Month: November 2022

Kiffmeister’s #Fintech Daily Digest (20221120)

~ kiffmeister

Grayscale’s Bitcoin Trust hits record-Low 45% discount

The market value of Grayscale’s $10.5 billion Bitcoin Trust (GBTC) is trading at record low discounts to the price of Bitcoin (BTC). Launched in 2013, GBTC pools money from institutional investors and uses it to buy BTC, which is then held in a Grayscale fund. GBT usually traded at a premium above its net asset value (NAV) but it has traded at a discount below NAV after several other alternative Bitcoin exchange-traded funds (ETFs) launched, like the Canadian Exchange-Traded Funds (ETFs) and several BTC futures ETFs. GBTC is currently trading at a discount of about 45% according to data from YCharts. [Read more at Decrypt]

Grayscale has been trying to convert the fund into an exchange-traded fund (ETF) which would enable investors to redeem their shares, which would result in GBTX market valuations tracking its NAV more closely. When ETFs trade at a premium (or discount) to NAV, authorized participants (APs) step in to arbitrage the gap away. APs are designated by the ETF issuer to acquire the securities that the ETF wants to hold, in exchange for ETF shares priced at their NAV (not the ETF’s market value). Also, APs can remove ETF shares from the market by purchasing and delivering them to the ETF issuer, in exchange, for the same value in the underlying securities.

Hence, for example, if GBTC were an ETF trading at a premium to NAV the APs would buy Bitcoin on the open market, and deliver them to Grayscale (the ETF issuer) in return for overpriced ETF shares, which the APs then sell on the market. This should drive the premium toward zero, while the AP earns a risk-free arbitrage profit. If the ETF were trading at a discount, the APs buy the underpriced ETF shares on the market and delivers them to Grayscale in return for the underlying Bitcoin, which can then be sold at a risk-free profit. However, GBTC is a close-ended fund, meaning the underlying BTC deposits are locked in, and GBTC shares can only be sold on the market after a six-month lockup imposed by the US Securities and Exchange Commission SEC Rule 144). Grayscale has applied to the SEC to convert GBTC into an ETF, but the SEC has rejected it and all such “spot” ETF applications, allowing only futures-based BTC ETFs. 

Years ago, when GBTC was trading at a massive premium to NAV, some pointed to a scheme by which the premium could be arbitraged. It involved buying GBTC from Grayscale at NAV and shorting free-trading GBTC. Six months later, the investor close the two positions out for a risk-free profit, although this glosses over risks like not being able to borrow and fund GBTC for up to six months. There’s no equivalent “risk-free” arbitrage trade for when GBTC is trading at a discount to NAV because it would have to involve redeeming the shares for the underlying BTC, which is impossible because GBTC is a closed-end investment fund.

Meanwhile,  with crypto firms being pressed to show more information about their reserves after FTX filed for bankruptcy protection, Grayscale won’t be showing any proof of reserves. “Due to security concerns, we do not make such on-chain wallet information and confirmation information publicly available through a cryptographic Proof-of-Reserve, or other advanced cryptographic accounting procedure.” [Read more on Grayscale’s Twitter feed]

Is Silvergate Capital facing a bank run?

Crypto bank Silvergate Capital’s stock is down about 47% since the news about FTX started to break, and there is chatter that Silvergate could be facing a run. Its Silvergate Exchange Network (SEN) operates as a real-time dollar and euro payments network for crypto exchanges and institutions (see graphic below). At the end of the third quarter, Silvergate had 1,677 customers, including all of the major crypto exchanges and more than 1,000 institutional investors, using SEN and about $12 billion of non-interest-bearing deposits. Silvergate doesn’t charge clients fees to use the SEN network so its main source of revenue is the carry on those deposits.

What’s probably driving the stock decline are investor concerns about deposit outflows from its exchange clients, as the crypto market slows down, including roughly $1.2 billion from FTX. However, Silvergate has a highly liquid balance sheet. At the end of the third quarter, the bank had nearly $1.9 billion of cash and cash equivalents and another $8.3 billion of available-for-sale securities that can be quickly converted into cash. Also, as a federally regulated bank, Silvergate could also tap the Federal Home Loan Bank or the Federal Reserve. Nevertheless, the situation bears watching. [Read more at the Motley Fool]

Silvergate Capital clients.

