Exploring blockchain-powered market infrastructures for traditional exchanges
Satoshi Capital Advisors CEO Josiah Hernandez and I have written a primer on blockchain-powered capital market infrastructures. It shows how they can increase the effectiveness and efficiency of the capital market(s) they operate within. However, there are notable challenges associated with implementing them, which the paper also covers. [Read more at SSRN]
Leaving the Wild West: Taming crypto and unleashing blockchain
And by coincidence, the IMF Managing Director Kristalina Georgieva spoke enthusiastically about the benefits of “new trading infrastructure using blockchain technology refined and popularized by the crypto boom”:
Today, banks create an asset in paper form, deposit it with a custodian, and message intermediaries so each may reconcile its version of who owns what. It works, but it’s expensive. Instead, imagine establishing the asset as an entry, or “token,” on a blockchain, and trading it by updating the blockchain. Potential gains could be large: The blockchain is accessible by all transacting parties, it is transparent and tamper-proof, and settlement is fast. Financial assets in token form can also be divided into parts to serve smaller investors. And transactions can be automated and bundled to occur simultaneously. This lowers the risk that counterparties or trades fail before an asset gets to its rightful owner.
Basel Committee consults on bank stablecoin exposure standards
The Basel Committee on Banking Supervision is proposing revisions to various elements of the prudential standard for bank exposures to crypto-assets published in December 2022. They flesh out the criteria on the composition of the reserve assets that back stablecoins, to be eligible for inclusion in the Group 1b category of crypto-assets, and thus benefit from a preferential regulatory treatment. For example, reserve assets should be comprised of central bank reserves, short-term marketable securities guaranteed by sovereigns and central banks with high credit quality, and short-term deposits at high credit quality banks. If longer-term assets are allowed, the issuer would have to overcollateralize the stablecoin holder claims. [Read more at the BIS]
Fnality launches DLT wholesale payment system in United Kingdom
London-based Fnality, launched its distributed ledger technology (DLT) based Sterling Fnality Payment System (£FnPS). This digital financial market infrastructure (FMI) and regulated payment system leverage an Omnibus Account held by £FnPS in the Bank of England real-time gross settlement (RTGS) service. The intent is to scale it up to create a seamless global liquidity management ecosystem for payment, payment versus payment (PvP), and delivery versus payment (DvP) transactions in both wholesale financial markets and emerging tokenized asset markets. This is arguably a wholesale central bank digital currency (CBDC) based platform, or at least a synthetic CBDC one, although I’m waiting for more architectural detail to make that determination. [Read more at Fnality]
FYI here are some of my upcoming speaking engagements:
– Digital Euro Conference 2024 (Frankfurt on February 29)[Register here]
*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.
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
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]