Kiffmeister’s #Fintech Daily Digest (20240115)*

January 15, 2024January 15, 2024 ~ kiffmeister

Scaramucci says Grayscale ETF sales helped fuel bitcoin decline

Bitcoin and other crypto-assets have tanked since the U.S. Securities and Exchange Commission (SEC) approved eleven spot bitcoin exchange-traded funds (ETFs). Some of the decline is being attributed to profit taking and buy-the-rumor-sell-the-news following the recent runup in prices. However, Skybridge Capital Founder Anthony Scaramucci is also attributing it to sales of Grayscale Bitcoin Trust (GBTC) shares to book losses and shift to lower fee alternatives. Most of GBTC’s competitors are charging annual fees of between 0.20 and 0.40% and many are offering temporary fee waivers, but Greyscale is charging 1.50% with no waiver. According to Finequia’s Matteo Greco, in the initial two days of trading after the ETF approvals there was a cumulative inflow of approximately $1.4 billion into the 11 ETFs and $600 million GBTC outflows. [Read more on Bloomberg]

FYI here are some of my upcoming speaking engagements:

– Digital Euro Conference 2024 (Frankfurt on February 29)[Register here and get a 20% discount with the Kiffmeister20 code]

*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]

Kiffmeister’s #Fintech Daily Digest (20240114)*

January 14, 2024January 17, 2024 ~ kiffmeister

Venezuela’s Petro cryptocurrency to cease operations

Venezuela’s national cryptocurrency, the Petro is set to cease operations on January 15. The Petro was launched as an oil-backed cryptocurrency in 2018 with the goal of helping the country evade U.S. sanctions, but it failed to gain widespread adoption throughout its existence. Domestically, the Petro was never declared legal tender, meaning that its acceptance was not mandatory. the Petro was not a central bank digital currency (CBDC), despite speculation in 2019 that the central bank would create one. [Read more at Cryptonews]

Navigating the architecture of digital rupiah

I reported on this earlier when only an Indonesian version of the report was available, but the Bank of Indonesia (BOI) has now published the English version of the summary of the responses to the consultation paper on DLT-based wholesale CBDC published in early 2023. [Read more at the BOI]

FYI here are some of my upcoming speaking engagements:

– Digital Euro Conference 2024 (Frankfurt on February 29)[Register here and get a 20% discount with the Kiffmeister20 code]

Kiffmeister’s central bank digital currency monthly monitor

Kiffmeister’s #Fintech Daily Digest (20240112)*

January 12, 2024January 12, 2024 ~ kiffmeister

The CBDCTracker.org central bank digital currency (CBDC) database has been updated, including some backdated adjustments to the status of various projects. Atakan Kavuklu discusses the notable highlights of the update here.

Project Promissa to test tokenization of financial instruments

The BIS Innovation Hub, Swiss National Bank and World Bank launched Project Promissa to build a proof of concept (PoC) of a distributed ledger technology (DLT) based platform for digital “tokenized” promissory notes. Many international financial institutions (IFIs) are partly funded promissory notes, most of which are still paper-based. Project Promissa intends to simplify the management of the notes and provide a single source of truth for all counterparties throughout the notes’ lifecycles. While the project aims to simplify the management of promissory notes between member nations and IFI, in the future it could be extended to include payments (or encashments) associated with such notes by integrating tokenized payment systems based on private or public money. [Read more at the BIS]

FYI here are some of my upcoming speaking engagements:

– Digital Euro Conference 2024 (Frankfurt on February 29)[Register here and get a 20% discount with the Kiffmeister20 code]