Intellectual property rights and DLT with a focus on art NFTs and tokenized art

The European Parliament’s Policy Department for Citizens’ Rights and Constitutional Affairs published a study that aims to provide an overview over intellectual property (IP) rights and distributed ledger technology (DLT) with a focus on IP issues relating to art non-fungible tokens NFTs and tokenized physical art works. [Read more on the European Parliament website]

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.

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]

Kiffmeister’s #Fintech Daily Digest (20221119)

~ kiffmeister

FSB outlines framework for monitoring progress toward the G20 cross-border payments targets

The Financial Stability Board (FSB) published its report to the G20 on the framework for monitoring progress toward meeting the targets for the G20 Roadmap for Enhancing Cross-border Payments, to achieve cheaper, faster, more transparent, and more accessible payments. The framework includes key performance indicators defined across the 11 targets for the three market segments – wholesale, retail, and remittances. Notably, the definitions of the wholesale and retail market segments have been adjusted to more clearly separate the differing use cases and end-user experiences and better align the definitions with those most typically used by the payments industry and end-users.

Wholesale transactions were defined as those between financial institutions, and retail transactions as those that were neither between financial institution end-users nor in the third market segment – remittances. Going forward, the wholesale market segment will include all payments with a value equal to or exceeding a specified threshold regardless of whether the end-users are financial institutions. The threshold will be set at a level that captures the use cases in this market segment, such as high-value corporate business-to-business. Relatedly, retail payments will be payments with a value less than the specified threshold, not including remittances. [Read more at the FSB]

Instant Payments: Regulatory Innovation and Payment Substitution Across Countries

The IMF published a paper that makes the case for instant payment systems as an alternative to retail central bank digital currency (CBDC). Instant, or fast, payments are credit transfers completed and settled within seconds or minutes. They have low costs, reduce payment risk, and have significantly replaced the use of cash, cards, or check and direct debit payments. The authors of the report note the role played by regulators in promoting instant payments and identify instances of significant payment instrument substitution across 12 advanced and emerging market economies. This substitution reflects the realized demand for attributes offered by instant payments. As these attributes are quite similar to those for CBDC, the demand for retail CBDC (if issued) may be less compelling. [Read more at the IMF]

State of Instant and Inclusive Payment Systems in Africa

The State of Instant and Inclusive Payment Systems in Africa report is an AfricaNenda’s initiative together with the World Bank and the United Nations Economic Commission for Africa. The report aims to inform payment actors in Africa and beyond about the developments in the instant retail payment system ecosystem on the continent. This first edition highlights the current landscape of instant payment systems, including an assessment of the inclusivity of such systems, through their accessibility to all end-users, their capacity to ensure fair access and design input opportunities for all licensed payment providers. The report also dives into end users’ experiences pointing to the fact that IPS are still far from meeting all consumers’ payment needs. [Read more at AfricaNenda]

Crypto-assets: evolution and policy response

De Nederlandsche Bank (DNB) published a paper intended underpin the central bank’s crypto-asset policy position. The study aims to: (i) deepen understanding of the functioning of crypto-assets and their attractiveness; (ii) revisit their main opportunities and risks, and (iii) summarize views on ongoing efforts regarding regulation, supervision and enforcement. [Read more at the DNB]

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.

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]

Kiffmeister’s #Fintech Daily Digest (20221118)

~ kiffmeister

I’ve updated my tabulation of wholesale central bank digital currency (CBDC) explorers. There 17 central banks that have recently issued, piloted, experimented with and/or researched wholesale CBDC. [Check it out here]

Georgian central bank plans to roll out pilot scheme for digital currency

The National Bank of Georgia reportedly plans to roll out a CBDC pilot. The central bank first announced the digital lari project in 2021 and invited innovators for a public-private partnership for the purpose. [Read more at Agenda.de]

The Macroeconomic Implications of CBDC: A Review of the Literature

The US Federal Reserve Board (FRB) published a paper that provides an overview of the literature on how a CBDC would affect the banking sector, financial stability, and the implementation and transmission of monetary policy in a developed economy such as the United States. A CBDC has the potential to improve welfare by reducing financial frictions in deposit markets, by boosting financial inclusion, and by improving the transmission of monetary policy. However, a CBDC also entails noteworthy risks, including the possibility of bank disintermediation and associated contraction in bank credit, as well as potential adverse effects on financial stability. A CBDC also raise questions regarding monetary policy implementation and the footprint of central banks in the financial system. Ultimately, the effects of a CBDC depend critically on its design features, particularly remuneration. [Read more at the FRB]

eCurrency providing technology for National Rollout of CBDC in Jamaica

eCurrency has entered into a long-term partnership with Bank of Jamaica to provide technology services for the national rollout of its JAM-DEX CBDC. [Read more at PR Newswire]

