Category: DeFi

Kiffmeister’s #Fintech Daily Digest (20230801)*

~ kiffmeister

DeFi liquidations: Volatility and liquidity

The OECD published a report that analyzes the connection between decentralized finance (DeFi) protocol liquidations and price volatility in decentralized exchanges (DEXs). The analysis employs transactional data of three of the largest DeFi lending protocols and suggests a positive relation between liquidations and post-liquidations price volatility across the main DEX pools. It also shows a positive correlation among borrowing rates and across different assets, which indicates that the liquidity in DeFi lending pools is connected, and that at extreme events, when investors pursue the same strategy at large numbers, liquidity of a particular asset may dry up in each of the pools across protocols. This implies that the liquidations mechanism might be limited in its ability to restore liquidity, as liquidators themselves rely on the liquidity available in the pools to repay underwater loans. [Read more at the OECD]

Ripple ruling rebuke complicates Coinbase’s defense against the SEC

In denying stablecoin issuer Terraform Labs’ motion to dismiss a U.S. Securities and Exchange Commission (SEC) lawsuit, Judge Jed Rakoff, of the U.S. District Court for the Southern District of New York rejected the use of a ruling from fellow Judge Analisa Torres, who recently ruled that Ripple Labs – another defendant against the SEC – did not violate securities law in making XRP available on secondary platforms for retail investors to purchase. Rakoff rejected Torres’ distinction between institutional sales and sales to retail investors on crypto exchanges, which he characterized as a misinterpretation of the Howey test used to determine if an asset is a security. [Read more at CoinDesk]

Namibia unveils new legal framework for digital asset providers

Namibia’s President Hage Geingob officially signed into law the Namibia Virtual Assets Act 2023 which covers the regulation of digital assets, cryptocurrencies and virtual asset service providers (VASPs) in the country. It establishes a framework for licensing and regulating VASPs, and appoints a regulatory authority responsible for supervising these providers and their activities. The Finance Ministry will determine the operative date for the law. [Read more on the Namibian government website]

*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 (20230707)*

~ kiffmeister

CBDCTracker.org June 2023 global CBDC developments update

Atakan Kavuklu published a summary of key central bank digital currency (CBDC) developments reflected in the end-June CBDCTracker.org database update. [Read more at Medium]

NY Fed completes PoC for regulated digital asset settlement

The Federal Reserve Bank of New York’s New York Innovation Center (NYIC), in collaboration with members of the U.S. financial services sector, published the findings of a proof of concept (PoC) that explored the feasibility of an interoperable network for wholesale payments operating on a shared multi-entity distributed ledger. The research project, undertaken jointly with private sector organizations, experimented with the concept of a regulated liability network (RLN), a theoretical payment infrastructure designed to support the exchange and settlement of regulated digital assets. The experiment successfully simulated both the domestic and cross-border scenarios, identifying shared ledger technology as a potential solution to support payment innovation. [Read more at the NY Fed NYIC]

Project Polaris: closing the CBDC cyber threat modelling gaps

The BIS Innovation Hub (BISIH) published a report on Part II of its Project Polaris which focused on the risk and resilience aspects of CBDCs built on distributed ledger technology (DLT) based platforms. It analyses several notable DLT attacks in the decentralized finance (DeFi) domain, revealing that there are gaps in existing threat modelling techniques that may not adequately address the threats and associated security controls to properly protect CBDCs that make use of novel technology (e.g., DLT, smart contracts) from the tactics, techniques and procedures (TTPs) used by threat actors in the DeFi space. Additionally, the “mean time to attack” (based on the DLT attacks studied in this analysis) is around 10 months from the launch of a DeFi implementation and the successful compromise. Hence, CBDC issuers must be positioned to monitor and repel both well understood and novel TTPs. [Read more at the BISIH]