Kiffmeister’s central bank digital currency monthly monitor

Kiffmeister’s #Fintech Daily Digest (20240110)*

January 10, 2024January 10, 2024 ~ kiffmeister

U.S. SEC approves spot bitcoin exchange-traded products

The U.S. Securities and Exchange Commission (SEC) approved the listing and trading of eleven spot bitcoin exchange-traded funds (ETFs). The eleven issuers are Bitwise, Grayscale, Hashdex, BlackRock, Valkyrie, BZX, Invesco, VanEck, WisdomTree, Fidelity and Franklin. Alongside the omnibus approval order, the SEC published a speech by Chair Gary Gensler that included a warning that “while we approved the listing and trading of certain spot bitcoin [ETFs] today, we did not approve or endorse bitcoin. Investors should remain cautious about the myriad risks associated with bitcoin and products whose value is tied to crypto.” [Read more at the SEC]

Compromised SEC account posted fake bitcoin ETF tweet

The day prior to the approval announcement, in a case of “do as I say, not as I do”, the U.S. Securities and Exchange Commission (SEC) is not employing two-factor authentication (TFA) on its X account, which was compromised to spread false bitcoin exchange-traded fund (ETF) news, according to X (formerly Twitter). Apparently, the SEC did not have TFA enabled at the time the account was compromised, only a few months after SEC Chair Gary Gensler reminded everyone to use “strong passphrases or passwords and set up multifactor authentication“! The fake tweets caused bitcoin prices to immediately spike to $47,680 from the $46,800 level, and then fall as low as $45,400 as the tweets were found to be fake. The fake tweet announced the approval of 13 spot bitcoin ETFs, which was quickly denied by Gensler. [Read more at Decrypt]

FYI here are some of my upcoming speaking engagements:

– Digital Euro Conference 2024 (Frankfurt on February 29)[Register here and get a 20% discount with the Kiffmeister20 code]

Kiffmeister’s central bank digital currency monthly monitor

Kiffmeister’s #Fintech Daily Digest (20240109)*

January 9, 2024January 9, 2024 ~ kiffmeister

Bitcoin touches $47,000 for the first time since April 2022 as investors brace for landmark ETF decision

Crypto market participants are holding their breath as they wait the U.S. Securities and Exchange Commission (SEC) verdict on a swath of spot Bitcoin exchange traded fund (ETF) applications, including from some of the big mainstream money managers (e.g., BlackRock, Fidelity and Franklin Templeton). Decisions are expected tomorrow (January 10) and hopes are running high that, after numerous unsuccessful application attempts, so stay tuned! [Read more at CNBC]

Central bank money settlement of wholesale transactions in the face of technological innovation

The European Central Bank (ECB) published an update on its explorations of central bank money settlement of wholesale transactions on distributed ledger technology (DLT) platforms. Together with interested market players, the Eurosystem intends to test three cross-platform settlement solutions: The first is a “trigger” solution developed by the Deutsche Bundesbank, in which euro central bank money settlement would take place on the existing TARGET settlement system. The second is a “TIPS Hash-Link” solution developed by the Banca d’Italia, in which settlement would take place in an infrastructure based on TIPS, which is currently used for settling instant retail payments. The third is a full-DLT solutions developed by the Banque de France, in which euro central bank money settlement would take place on a DLT platform, operated by the central bank or jointly with other parties. [Read more at the ECB]

CBDCs and national security: Policy considerations

The U.K.-based Royal United Services Institute (RUSI) published a paper on the potential adverse international security effects of the development of foreign central bank digital currencies (CBDCs). Concerns center on (1) the possibility of China dominating the CBDC market, (2) implications of first-mover advantage (and conversely the implications of the Bank of England delaying domestic development of a CBDC), (3) he role of CBDCs in international sanctions, and (4) the impact of foreign CBDCs on the United Kingdom as a financial center. [Read more at the RUSI]

FYI here are some of my upcoming speaking engagements:

– Digital Euro Conference 2024 (Frankfurt on February 29)[Register here and get a 20% discount with the Kiffmeister20 code]

