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Under the original Libra white paper, Libra Association members would receive dividends for profits generated by reserve assets, which created an incentive for decisionmakers to invest in risky assets for higher returns, at the expense of the retail public. However, in the new version of the white paper, interest earned from reserve assets will not be used to pay dividends to investors.
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This Bank of Lithuania paper presents the CBDC concept and typology, surveys the literature, documents initiatives undertaken by other central banks, and discusses monetary policy and financial stability implications.
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In a report detailing the progress of CBDC development around the world, the Central Bank of Lithuania says the little researched idea of a multi-currency CBDC deserves more consideration.
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Saga is launching a virtual currency which pegs its value to the basket of currencies that form the IMF’s special drawing rights. The U.K.-based company’s advisory board includes the likes of Nobel laureate Myron Scholes and J.P. Morgan’s Jacob Frenkel. But the firm doesn’t plan to launch its token in the U.S. yet, claiming it doesn’t currently have the regulatory clarity required to do so.
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Recent developments have re-opened the debate on the future of money. This Policy Contribution discusses two aspects: the implications of the rise of global private stablecoins, such as Facebook’s Libra, and the role that public central bank digital currencies could play.
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As digital trading evolves, the balance between competition, market stability and liquidity will be a critical test — for hedge funds, investment banks and regulators alike.
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Bakkt records over 50% surge in open interest, launching the options on Bitcoin futures contracts today along with cash-settled Bitcoin futures.
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“Cryptocurrencies do not solve mainstream problems. This does not represent a design flaw. In fact, this is an intentional trade off. Decentralized systems forsake scale, speed, and cost in favor of one key feature: censorship resistance. Cryptocurrency solves problems faced by the censored who, by definition, are not the mainstream.
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TransferWise will launch the Visa Direct-powered service in Spain, with plans to follow up in Bulgaria, Czech Republic, Hungary, and Romania and then scale it throughout Europe and worldwide in 2020.
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Santander, the Spanish banking group, recently became the subject of a Whale Alert tweet as they redeemed their first blockchain bond on the Ethereum ledger, worth $99,000.
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Open banking has grown to become a global phenomenon and while pioneers like the UK and the European Union (EU) have turned to regulatory action to support the industry’s transition into this new era of banking, legislators in Switzerland has reacted more cautiously so far. The Swiss Bankers Association (SBA) has already rejected the proposal for an interpretation of PSD2, the EU’s second payment services directive, to be adapted to the Swiss market and have instead let the market decide how the topic should be tackled.tags: OpenBanking Fintech
Category: Digest
Kiffmeister’s Fintech Daily Digest 12/09/2019
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The People’s Bank of China will reportedly start small-scale testing its digital currency (CBDC) in Shenzhen this month (December). The test will be performed in a “horse race” model, with each of four participating banks proposing a different payment model. While some of the banks chose to collaborate with the three telecom firms participating in the pilot to develop SIM cards with built-in digital wallets, others have built their independent wallet apps. Suzhou may test the new currency as well.
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Under the PBOC DC/EP CBDC model, commercial banks will first obtain the digital currency from the PBOC by depositing RMB reserves. Users and businesses can then register digital wallets with these commercial banks to use the new digital currency, according to an online course on Libra and cryptocurrency given by PBOC’s digital currency director Mu Changchun.
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The Financial Stability Board published two reports that consider the financial stability implications from an increasing offering of financial services by BigTech firms, and the adoption of cloud computing and data services across a range of functions at financial institutions.
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Thailand and Hong Kong have launched Project LionRock-Inthanon, a collaboration to use wholesale CBDC to facilite real-time cross-border payments between banks in the two countries.
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Three months after launching its physically settled bitcoin futures product, the Intercontinental Exchange’s Bakkt has gone live with its bitcoin options and cash-settled futures contracts.
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Cryptocurrency exchange OKEx is launching bitcoin options trading later this month.
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We’ve often argued that a stablecoin is nothing more than a glorified exchange traded fund (ETF). So when it comes to the fuss about how to regulate stablecoins like Libra, is it possible that most of the hard work has already been done on account of the regulatory environment that governs ETFs?
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The world‘s first blockchain-based digital collector coin created by the Bank of Lithuania is dedicated to the 16 February 1918 Act of Independence of Lithuania and its 20 signatories. The coin is expected to be issued in spring 2020.tags: Fintech CryptoAssets
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Bank of China, one of the four primary commercial banks in China, has issued 20 billion yuan or around $2.8 billion in blockchain-based bonds for small businesses with their own blockchain platforms.tags: Fintech Blockchain
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Ukraine’s legislature, has approved amendments that introduce legal terms and definitions pertaining to the crypto space. The new legislation, which aims to transpose the FATF standards into national law, also identifies who is to take responsibility for the oversight of cryptocurrencies in the country.
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The Indonesian Fintech Lenders Association has partnered with the Financial Services Authority (OJK) to open a Fintech Data Centre to review the P2P lending industry. (November)
Kiffmeister’s Fintech Daily Digest 12/08/2019
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A simulation exercise at Harvard University’s Kennedy School explored the dangers if large sums could be secretly sent secretly to hostile nations.
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To get around its epic scaling limitations the numero uno cryptocurrency system (bitcoin, duh) is finally deploying the Lightning Network (LN) to major players such as the exchange Bitfinex. And what that basically means is that bitcoin is moving firmly away from real time gross settlements and push payments and into the world of deferred net settlement and pull payments. An ironic state of affairs given its raison d’être was to rid the world of intermediaries and reduce settlement risks and exposures.
