Kiffmeister’s #Fintech Daily Digest (20220730)

Seven out of ten tell Fed they don’t want digital dollar: Cato Institute

The Cato Institute analyzed responses to the Federal Reserve consultation on central bank digital currency (CBDC) and found that 66.52% of the 2,052 comments rejected a digital dollar. By excluding blank comments or those soliciting work on the project, the figure rises to 71.21%, with 11.74% in support of a CBDC, and 17.06% neutral. The most common concerns were over financial privacy, financial oppression, and the risk of disintermediating the banking system. [Read more at the Cato Institute]

How profitable is the world’s largest stablecoin?

In a recent blog post, the world’s largest stablecoin issuer Tether mocked its smaller competitor, Circle (which issues USD Coin), for being unprofitable. In Circle’s first quarter of 2022, it was $113 million in the red, whereas according to JP Koning’s estimates based on an analysis of Tether’s six attestation reports, Tether earned $13 million over the twelve months ending March 31, 2022. Going forward, both Circle and Tether can be expected to earn much more interest income on their base of non-interest-paying customer deposits, but Tether may face losses on its possibly riskier investments, including $62.8 billion in the collapsed lender Celsius, which is probably worthless now. [Read more on Moneyness]

The optimal quantity of CBDC in a bank-based economy

The European Central Bank published a paper that provides evidence on the estimated effects of CBDC issuance on bank valuations and lending. It concludes that digital euro issuance would exert a fiscal expansion effect (through an expansion of the central bank balance sheet and profits) and a bank disintermediation effect. The sign and magnitude of the net impact on bank lending and real GDP depends on the relative size of these two opposing effects. However, appropriately calibrated CBDC holding limits and remuneration rates could be effective in mitigating the risk of bank disintermediation and induce significant welfare gains. [Read more at the ECB]

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 (20220729)

It’s been a quiet week on the Fintech front, which is why you may have noticed that I’ve been skipping a few days. In addition to the one piece of news below, I’ve posted an update to my tabulation of retail central bank digital currency (CBDC) explorers here.

National Bank of Kazakhstan report on open APIs, open banking and digital financial services

The National Bank of Kazakhstan (NBK) published a report on the development of the ecosystem of open application programming interfaces (APIs), open banking and digital financial services in Kazakhstan. [Read more at the NBK]

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 (20220727)

Central African Republic begins public sale of Sango Coin

The national cryptocurrency of the Central African Republic, Sango Coin, is now on sale. People looking to buy the token need at least $100 in Bitcoin, Ethereum, BNB Smart Chain, Tether, USD Coin, Binance USD, or DAI. Buyers cannot withdraw or transfer their tokens until the lock-up period is over. However, only 5% of the tokens had been sold in the first 24 hours of the public sale. [Read more at the Block]

JAM-DEX officially launched through Lynk App

The Bank of Jamaica (BOJ) officially launched Jamaica’s JAM-DEX central bank digital currency (CBDC)  through the Lynk app on July 11.  Lynk is currently the only transaction platform for Jamaicans to use their JAM-DEX. As part of the launch, the first 100,000 customers that signed up for JAM-DEX via the Lynk app were given an incentive bonus of J$2,500 JAM-DEX in their wallets by the Government of Jamaica. [Read more at the Lynk]

BME,  BBVA and IADB issue blockchain-registered regulated bond in Spain

Bolsas y Mercados Españoles (BME), through Iberclear, Banco Bilbao Vizcaya Argentaria (BBVA) and the Inter-American Development Bank (IADB), have completed the first bond issuance in Spain listed in a regulated market and registered using blockchain technology developed by ioBuilders. The blockchain platform allows the registration, trading in the secondary market and life cycle management of a bond issued in a regulated market. Smart contracts have been used for the execution of the distribution, purchase and sale, settlement and corporate events processes, using electronic money tokenized by BBVA for the management of cash throughout the term of the issuance. [Read more at BME]

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 (20220725)

