Kiffmeister’s #Fintech Daily Digest (20220301)

March 1, 2022March 1, 2022 ~ kiffmeister

Cambridge University Launches Crypto Research Project with IMF, BIS

Cambridge University’s Centre for Alternative Finance has announced a collaboration with the International Monetary Fund (IMF), the Bank for International Settlements (BIS) and others to conduct crypto research. The Cambridge Digital Assets Programme, aims to bring further insight into the growing digital asset industry by providing data-driven insights through collaborative research involving public and private sector stakeholders. [Read more]

The research agenda for the Programme will be centered around three workstreams. The first is focused on environmental implications and broader environmental, social and governance (ESG) considerations of digital assets and their associated services. The second will look at the processes and configurations of distributed financial market infrastructure (dFMI), and the third on crypto-assets, stablecoins, central bank digital currency (CBDC), as well as enterprise and consumer tokens. [Read more]

CME Group plans to launch micro-sized Bitcoin and Ether options

The Chicago Mercantile Exchange (CME) announced that it will launch, subject to regulatory review, options trading for its existing micro Bitcoin (BTC) futures and micro Ether (ETH) futures that will be 10% the size of the respective tokens. The futures options, expected to start trading on March 28, will come more than two years after the firm launched a BTC options trading product in January 2020 and more than four years since the group launched the first Bitcoin futures contract in December 2017. [Read more]

Bitcoin jumps after Treasury imposes new sanctions against Russian central bank

The crypto market rose after the Treasury Department imposed new sanctions against Russia’s central bank that will effectively prohibit Americans from doing business with the Russian central bank and freezes assets within the United States. However, the crypto market rally may also be linked to hopes that Fed will be less likely aggressively hike amid the uncertain geopolitical backdrop. [Read more]

Kiffmeister’s #Fintech Daily Digest (01/13/2022)

January 13, 2022 ~ kiffmeister

Derivatives are coming to Coinbase, following purchase of FairX

Coinbase intends to enter the derivatives trading markets, having acquired the FairX derivatives exchange. FairX is a Designated Contract Market derivatives exchange regulated by the Commodity Futures Trading Commission. FairX only launched in May 2021, but it has already secured brokerage partnerships with TD Ameritrade and E*Trade, and 18 others. Coinbase said the acquisition is a “key stepping stone on Coinbase’s path to offer crypto derivatives to retail and institutional customers in the US.” [Read more]

Central bank digital currencies (CBDCs) in Latin America and the Caribbean

The Bank for International Settlements (BIS) published a paper that examines the views toward CBDCs Latin American and Caribbean (LAC) region central banks , drawing on their responses to a survey conducted by the BIS in late 2020 and early 2021. It also examines whether the engagement of LAC central banks with CBDCs can be explained by the structural characteristics of their economies. Thirdly, it reviews the long list of potential benefits, costs and risks of CBDCs, focusing on their relevance to the LAC economies. Finally, the paper reviews the design choices that central banks face and the actual choices made by a number of central banks in the region. [Read more]

BIS, SNB and SIX successfully test integration of wCBDC settlement with commercial banks

The BIS, the Swiss National Bank and SIX successfully tested the integration of wholesale (wCBDC) settlement with the core banking systems of five commercial banks. The experiment explored the settlement of interbank, monetary policy and cross-border transactions on the test systems of SIX Digital Exchange, SIX Interbank Clearing (the Swiss real-time gross settlement system) and the core banking systems of Citi, Credit Suisse, Goldman Sachs, Hypothekarbank Lenzburg and UBS. The test was part of Project Helvetia, an ongoing investigation into the settlement of tokenised assets with wholesale CBDC. [Read more]

Visa Partners With ConsenSys to Help Bridge CBDCs With Traditional Finance

Visa has teamed up with Ethereum scaling firm ConsenSys to help central bank digital currency (CBDC) networks bridge the gap with traditional financial institutions. Visa has created a CBDC Payments Module to serve as an on-ramp for CBDCs to existing payment networks. Banks and issuer processors will be able to plug into the module and integrate their existing infrastructure. Customers will eventually be able to use their CBDC-linked Visa card or digital wallet anywhere that Visa is accepted globally. Visa is currently in the process of integrating the Module with the ConsenSys Codefi CBDC sandbox powered by ConsenSys Quorum. [Read more]

USDF Consortium Launches to Enable Banks to Mint USDF Stablecoins

The USDF Consortium, an association of FDIC-insured financial institutions, launched, with a mission to build a network of banks to further the adoption and interoperability of a bank-minted USDF stablecoin. USDF will be minted exclusively by U.S. banks and will be redeemable on a 1:1 basis for cash from a Consortium member bank. The Consortium’s founding bank members include New York Community Bank, NBH Bank, FirstBank, Sterling National Bank, and Synovus Bank. [Read more]

