Kiffmeister’s #Fintech Daily Digest (20221108)

Binance offers to buy FTX’s non-U.S. operations to fix ‘liquidity crunch’

Binance has reached a deal to buy the rival crypto exchange FTX for an undisclosed amount. Binance CEO Changpeng Zhao announced that “there is a significant liquidity crunch” at FTX and that after FTX asked for Binance’s help, they “signed a non-binding letter of intent, intending to fully acquire FTX and help cover the liquidity crunch.” Zhao added that Binance will be conducting full due diligence in the coming days, and the firm has the discretion to pull out from the deal at any time. Days earlier, Binance had announced that it would sell all of its FTX FTT governance tokens, which set in motion the chaos that resulted in FTX’s liquidity woes. [Read more at CNBC]

The case for convenience: how CBDC design choices impact monetary policy pass-through

The BIS published a paper that that explores the implications of central bank digital currency (CBDC) remuneration and convenience, focusing on the US monetary system with its large excess reserves, with the rate of interest on reserves (IOR) as the main monetary policy tool. The paper finds that at low IOR rates, large banks are non-responsive to IOR rate changes, leading to weak pass-through of IOR rate changes to deposit rates. Here an interest-bearing CBDC could provide competitive pressure to drive up deposit rates and improve monetary policy transmission. However, increasing remuneration past a point where it becomes a binding floor, increases deposit rates but leads to greater inequality of market shares in both deposit and lending markets, and reducing deposit rate responsiveness to IOR changes.

The paper also finds that payment convenience is a crucial aspect of CBDC design that may be more desirable than remunerating CBDC. Payment convenience could be driven by a host of features that enhance the performance of CBDC as a medium of exchange. Examples include the quality of the user interface, processing speed, privacy and access to markets. A highly convenient CBDC produces sufficient competitive pressure in deposit markets to raise deposit rates for any given level of IOR and increases the responsiveness of deposit rates to IOR rate changes. Increasing payment convenience also has favorable effects on market composition by levelling the playing field. [Read more at the BIS]

Introducing datonomy™: A Digital Assets Taxonomy

CoinMetrics, Goldman Sachs and MSCI have created Datonomy™, a taxonomy for classifying digital assets. Datonomy is designed to be intuitive to the average investor while remaining true to the language of the crypto industry. Importantly, it allows investors the same structural framework for investing in the “Decentralized Finance Sector” the same way that they would traditionally invest in, say, the “Energy Sector.” Datonomy classifies assets primarily based on their economic context of use. This contrasts with a purely technical taxonomy, or one that confounds the technical and economic characteristics of tokens and their protocols. [Read more at CoinMetrics]

Fintech Saudi 2021/22 Annual Report

Fintech Saudi published its 2021/22 Annual Report, which showed that the number of active Fintechs in Saudi Arabia has increased by 79% from 2021 to 147, marking a 14.7x increase in 4 years. The report anticipates further growth over the coming year, with the launch of three new digital banks, and the recent publication of the Kingdom’s open banking framework, setting out legislation, regulatory guidelines and technical standards. Fintech Saudi was launched by the Saudi Central Bank in partnership with the Capital Market Authority in April 2018 to act as a catalyst for the development of the Fintech industry in Saudi Arabia.  [Read more at Fintech Saudi]

Kiffmeister’s Global Central Bank Digital Currency Monthly Monitor

Just a reminder that I produce a monthly digest of central bank digital currency (CBDC) developments exclusively for the official sector. So for any of you out there who work for a central bank, ministry of finance or international financial institution who would like to receive it by email on the first business day of every month, please DM me on LinkedIn or email me at chronicles@kiffmeister.com.

Satoshi Capital Advisors is a New York-based, global advisory firm that works with central banks, governments, and the private sector to architect, implement, and operate varying initiatives. Satoshi Capital Advisors’ central bank work revolves around CBDC architecture and implementation, providing advisory services from research phase through to growth phase. Utilizing a product-market fit and technology agnostic approach to CBDC architecture and implementation enables Satoshi Capital Advisors to build tailored solutions, bespoke to local financial system nuances. Satoshi Capital Advisors welcomes requests from central bank officials for virtual and in-person CBDC workshops. [Click here for more information]

WhisperCash offers the first fully offline digital currency platform that has the same properties as physical cash. It can perform secure consecutive offline payments without compromising on security, privacy or accessibility. WhisperCash allows direct person to person offline payments without any server infrastructure or internet connectivity. It comes in various form factors including the self-contained credit card-sized “Pro” that sports an eInk screen and capacitive keyboard, and lasts for two weeks between recharges assuming a few transactions per day. [Click here for more information]