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The Libra Association has published its second roadmap for Libra Core, the key software that underpins the planned Libra network.
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U.S. Congressman Paul Gosar introduced the Crypto-Currency Act of 2020, a draft bill to clarify which federal agencies should regulate crypto. Earlier this year, U.S. lawmaker Warren Davidson also reintroduced the Token Taxonomy Act, seeking to clear regulatory uncertainty.
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The World InsurTech Report (WITR) 2019 from Capgemini and Efma explores the Insurance marketplace of the future and offers insights into how established insurers and InsurTechs can remain competitive in a dynamic business environment.
Category: Digest
Kiffmeister’s Fintech Daily Digest 12/19/2019
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Iran’s President Hassan Rouhani has proposed creating a cryptocurrency for Muslim countries as an alternative to the US dollar. Rouhani said the U.S. has used economic sanctions as the “main tools of domineering hegemony and bullying” of other nations. Last month, BRICS nations also proposed creating a cryptocurrency for settling payment transactions between the group “
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EY today announced the release of the third-generation zero-knowledge proof (ZKP) blockchain technology to the public domain on the Ethereum public blockchain. The enhancements of the ZKP blockchain technology will help make private transactions on public blockchains more scalable by significantly reducing transaction costs through batching multiple private transfers together in a single transaction.
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The hype around initial coin offerings may have quieted down in the States, but France seems to be taking a newfound interest. On Dec. 17th, France’s financial regulator, the Autorité des Marchés Financiers, granted the country’s first approval for an ICO application.
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On December 10th, 2019, Monerium and Tradeshift Frontiers carried out the world’s first cross-border euro transaction on the Ethereum network. Using the Tradeshift platform, Tradeshift ordered goods from Shop Icelandic which in turn ordered the goods from their supplier, Nordic Store. Invoices and purchase orders were issued through Tradeshift smart-contracts and settled using Monerium e-money on-chain.
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In this work, we investigate how the governance features of a managed currency (e.g., a fiat currency) can be built into a cryptocurrency in order to leverage potential benefits found in the use of blockchain technology and smart contracts. The resulting managed cryptocurrency can increase transparency and integrity, while potentially enabling the emergence of novel monetary instruments.
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Instead of increasing its size and scope, the Fed should reconsider its priorities. There does not seem to be an urgent need for real-time payment technologies, which are already being offered and developed by the private sector. The role of public entities such as the Fed is not to compete with the market, but to provide and secure a good competitive environment for the market to develop.
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The Financial Conduct Authority has issued a call for input on proposals to extend open banking rules to a wider range of products, under a new model billed as ‘open finance’.
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Planning to score some cocaine before meeting your girlfriend at a hotel? Neither the cops nor your wife will be any the wiser if you use some of the “anonymity vouchers” Europe’s central bank just proposed building them into an e-euro.
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The paper finds that the credit scoring model based on machine learning and non-traditional data is better able to predict losses and defaults than traditional models in the presence of a negative shock to the aggregate credit supply. One possible reason for this is that machine learning can better mine the non-linear relationship between variables in a period of stress. Finally, the comparative advantage of the model that uses the fintech credit scoring technique based on machine learning and big data tends to decline for borrowers with a longer credit history.
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Funnily enough, the core point I keep returning to is that you need trusted intermediaries to allow people who don’t trust each other to trade. And that is what banking does. Banks exist as regulated and licensed institutions to ensure you can trust them to transfer funds without losing them. That’s it folks. That’s what it’s all about and crypto is learning this, just as every FinTech does. Banks exist for a reason, are regulated the way they are for a reason and operate the way they do for a reason. And that reason is all about trust.tags: Fintech CryptoAssets
Kiffmeister’s Fintech Daily Digest 12/18/2019
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The Council and the Commission state that no global “stablecoin” arrangement should begin operation in the European Union until the legal, regulatory and oversight challenges and risks have been adequately identified and addressed. However, the notice doesn’t define exactly what a *global* stablecoin is, which is rather important, because almost all stablecoin issues aspire to be global!
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U.S. Fed’s Lael Brainard: “In one industry report, researchers found that roughly two-thirds of the 120 most popular cryptocurrency exchanges have weak AML, CTF, and KYC practices. Only a third of the most popular exchanges require ID verification and proof of address to make a deposit or withdrawal. This is troubling, since a number of studies conclude that cryptocurrencies support a significant amount of illicit activity. One study estimated that more than a quarter of bitcoin users and roughly half of bitcoin transactions, for example, are associated with illegal activity.”tags: Fintech CryptoAssets Bitcoin AMLCFTSex, Drugs, and Bitcoin: How Much Illegal Activity Is Financed through Cryptocurrencies?But the paper she cites is based on very old data, bitcoin transactions between January 3, 2009 and the end of April 2017.