UK to explore blockchain-based government bond

The Financial Services and Markets Bill 2022 has been introduced into the U.K. Parliament. Section 22 of the Bill contains a new power for the government to introduce bespoke rules on the regulation of payments, payment systems and service providers in relation to the payments that include “digital settlement assets”, which includes any digital representation of value or rights that “(a) can be used for the settlement of payment obligations; (b) can be transferred, stored or traded electronically, and (c) uses technology supporting the recording or storage of data (which may include distributed ledger technology).” The Chancellor of the Exchequer said that HM Treasury will be working to understand how distributed ledger technology could be applied to a U.K. sovereign debt instrument. [Read more at Gov.uk]

What can CBDC designers learn from asking potential users? Results from a survey of Austrian residents

The Österreichische Nationalbank (ONB) published a paper that summarizes the results of a survey of 2006 Austrian residents about their central bank digital currency (CBDC) design preferences and their likelihood of using a digital euro. Respondents were satisfied with the existing payment options, and only about half expressed at least some interest in a digital euro. In terms of CBDC design, high importance was placed on security against fraud and theft, but less than a third considered privacy important. [Read more at the ONB]

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 (20220723)

Central African regional central bank seeks common digital currency

The Bank of Central African States has reportedly been urged by its board to introduce a common digital currency for its six member states (Cameroon, Chad, the Republic of Congo, Gabon, Equatorial Guinea and the Central African Republic). The board made the call in an emailed statement signed by its head, Herve Ndoba, on July 21 following a meeting in Cameroon’s economic capital, Douala. The proposal comes after the central bank’s strong opposition for the Central African Republic’s adoption of Bitcoin as legal tender this year. [Read more at Bloomberg]

I’m skeptical about this story because I’ve perused the French Africa press, and the only concrete evidence I’ve come across pertains to a “resolution” from the Union Monetaire de L’Afrique Centrale on the need for regionally consistent crypto regulations. [See it here] Has anyone out there seen anything more concrete?

Crypto Woes Spread as Celsius, Babel Links Hit Another Firm

Asian-based crypto exchange Zipmex has halted withdrawals as the fallout from a series of defaults spreads further throughout the digital-assets industry. As part of its story on Zipmex, Bloomberg produced a tabulation of crypto platforms with liquidity problems. [Read more at Bloomberg]

What factors determine central bank interest in CBDC?

This paper by Bank of Indonesia staff attempts to explain the differences in central bank digital currency (CBDC) interest across emerging and advanced market countries. Based on a cross-country dataset, it shows that wholesale CBDC work is more advanced in countries with developed financial markets and greater cross-border transactions. Retail CBDC work is more advanced in countries with lower financial inclusion and a large informal economy. It further shows that different factors affect retail CBDC adoption across emerging and advanced countries. [Read more at the Bulletin of Economics and Banking]

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 (20220722)

New York Regulators Have Planted a Seed for Stablecoin Transparency

In June 2022, the New York Department of Financial Services (NYDFS) issued formal guidance for NYDFS-approved stablecoin issuers, including upgrades to the amount and quality of information that issuers must provide to the public. With the new guidance, management’s assertions must now be tested and published no later than 30 days after the end of the month, but also on one randomly selected business day during the month. Secondly, stablecoin issuers will be required to submit their internal controls to audit. However, the new regulations apply to Gemini dollar (GUSD) Binance USD (BUSD) and Paxos dollar (USDP). [Read more at JP Koning’s Moneyness]

Barclays to host CBDC hackathon

Barclays will host the “CBDC Hackathon 2022” on September 27 and 28, 2022. It will consist of a series of coding challenges that will simulate the use of central bank digital currency (CDBC) and commercial bank money. Teams of four will develop coding solutions to multiple challenges including connecting to Barclays simulation of central and commercial bank application programming interfaces (APIs). The tasks will be drawn from the Bank of England’s CBDC platform model. [Read more at Barclays]

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 (20220721)