New FTX chief says crypto group’s lack of control worse than Enron

The new chief executive of FTX, an insolvency professional who oversaw the liquidation of Enron, has said that the bankruptcy of the crypto group is the worst case of corporate failure he has seen in more than 40 years. John Ray III, who was appointed to run the FTX bankruptcy, said in a US court filing that he had never seen “such a complete failure of corporate controls and such a complete absence of trustworthy financial information”. [Read the statement here]

FTX Bankruptcy Jurisdiction Fight: Bahamas Regulators Now Confirm They Directed SBF to Move Assets

At least some of the millions of dollars in FTX customer funds mysteriously moved off the exchange during the week of November 7, 2022 were moved at the direction of regulators in the Bahamas. That assertion was made in a new filing by the company, and confirmed later by the Securities Commission of the Bahamas. [Read more at Decrypt]

And for those interested in following the FTX trials and tribulations, I’m still collecting them on my Diigo social bookmarking page.

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.

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]

Kiffmeister’s #Fintech Daily Digest (20221117)

~ kiffmeister

I’ve updated my tabulation of retail central bank digital currency (CBDC) explorers. I still count 91 central banks that have recently issued, piloted, experimented with and/or researched retail CBDC not including two that started issuing retail CBDC and then shut the platforms down (Ecuador and Finland). [Check it out here]

Custodia Bank’s master account lawsuit against Fed advances

Judge Scott Skavdahl of the U.S. District Court for the District of Wyoming denied the Federal Reserve’s motion to dismiss the master account lawsuit brought by Custodia Bank, ruling the bank had sufficiently argued that the Kansas City Fed engaged in “unreasonable delay” in processing its master account application. Custodia, which was granted a special-purpose depository institution (SPDI) license in Wyoming in 2020, has been waiting two years for the Fed to approve its application for a master account, a delay the bank has called unlawful. [Read more at Banking Dive]

Custodia versus the Fed (20221111)Download

ASX reassesses CHESS blockchain replacement

The Australian Securities Exchange (ASX) will reassess all aspects of its Clearing House Electronic Subregister System (CHESS) share trading software replacement project following completion of an independent review, conducted by Accenture, and its own internal assessment. The CHESS software enables ASX’s registry to manage settlement of transactions, and the exchange has strived since 2017 to replace it with Digital Asset’s blockchain-based technology in a bid to cut costs. The independent report identifies significant challenges with the solution design and its ability to meet ASX’s requirements. The CHESS replacement capitalized software will be derecognized in light of the solution uncertainty, resulting in a charge of about A$250 million pre-tax. [Read more on the ASX]

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.

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]

Kiffmeister’s #Fintech Daily Digest (20221116)

~ kiffmeister

Facilitating Wholesale Digital Asset Settlement

The New York Fed’s Innovation Center (NYIC) is participating in a proof-of-concept project along with members of the private sector to explore the feasibility of an interoperable network of digital central bank liabilities and commercial bank digital money using distributed ledger technology (DLT). In a 12-week proof-of-concept project—the Regulated Liability Network U.S. Pilot—the NYIC will experiment with the concept of a regulated liability network (RLN). RLN is a concept for a financial market infrastructure (FMI) facilitating digital asset transactions that connect deposits held at regulated financial institutions using DLT. The proof-of-concept will build a prototype for a distributed ledger-based network and test the feasibility of payments between financial institutions using tokenized regulated liabilities on the RLN. The project will be conducted in a test environment and only use simulated data. [Read more at the NY Fed]

Genesis’s crypto-lending unit Is halting customer withdrawals in wake of FTX collapse

Genesis Global Capital, the lending arm of crypto investment bank Genesis Global Trading, is temporarily suspending redemptions and new loan originations in the wake of FTX’s collapse. The unit serves an institutional client base and had $2.8 billion in total active loans as of the end of the third quarter of 2022. This decision impacts the lending business at Genesis and does not affect Genesis’s trading or custody businesses. [Read more at CoinDesk]

Bahamas central bank shares CBDC lessons from Sand Dollar’s first two years

In a recent speech, Central Bank of the Bahamas (CBB) Governor John Rolle described four central bank digital currency (CBDC) factors that the Bahamas’ experience suggests are particularly important – and that remain important to its own efforts to encourage CBDC adoption. Those factors are: building a network of merchants that accept and encourage CBDC use; achieving interoperability with the traditional banking system; enlisting participation from the traditional banking sector and credit unions; and the importance of “user education” and “inspiring user confidence”. [Read more at Global Government Fintech]

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.

