Category: Bitcoin

Kiffmeister’s #Fintech Daily Digest (20221221)

~ kiffmeister

ECB publishes second progress report on the digital euro investigation phase

The European Central Bank (ECB) published the second progress report on the investigation phase of a digital euro. It outlines the developments made since the first progress report, which was published in September 2022. The report details a second set of design and distribution options that were recently endorsed by the Governing Council and describes the roles of the Eurosystem and supervised intermediaries in the digital euro ecosystem. In 2023 the ECB will further assess a number of design and distribution options and in the second half of the year present the overall design of a digital euro to the Governing Council. [Read more at the ECB]

Report on results of the second phase of the Digital Tenge Pilot Project

The National Bank of Kazakhstan (NBK) and the Payment and Financial Technology Development Center of the Bank of Kazakhstan published the English version of their report on the second phase of their digital tenge central bank digital currency (CBDC) feasibility study.The second phase was comprised primarily of proof-of-concept work involving select financial institutions, merchants and final users. The report calls it a “pilot” but is silent on who the selected final users were. If they were central bank employees, it is a proof-of-concept by most CBDC exploration workflow taxonomies, but if users were selected from the general public, then it’s a pilot. In any case, the report recommends a phased rollout starting in 2023 with a gradual expansion of its functionality and step-by-step introduction into production scale by the end of 2025. [Download the report at the NBK]

The Bank of England seeking to bring systemic stablecoins into its regulatory remit

The Bank of England published its supervision of financial market infrastructures 2022 Annual Report. It reports that the Financial Services & Markets Bill, published in July 2022 and scheduled to complete in 2023 seeks to bring systemic stablecoins into the Bank’s regulatory remit, and bring the UK regime in line with standards discussed. The Bank is now working on a regulatory framework for systemic stablecoins and plans to consult on this in due course. Alongside regulation, another key component of a stablecoin regime is the potential application of the FMI Special Administrative Regime to systemic stablecoin firms. The Bank, working with His Majesty’s Treasury, will continue to develop this regime to ensure it reflects international CPMI-IOSCO guidance. [Read more at the Bank of England]

What’s Next for Bitcoin Lightning?

In the last part of its series on the Lightning Network, etonec takes a look at the status quo of the network in charts, statistics, and visualizations using publicly available data. What started as an interconnection of a few nodes has evolved from a small network to a global network for value exchange. An increasing number of Lightning Nodes are being put into operation, which are better connected with one-another every day through payment channels. Away from hobbyists and early adopters, the first companies are latching onto the network – whether from the user side or the infrastructure side. [Read more at etonec]

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 (20221220)

~ kiffmeister

Visa proposes account abstraction for recurring auto payments

Visa published a paper that outlines how to write a smart contract application for a self-custodial wallet that could allow a user to setup a programmable payment instruction that can push funds automatically from one self-custodial wallet account to another at recurring intervals, without requiring the user’s active participation each time.  This solution taps into a concept known as “Account Abstraction” (AA), a developer proposal currently being explored within the Ethereum ecosystem. The idea behind AA is to make user accounts on Ethereum function more like smart contracts by allowing a user to have programmable features embedded into their wallets. [Read more at Visa]

Currently, there are two types of accounts on the Ethereum network: Externally Owned Accounts (EOA), controlled by a private key, and Contract Accounts (CA), which are essentially smart contracts. EOAs can initiate transactions, but CA’s cannot. However, by using AA, it is possible to create a smart contract that can initiate transactions on behalf of an EOA, enabling the creation of a self-custodial wallet that can make automatic recurring payments. AA combines user accounts and smart contracts into a single type of account on the Ethereum blockchain. This is possible by allowing for the creation of validity rules for individual transactions. [Read more at Coin Desk]

Towards legal interoperability of retail CBDCs: a comparative law perspective

The European Central Bank (ECB) published a collection of papers presented at the September 5-6, 2022 European System of Central Banks (ESCB) Legal Conference, including three on the legal aspects of central bank digital currency (CBDC) interoperability. A paper by Jess Cheng and Joseph Torregrossa discusses the concept of “legal interoperability” in the domestic payment system and its relevance to the retail CBDC context, particularly as the necessary legal foundation for transferability and convertibility. The second by Panagiotis Papapaschalis makes the case for exposing and overcoming technical and legal obstacles to interoperability ex-ante and early on, rather than trying to tackle them ex post, i.e. only when the various, diverging, CBDCs have gained momentum. The third paper, by Seraina Grünewald, focuses particularly on the prospects and challenges for the legal interoperability of a digital euro. [Read more at the ECB]