MAS amendments to restrictions on e-money personal payment accounts

Following a public consultation, the Monetary Authority of Singapore (MAS) is going to raise the caps on e-wallets during the second half of 2023. The maximum amount of funds that can be held at any given time (“stock cap”) in each e-wallet, is being raised from $5,000 to $20,000, and the maximum total outflow over a rolling 12-month period (“flow cap”) from each e-wallet, is being raised from $30,000 to $100,000. [Read more at the MAS]

Namibia passed bill to regulate crypto and digital assets

On June 22, Namibia’s lower house of parliament passed legislation to regulate digital assets, cryptocurrencies and virtual asset service providers (VASPs) in the country. It aims to establish a framework for licensing and regulating VASPs, and appoint a regulatory authority responsible for supervising these providers and their activities. The bill is now awaiting official publication before coming into effect. [Read More at CoinTelegraph]

 

Kiffmeister’s #Fintech Daily Digest (20230629)*

~ kiffmeister

Project Mariana: cross-border exchange of wholesale CBDCs using automated market-makers

The Bank for International Settlements (BIS) published an interim report on Project Mariana, which investigates combining FX trading and settlement in cross-border transactions into a single instantaneous step using automated market makers (AMMs) and wholesale central bank digital currencies (CBDCs) to eliminate credit and settlement risk. The project also examined cross-border interoperability using wholesale CBDC based on a uniform technical standard, as a way to future-proof CBDC developments. In addition, Mariana investigated asset mobility between different blockchain-based networks using bridges. [Read more at the BIS]

Central bank digital currency global interoperability principles

The World Economic Forum (WEF) published a report that analyses CBDCs from a regional perspective, identifying unique aspects and areas of alignment among jurisdictions. It highlights key CBDC principles that will facilitate interoperability with various types of payment systems, technical standards, regulatory standards and legacy payment architecture and infrastructure, that will allow participants in different systems to conduct, clear and settle payments or financial transactions across systems without participating in multiple systems. The report calls for public-private cooperation, regulatory consistency, innovation and participation in standards development. [Read more at the WEF]

Making it through the (crypto) winter: facts, figures and policy issues

The Bank of Italy published a paper on the challenges crypto-asset regulation faces, as well as the drivers of the most recent regulatory developments, highlighting remaining open issues. It warns that conventional regulatory approaches that rely on entity-based rules will leave some gaps. For example, they may not fully address decentralized finance (DeFi) activities because of their non-traditional legal entity structures, decentralized governance, smart-contracts, and the anonymity of persons in charge. The report calls for an approach based on the combination of legislation and soft regulation, with the advantages of flexibility, dynamism, and pragmatism. [Read more at the Bank of Italy]

Oxbridge Re raises $2.4m for sidecar via DeltaCat Re tokenized reinsurance securities

Cayman Islands-based Oxbridge Re sold $2.4 million DeltaCat Re tokenized reinsurance securities, representing fractionalized interests in reinsurance contracts written by its Oxbridge Re NS reinsurance sidecar. They are tokenized on the Avalanche blockchain. Sidecars are a limited-life special purpose vehicle funded by capital market participants and sponsored by a reinsurer from which it derives its business or quota share. The sidecar assumes a percentage of the ceding reinsurer’s underwriting risk in exchange for a similar percentage of the associated premiums. [Read more at Artemis] and for more on sidecars and other insurance risk transfer vehicles see my 2020 Pension Research Council paper]

*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 participating in Currency Research’s in-person Global Payments Summit in Cape Town from June 28 to 30. [Register here]
  • I’ll be lecturing at the Digital Euro Association (DEA) Digital Money Academy on July 27, 2023. [Register 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.