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]

Kiffmeister’s #Fintech Daily Digest (20221115)

~ kiffmeister

CBDCTracker.org has updated its open-source central bank digital currency (CBDC) project database. Key updates include the Reserve Bank of Australia building a wholesale CBDC solution on permissioned Ethereum, the People’s Bank of China continuing to expand its retail CBDC pilots, the Reserve Bank of India launching a wholesale CBDC pilot with a retail CBDC pilot soon to follow, the Iranian monetary authority launching a pilot of its RamzRial “national cryptocurrency”, and further details surrounding a Norwegian CBDC. [Read more at CBDCTracker.org]

SBI, ICICI, IDFC, HDFC, Yes Bank in RBI’s list for digital currency pilot

State Bank of India, ICICI Bank, IDFC First Bank, HDFC Bank and Yes Bank are reportedly among a shortlist of at least five lenders that the Reserve Bank of India (RBI) has chosen to work on its retail central bank digital currency (CBDC) pilot that is expected to go live soon. [Read more at the Economic Times]

Trezor reports 300% surge in sales revenue due to FTX contagion

Amid growing concerns over centralized cryptocurrency exchanges in the wake of the FTX crisis, investors are increasingly moving to hardware crypto wallets. Hardware wallet provider, Trezor, saw its sales revenue surge 300% week-on-week and it’s still growing in the aftermath of the FTX debacle. Ledger, a major rival hardware wallet supplier, has also recorded a significant surge in demand for its devices recently as well. And now even some of the biggest crypto exchanges have started promoting the need for self-custody. Binance CEO Changpeng Zhao admitted on November 14 that centralized exchanges may no longer be necessary as investors would shift to self-custodial solutions like hardware or software wallets. [Read more at Coin Telegraph]

Bitcoin Cash Could Be Legal Tender in St. Kitts by March

“Bitcoin Cash (BCH) could be legal tender in Saint Kitts and Nevis by next March… [Prime Minister] Terrance Drew, who is also finance minister of the Caribbean country, said the decision would follow a process of due diligence and consultation with experts and the Eastern Caribbean Central Bank… Bitcoin Cash is a fork of Bitcoin, which split in 2017 with the aim of making transactions faster and easier, and is, Terrance said, already in practice being accepted by some local businesses.” [Read more at CoinDesk and the Saint Kitts and Nevis government website]

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]

Kiffmeister’s #Fintech Daily Digest (20221114)

~ kiffmeister

Binance proposes recovery fund for crypto projects facing liquidity crisis

Binance announced that it is forming an industry recovery fund, to help projects who are otherwise strong, but in a liquidity crisis. CEO Changpeng “CZ” Zhao also welcomed other industry players with cash who wants to co-invest to join the fund. Tron, Huobi Global and Poloniex will reportedly support the initiative. [Read more at CoinDesk]

Can proof-of-reserves prevent future crypto exchange collapses?

A number of crypto exchanges are rushing to publish proof-of-reserves in a seeming attempt to reassure investors their funds are safe in the wake of the FTX meltdown. Proof-of-reserves (PoR) are independent audits by third parties that aim to provide transparency and evidence that a custodian holds the assets it claims to own on behalf of its clients. Auditors then aggregate balances into a Merkle tree, which entails all client balances. The CBDC Think Tank’s Jamiel Sheikh has provided a nice infographic that illustrates how PoR works (see below). And Nic Carter has set up a PoR dashboard to keep track of entities which have conducted a recent PoR attestations. [Click here for the dashboard]

Crypto trading and Bitcoin prices: evidence from a new database of retail adoption

The Bank for International Settlements published a paper that investigates the drivers of crypto adoption, based on a novel database (made available with the paper) on retail use of crypto exchange apps in 95 countries over 2015–22. It shows that a rising Bitcoin price is followed by the entry of new users. About 40% of these new users are men under 35, commonly identified as the most “risk-seeking” segment of the population. Overall, back of the envelope calculations suggest that around three-quarters of users have lost money on their Bitcoin investments as most entered when prices where high (see graph below). Blockchain data show that large hodlers (“whales”) were selling when smaller investors were entering, as early investors and insiders cashed out at their expense. [Read more at the BIS]