Funds Lost to DeFi Hacks More Than Doubled to $1.3B in 2021: Certik

Certik reported that the amount of money lost in decentralized financed (DeFi) project hacks more than doubled to $1.3 billion in 2021, with centralization the most common vulnerability. According to DefiLlama data, the total value locked (TVL) in DeFi protocols at end-2021 was $243.88 billion, up from $18.29 billion the year before, meaning the lost funds shrank to 0.5% of TVL last year from 2.78% in 2020. [Read more]

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Central Bank Digital Currency Workshop, hosted by the CBDC Think Tank

The Central Bank Digital Currency Think Tank (CBDCTT) is hosting an in-person CBDC Workshop in Washington DC on February 24. It’s an intensive and hands-on CBDC course for central bank leadership and staff that are looking to understand and position for CBDCs. The workshop is a mix of lectures from CBDC experts and hands-on exercises. Certification of completion will be provided by the CBDCTT. Note that it is open only to central bank staff and finance ministries! [Register here]

Kiffmeister’s #Fintech Daily Digest (12/14/2021)

December 14, 2021 ~ kiffmeister

Dogecoin Rockets 30% After Elon Musk Says Tesla Will Use for Payments

Elon Musk announced that Tesla will begin accepting Dogecoin as payment for “some” merchandise (swag?) to “see how it goes.” The Tesla CEO has a long and well-established relationship with meme cryptocurrency Dogecoin. In May of this year—around the same time he reversed course on Bitcoin—Musk said that Dogecoin could beat Bitcoin “hands down.” Since today’s news broke, Dogecoin’s price surged from around $0.16 to over $0.21 at one point. [Read more]

Ukraine Electronic Hryvnia Pilot Launched by TASCOMBANK and Bitt on Stellar

Ukrainian commercial bank TASCOMBANK, and Bitt, the firm behind the Eastern Caribbean Central Bank and Central Bank of Nigeria central bank digital currency pilots, have launched a pilot project to issue an electronic hryvnia on Stellar. The pilot will test the digital currency on the use cases of programmable payroll for public employees at Diia, an IT solutions enterprise, as well as for peer-to-peer payments and merchant payments. The project is being implemented under the supervision of the National Bank of Ukraine and with the support of the Ministry of Digital Transformation. [Read more]

E-Money: Prudential Supervision, Oversight, and User Protection

The IMF published a paper on the evolving prudential frameworks for nonbank issuers of electronic money (e-money). Some jurisdictions take a relatively light-touch approach to regulating e-money issuers (EMIs). Others have sought to apply more stringent requirements to protect e-money users, as the sector has grown in importance. The paper ends with recommendations for policymakers, especially in those emerging market economies and developing countries wherein EMIs have reached a scale at which they could have a significant economic impact if they were to fail. [Read more]

BIS CPMI report highlights rapid development of retail fast payments

The BIS Committee on Payments and Market Infrastructures (CPMI) published a review of recent developments in retail fast payment systems (FPS). It notes that FPS can have significant implications for the operations and services of real-time gross settlement (RTGS) systems, including potential modifications to their access criteria and operating hours. The report also finds that FPS adoption rates are generally low in the early stages of implementation, but some recent ones have seen more rapid take-up. Also, FPS are increasingly settling obligations between banks and, where relevant, non-bank FPS participants on a gross (ie payment-by-payment) basis in real time, and most jurisdictions have either adopted or are moving towards ISO 20022 as the FPS messaging format. [Read more]

Contractual Standards for Digital Asset Derivatives

The International Swaps and Derivatives Association (ISDA) published a paper on the development of common legal standards and definitions for digital asset derivatives. The paper (i) identifies novel technology and market-driven events that could disrupt the operation of a digital asset derivatives transaction and provides a framework for dealing with these events; (ii) explores how digital assets (and the derivatives that reference them) can be valued and what happens when a valuation cannot be obtained; and (iii) analyzes how digital assets might interact with the existing ISDA documentation architecture, including the ISDA Master Agreement and industry standard collateral documentation. ISDA has also produced a supplement to the paper that sets out a granular, technical analysis of different ISDA product definitions and their potential applicability to digital asset derivatives. [Read more]

Kiffmeister’s #Fintech Daily Digest (11/12/2021)

