IMF warns on Marshall Islands’ Fintech plans
IMF staff, in their concluding statement of their 2023 Article IV consultation mission, expressed concerns about the Fintech initiatives of the Republic of the Marshall Islands (RMI). These included the enactment of the DAO Act and the move to start registration of decentralized autonomous organizations (DAOs), and the potential launch of a stablecoin. Concerns included capacity constraints and questions regarding the understanding of the authorities to adequately regulate and supervise these initiatives. IMF staff also encouraged the authorities to expeditiously enact the SOV Repeal Bill. (In 2018 the RMI legislature passed the SOV Act making the RMI government-backed SOV crypto-asset a second legal tender, in addition to the US dollar, about which IMF staff had expressed reservations.) [Read more at the IMF]
The BIS on the crypto ecosystem key elements and risks
The BIS published a report on the key elements of the crypto ecosystem. It concludes that the crypto ecosystem is characterized by congestion and high fees, which lead to fragmentation. And despite an original decentralization ethos, crypto and decentralized finance (DeFi) often feature substantial de-facto centralization. Also, while DeFi mostly replicates services offered by the traditional financial system, it amplifies known risks. Moreover, as DeFi does not finance activity in the real economy, its growth is driven by the speculative influx of new users, with substantial risks to investors. [Read more at the BIS]
UK consultation on the digital securities sandbox
The U.K. government is consulting on Digital Securities Sandbox (DSS) in which the financial industry will be able to set up and test financial market infrastructures that utilize digital asset technology. The DSS will enable firms to set up and operate financial market infrastructures (FMIs) using innovative digital asset technology, performing the activities of a central securities depository (specifically notary, settlement and maintenance), and operating a trading venue under a temporarily modified legislative and regulatory framework. The consultation invites feedback from industry on the approach to the DSS, and seeks feedback on some further policy and legal issues. [Read more at HM Treasury]
Nuggets working with Bank of England on privacy layer for digital pound
Payments platform Nuggets is working with the Bank of England to develop a privacy and identity layer for a potential digital pound. The platform, which enables decentralized identity, plans to design a private and secure system to prevent the tracking and correlation of transactions, as well as prevent fraud and money laundering. Nuggets said that it plans to implement zero-knowledge proofs on its privacy layer, which will enable people to verify their identity without sharing their data. [Read more at Coindesk]
Grayscale bitcoin shares discount lowest since last summer
The Grayscale Bitcoin Trust (GBTC) discount continues to shrink amid a wave of U.S. exchange-traded fund (ETF) applications. Grayscale has attempted to convert GBTC from a closed-end fund into an ETF to enable redemptions at bitcoin’s market price, but the U.S. Securities and Exchange Commission (SEC) has denied approval so far. The inability of investors to redeem GBTC is the primary reason for the GBTC discount. However, BlackRock’s Bitcoin ETF filing on June 16 revived the market’s hope around ETF approvals. [Read more at Decrypt]
*For those interested in intra-day updates, check out my searchable Diigo Fintech developments database, which is also a good place to go to query for past developments: https://www.diigo.com/user/kiffmeister/ART.
Upcoming conferences, webinars and speaking engagements:
- I’ll be lecturing at the Digital Euro Association (DEA) Digital Money Academy on July 27, 2023. [Register here]
Kiffmeister’s 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 (only) if you work at a central bank, ministry of finance or international financial institution (e.g., the BIS, IMF, OECD, World Bank) and 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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