Kiffmeister’s central bank digital currency monthly monitor

Kiffmeister’s #Fintech Daily Digest (20240107)*

January 7, 2024January 7, 2024 ~ kiffmeister

Indonesia to progress wholesale DLT-based CBDC trials

Bank Indonesia (BI) shared [on December 27, 2023] the results of its wholesale distributed ledger technology (DLT) based central bank digital currency (CBDC) consultation. In general, the top-level design of wholesale digital rupiah is in line with public expectations. The project will now enter the proof of concept stage, which will be followed by prototyping and piloting/sandboxing. [Read more at the BI]

Bank profitability and central bank digital currency

The European Commission (EC) published a paper [in June 2023] that analyzes the potential effect of a digital euro on banks’ profitability. It uses a large sample of European Union (EU) banks that span the period from 2007 to 2021 to assess the sensitivity of banks’ profits to the loss of deposits. The results show that, for a large take-up of CBDC, there might be substantial challenges for banks’ profitability, especially for small banks, that mostly rely on deposits as a source of funding. The paper recommends that digital euro holdings be capped (e.g., at EUR 3,000) to preserve the inherited profitability that comes from banks’ cheap deposit funding. [Read more at the EC]

FYI here are some of my upcoming speaking engagements:

– Digital Euro Conference 2024 (Frankfurt on February 29)[Register here and get a 20% discount with the Kiffmeister20 code]

Kiffmeister’s central bank digital currency monthly monitor

Kiffmeister’s #Fintech Daily Digest (20240105)*

January 5, 2024January 5, 2024 ~ kiffmeister

Bank of Spain selects partners for DLT-based wholesale CBDC testing

Banco de España (BDE) has chosen two Spanish banks (Cecabank and Abanca) to participate in distributed ledger technology (DLT) based wholesale central bank digital currency (CBDC) tests. The proofs of concept will feature the testing of the processing and settlement of domestic and cross-border interbank payments, and simulating tokenized bond settlements. The BDE has previously noted that this DLT-based wholesale CBDC work is independent of the digital euro project that would cover the eurozone if implemented. Adhara Blockchain will be providing technical services. [Read the Cecabank-Abanca contract here the Adhara one here]

Minutes of the BOE October 2023 CBDC Technology Forum meeting

The Bank of England (BOE) published the minutes of the October 2023 retail CBDC Technology Forum meeting. The four subgroups presented their objectives, expected outputs and timelines. Subgroup 1 will look at privacy-enhancing technologies and aliases. Subgroup 2 will focus on alternative models of interaction between payment infrastructure providers (PIPs). Subgroup 3 will explore options for the core ledger design in general terms, rather than the technology or solutions provided by specific vendors. Subgroup 4 will assess what a platform for innovation might look like and explore the possible technology requirements for one. [Read more at the BOE]

The cost-of-living crisis is driving a return to cash

The British Retail Consortium’s (BRC) Payments Survey 2023 shows that cash transactions grew in 2023 for the first time in a decade, both by volume and value. According to the Bank of England (BOE), cash in circulation has declined very slightly (-0.45%) in 2023, but the value of the £20 denomination which is the most widely used transactional note increased by 3.6%. The BRC says that “this reflects a choice by many households to use cash to budget more carefully during the onset of the cost of living crisis, as well as a natural return to cash usage following the move to contactless during Covid.” [Read more at the BRC]

FYI here are some of my upcoming speaking engagements:

– Digital Euro Conference 2024 (Frankfurt on February 29)[Register here and get a 20% discount with the Kiffmeister20 code]

Kiffmeister’s central bank digital currency monthly monitor

Kiffmeister’s #Fintech Daily Digest (20240104)*

January 4, 2024January 4, 2024 ~ kiffmeister

Update on the work of the digital euro scheme’s Rulebook Development Group

The European Central Bank (ECB) has published a report summarizing the progress made by the digital euro scheme’s Rulebook Development Group (RDG). Since the last update in June 2023, the RDG has drafted the first chapters of the digital euro rulebook in line with the legislative proposal and the digital euro design decisions approved by the Governing Council of the ECB. This first draft of the rulebook is an intermediate version which covers: (i) the functional and operational models, including the end-to-end flows describing the functioning of all use cases and services relating to a digital euro; (ii) the technical scheme requirements depicting a high-level architecture and standards which should potentially be considered in a digital euro landscape; and (iii) the adherence model setting out the rights and obligations of scheme members in accordance with the draft legislation. [Read more at the ECB]

