Kiffmeister’s #Fintech Daily Digest (20221123)

For those interested in following the details of the trials and tribulations around the FTX exchange collapse, I’m collecting my favorite articles here on my Diigo social bookmarking page

BOJ eyes pilot experiments next year to issue digital yen

The Bank of Japan (BOJ) will reportedly begin preparations to conduct a retail central bank digital currency (CBDC) pilot next Spring (2023) year. According to Nikkei Asia, “after spending two years verifying whether there are any problems with bank account deposits and withdrawals, the BOJ will decide whether to go ahead with a digital yen in 2026.” However, it’s not clear yet whether this is a “pilot” (testing in the “wild” with real live users) or a proof of concept (tested among financial institutions in a “laboratory” setting). [Read more on Reuters]

Let’s Stop Regulating Crypto Exchanges Like Western Union

US-based cryptocurrency exchanges including Coinbase, FTX US, and Binance.US are overseen on a state-by-state basis as money transmitters. MoneyGram, PayPal and Western are regulated as money transmitters, and starting in the 2010s, crypto exchanges were subsumed under it.  Money transmitter laws are known for lax security requirements, slim capital requirements, an insufficient “ring fencing” of customer funds in the case of bankruptcy and an overly permissive list of investments to which transmitters can deploy their customers’ funds. Isn’t it about time that crypto exchanges were put under SEC or CFTC oversight? [Read more on Coin Desk]

An assessment of the volatility spillover from crypto to traditional financial assets: the role of asset-backed stablecoins

The Hong Kong Monetary Authority (HKMA) published a paper on volatility spillover from asset-backed stablecoins to money market instruments. Stablecoins bear liquidity mismatch risks similar to money market funds, which may expose them to a fire-sale of reserve assets in times of crypto ecosystem instability and in turn increase the volatility of these reserve assets. It finds that, in extreme circumstances, these fire-sales could have material impacts on the traditional financial system such as the money market. The paper proposes regulations that require stablecoin issuers to provide standardized and regular disclosures of their reserve assets holdings, and possibly imposing restrictions on the composition of reserve assets and requiring well- defined redemption rights. [Read more at the HKMA]

Bank of America To Partner With Ripple for ODL Services After XRP Lawsuit Finishes: Report

Bank of America is reportedly waiting for the end of the U.S. Securities and Exchange Commission (SEC) court case against Ripple to use the firm’s on-demand liquidity (ODL) products. Ripple’s ODL solution uses the XRP to enable faster and cheaper cross-border payments without the need for pre-funded destination accounts. [Read more at the Daily Hodler]

Digital Euro Association Digital Money Academy

I will be discussing global central bank digital currency (CBDC) developments at the Digital Euro Association’s Digital Money Academy on November 29. If you want to get into CBDCs, register for the Academy 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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