Kiffmeister’s #Fintech Daily Digest (20221112)

FTX says it moved remaining funds to cold wallets to ‘mitigate damage’ after ‘unauthorized transactions’

Over $600 million in crypto left FTX’s wallets late Friday (November 11, 2022) and many FTX wallet holders also reported that they were seeing $0 balances in their FTX.com and FTX US wallets. The bankrupt exchange’s general counsel Ryne Miller said the exchange was “investigating abnormalities with wallet movements related to consolidation of FTX balances across exchanges — unclear facts as other movements not clear.” Shortly after that, he said that the firm had initiated precautionary steps to move all digital assets to cold storage. Also, on-chain data seems to indicate that funds are also being drained from wallets of clients of Almeda, a sister trading company of the exchange. Obviously the situation is very fluid, with all sorts of rumors floating around. For those interested in following the FTX trials and tribulations, I’m still collecting them here on my Diigo social bookmarking page.

New York Fed, several big banks testing ‘regulated liability network’

The New York Fed is reportedly poised to unveil a proof-of-concept for “regulated liability networks” — an experiment around tracking and transmitting tokenized debt issued by an array of regulated financial institutions. Citi’s Tony McLaughlin, a leader in the field of regulated liability networks. in a recent blog post on Citi’s website, wrote, “It may be possible for central banks and regulators to create a new direction for the regulated sector through a slight pivot in existing CBDC projects and the nascent tokenization of commercial bank money. They may adopt a broader view of the task at hand — not the tokenization of central bank liabilities, but the tokenization of all regulated liabilities on a common platform.” [Read more on The Block]

FTX showed the problems of centralized finance, and proved the need for DeFi

The FTX collapse was a failure of centralized finance (CeFi), not decentralized finance (DeFi). If there is a silver lining for the FTX fiasco, it is a reminder of the importance of decentralization. Like the financial institutions that collapsed in 2008, the CeFi economic incentive is to under-collateralize and take risks with user funds, play political games, and cozying up to regulators. DeFi platforms are designed to preserve the benefits introduced by Bitcoin and magnified by Ethereum: permissionless, transparency, censorship resistance and self-sovereign custody of assets. [Read the whole editorial on CoinDesk]

Binance Reserves Show Almost Half of Holdings Are in Its Own Tokens

Binance holds $74.7 billion worth of tokens of which around 40% are in its own BUSD US dollar-pegged stablecoin and its BNB native coin. Of the $74.6 billion termed as networth, about $23 billion was in BUSD and $6.4 billion in BNB. The exchange has also allocated 10.5% of its holdings in Bitcoin and 9.8% in Ether. While Binance shared details of its reserves, the dashboard does not break down how much of the assets are its own holdings, versus those of its customers. [Read more on Bloomberg]

Crypto.com Holds 20% of Its Reserves in Meme Token SHIB

Crypto.com holds 31% of its digital asset reserves in Bitcoin, 20% in the Shiba Inu token (a highly speculative “meme coin”) and 17% in Ethereum. Various other cryptocurrencies and tokens collectively account for the rest. Meme coins are cryptocurrencies and tokens that are typically inspired by internet memes, and don’t have significant functional utility. [Read more at Decrypt]

New Zealand government moves to introduce open banking to give customers a better deal

New Zealand will introduce open banking over the next two years. Minister of commerce and consumer affairs David Clark said “open banking ensures banks must share customer information if they request it, making it easier for New Zealanders to compare mortgage rates, apply for loans, and switch banks.” [Read David Clark’s statement here]

A LeVeL Paying Field: Cryptographic Solutions towards Social Accountability and Financial Inclusion

Crypto-assets rely on fixed public/private key algorithms, which are resting targets for advanced cryptanalysis. BitMint’s BitMint*LeVeL protocol allows each holder to pick their own public/private key algorithm, so that an attacker would have to compromise all the algorithms used by all previous coin owners – a substantial security upgrade relative to existing crypto-assets. LeVeL can be applied to crypto-assets and fiat currency to effectively serve as a claim check. BitMint*LeVeL can achieve decentralization via BitMint’s InterMint: Money is minted by many smoothly interchangeable mints competing for traders. [Download the paper here]

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.

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