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 (20230626)*

~ kiffmeister

MAS proposes framework for digital asset networks

The Monetary Authority of Singapore (MAS) published a report proposing a framework for designing open, interoperable networks for digital assets (i.e. tokenized real-economy and financial assets ). The report also considers how the CPMI-IOSCO principles for financial market infrastructures (PFMIs) can be applied to evolving models of digital asset networks, based on industry pilots launched under Project Guardian, MAS’s collaborative initiative with the financial industry to test the feasibility of applications in asset tokenization and decentralized finance (DeFi).  The MAS also announced an expansion of Project Guardian to more asset classes. [Read more at the MAS]

Crypto Travel Rule implementation ‘remains relatively poor,’ says FATF

The Financial Action Task Force (FATF) renewed its request for countries to implement the “travel rule”, explaining that “many” member states have failed to implement the rule. The rule requires virtual asset service providers (VASPs) to communicate the personally identifiable information (PII) of senders to the VASPs of recipients and vice versa whenever the amount transacted is above $1,000. FATF claims that the travel rule is a “key requirement to prevent funds being transferred to sanctioned individuals or entities”, and noncompliance “creates significant loopholes for criminals to exploit”. Closing the gaps in global regulation of virtual assets is an urgent priority. [Read more at the FATF]

Belgium regulator orders Binance to stop services in country

Belgium’s Financial Services and Markets Authority (FSMA) ordered Binance to cease all offers of virtual currency services in the country — immediately. “The FSMA has noted that Binance is offering and providing exchange services in Belgium between virtual currencies and legal currencies, as well as custody wallet services, from countries that are not members of the European Economic Area.” FSMA said Binance did not dispute that it offered those services in Belgium. [Read more at the FSMA]

*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:

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 (20230617)*

~ kiffmeister

EU’s leaked digital euro bill outlaws interest, large holdings, programmability

A leaked draft of the proposed Digital Euro Bill, to be proposed by the European Commission on June 28, 2023 will ban remuneration, surcharges and programmability, and make offline payments available from the outset. The regulation aims to ensure a level of privacy equal to taking cash from an ATM during offline, face-to-face interactions, and neither the European Central Bank (ECB) nor the payment service providers will have access to personal transaction data. The draft law also allows the ECB to set holding limits to limit disintermediation risk. Much of this is rather consistent with a slide deck published by the ECB on June 15.  [Read more at CoinDesk and the ECB]

Binance under investigation in France for alleged money laundering

The Paris prosecutor’s office is reportedly investigating Binance for allegedly offering its digital asset services illegally. Furthermore, authorities have accused the exchange of engaging in acts of aggravated money laundering, which include competing with investment operations, concealing funds, and converting illicit proceeds. According to the Binance spokesperson, this was rumor was conflated from a routine on-site visit which is a regulatory requirement for financial institutions in France. [Read more at Inside Bitcoins]

Binance to exit the Netherlands after failing to obtain regulatory approval

Binance said it will leave the Netherlands after the company’s application to register under the Dutch crypto authorization regime was rejected. Under the current regulatory regime, Binance can only get approval to operate in an European Union (EU) country by registering under its money laundering prevention rules. The firm has so far received such approvals in France, Italy, Spain, Poland, Sweden and Lithuania. This may change once the EU’s Markets in Crypto Assets (MiCA) regulation comes into force at the end of June 2023. [Read more at CNBC]

Binance and where there’s smoke there’s fire?

I’m beginning to lose track of all the directions Binance is coming under fire from, but here’s more on recent events:

And here are some random things I picked up this week, thanks to John Ho and Norbert Gehrke:

  • The Organization for Economic Co-operation and Development (OECD) Council has adopted a new set of recommendations on how digital identity should be governed on the proposal of the Public Governance Committee (PGC). [Read more at the OECD and John’s summary here]
  • In January 2022, the Asian Development Bank (ADB) launched a project to make cross-border securities transactions more efficient and secure through the use of blockchain technology. Project Tridecagon proved that the deployment of DLT/BC solutions for the settlement of cross-border securities transactions is possible, particularly in a well-governed and functionally well-defined environment. [Read more at the ADB and Norbert’s summary here]
  • The ADB published a paper that outlines why regulators urgently to adapt and adopt flexible policies that improve oversight of emerging products and providers. It sketches out the fintech landscape and explains how economies can encourage innovation while increasing international cooperation to insulate against the growing financial, operational, and cybersecurity risks the new technology brings. [Read more at the ADB and Norbert’s summary 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.