November 12, 2021 ~ kiffmeister

SEC Rejects VanEck’s Spot Market Bitcoin ETF

The US Securities and Exchange Commission (SEC) rejected VanEck’s application to launch an exchange-traded fund (ETF) that directly tracks the price of Bitcoin. In its ruling, the SEC cited concerns that the Bitcoin spot market is prone to “fraud and manipulation.” To date, the SEC has only allowed Bitcoin ETFs linked to BTC futures contracts that are regulated by the Commodities and Futures Exchange Commission (CFTC) to move forward. [Read more]

Tether Papers: This is exactly who acquired 70% of all USDT ever issued

Protos catalogued and investigated every USDT ever sent to and from Tether, across the eight blockchain and layers on which it currently exists: Omni (Bitcoin), Liquid (Bitcoin), Ethereum, Tron, Simple Ledger Protocol (Bitcoin Cash), EOS, Solana, and Algorand. They found that two companies, Alameda Research (parent of crypto exchange FTX) and Cumberland Global (the crypto-trading sub of markets powerhouse DRW), were responsible for seeping 55% of all USDT into the crypto ecosystem. [Read more]

Swiss Central Bank Ready to Run With wCBDC in January: ‘Just Takes a Policy Decision’

The Swiss National Bank (SNB) will technically be ready to launch a wholesale central bank digital currency (CBDC) in January 2022, using Switzerland’s Six Digital Exchange (SDX). However, a policy decision has yet to be taken, and there is the question of whether the SNB can legally issue wholesale CBDC. Also, Thomas Moser, a member of the SNB’s governing board, says there are no plans for going live at this point in time. [Read more]

Run-Proof Stablecoins

David Andolfatto explains how the theory of bank runs suggests that stablecoins might be rendered run-proof if their liabilities are properly designed. For example, a *credible* promise to suspend redemptions when redemption activity is abnormally high can serve to discourage runs. He describes how “smart contracts” could be used to bolster the credibility of the threat of suspending redemptions in the event of abnormal redemption activity, and may actually prevent any runs from occurring in the first place. [Read more]

The World Bank Launches a Fast Payments Toolkit

The World Bank has developed a Fast Payments Policy Toolkit, which consists of a global fast payments tracker as well as other resources pertaining to the topic. The tracker provides updates on jurisdictions around the world (by income level and geographic region) that have implemented fast payments and also provides information on different implementation aspects (such as technical features, technology, access rules) for each such jurisdiction. [Read more]

Upcoming Virtual Conferences at Which I’m Speaking:

World Banknote Summit 2021

The November 22-24 World Banknote Summit is a platform where the leaders of the global banknote community can meet and discuss current and future issues faced by banknotes as a form of payment. The summit plays host to various industry insiders and business experts who share their insights into banknotes, the dynamic and ever-changing face of the payments industry, the challenges on the horizon and potential solutions. The program is available here, and click here to register.

ITU DC³ Conference: From cryptocurrencies to CBDCs

The January 25-27 DC³ Conference: From cryptocurrencies to CBDC, will highlight the work of the Digital Currency Global Initiative with a spotlight on emerging trends, innovations and initiatives shaping the future of digital currencies. The conference is organized jointly by the International Telecommunication Union (ITU) and the Stanford University Future of Digital Currency Initiative (FDCI). The program is available here, and click here to register (it’s free).

Kiffmeister’s #Fintech Daily Digest (10/18/2021)

October 18, 2021 ~ kiffmeister

I’ve updated my tabulation of wholesale central bank digital currency (CBDC) experiments to add Hyperledger Besu to the technology platform used in the Bank for International Settlements Innovation Hub (BISIH) multi CBDC mBridge joint project (BISIH Hong Kong Centre, the Hong Kong Monetary Authority, the Bank of Thailand, the Digital Currency Institute of the People’s Bank of China and the Central Bank of the United Arab Emirates).

Digital yuan’s anonymity is misunderstood, says China’s digital currency leader

Mu Changchun, the Director General of the People’s Bank of China (PBOC), clarified how the managed anonymity of China’s digital yuan works. Wallets come in multiple tiers, with small transaction value tiers supporting anonymity by requiring only a phone number as identity, but larger-value tiers requiring conventional proof of identity. Under China’s Personal Information Protection Law, the telecom companies cannot release identity information to any third parties, including the central bank. However, if it’s suspected that some anonymous transactions are illicit, law enforcement agencies can present a legal warrant to the phone company to get the user’s identity. Also, all wallets have a sub wallet function in which each merchant can have a separate wallet to avoid linking a person across merchants. [Read more]

