Kiffmeister’s #Fintech Daily Digest (20220615)

Brazil’s digital currency implementation pushed to 2024

Banco Central do Brasil is reportedly pushing out its central bank digital currency (CBDC) pilot work from end-2022 to 2023. This is due to a workers’ strike at the central bank, which impacted the original schedule. [Read more]

Deciding on a Digital Dollar: The Necessary Steps for Canada

The Centre for International Governance Innovation (CIGI) published a conference report based on an April 2022 workshop attended by Canadian and international experts (including yours truly). The discussion focused on the international backdrop and what can be learned from global leaders in CBDCs, to determine next steps for Canada and to assess the legal and regulatory changes required to support a Canadian CBDC. [Read more]

Tether Condemns False Rumors About Its Commercial Paper Holdings

Tether pushed back on rumors that the commercial paper held as USDT stablecoin reserves is 85% comprised of paper backed by (mostly shaky) Chinese or Asian firms. As of the most recent attestation report commercial paper made up about 25% of USDT’s backing, and Tether is gradually switching maturing paper into short-maturity U.S. Treasury securities. Also, Tether’s Celsius position has been liquidated with no losses to Tether, and Tether has currently zero exposure to Celsius apart from a small investment made out of Tether equity in the company. [Read more]

DeFi lending: intermediation without information?

A Bank for International Settlements (BIS) paper explores decentralized finance (DeFi) lending platforms, concluding that their current institutional features mostly facilitate speculation in crypto-assets rather than real economy lending. Due to the anonymity of borrowers, over-collateralization is pervasive, which generates procyclicality. Reliance on collateral also limits access to credit to borrowers who are already asset-rich, negating financial inclusion benefits. The paper concludes that for DeFi lending to make inroads into the real economy, it needs to tokenize real assets and rely less on collateral by developing its ability to gather information about borrowers; as such, the system is likely to gravitate towards greater centralization. [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]