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]