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Contrary to media reports, the Government of the Virgin Islands is not in the process of developing or launching its own national cryptocurrency, neither by itself nor in partnership with any other entity, to replace the US dollar with a digital currency. The British Virgin Islands adopted the US dollar as its currency in 1959 and have made no commitments to replace it as the official currency in any form.
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Vodafone plans to transform its M-Pesa African mobile payments service into a financial platform spanning the continent as it seeks to unlock the value of one of the world’s largest fintech networks.tags: Fintech MobileMoney
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South Korea’s Financial Services Commission reportedly launched an open banking service to enable bank customers to access nearly all banking services through a single smartphone application, including withdrawals and transfers.
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The Federal Reserve Board announced a series of “fintech innovation office hours” across the country to meet with banks and companies engaged in emerging financial technologies.tags: Fintech Regulation
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With its rule change, the FDIC has significantly broadened the ability of fintechs and nonprofits to partner with banks without having being characterized as a “deposit broker” – so long as the third party’s primary business is not accepting deposits. More importantly, the FDIC has initiated an application process where any third party can apply to the FDIC and receive an exemption if it meets the requirements of the new rule. Once the exemption is granted, banks can receive deposits from the fintech’s customers without the deposits being characterized as “brokered deposits” by regulators.
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Payments startup Circle is pivoting its business to solely offering stablecoin services with the sale of its OTC trading desk. As part of the move, the firm confirmed the departure of additional executives, just weeks after co-CEO Sean Neville announced he would be stepping down.
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Since the Ethereum blockchain has run into scalability issues on the technical side, that has prevented it from growing too much further. They are working hard to sort that out but until they do, we can only speculate as to the future value. And unlike Bitcoin — which has a set number of coins that can be mined — Ether has an unlimited amount, which puts further pressure on the coin.
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In a recent CNN International interview, the CEO of MoneyGram Alex Holmes explained that Ripple and the services provided were very important for the company considering they were performing a deep digital transformation. At the same time, he talked about how XRP is helping the company to reduce costs.
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A Kraken employee is suing the exchange alleging fake company officer addresses, disappearing customer funds, stock option shenanigans, and sanctions violations.
Kiffmeister’s Fintech Daily Digest 12/17/2019
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Bitcoin price broke down below the psychological level of $7,000 late on December 16. The cryptocurrency updated the December low after blockchain researcher Chainalysis said that PlusToken scammers were selling coins to cash out.
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A new ECB paper shows that it is possible to build a simplified CBDC payment system while safeguarding users’ privacy for low-value transactions and ensuring that higher-value transfers are subject to AML checks.
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Coinmetrics digs into how they audit crypto-assets, what difficulties can be encountered during this exercise and what can be learned from it. It then attempts a ranking of assets along two different dimensions of auditability: node operation and ledger reconstruction.tags: Fintech CryptoAssets
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“I am realizing Lebanon is in a situation where there is an implied currency control but the government cannot control bitcoin which is a good thing because people have no trust and the ability of the central bank which really causes the ponzi style collapse and the bitcoin does not have that,” said Taleb.
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Digital Asset’s DAML is a smart contract language that is designed to work with blockchain platforms. DAML cannot be used on its own – it needs a platform underneath it. What’s unique about DAML, however, is that we’re enabling it to work on more than just blockchain platforms.
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Fidelity Investments is setting up a new entity to serve European institutional digital asset investors.
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“Take out a $2,000 zero-interest, 39-month installment loan from Affirm to buy a Peloton bike this Christmas and it is likely that Cross River is actually making the loan. Cross River holds onto such loans for a few days, then typically transfers them to the fintech, which will sell the debt to hedge funds and bond buyers, or securitize it into bundles of thousands of such loans. “
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Crypto assets could be subject to a “full deduction” from Common Equity Tier 1 (CET1) capital if held in the banking book, under a hypothetical prudential framework set out by the Basel Committee. In the proposed example, direct holdings of crypto assets would be allocated to the banking book, while indirect exposures would be assigned to the trading book.
