Kiffmeister’s #Fintech Daily Digest (20220604)

Reports show scammers cashing in on crypto craze

According to the U.S. Federal Trade Commission, since the start of 2021, approximately 46,000 Americans have lost more than $1 billion worth of digital assets in crypto scams. The fraudulent activities affected approximately 46,000 people. $575 million was lost in investment-related crypto scams, $185 million to romance frauds, and $93 million to business imposters. Because the vast majority of frauds are not reported, these figures are assumed to reflect just a small fraction of the public harm. [Read more]

How to Build Stablecoin Trust – Audits and Attestations

Circle’s Chief Financial Officer explains the difference between stablecoin audits and attestations. An audit is an assurance engagement that verifies the accuracy of financial statements and is typically performed annually by a public accounting firm. The audit verifies the accuracy, completeness and composition of the reserve and tests the internal controls over financial reporting that ensure financial statement accuracy. In an attestation – the accounting firm “attests” to the accuracy of a set of statements. It is different from an audit (it makes little sense to test financial controls monthly, for example), but it provides the same standards of assurance over the statements. [Read more]

Fintech, Female Employment, and Gender Inequality

Using a novel fintech dataset for 114 economies worldwide, this International Monetary Fund (IMF) paper shows that fintech adoption significantly improves female employment and reduces gender inequality, the effect being more pronounced in firms without traditional financial access. Fintech not only increases the number and ratio of female employees in the workforce, but also mitigates financial constraints of female-headed firms. Digital divide and poor institutions weaken such benefits. [Read more]

An Investor’s Guide to Crypto

This paper by Campbell R. Harvey and others provides practical insights for investors seeking crypto exposure. It discusses a wide variety of tokens, highlighting their functionality and investment properties. It critically compares popular valuation methods, and contrasts buy-and-hold investing with more active styles. Underlying crypto performance has been notoriously volatile, but volatility-targeting methods are effective at controlling risk, and trend-following strategies have performed well. Crypto assets display a low correlation with traditional risky assets in normal times, but the correlation also rises in the left tail of these risky assets. Finally, the paper details important custody and regulatory considerations for institutional investors. [Read more]

Upcoming events I’m affiliated with:

The CBDC Think Tank is hosting a CBDC Papers Lecture Series on June 17 and 24 starting at 7am EST and running for 4 hours each day. [View list of papers and register here]