Kiffmeister’s #Fintech Daily Digest (20230406)

April 6, 2023April 6, 2023 ~ kiffmeister

Texas bill would create state-issued gold-backed digital currency

Bills introduced in the Texas House and Senate would require the state comptroller to establish a digital currency that is fully backed by gold and fully redeemable in cash or gold. The comptroller would be required to create a mechanism to use this digital currency in everyday transactions. In practice, individuals would be able to purchase digital currency from the state. The state would then use the money to purchase gold that would be held in the Texas Bullion Depository or another secure vault. The bills must next be assigned to committees, after which they must get a hearing and pass by a majority vote before moving forward in the legislative process. [Read more at SchiffGold]

Payment versus trading stablecoins

An article by Circle Chief Economist Gordon Liao distinguishes stablecoins’ use in trading versus payment activities and their impact on financial stability. Payment stablecoins like Circle’s USDC have lower speculation exposure than trading stablecoins like Tether’s USDT, MakerDAO’s DAI, and Binance’s BUSD. Two measures are presented as evidence; the total crypto trading volume facilitated by the stablecoin in question versus the amount of it in circulation, and the correlation between the change in stablecoin circulation and crypto-asset returns. Dai shows the highest correlation with crypto-asset returns because it is collateralized with crypto-assets, so a decrease in the asset collateral’s value can prompt the forced redemption of the stablecoin. [Read more at CEPR.org]

CBDCs: 12 aspects of a successful adoption

G+D has compiled a handy checklist of aspects that constitute a successful central bank digital currency (CBDC) exploration and implementation strategy. It starts with finding the proper balance between pain points, motivations, and opportunities for all stakeholders in that particular ecosystem. Successful implementation could be based on an innovative use case that solves one or more pain points, or it could also offer an opportunity that was previously unavailable. Also, all ecosystem stakeholders – consumers, financial service providers, and merchants – should feel that their interests are kept in mind. Finally, CBDC should not be just a solution to a particular problem in itself, but rather, it is should also provide a platform for innovation that enables new business models. [Read more at G+D]

Crypto carry

The Bank for International Settlements published a paper on crypto futures carry, i.e. the difference between futures and spot prices, which can become very large (up to 60% p.a.) and varies strongly over time. This behavior is most consistent with the existence of a highly volatile crypto convenience yield that stems from two main forces: (i) trend-chasing and attention by smaller investors seeking leveraged upside exposure to crypto assets in boom periods, and (ii) the relative scarcity of “arbitrage” capital taking the other side through a cash and carry position. Engaging in the latter is risky due to spikes in margins and liquidations amid drawdowns. The interplay between these two forces, and the involved high leverage, may help explain why severe market crashes are a frequent feature of crypto markets. [Read more at the BIS]

Upcoming conferences, webinars and speaking engagements:

I’ll be moderating a panel on “what happens when the lights go out…different schemes for offline functionality” at the in-person Digital Currency Conference (DCC) in Mexico City on May 18. [Register here]
I’ll be participating in Currency Research’s in-person Central Bank Payments Conference and Global Payments Summit in Cape Town from June 26 to 30. [Register here and here respectively]

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.

The Sovereign Official Digital Association (SODA) is a technology-agnostic firm offering advisory services at the intersection of central banking, digital finance and the web3 industry, aiming to make public digital money a reality. SODA believes institutions in the existing financial ecosystem should have access to the tools and resources they need to move from discussion to action. SODA offers ‘real life’ use cases to help test digital money and drive adoption as central banks and other public institutions explore the future of a more financially inclusive world powered by interoperable blockchain-based networks. SODA would love you to join us on this journey – please get in touch (chris@sodapublicmoney.org).

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 (20230405)

April 5, 2023April 5, 2023 ~ kiffmeister

Banco Central de Reserve del Peru is actively exploring CBDC

Banco Central de Reserve del Peru (BCRP), with technical assistance from the International Monetary Fund (IMF), is actively investigating the benefits and risks of central bank digital currency (CBDC). Possible benefits include lowering financial inclusion barriers, as well as strengthening monetary and financial stability, and the security and efficiency of payment systems. A survey has been issued to learn the views of the stakeholders, including market agents, on key aspects contained accompanying white paper. [Read more at the BCRP]

Crypto exchange Beaxy, founder sued by SEC for violations

The US Securities and Exchange Commission (SEC) is suing Beaxy.com for operating an unregistered exchange, brokerage and clearing business simultaneously, the first such action by the agency against a crypto platform. According to Bloomberg.com, this action may be another building block that may help the SEC build a case against bigger crypto platforms such as Coinbase, which also performs a range of business functions. Coinbase said it was recently notified of the SEC’s intent to sue the platform over various issues. [Read more at the SEC]

Wyoming to issue stable tokens

Wyoming’s governor has signed SF 127 enacting the Wyoming Stable Token Act, creating the Wyoming stable token commission, and authorizing the issuance of stable tokens in the state. Under the Act, a Wyoming stable token is “a virtual currency representative of and redeemable for one United States dollar held in trust by the state of Wyoming” that may only be issued in exchange for a USD. The Act also outlines criteria relating to liability limitations and requires that the commission issue at least one Wyoming stable token no later than December 31, 2023. [Read more at JDSupra]

Upcoming conferences, webinars and speaking engagements:

I’ll be moderating a panel on “what happens when the lights go out…different schemes for offline functionality” at the in-person Digital Currency Conference (DCC) in Mexico City on May 18. [Register here]

Kiffmeister’s global central bank digital currency monthly monitor

Kiffmeister’s #Fintech Daily Digest (20230404)