Upcoming conferences, webinars and speaking engagements:

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 (20230518)*

~ kiffmeister

A legal framework for the digital euro

The European Parliament published a study that assesses the European Central Bank’s (ECB’s) first three progress reports on the digital euro from a legal perspective. It looks into what key design choices proposed by the ECB reveal in terms of the legal qualification of the digital euro and discusses legal aspects of the infrastructure supporting it. It distinguishes between the object of the digital euro and the infrastructure or “scheme” needed for its distribution and settlement. Overall, the objective of ensuring a strong monetary anchor in the financial system should take centre stage. A simple and cash-like design of the digital euro would not only aid that objective, but also reduce legal risk. [Read more at the European Parliament]

Commencement of new phase of the e-HKD’s research programme

The Hong Kong Monetary Authority (HKMA) today announced the commencement of a new phase of its e-HKD central bank digital currency (CBDC) research program. A total of 16 firms from the financial, payment and technology sectors have been selected to participate. There will be deep dives into potential use cases in six categories, including full-fledged payments, programmable payments, offline payments, tokenised deposits, settlement of Web3 transactions and settlement of tokenised assets. [Read more at the HKMA and the list of projects here]

Note: The HKMA called this new phase a “pilot” but it’s not clear whether it will engage with actual users. If yes, it is a pilot, but if not, it would likely be a proof-of-concept phase.

Ripple to demonstrate tokenization in HKMA e-HKD  program

Ripple is one of the firms participating in this new phase of the HKMA’s e-HKD digital Hong Kong dollar (e-HKD) research program by showcasing a real estate asset tokenization solution. Ripple will partner with Taiwan’s Fubon Bank and others to demonstrate equity release with tokenized assets using a retail version of the e-HKD CBDC. The project will run on the new Ripple CBDC Platform, that uses a new private ledger with XRP Ledger technology and enhanced functionality, including offline transactions and non-smartphone use. It’s the same platform that may be piloted in Bhutan, Montenegro and Palau. [Read more at Coin Telegraph]

Crypto, tokens and DeFi: navigating the regulatory landscape

The Bank for International Settlements (BIS) published a paper that provides an overview of policy measures taken in 19 jurisdictions to address the risks associated with activities that incorporate crypto-assets and distributed ledger technology (DLT) programmability capabilities in financial services. The paper classifies policy measures into three categories and identifies different types of initiatives across jurisdictions, including bans, restrictions, clarifications, bespoke requirements, and initiatives to facilitate innovation. It finds that, for centrally managed issuance activities, current regulatory initiatives focus mainly on issuers of security tokens and stablecoins. Initiatives related to centrally managed infrastructure activities mainly explore the benefits and risks from traditional financial intermediaries’ use of DLTs and their programmability capabilities. Initiatives related to centrally managed service provision activities often extend the regulatory perimeter to new non-bank centralized intermediaries. [Read more at the BIS]

*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:

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 (20230510)

~ kiffmeister

Visa uses CBDC for programmable finance prototype for Brazilian farmers

Visa developed a programmable finance platform that allows Brazilian soybean farmers to securely fund and sell their crop harvests on a permissioned version of the Ethereum blockchain. Partnering with Agrotoken, Microsoft, and Sinqia, Visa was one of nine finalists tasked with exploring innovative blockchain-based use cases for Brazil’s real digital central bank-issued digital currency (CBDC) as part of the Banco Central do Brasil’s most recent LIFT Challenge. The CBDC’s programmability allows delivery and payment of assets and currencies to be automatically settled only when certain conditions are met, for more efficient capital usage and reduced counterparty risks. [Read more at Visa]

ECB calls for candidates to participate in the digital euro workstreams

The European Central Bank (ECB) is inviting relevant experts to contribute to two new digital euro scheme rulebook workstreams. The first one is focused on identification and authentication the second on infrastructure-related requirements (e.g., IT security, connectivity, reconciliation, and end-to-end service level requirements, plus key performance indicators). Participation will not be remunerated, although an earlier version of the announcements said that participants will not be reimbursed for travel and subsistence expenses in connection with their attendance at workstream meetings, which have now been specified as all virtual. [Read more at the ECB here and here]

Decentralized or disintermediated finance: what regulatory response?