IMF wants M-Pesa shielded in CBK digital shilling plan

The IMF published feedback on the Central Bank of Kenya (CBK) central bank digital currency (CBDC) discussion paper published in February 2022. The IMF recommended that the paper emphasize that CBDC will “do no harm” to existing private-sector digital payment solutions. A poorly designed CBDC risks taking away customers of banks and other digital finance providers, increasing the cost of financing for banks, and depriving banks of valuable information they obtain through establishing customer relations. [Read more at the IMF]

Lenders Are Thwarting Digital Currency’s Adoption in Nigeria

Nigerian lenders are impeding the use of the nation’s CBDC because they are concerned about losing revenue from traditional banking services, according to central bank Governor Godwin Emefiele. Only about 700,000 customers have created an e-naira wallet since its introduction in October last year, and e-naira transactions have also failed to pick up. Currently, the e-naira wallet is available to only bank customers, but the central bank is close to concluding tests with MTN Group’s Nigeria unit to provide a channel to enable Nigerians without bank accounts to open e-naira wallets. [Read more at Bloomberg]

Indonesia plans wholesale digital currency

Bank Indonesia Governor Perry Warjiyo reportedly said that the central bank will release the conceptual design of digital rupiah by the end of 2022. The central bank will distribute the CBDC to large banks and payment service companies to sell to smaller banks for various retail transactions. It is also considering ways to ensure it would be exchangeable across borders. [Read more at Bloomberg]

RBI working on phased implementation of digital currency

Reserve Bank of India (RBI) Executive Director Ajay Kumar reportedly said that the central bank is working on a phased implementation of both retail and wholesale CBDC. He also said that the necessary amendment to the relevant section of the RBI Act 1934 had been made enabling the RBI to conduct pilot and subsequent issuance of CBDC. [Read more at The Print]

The Macroeconomic Impact of Cryptocurrency and Stablecoins

The World Economic Forum (WEF) has published a white paper that seeks to forecast the potential macroeconomic effects of crypto-assets and stablecoins based on qualitative assessments from global macroeconomists and credible literature in this space. The majority of economists interviewed predict that allowing crypto-assets to play a regulated role in the economy will bring the highest macroeconomic net benefit to society, contingent on the responsible design and enforcement of regulation. The WEF’s Digital Currency Governance Consortium will deliver more detail regarding regulatory best practices at a later date. [Read more at WeForum.org]

The end of the crypto-diversification myth

An article published by VoxEU proposes a mechanism to explain why the correlation between cryptocurrency and equities went from low and negative to consistently high and positive since the onset of the Covid-19 crisis in 2020.  With investor-level holdings from a bank offering both trading accounts and cryptocurrency wallets, it shows that retail investors’ net trading volumes of stocks and cryptocurrencies are highly positively correlated. Theoretically, this micro-level pattern translates into a cross-asset class correlation. Evidence suggests that the pattern emerged in March 2020, and that stocks preferred by crypto-traders exhibit a stronger correlation with Bitcoin. [Read more at VoxEU]

Cash remains king in Germany

Recently, Deutsche Bundesbank published a study on the payment behavior and habits in Germany (for 2021). The study is very, very detailed and provides data for all kinds of questions around payments. The main takeaway is that cash is still king in Germany. [Read more via Jonas Gross’s summary on LinkedIn]

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 (20220720)

Stablecoins’ role in crypto and beyond: functions, risks and policy

This European Central Bank (ECB) article analyses the role played by stablecoins within the wider crypto-asset ecosystem and finds that some existing stablecoins are already critical to liquidity in crypto-asset markets. This could have wide-ranging implications for crypto-asset markets if a large stablecoin were to fail and could also have contagion effects if crypto-assets’ interlinkages with the traditional financial system continue rising. The article calls for the urgent implementation of effective regulatory, supervisory and oversight frameworks before significant further interconnectedness with the traditional financial system occurs. [Read more at the ECB]

Integrating DLTs with market infrastructures: analysis and proof-of-concept for secure DvP between TIPS and DLT platforms