Citi alumni plan bitcoin securities that don’t need US SEC approval

A group of former Citigroup executives is starting to offer bitcoin-backed securities that they say don’t need the blessing of the U.S. Securities and Exchange Commission (SEC). Receipts Depositary Corporation (RDC) plans to issue the bitcoin depositary receipts (BTC DRs) to Qualified Institutional Buyers (QIBs) in transactions exempt from registration under the Securities Act of 1933. BTC DRs follow the same construction as American Depositary Receipts (ADRs), and like ADRs, they operate within U.S.-regulated market infrastructure and are cleared through the Depository Trust Company (DTC). BTC DRs have been issued a CUSIP number and an ISIN. [Read more at Markets Media]

ISDA updates master agreement for tokenized collateral

The International Swaps and Derivatives Association (ISDA) has updated an annex to its master derivatives agreement to support the use of tokenized collateral. The Tokenized Collateral Model Provisions do not purport, and should not be considered, to address all issues and considerations that may be relevant in connection to the transfer or receipt of Tokenized Collateral, including, without limitation, enforceability, regulatory, tax and accounting issues and considerations. [Read more at ISDA]

FYI here are some of my upcoming speaking engagements:

– Digital Euro Conference 2024 (Frankfurt on February 29)[Register here and get a 20% discount with the Kiffmeister20 code]

Kiffmeister’s central bank digital currency monthly monitor

Kiffmeister’s #Fintech Daily Digest (20240103)*

January 3, 2024January 3, 2024 ~ kiffmeister

Calls for applications for digital euro component providers

The European Central Bank (ECB) has issued five calls for applications to establish framework agreements with potential providers of digital euro components and related services. At this stage the ECB is not making a commitment to launch any of the development work listed in the calls for applications. The purpose of the selection process is to establish framework agreements with the most suitable external providers to ensure that the Eurosystem is prepared to start developing a digital euro in the future if warranted. [Read more at the ECB]

What London’s Oyster cards reveal about central bank digital currencies

According to Martin C W Walker, privacy fears may not turn out to be the greatest obstacle to the rollout of retail central bank digital currencies (CBDCs). What if the simple inconvenience of using CBDC is enough to stop widespread adoption? The evidence from Transport for London (TfL), the body that controls London’s public transport, suggests that convenience is a very powerful force in retail payments. Having to top up an Oyster pay-as-you-go card is considerably less convenient than paying directly from a bank account (via a debit card) or using a credit card. So who would bother to top up the CBDC wallet to pay for things for which they could already use their credit or debit cards? [Read more at the LSE Business Review blog]

**Oyster pay-as-you-go vs contactless, total journeys (number of journeys per four-week period)**

FYI here are some of my upcoming speaking engagements:

– Digital Euro Conference 2024 (Frankfurt on February 29)[Register here]

Kiffmeister’s central bank digital currency monthly monitor

Kiffmeister’s #Fintech Daily Digest (20240101)*

January 1, 2024January 1, 2024 ~ kiffmeister

Cashless payments and consumer spending

The Swiss National Bank (SNB) published a paper that examines how payment choice affects consumer discretionary spending using a proprietary dataset that links a payment-methods survey, a payment-diary survey and a behavioral survey for a representative sample of 1,138 Swiss consumers. It finds that “present-biased” consumers spend more, the more often they use cashless payment instruments. (Present-based consumers are those that score high on indicators of impulsivity and procrastination.) For consumers with low levels of present bias, spending is unaffected by payment instrument usage. This suggests that designers of instant payment services and central bank digital currency (CBDC) wallets consider offering prepaid payment cards or of mobile-payment applications that allow consumers to manage and restrict their liquidity in a convenient manner. [Read more at the SNB]