’s structural flaws make it an unsuitable basis for a monetary system, and instead envisions a future where programmability and tokenization are built on top of central bank digital currencies (CBDCs). Structural flaws make the crypto universe unsuitable as the basis for a monetary system: because it lacks a stable nominal anchor, while limits to its scalability result in fragmentation. Contrary to the decentralization narrative, crypto often relies on unregulated intermediaries that pose financial risks. [Read more]

Bank of Israel investigates anonymous digital shekel payments

The Bank of Israel published an update on their CBDC proof-of-concept (PoC) experiments, including some that were based on distributed-ledger technology (DLT) infrastructure on the cloud, and the application of a Quorum blockchain based on Ethereum. They also examined a platform developed by VMware in which there would be a wallet that can hold “ordinary” digital shekels, the transfer of which is recorded in the ledger, and “private” digital shekels, the transfer details of which are not recorded openly, and where both sides to the transaction enjoy complete privacy as with cash payments. There would be a periodic (e.g., monthly) “budget” for payment using private shekels. [Read more]

BIS G20 TechSprint 2022 Shortlist Winners

Yesterday I reported that the BIS Innovation Hub and Bank Indonesia had apparently chosen the projects that will be invited to showcase prototypes in a July workshop for the CBDC-focused G20 Techsprint. The BISIH have yet to publish them, but I picked up four from vendors themselves: BitMint (quantum-safe offline-capable peer-to-peer digital currency (DC) platform), Dragonfly Fintech (blockchain-based DC platform), Fluency (blockchain-based offline-capable DC platform), and Giesecke+Devrient (multiple-media offline-capable DC platform). Now thanks to Gieseke+Devrient’s  Tanja Heßdörfer, we have three more; Bitt and IDEMIA (offline-capable DC platform),  Extolabs (offline-capable DC platform), and R3 (blockchain-based DC platform).

The U.S. Uniform Commercial Code and Crypto

In this Twitter thread, Adam Levitin discusses the impact on crypto-asset markets of the new (and pending) Article 12 (A12) of the U.S. Uniform Commercial Code (UCC). The UCC is state law, but it’s developed by the American Law Institute (ALI) and the Uniform Law Commission (ULC), which has state government representatives. A12 has been approved by the ALI and is pending ULC approval. Once that happens, it will be up to state legislatures to adopt it, which may take a year or two. A12 will enable perfection of security interests in digital assets, which is not possible in most states. That’s a problem because if a debtor (e.g., a crypto-asset exchange) files for bankruptcy, any unperfected security interest (e.g., crypto-assets held in custody at the bankrupt exchange) can be avoided, meaning that the creditor (crypto-asset holder) becomes an unsecured creditor. For more detail see Adam’s “Not Your Keys, Not Your Coins” paper. [Read more]

Upcoming events I’m affiliated with:

The second session of the CBDC Think Tank CBDC Papers Lecture Series will be held on June 24 starting at 7am EST and run for 4 hours. [View list of papers and register here]

The CBDC Think Tank, in partnership with the International Monetary Fund and George Washington University, is hosting a full-day in-person CBDC Masterclass on October 12 in Washington DC. The sessions are designed as instructional deep dives with full presentations and Q&A components.  [Register here]

Kiffmeister’s #Fintech Daily Digest (20220620)

~ kiffmeister

BIS G20 TechSprint 2022 Shortlist Winners

The Bank for International Settlements (BIS) Innovation Hub and Bank Indonesia have apparently chosen the projects that will be invited to showcase prototypes in a July workshop for the central bank digital currency (CBDC) focused G20 Techsprint. During the workshop, the project managers will receive feedback from national authorities and invited experts, after which an independent panel of experts will choose the winning solutions, to be announced in October. The three categories are focused on (i) CBDC distribution and transfer, (ii) financial inclusion and (iii) interoperability. Above I say “apparently” because there’s no announcement from the source, just from vendors themselves, four so far that I know of; BitMint (quantum-safe offline-capable peer-to-peer digital currency (DC) platform), Dragonfly Fintech (blockchain-based DC platform), Fluency (blockchain-based offline-capable DC platform), and Giesecke+Devrient (multiple-media offline-capable DC platform).

Project Rosalind Phase 1 – Invitation for Expression of Interest (EOI) for API Users and Advisors Group

The BIS Innovation Hub London Centre invites companies and organizations to submit expressions of interest to join the Project Rosalind to develop application programming interface (API) prototypes for distributing CBDCs. The group will be structured into two tiers – API users and technical advisors, with different roles and responsibilities for each. The project, run jointly with the Bank of England, aims to address some of the questions around developing a retail CBDC system, including: how to improve public-private sector collaboration? How to maximize interoperability, encourage competition and enable adoption? How might retail CBDC meet current and future consumer needs in a fast-changing payments landscape? The objective is to explore how this interface could best enable a central bank ledger to interact with private sector service providers to safely provision retail payments. [Read more]

Bank of Ghana rolls out mobile wallet

The Bank of Ghana has launched GhanaPay, a common mobile wallet open to banks, savings and loans companies and rural and community lenders, enabling the industry to pool resources and reduce the cost of developing and testing new technologies. With GhanaPay, merchants do not need to maintain banking relationships with several banks to receive bill payments from other bank customers. In addition, customers only need to maintain an account with a bank to make bill payments to the entire network of customers and merchants registered with GhanaPay.  [Read more]

Upcoming events I’m affiliated with:

The second session of the CBDC Think Tank CBDC Papers Lecture Series will be held on June 24 starting at 7am EST and run for 4 hours. [View list of papers and register here]

The CBDC Think Tank, in partnership with the International Monetary Fund and George Washington University, is hosting a full-day in-person CBDC Masterclass on October 12 in Washington DC. The sessions are designed as instructional deep dives with full presentations and Q&A components.  [Register here]