Russia’s Digital Ruble Integrated Into Banking App

VTB Bank has reportedly become the first Russian bank to add the digital ruble to its mobile application. The integration is currently being tested with accounts set up for legal entities. Select customers will be granted access in the coming months and will be able to join the trials. [Read more at Bitcoin.com]

Bank of England looking for CBDC solution architect

The Bank of England is recruiting for Solution Architects within the Technology team of its Central Bank Digital Currency (CBDC) Unit. The CBDC Unit is responsible for analyzing the opportunities and challenges presented by CBDC and developing the design of a CBDC. The Unit’s activities include macroeconomic analysis, work on functional design, exploration of technology options, and engaging private-sector and international counterparts. The responsibility of the job holder will be to explore the technology design and architecture options for a potential retail CBDC. [Apply 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.

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]

Kiffmeister’s #Fintech Daily Digest (20221113)

~ kiffmeister

No real news today, but for those interested in following the FTX trials and tribulations, I’m still collecting them here on my Diigo social bookmarking page.

JP Koning points out that throughout the FTX crisis the big three USD-pegged stablecoins have been acting differently, with Tether’s USDT outstandings shrinking as it experiences redemptions, while Circle’s USDC and Binance’s BUSD benefit from inflows.

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]

Kiffmeister’s #Fintech Daily Digest (20221112)

~ kiffmeister

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.

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]

Kiffmeister’s #Fintech Daily Digest (20221111)

~ kiffmeister

FTX files for Chapter 11 bankruptcy

FTX announced that it has moved to file for Chapter 11 bankruptcy protection, along with FTX US, Alameda Research and approximately 130 additional affiliated companies. FTX Digital Markets, FTX Australia, FTX Expess Pay and LedgerX (which does business as FTX US Derivatives) are not included. [Read the press release here]

For those interested in following the trails and tribulations around the FTX exchange collapse, I’m collecting my favorite articles here on my Diigo social bookmarking page. See also below for an update on the impact on the pegs of the two biggest US dollar-pegged stablecoins, Tether’s USDT and Circle’s USDC.

New York Fed and Monetary Authority of Singapore Collaborate to Explore Potential Enhancements to Cross-Border Payments Using Wholesale CBDCs

The Federal Reserve Bank of New York’s New York Innovation Center (NYIC) and the Monetary Authority of Singapore (MAS) announced Project Cedar Phase II x Ubin+, a joint experiment to investigate how wholesale central bank digital currencies (CBDCs) could improve the efficiency of cross-border wholesale payments involving multiple currencies. Project Cedar Phase II x Ubin+ will enhance designs for atomic settlement of cross-border cross-currency transactions, leveraging wholesale CBDCs as a settlement asset. [Read more at the NY Fed]

Atlantic Council launches global cryptocurrency regulation tracker

The Atlantic Council published new research that categorizes and explains how the world’s largest economies are regulating cryptocurrencies. It looks at 25 countries—G20 member countries, in addition to countries with the highest rates of cryptocurrency adoption including Iran, Pakistan, Philippines, Thailand, Ukraine and Vietnam.  Each country is assigned one of three regulatory statuses: legal (where all activities are permitted), partial ban (where one or more activity is not permitted), and general ban (where all activity is limited). It breaks regulations down by tax policy, requirements to combat money laundering and terrorist financing, consumer protection rules, and licensing and disclosure obligations. [Read more at the Atlantic Council]

Realizing Programmability in Payment and Settlement Systems

The Bank of Japan (BoJ) published a paper that summarizes programmability and related concepts. It shows that programmability can be found in existing payment and settlement mechanisms, and that programmability does not necessarily depend on distributed ledger technology. It then discusses how programmability is paving its way to play more important roles in future payment and settlement systems, including via embedding the programmability into the money itself (“programmable money”). [Read more a the BoJ]

Major stablecoins destabilized as market volatility and redemptions surge

Significant market volatility this week induced by the collapse of the FTX exchange has impacted stablecoins with many of them depegging temporarily. Tether’s USDT temporarily declined to $0.97 on November 10 as redemptions reportedly surpassed $600 million over the previous two days. Circle’s USDC fell to $0.977 very briefly. Both rapidly regained their pegs. Yesterday I reported that USDT had spiked down and USDC spiked up, but different sources tell different stories. Yesterday’s USDC graphic sourced CoinMarketCap.com whereas CoinGecko.com tells a different story (see below). with USDC also spiking down like USDT did. In any case, lots of volatility! [Read more on CoinTelegraph]

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]