April 4, 2023April 4, 2023 ~ kiffmeister

Kuwait central bank studying potential CBDC issuance

Central Bank of Kuwait (CBK) Governor Basel Al Haroon in an interview published in the Banker discussed the central bank’s ongoing central bank digital currency (CBDC) research. The bank has formed a team of experts from various fields within the CBK to study the topic. According to Al Haroon, any such issuance would need to be accomplished in a way that preserves monetary and financial stability, while maintaining confidence in Kuwait’s payment system. [Read more at the Banker]

Russia touts common digital currency between Russia, China, India

The Deputy Chairman of the State Duma, Alexander Babakov, suggested that Russia, China and India should trade using a common digital currency, which could be a digital ruble, rupee or yuan. “India, Russia, and China are the countries that now create a multipolar world that is backed by the majority of countries. Its creation should be based on establishing new financial ties based on a system that does not safeguard today’s dollar and euro, but rather creates a new currency capable of serving our goals,” he said. [Read more at TASS]

Upcoming conferences, webinars and speaking engagements:

I’ll be moderating a panel on “what happens when the lights go out…different schemes for offline functionality” at the in-person Digital Currency Conference (DCC) in Mexico City on May 18. [Register here]

Kiffmeister’s global central bank digital currency monthly monitor

Kiffmeister’s #Fintech Daily Digest (20230402)

April 2, 2023April 2, 2023 ~ kiffmeister ~ 1 Comment

Swiss payments vision – an ecosystem for future-proof payments

The Swiss National Bank (SNB) plans to continue with the wholesale central bank digital currency (CBDC) securities settlement experimentation (Project Helvetia) that was concluded in January 2022. That had tested the issuance and settlement of tokenized securities with wholesale CBDC on the SIX Digital Exchange (SDX). In the next phase, the SNB will issue wholesale CBDC on SDX and test selected transactions with market participants. They will also test the use of “synthetic” wholesale CBDC (privately-issued stablecoins backed by SNB deposits) in a similar context.

The SNB will also experiment with the processing of tokenized securities in which the payment leg is synchronized via a link to the Swiss Interbank Clearing (SIC) real-time gross settlement (RTGS) system, which was also tested in the first phase of Project Helvetia. Such synchronization turned out to be technically possible but clunky compared to integrated processing, since the distributed ledger technology (DLT) functionalities had been restricted. The new project will try to minimize the clunkiness by making adjustments to the SIC system or to the link itself. [Read more at the SNB]

European Banking Federation vision on a digital euro ecosystem

The European Banking Federation (EBF), which represents the vast majority of the European banking sector, published a paper on a digital euro ecosystem. It argues that a retail digital euro could be envisaged in the mix of new tools and solutions to meet evolving payment needs, as long as it adds value to consumers, is appropriately designed, in close cooperation with the private sector, and mitigates ex ante the accompanying risks. a retail digital euro could – if properly designed – support the strategic autonomy of Europe and ensure a monetary anchor role of the euro. A wholesale digital euro based on DLT for the settlement of interbank transfers and related wholesale transactions in central bank reserves, would support the international role of the euro, enhance global cross-border payments and match the needs arising from digital finance. [Read more at the EBF]

Upcoming conferences, webinars and speaking engagements:

I’ll be moderating a panel on “what happens when the lights go out…different schemes for offline functionality” at the in-person Digital Currency Conference (DCC) in Mexico City on May 18. [Register here]

Kiffmeister’s global central bank digital currency monthly monitor

Kiffmeister’s #Fintech Daily Digest (20230401)

April 1, 2023April 1, 2023 ~ kiffmeister

I’ve updated my tabulation of retail central bank digital currency (CBDC) explorers. There are still 93 central banks that have recently issued, piloted, experimented with and/or researched retail CBDC, but some of the links have been updated and categorizations shuffled. [Click here]

Ghana: e-Cedi launch delay due to economic challenges – BoG

The Bank of Ghana (BoG) is delaying the launch of its e-Cedi central bank digital currency (CBDC) due to the impact of economic dislocation caused in 2022. The pilot phase has been completed, with selected consumers at Sefwi Asafo in the Western North Region using the currency to buy items, goods, food and services, including when users were offline. “At a certain point, [the BoG] will go back to the e-Cedi project and decide on the launch date.” [Listen to Governor Dr. Ernest Addison’s speech on Facebook starting at the 50:00 mark]

National Bank of Denmark Governor says low cash usage doesn’t justify retail CBDC

National Bank of Denmark (DNB) Governor, Signe Krogstrup, delivered a speech on March 9, 2023 arguing that the decline in the use of cash in Denmark does not necessarily justify the issuance of a retail CBDC. He does not believe that the decline in cash per se is a substantial risk to monetary and financial stability, and doesn’t reflect the sort of erosion of trust that would warrant a retail CBDC. He argued that commercial banks still have to hold central bank reserves, so central bank money is still at the core of the financial system. [Read more at the DNB]

Stacking up the benefits: lessons from India’s digital journey

The IMF published a paper on India’s foundational digital public infrastructure (DPI), consisting of unique digital identification, payments system and data exchange layers, It has been harnessed to foster innovation and competition, expand markets, close gaps in financial inclusion, boost government revenue collection and improve public expenditure efficiency. In the paper’s view, India’s journey in developing a world-class DPI highlights powerful lessons for other countries embarking on their own digital transformation, in particular a design approach that focuses on shared building blocks and supporting innovation across the ecosystem. [Read more at the IMF]

Upcoming conferences, webinars and speaking engagements:

I’ll be moderating a panel on “what happens when the lights go out…different schemes for offline functionality” at the in-person Digital Currency Conference (DCC) in Mexico City on May 18. [Register here]

Kiffmeister’s global central bank digital currency monthly monitor

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