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State Street is partnering with crypto exchange and custodian Gemini Trust on a pilot that examines reporting scenarios for digital assets. The trial will track a reporting process for bitcoin and ether that are held for a user in Gemini’s custody service.
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Accenture has partnered with global trade finance blockchain startup TradeIX, becoming an onboarding partner for R3’s Marco Polo Network.
Kiffmeister’s Fintech Daily Digest 12/16/2019
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Regardless of your view, it is clear that bitcoin has driven society to think more broadly about the nature of money, the way we engage in economic activity, and the role of financial intermediaries and technology infrastructure in our markets.
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Federal Deposit Insurance Corp. Chairman Jelena McWilliams said that the agency aims to modernize the classification of brokered deposits to account for changes in technology and how many consumers use tech to get access to banking, including the rise of “third-party fintech apps.
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ErisX, the Wall Street-backed cryptocurrency exchange operator, said in an alert to potential clients today that its market for cryptocurrency futures will kick-off on December 17.
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The European Commission Expert Group on Regulatory Obstacles to Financial Innovation published its recommendations on how to create an accommodative framework for Fintech. The group’s 30 recommendations are pertaining to the innovative use of technology in finance, maintaining a level playing field, access to data, and the financial inclusion and ethical use of data.tags: Fintech Regulation
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Built on R3’s open-source blockchain platform Corda, Marco Polo has hosted the largest global trade finance trial that involved over 70 organizations from 25 countries including financial giants like Japanese SBI Holdings,
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Decred launched in 2016, and was originally a Bitcoin codebase fork. The project now incorporates governance functions using a hybrid PoW and PoS consensus system. PoW miners create the blockchain and earn a portion of the block reward. PoS stakeholders purchase tickets, which; earn a portion of the block reward, participate in on-chain and off-chain network governance, and validate blocks discovered by miners.
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After BottlePay’s shutdown announcement last week, two more European cryptocurrency firms have shut down because of the upcoming Anti-Money Laundering (AML) rules in the European Union.
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SWIFT’s global KYC registry goes live today, allowing corporate groups to manage and share KYC data with global partners. The launch follows a testing period supported by 18 corporate groups and 16 global banks, amounting to over 7,000 corporate-to-bank relationships on SWIFT.
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The planned end date for leveraged crypto trading is 12:00 on Friday, March 13, 2020, by which deadline all open positions should be settled. Customers will then have until the end of March 2020, to transfer any Japanese Yen balance in Coincheck’s leverage account to their own trading accounts.
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This partnership follows a succession of bank partnerships across the world for TransferWise for Banks, including Bank Novo and Stanford Federal Credit Union in the United States and Up! in Australia this year alone and signifies the entry into the Canadian market. TransferWise has also announced numerous European partnerships with Monzo in the UK, Bunq in the Netherlands, N26 in Germany, LHV in Estonia and BPCE, France’s second largest bank.
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According to Deutsche Bank the current money system is fragile. Deutsche Bank sees that by 2030 digital currencies will rise to over 200 million users. In the “Imagine 2030” report, Deutsche Bank suggests that digital currency could eventually replace cash one day, as demand for anonymity and a more decentralized means of payment grows.tags: Fintech CryptoAssets
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According to Deutsche Bank the current money system is fragile. Deutsche Bank sees that by 2030 digital currencies will rise to over 200 million users. In the “Imagine 2030” report, Deutsche Bank suggests that digital currency could eventually replace cash one day, as demand for anonymity and a more decentralized means of payment grows.
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The ECB has welcomed an initiative by some of Europe’s top banks to explore the development of a rival payment system to challenge the dominance of Visa and Mastercard and the threat from Chinese and US Big Tech firms. Backed by twenty French and German banks, the The Pan European Payment System Initiative (Pepsi) would seeks handle all forms of cashless transactions.
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“The Eurosystem therefore welcomes the strategic initiative of a number of major European banks to create a true pan-European retail payment solution that has the potential to meet the vision of our strategy. The proposed solution would be based on the SEPA credit transfer instant (SCT Inst) scheme, which is in our view the correct approach as it is future-oriented. And it could capitalise from day one on existing powerful and sophisticated infrastructures, such as the Eurosystem’s TIPS.”