ProShares announces Tuesday listing of bitcoin futures ETF $BITO

“ProShares announced it will launch its bitcoin futures-tied exchange traded fund (ETF) on October 19. On October 15, the firm filed a post-effective amendment prospectus stating its intention to list on October 18. Now, additional public documents say that ‘the Fund is scheduled to list and begin trading on the NYSE Arca on October 19, 2021.’ The ProShares Bitcoin Strategy ETF will trade under the ticker $BITO. It will invest mostly in bitcoin futures, though it will not directly invest in the cryptocurrency. The US Securities and Exchange Commission (SEC) has yet to approve a spot-based bitcoin ETF, and many proposals have been cast aside due to concerns of price manipulation in the bitcoin spot market.” [Read more]

Grayscale confirms Bitcoin ETF plans

Grayscale announced it will be converting its GBTC Trust into an ETF “once there’s official and verifiable evidence of the SEC’s comfort with the underlying Bitcoin market — likely in the form of a Bitcoin futures ETF being deemed effective — the NYSE Arca will file a 19b-4 to convert $GBTC into an ETF.” [Read more]

Klarna Adds Pay Now Option Following Complaints About BNPL Service

“Klarna announced the addition of the ability to “Pay Now” for UK customers alongside the option to Buy Now, Pay Later (BNPL). Klarna said it took these actions after being informed by the UK Financial Ombudsman Service (FOS) that complaints about BNPL products currently could not be referred to FOS on a voluntary jurisdiction basis. Klarna said it has established its own complaints adjudicator for consumers who remain dissatisfied with how a complaint against Klarna has been handled. Klarna addeed that it has worked with consumer group, Fairer Finance, to make sure that terms & conditions are easy to understand.” [Read more]

Kiffmeister’s #Fintech Daily Digest (05/04/2021)*

May 4, 2021 ~ kiffmeister

S&P Dow Jones Indices Launches Cryptocurrency Index Series

S&P Dow Jones Indices launched a series of digital asset benchmarks, the S&P Digital Market Indices, that will measure the performance of digital assets listed on recognized open cryptocurrency exchanges. At launch, the index series will cover Bitcoin and Ethereum, and there will be Cryptocurrency MegaCap Index that measures the market cap-weighted performance of Bitcoin and Ethereum. Later this year other coins will be added. The indices use pricing data from Lukka, a crypto software and data provider, to determine the eligibility universe and pricing of individual constituents.

Micro Bitcoin futures

The Chicago Mercantile Exchange (CME) Group launched micro Bitcoin futures at one-tenth the size of one Bitcoin. The original CME Bitcoin futures contract, launched in December 2017, is worth five Bitcoin. Micro contracts appeal to retail traders priced out by the original offering, and institutional users who wanted more wiggle room in their trading strategies.

April Global Fintech Monthly Monitor

Also, if you haven’t already done so, please check out the April edition of my Global Fintech Monthly Monitor. Make sure to click on the link at the bottom of the post to see it in its full glory, including tables with bonus information! Also, please send feedback as this is still a work in progress.

*For those interested in intra-day updates and news that didn’t make the Daily Digest cut, please check out my Diigo fintech bookmarks: https://www.diigo.com/user/kiffmeister/Fintech

Kiffmeister’s #Fintech Daily Digest (03/30/2021)*

March 30, 2021 ~ kiffmeister

PayPal Launches “Checkout with Crypto“

PayPal launched Checkout with Crypto that US PayPal customers with certain crypto-assets (Bitcoin, Litecoin, Ethereum or Bitcoin Cash) will be able to choose to check out with crypto seamlessly within PayPal at millions of global online businesses. Customers pay no transaction fees but a spread will be built into the conversion from crypto to USD. There are no additional integrations or fees required by the business. All transactions are settled in USD and converted to the applicable currency for the business at the standard PayPal conversion rates.

CME Announces Launch of Micro Bitcoin Futures in May

The Chicago Mercantile Exchange (CME) will launch smaller-sized bitcoin futures contracts in May. The new contracts sized at one-tenth of one bitcoin will be cash-settled based on the CME CF Bitcoin Reference Rate.

Assurance Opinion Confirms Tether’s Reserves Fully Backed

Tether released an attestation dated February 28, 2021 and delivered by accounting firm Moore Cayman that shows that its stablecoins are fully backed. However, the report doesn’t describe how Tether’s reserves are held.

BNY Mellon Weighs Controversial Bitcoin Valuation Model

BNY Mellon published a paper that evaluates different methods of valuing Bitcoin, that spotlighted the controversial stock-to-flow model that—if correct—would see Bitcoin’s price hit $100,000 to $288,000 this year.