The Banque de France l’Autorité de Contrôle Prudentiel et de Résolution (ACPR) published a discussion paper on possible regulatory approaches to decentralized finance (DeFi). The paper provides an analysis of the structure and risks of disintermediated finance and its various components before formulating different regulatory framework scenarios, some of which are alternative, others complementary. The purpose of this document is to inform the ACPR’s positions and to contribute to ongoing discussions, particularly at the European level, on the value of and procedures for regulating disintermediated finance. [Read more at the ACPR]

Upcoming conferences, webinars and speaking engagements:

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 (20230504)

~ kiffmeister

Florida and North Carolina legislators approve anti-CBDC legislation

The North Carolina (NC) House of Representatives and the Florida House of Representatives and Senate approved anti-central bank digital currency (CBDC) legislation.  The NC legislation prohibits individuals from using CBDCs for any payments to the state, and bars the Federal Reserve from using NC as a potential CBDC pilot testing ground. The Florida legislation excludes CBDC from the definition of “money” for purposes of the Uniform Commercial Code (UCC). The Cato Institute’s Nicholas Anthony has written a nice explainer on the impact of the UCC on digital currency in general, and the Uniform Law Commission has published a paper that covers the CBDC impact specifically. [Read more at Kitco]

The SEC redefines “exchange”: An act in three parts

The US Securities and Exchange Commission (SEC) has reopened the comment period on proposed amendments to Rule 3b-16 under the Securities Exchange Act of 1934. The amendments could significantly expand the number and type of platforms subject to registration with the SEC as exchanges or broker-dealers, including decentralized finance (DeFi) platforms that trade crypto-asset securities. The reopening requested information and public comment on crypto-asset securities trading on such systems. [Read the SEC press release here and analysis by Morrison Foerster here]

Upcoming conferences, webinars and speaking engagements:

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 (20230423)

~ kiffmeister

Bank of Japan CBDC PoC Phase 2 Results

The Bank of Japan (BoJ) published the results of Phase 2 of its central bank digital currency (CBDC) proof-of-concept (PoC) that was conducted between April 2022 and March 2023. Although it is only available in Japanese, Norbert Gehrke wrote a summary of the report in English. The objective of the PoC Phase 2 was to uncover potential technical issues early as they relate to the basic functions covered in Phase 1. Some desirable peripheral functions not covered in Phase 1 were also added. Then, the technical implementation and processing performance was validated. [Download the report at the BoJ and read Norbert Gehrke’s English language summary on Medium]

Uptake of e-CNY remains disappointing

According to Changchun Mu, director of the People’s Bank of China’s Digital Currency Institute, China’s e-CNY CBDC needs to be made more appealing and user friendly in order to satisfy market needs. He was speaking at the Bank for International Settlements (BIS) Innovation Summit on March 22, 2023 and gave a surprisingly frank assessment of the status of the e-CNY pilot project. [Watch the video at the BIS and check out Rosa Giovanna Barresi’s summary and discussion on LinkedIn]

Fed’s Waller says tokenization shows promise, but risks remain

US Federal Reserve Board (Fed) Governor Christopher Waller spoke about the potential benefits and risks of blockchain-based asset tokenization and the related use of smart contracts. In particular, he pointed to the way that smart contract-enabled atomic settlement can mitigate settlement and counterparty credit risks by ensuring that the buyer will not pay if the seller does not deliver; and conversely, that the seller will not deliver if the buyer does not pay. However, smart contracts can have bugs and potential cyber vulnerabilities; and instantaneous settlement raises its own set of risks. [Read more at the Fed]