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The Dark Side of Digital Financial Transformation: The New Risks of FinTech and the Rise of TechRiskAs a result of the digitization and datafication of finance, combined with new technologies, cybersecurity and technological risks are now evolving into major threats to financial stability and national security. In addition, the entry of major technology firms into finance – TechFins – brings new issues. The first arises in the context of new forms of potentially systemically important infrastructure (such as data and cloud services providers). The second arises because data – like finance – benefits from economies of scope and scale and from network effects and – even more than finance – tends towards monopolistic or oligopolistic outcomes, resulting in the potential for systemic risk from new forms of “Too Big to Fail” and “Too Connected to Fail” phenomena. This paper suggests some basic principles about how such risks can be monitored and addressed, focusing in particular on the role of regulatory technology (“RegTech”).
Kiffmeister’s Fintech Daily Digest 12/15/2019
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Despite the rise in cashless payments, the market for cash is expected to continue to grow. The amount of banknotes in circulation is expected to increase annually between 3 percent and 4 percent, according to Edison, exceeding gross domestic product growth rates in most areas. The reason: In uncertain times, cash is still king.
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Venezuela President Maduro announced that next week there will be an airdrop of 0.5 PTR ($30) to eligible citizens who register with the Petro App.
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The bitcoin payments startup Bottle Pay shut down on Friday, citing the AMLD5 European Union regulation coming into effect Jan. 10, 2020. The Bottle Pay app once allowed users to send tiny amounts of bitcoin using just social media texts and handles, from Twitter to Telegram.
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The Estonian Ministry of Finance published a consultation paper on how to regulate cryptographic assets. One key question is whether the Financial Supervision Authority should regulate virtual assets. Currently virtual currency service providers must obtain a license from the Financial Intelligence Unit, but supervision over the business activities of such entities is excercised in a limited capacity.
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Digital finance has the potential to transform emerging market and advanced economies alike. India’s approach rests on the principle of providing digital financial infrastructure as a public good. It offers an important case study where the results are relevant and applicable for all economies, irrespective of their stage of development.
Kiffmeister’s Fintech Daily Digest 12/14/2019
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Here’s the updated master list of countries where *retail* central bank digital currencies are being actively explored, according to publicly-available information. I count 48 in total of which 11 have done or will soon do limited-scale pilots.
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Libra is actually a revamped version of a much older payments model. In 1996, Douglas Jackson, an oncologist and fan of the gold standard, founded a payments system called e-gold. Backed one-to-one by reserves of the yellow metal, the e-gold system allowed users all around the world to make instant private electronic payments. Unfortunately, e-gold ran into problems with regulators…
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A New York Supreme Court Appellate Division filing claims that Bitfinex and Tether (which share executives and shareholders) had gradually been depleting the reserves backing Tether’s USDT stablecoin, by first by going from actual cash in hand to $625 million in an inaccessible Crypto Capital account, and then by replacing that with a $625 million IOU from Bitfinex. That debt, said the NYAG, “seemed unlikely to be repaid,” as Bitfinex required the funds for withdrawals on its exchange.
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A letter sent by law firm Miller Thomson to the Royal Canadian Mounted Police (RCMP) asks for the authorities to dig up and examine the body of Gerald Cotten, who reportedly died of complications due to Crohn’s disease at the end of December 2018. Cotten was 30 at the time.
Kiffmeister’s Fintech Daily Digest 12/13/2019
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The Riksbank will sign a deal with Accenture to create a pilot platform for its e-krona digital currency. The public procurement resulted in eleven requests to participate, from which the Riksbank selected three suppliers who were invited to present tenders. The Riksbank intends to sign an agreement before the end of the year. https://www.riksbank.se/en-gb/press-and-published/notices-and-press-releases/notices/2019/riksbank-develops-an-e-krona-in-a-test-environment/
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President Christine Lagarde confirmed that the ECB will accelerate the work of the task force exploring central bank digital currencies (CBDC). The aim is to deliver a paper around mid-2020.
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“My personal conviction is that given developments we see, not so much in bitcoin but in stablecoins projects… we’d better be ahead of the curve because there is clearly demand out there that we have to respond to.”
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The wide adoption of a new technology comes with “small wins” that tackle large-scale problems. Focusing on attainable and measurable objectives is the key to achieving high transactional volumes. The players that offer tangible solutions to billion-dollar issues will have higher chances of staying afloat and succeeding in the entrepreneurship arena.
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Universally accessible central bank digital currency would bring no additional benefits for Switzerland at present. Instead, it would give rise to new risks, especially with regard to financial stability. The Federal Council approved a report examining the opportunities and risks of introducing a cryptofranc (e-franc), and they and the Swiss National Bank will continue to monitor developments in this area closely.