* The views expressed herein are those of the author and should not be attributed to the International Monetary Fund, its Executive Board or its management.

Kiffmeister’s #Fintech Daily Digest (02/10/2021)*

February 10, 2021July 11, 2022 ~ kiffmeister

Payments innovation beyond the pandemic

The Bank of Canada’s work to prepare its contingency plan for launching a central bank digital currency (CBDC) has accelerated, driven by a sharp decline in the acceptance of cash. If this trend continues beyond the pandemic and/or private digital currencies take hold as means of payment, the Bank could be pushed over the edge. Meanwhile, the Bank has been researching and experimenting with different technologies, and engaged three university project teams to independently develop proposals for what a digital currency ecosystem could look like. Their reports will be published on February 11.

The conversation on general-purpose central bank digital currency

According to a Minneapolis Fed article, “the benefits of a central bank digital currency (CBDC) in the United States are not immediately obvious. Largely due to the legal and regulatory framework supporting the payments infrastructure, an end user’s buying power and ability to trust in the integrity of a transaction are the same for banknotes and bank account balances. Because the banking sector facilitates the exchange of funds between parties, the absence of central bank-issued digital money for general purposes is not currently an issue for most Americans.”

And check out the CBDC Navigator and its nice curated library of resources on central bank digital currency.

Grayscale’s Crypto-Assets under Management Reaches $36 Billion

The total value of Grayscale’s crypto-assets under management reached $36.5 billion, of which $30.1 was in the Bitcoin Trust and $5.3 in the Ethereum Trust. Grayscale bought 116,174 Ethereum during the last 4 weeks, and 12,450 worth nearly $22.5 million on February 9.

And bitcoin futures open interest smashes $15 Billion.

JPMorgan Sees Tesla Bitcoin Bet as Too Bold for Others to Follow

“Don’t count on other large companies to emulate Tesla’s decision to add Bitcoin to its balance sheet, according to JP Morgan. Corporate treasury portfolios are typically stuffed with bank deposits, money market funds and short-dated bonds, meaning that annualized volatility — or the range of swings during the course of a year — hovers around 1%. Adding a 1% Bitcoin allocation’“would cause a big increase in the volatility of the overall portfolio,’ wrote the strategists. Such an allocation could mean the portfolio’s volatility rises to 8% due to Bitcoin’s 80% annualized volatility, they said.

* The views expressed herein are those of the author and should not be attributed to the International Monetary Fund, its Executive Board or its management.

Kiffmeister’s #Fintech Daily Digest (12/28/2020)

December 28, 2020 ~ kiffmeister

BlackRock Looking to Hire a VP-level Blockchain Lead

BlackRock Financial Management posted a job ad for a VP-level blockchain lead to create and implement strategies designed to drive demand for the firm’s offerings and enhance the value proposition to clients of the firm’s investments and technology offerings. The candidates must have experience in: articulating the technological foundations of blockchain technology including cryptographic hash functions, distributed network consensus mechanisms, and public-private key cryptography; devising and articulating fundamental valuation methodologies for crypto-assets; evaluating game theory and decentralizing governance models associated with blockchain technology; and working with key drivers of blockchain networks’ design and their impact on the four key dimensions of blockchain performance including speed, scalability, privacy, and security.

Binance Launches European-Style Vanilla Bitcoin options contracts

Binance launched European-style “vanilla” Bitcoin options contracts. The options are priced and settled in Tether (USDT). American-style options contracts, which Binance launched in April 2020, allow traders to purchase the Bitcoin at any point up until the contract expires. European-style contracts can only be exercised on the expiration date. The term “vanilla” refers to how the contract arrangement is generally simple, in contrast with more “exotic” products.

Kiffmeister’s #Fintech Daily Digest (12/20/2020)

December 20, 2020 ~ kiffmeister

FTX Seeks to Launch Coinbase Futures Market Ahead of Public Listing

Crypto-asset exchange FTX is working with CM-Equity on a pre-listing futures market for the Coinbase initial public offering (IPO). FTX first partnered with CM-Equity when launching its tokenized stock spot and futures markets in October 2020. FTX also launched a pre-IPO market for Airbnb the day before the firm’s December 10 stock trading debut. However, FTX prohibits U.S.-based traders from accessing Coinbase futures.

Flare Network Has Worked Out How Much Free Crypto it Will Give to XRP Holders

Flare Networks has determined how many free Spark (FLR) tokens it shall issue to XRP holders that held funds in the cryptocurrency exchanges or wallets that participated in its airdrop in early December 2020.