The shape of things to come: innovation in payments and money

Bank of England (BoE) Deputy Governor Sir Jon Cunliffe spoke about four areas where the tokenization of money is being explored. The first is stablecoins used for payments, the second is the tokenization of commercial bank deposits, the third is the next stage of the BoE’s work on issuing a digital pound and the last is the Bank’s work to ensure to ensure these new forms of money are robust and uniform. [Read the speech at the BoE and check out a discussion on LinkedIn led by Rosa Giovanna Barresi]

Upcoming conferences, webinars and speaking engagements:

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 (20230411)

~ kiffmeister

Misleading news alert: The Digital Currency Monetary Authority (DCMA) launches an international CBDC

The Digital Currency Monetary Authority (DCMA) announced their official launch of an international central bank digital currency (CBDC) at the 2023 International Monetary Fund (IMF) Spring Meetings. The press release implies that their Universal Monetary Unit (UMU) algorithmic stablecoin has the IMF’s blessing, including quoting IMF Financial Counselor Tobias Adrian from a November 2022 speech that implies nothing about DCMA engagement. Also,  the following quote from the DCMA’s legal counsel appears designed to mislead:  “although the IMF has not officially endorsed UMU, in reviewing the DCMA’s whitepaper and in weekly team discussions, the IMF has yet to state any objections to UMU’s FX premium rates and its monetary sovereignty approach.” [Read more at PR Newswire]

Update: I have double checked that the IMF made no official comments about the DCMA UMA stablecoin, and I checked with the IMF staff that would, and they hadn’t even heard of it. Maybe some lower-level staffers were given the white paper to read, and the DCMA used that to imply IMF blessing, when they didn’t get back with comments. @Krippenreiter did some detailed historical analysis on the DCNA and its staff, and it his/her conclusion was that “I’ve rarely come across something that is so dubious and appears to be a fraud while… [while making unsubstantiated claims] to have collaborated with the United Nations and World Economic Forum on a Project Yetta… [Read more on Twitter]

Central Bank of Montenegro developing a digital currency strategy and pilot

The Central Bank of Montenegro (CBCG) is working with Ripple to develop a strategy and pilot program to launch a national stablecoin, in a follow-up to Prime Minister Dritan Abazovic’s related Tweet in January. The CBCG will work with Montenegro’s government and academia to create a practical digital currency or secure currency solution to test blockchain functionality and potential. Montenegro uses the EUR, despite not being a member of the Eurozone, although it is a candidate country for European Union (EU) membership.  [Read more at the CBCG]

Stablecoins versus tokenized deposits: implications for the singleness of money

The Bank for International Settlements (BIS) published a paper that compares the key characteristics of stablecoins (“private tokenized monies that circulate as bearer instruments”) and tokenized commercial bank deposits. It claims that stablecoins violate the “singleness of money” principle because their relative exchange values can and do depart from parity. The problem could be solved by the introduction of clearing houses to support par exchange for the stablecoins issued by its members. However, according to the paper, this is a step backwards because the problem has already been solved by the existing two-tier monetary system. Also, tokenized deposit functionality can be expanded to allow for programmable ledgers, contingent execution and composability of transactions. [Read more at the BIS]

DeFi could be forced to incorporate and certify, French central bank says

The Banque de France (BdF) published a consultative paper on potential regulatory responses to decentralized finance (DeFi). “The regulation of disintermediated finance cannot simply replicate the systems that currently govern traditional finance… [as one option] players exercising effective control over sensitive services could be required to incorporate, becoming subject to supervision.” The paper also floated the idea  of strengthening the security of smart contracts using a certification mechanism covering code security and governance. In addition, it proposed rules should also stop intermediaries selling highly leveraged products to retail investors. [Read more at the BdF]

Upcoming conferences, webinars and speaking engagements:

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]