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Banks are issuing more notes than ever and yet they seem to be disappearing off the face of the earth. Central banks don’t know where they have gone, or why, and are playing detective, trying to crack the same mystery.
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“The final story in this analysis is that, in totality, nearly six years of aggregate data paint the picture that Bitcoin has utility and that its promise is beginning to be realized for the types of people Satoshi said it would.”
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Terra announced its stablecoin issuance protocol would act as Mongolian messaging app memeChat’s new financial backbone. That app, which has attracted 50,000 users since its March launch, now features the Terra-backed memePay payment service as well.
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Through a subsidiary called solaris Digital Assets, the Berlin-based bank will offer a white-labeled custody product, the company recently announced.
Kiffmeister’s Fintech Daily Digest 12/12/2019
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“We generally think that central banks should remain engaged in examining the full range of issues associated with CBDC, including the potential to offer synthetic CBDC, and deepen their familiarity with new technologies.”
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The Basel Committee published its discussion paper on a issues related to the prudential regulatory treatment of crypto-assets. The Committee is seeking views on a range of issues, including on the general principles and considerations to guide the design of a prudential treatment of banks’ exposures to crypto-assets. Stablecoins are mentioned only in passing, the paper saying that stablecoins warrant further assessment and elaboration before specifying a prudential treatment.
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This CPMI report discusses some potential design choices and includes a non-exhaustive list of questions that wholesale digital token developers may need to consider. Important considerations include availability; issuance and redemption; access; underlying assets/funds and claims; transfer mechanism; privacy and regulatory compliance; and interoperability. Depending on the design choices made, there could be a number of implications for safety and efficiency of the token arrangement.
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None of us who favor strong encryption is saying that child exploitation isn’t a serious crime, or a worldwide problem. We’re not saying that about kidnapping, international drug cartels, money laundering, or terrorism. We are saying three things. One, that strong encryption is necessary for personal and national security. Two, that weakening encryption does more harm than good. And three, law enforcement has other avenues for criminal investigation than eavesdropping on communications and stored devices.
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In sum, the case for bitcoin as a sanctions buster is not clear-cut. Genuine evil leaders probably should be sanctioned, the less ways to short-circuit the blockade the better. And given the way that U.S. sanctions are structured, bitcoin may not provide much help anyways.
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CoinShares said 65% of global bitcoin mining happens in China, and the country’s Sichuan province alone produces 54% of global hash rate. The remaining 35% of bitcoin miners are spread from the U.S. to Russia and Kazakhstan.
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Equilibrium’s EOSDT is now backed by smart contracts that pay out consumers if the dollar-pegged token crashes through its collateralized floor. Much like how America’s FDIC insures consumers’ traditional bank deposits against a run.
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Ripple has condensed its broad Xpring developer platform into a single site. The new platform aims to allow crypto and non-crypto developers to integrate payments into any mobile application. Now, Xpring.io offers those developers a wallet, new tools, technical documentation and Xrping customer service.
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“What people in London, New York and Silicon Valley don’t understand is that Asia is now setting the pace in financial services innovation,” says James Lloyd, a partner at EY Asia-Pacific focusing on fintech and payments.
Kiffmeister’s Fintech Daily Digest 12/11/2019
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“Digital financial assets such as cryptocurrencies continue to potentially transform financial markets, but their risk to financial stability is lower than a year ago because of their reduced market capitalization.”tags: Fintech CryptoAssets
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New York State Department of Financial Services proposed to modify the new crypto-asset approval process. The NYDFS currently approves every crypto-asset on a case-by-case basis with individual exchanges. The NYDFS is proposing that any crypto-assets approved for listing in New York can be listed by any exchange that operates in the state, and the regulator will publish a model framework for crypto-asset listings that exchanges should model their versions around.
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Crypto companies have filed 7,100 Suspicious Activity Reports (SAR) since May.
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Payment processor BitPay has announced it is adding three USD-pegged stablecoins to its list of supported tokens (USD Coin (USDC), Gemini Dollar (GUSD) and Paxos Standard Token (PAX)).
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Ripple has condensed its broad Xpring developer platform into a single site. The new platform aims to allow crypto and non-crypto developers to integrate payments into any mobile application. Now, Xpring.io offers those developers a wallet, new tools, technical documentation and Xrping customer service.
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Mastercard is carrying out the first pilot of a digital identity programme designed to let people prove who they are immediately, safely and securely in both the digital and the physical world.