ECB finds strong demand for both cash and digital payments

Cash is still the most frequently used means of payment at the point of sale, but its share is declining according to the latest study on the payment attitudes of consumers in the euro area, published by the ECB. Cash was used for 59% of point-of-sale transactions in 2022, down from 72% in 2019. It is the means of payment most often used for small-value payments in stores and for person-to-person transactions. A majority (60%) also consider it important to have cash as a payment option. Consumers perceive cash as helpful to remain aware of their expenditures, to protect their privacy and to allow transactions to be settled immediately. [Read more at the ECB]

UAE to launch instant payment platform in 2023

In the first quarter of 2023, the Central Bank of the United Arab Emirates (CBUAE) will start phasing in an Instant Payment Platform with a pilot group of licensed financial institutions. The initiative will enable payments processing and fund transfers in the UAE both around the clock and in real time. The new platform will enable the provision of the next generation of payment services to UAE financial institutions and consumers. [Read more at the CBUAE]

Crunchfish ready to start Digital Cash pilot with Indian banks

Crunchfish in partnership with HDFC Bank and one additional Indian bank have been working together to develop a solution for offline retail payments that will be demonstrated in a pilot to Reserve Bank of India (RBI) in their Regulatory Sandbox program. The project, if successful, will provide the basis for RBI’s guidance and regulatory support in providing offline retail payments, based on Crunchfish Digital Cash platform, to the payment ecosystem of India. [Read more at Crunchfish]

Five ways you can use Bitcoin Lightning today

etonec continued its series of articles on the Lightning Network and Bitcoin Lightning. In the latest article, it focuses on payments in retail, hospitality, e-commerce, as well as donations, cross-border payments, streaming payments, and financial inclusion. The advantages of payments via the Lightning Network are primarily the high transaction speed, direct confirmation and settlement of payments, as well as the marginal transaction fees and a high degree of scalability. As a result, applications with very small payment amounts (“nano-payments”) and a high number of transactions can be achieved in a technically efficient manner. [Read more at etonec]

Digitalization, financial knowledge and financial decisions

La Banca d’Italia published a survey-based paper that analyzed the relationship between digitalization, financial knowledge and financial decisions. It found that digital skills are a useful complement to financial skills in monitoring expenses and therefore to saving money. Moreover, such skills are also related to a more favorable attitude towards digital finance. With the same level of financial knowledge, digital skills do not however affect investment decisions. Finally, there is a significant gender gap, at the expenses of women, in terms of both digital skills and financial knowledge. [Read more at Banca d’Italia]

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 (20221127)

~ kiffmeister

Hedging sanctions risk: Cryptocurrency in central bank reserves

A paper by the Harvard University’s Matthew Ferranti explores the potential for Bitcoin to serve as an alternative central bank reserve currency asset to ex-ante hedge against the risk of financial sanctions. It uses a dynamic Bayesian copula model to simulate the joint returns of Bitcoin and other reserve assets under a wide range of plausible sanctions probabilities. Assuming mean-variance preferences, a modest risk of sanctions significantly increases optimal gold and Bitcoin allocations. If a central bank cannot acquire sufficient physical gold to hedge its sanctions risk, the optimal Bitcoin share rises further, suggesting that gold and Bitcoin are imperfect substitutes. It concludes that sanctions risk may diminish the appeal of US Treasuries, propel broader diversification in central bank reserves, and bolster the long-run fundamental value of both cryptocurrency and gold. [Download the paper on Matthew Ferranti’s website]

How crypto goes to zero

A recent Economist article goes through the most likely path towards zero crypto – basically ending at the point where no one is using it. It rejects the attack-and-shut-down the major crypto-assets because that would essentially involve gaining 51% control of the computational power or value of tokens staked to verify transactions, which would be extraordinarily expensive, even at today’s depressed prices. The more likely scenario, according to the article, is the collapse and generally a massive loss in faith in the exchanges and decentralized finance (DeFi) lending protocols. This could lead to further collapses of crypto prices, making 51% attacks more feasible, triggering a self-reinforcing crash as confidence in the protocols tanks. [Read more at the Economist]

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]