The Banca d’Italia published a paper that evaluates two solutions for synchronizing the asset-leg and the cash-leg of a DvP (delivery versus payment) transaction on distributed ledger technology (DLT) rails. Both use the Target Instant Payment Settlement (TIPS) platform to provide the settlement services of the cash leg. The solutions preserve the atomic nature of a DvP transaction, building a “bridge” between the DLT asset management platform and the central bank payment system. This architecture offers the potential to standardize communications with DLTs and avoid the need to issue central bank money as cash tokens on DLTs – a key point of other approaches – thus preserving the central bank’s control over the cash-leg of the DvP. [Read more at the Banca d’Italia]

ING pilots ultra-wideband tech for P2P contactless payments

ING, working with Samsung and NXP Semiconductors, is piloting a peer-to-peer payments app that uses ultra-wideband (UWB) technology to let users transfer money by simply pointing one handset at another. There is no need to enter another person’s email address, phone number or International Bank Account Number (IBAN) when making a payment. UWB is a technology based on radio waves that that can precisely lock onto an object, discover its location and communicate with it. [Read more at Finextra.com]

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 (20220718)

Reconciling the Atlantic Council CBDC Tracker with My Tabulations

The Atlantic Council publishes a CBDC Tracker that aspires to be the definitive record of publicly announced central bank digital currency (CBDC) projects. However, it publishes with headline numbers that are significantly higher than those implied by my retail and wholesale CBDC tabulations. The Atlantic Council CBDC Tracker recently reported that 105 countries were exploring, whereas I count 86 central banks that are authorized to issue CBDC.

I’ve plodded through their graphic and I think I have nailed down the most of the difference, a combination of double counting and including some central banks that, in my opinion,  are not exploring CBDC:

  • I count the Eurozone as one “country” because only the European Central Bank is authorized to issue currency there, whereas the Atlantic Council counts all nine national central banks conducting CBDC projects.
  • Similarly I count the Eastern Caribbean Currency Union as one because only the Eastern Caribbean Central Bank can issue currency there, whereas the Atlantic Council counts seven of the national central banks, although counts Anguilla separately even though they’re part of the Union.

If I follow that scheme my count would go from 86 to 101. Then there are six countries that the Atlantic Council includes that I don’t:

  • Belarus, Belize, and Senegal, where private and/or government-owned banks were piloting digital currencies with the central bank’s blessing.
  • Venezuela, where the government (not the central bank) issued the Petro, with no apparent central bank backing or involvement.
  • Fiji and Vanuatu, which were focus of a digital currency research effort by Japanese Fintech firm Soramitsu, commissioned by NTT Data Institute of Management Consulting with the blessing of the Japanese government. (Solomon Islands and Tonga were part of the project too, but for some reason were left off the Atlantic Council Tracker.)

Those would take my total to 107, but then the Atlantic Council missed five projects from my tabulation: Bangladesh, Paraguay, Qatar, Sudan and Yemen, takes it to 112, so go figure!

If anyone can help me with the reconciliation, please let me know in the comments!

BNP Paribas issues tokenized bond for EDF on public blockchain

BNP Paribas structured and tokenized a project finance bond on the public Ethereum blockchain. The proceeds were used to fund solar energy projects through Électricité de France Energies Nouvelles Reparties (EDF ENR), which helps businesses and individuals install solar panels. [Read more at Ledger Insights]

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 (20220717)

I’ve updated my tabulation of retail central bank digital currency (#CBDC) explorers – lots of link updates and one additional central bank (Dominican Republic). [See and download it here]

Women in Fintech: As Leaders and Users

The IMF published a paper that explores the interaction between women and fintech by examining: (i) the role of women leaders on firm-level performance in the fintech industry; and (ii) the determinants of gender gaps in the usage of digital services to better understand the cross-country differences. Results indicate that greater gender diversity in the executive board is associated with better performance of fintech firms. With regard to determinants of the gender gaps in the usage of digital financial services, the paper reports that higher financial and digital literacy of women is associated with lower gender gaps in digital financial inclusion, and that socio-cultural factors also play a key role. [Read more at IMF.org]

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]