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The Cryptocurrency Indicators of Suspicion Working Group Report details 86 indicators of suspicious activity, or patterns of transactions on the blockchain, to provide details of how criminals have laundered $3.7 billion in 2019 so far. Project Participate is comprised of a crack team of compliance officers from firms active in the crypto space, including major banks and crypto exchanges companies, plus blockchain investigation firms Chainalysis and Bitfury Crystal.
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Facebook’s Libra represents American interests to the point that it can be considered a digital currency issued by the US Federal Reserve, according to Long Baitao, executive deputy director of Tsinghua University’s blockchain research institute.
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This paper maps the global shadow payment system and identify what mechanisms, if any, SPPs use to protect their customers. Examining the business models and customer contracts of over 100 SPPs, the paper suggests that, at least from a consumer protection perspective, SPPs are currently not an effective substitute for bank-based payment systems.
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From payments to lending to insurance to checking accounts, Amazon is attacking financial services from every angle without applying to be a conventional bank.
Kiffmeister’s Fintech Daily Digest 12/07/2019
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If China digitizes its currency, as it plans to do, and the North Koreans use it to finance their missile program, it’s a flow of money that circumvents U.S. sanctions. That would force the U.S. to grapple with its own now-antiquated currency.
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Crusoe Energy Systems is harnessing surplus gas at source to turn it into electricity, powering the data centers that in turn generate revenue by mining Bitcoin. The company will install 70 units next year, each with a capacity of about 1 megawatt, which would keep about 10 million cubic feet a day of gas from being flared.
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Paying for things online usually means giving up plenty of privacy. But this needn’t always be the case. Last night I donated to a local charity via their website and didn’t have to give up any of my personal information. The trick for achieving a degree of online payments anonymity? Not bitcoin, Zcash, or Monero. I used a product created by old fashioned bankers: a non-reloadable prepaid debit card.
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Perhaps bitcoin itself will achieve stability over time, as its liquidity improves with growing investment in the crypto-asset category. Those who believe it will do so may feel disappointment or impatience reading this article. For in 2019, market and network data have told a different story: volatility has increased and liquidity remains stagnant. “
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China is launching a range of blockchain and financial programs in a bid to boost its relationship with countries participating in the Belt and Road Initiative.tags: Blockchain Fintech
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The Boerse Stuttgart Digital Exchange became available to all users in Germany and also for residents in the European Economic Area. The crypto exchange allows users initially to trade the Bitcoin-Euro pair, with further digital assets to follow suite soon.
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The NYDIG Bitcoin Strategy Fund will invest in cash-settled bitcoin futures contracts traded on CFTC-registered exchanges. The fund does not intend to invest in crypto-assets directly.
Kiffmeister’s Fintech Daily Digest 12/06/2019
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The private sector will always have an important role to play in payments. The question is how to divide the work between private and public: Agustín Carstens
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The monetary authorities of Hong Kong and Thailand are poised to roll out a two-tier digital token, part of the process for creating a prototype for cross-border fund transfers between the two economies.
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Dozens of crypto funds, almost 70, have closed this year, a mainstream media outlet reported. And while the startling number reveals the influx of institutional investors into the crypto space might not be happening at a fast pace, it’s also worth noting that crypto fund launches are projected to reach 140 by the end of the year.
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Coinbase’s Visa debit card offering has added support for ethereum-based DAI stablecoin.
Kiffmeister’s Fintech Daily Digest 12/05/2019
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Nearly 70 crypto-focused hedge funds that mostly cater to pensions, family offices and wealthy individuals closed this year. The number of new fund launched is less than half the amount started in 2018.
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For all the talk of central banks issuing digital currencies, many of them are secretly hoping the private sector will come up with solutions that make this unnecessary.
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MoneyGram is expanding its debit card deposit service internationally via the Visa Direct real-time push payments platform. MoneyGram becomes the first company in the industry to enable cross-border transfers from the United States using Visa Direct. This service is now available to Spain and the Philippines, and soon to additional countries.tags: Fintech CrossBorder
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In effect, gift cards can be seen as a sort of stablecoin which are available for purchase on nearly every street corner in the world. Additionally, as you will find out later in the article, the people using these gift cards as stablecoins often don’t even need to know what a stablecoin is or how cryptocurrency works.
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Deutsche Börse and HQLAX have successfully launched their DLT solution for collateral swaps in the securities lending market. The first live transactions were executed by Commerzbank, Credit Suisse and UBS on the Eurex Repo F7-trading system.
Kiffmeister’s Fintech Daily Digest 12/04/2019
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“In Japan, the amount of cash outstanding is still increasing, and it does not seem that there is a demand for CBDC from the public at present. Nevertheless, the Bank of Japan has been conducting technical and legal research on this matter in order to stand ready when the need for CBDC may arise in the future.”tags: Fintech CryptoAssets
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“The ECB will continue to assess the costs and benefits of issuing a central bank digital currency that could ensure that the general public will remain able to use central bank money even if the use of physical cash eventually declines. Prospects of central bank initiatives, however, should neither discourage nor crowd out private market-led solutions for fast and efficient retail payments in the euro area.”tags: Fintech CryptoAssets
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We are particularly keen to take part in experiments to integrate a “wholesale” CBDC into innovative procedures for exchanging and settling tokenised financial assets. Our actions will naturally contribute to the work of the Eurosystem, which should make looking into the possibility of an “e-euro”… Beyond this, we intend to take part in the work of the BIS Innovation Hub.
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Despite defections, his cryptocurrency project still has the support of 21 organizations and has more than 100 of the social network’s employees working on it.
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On November 18, 2019, the UK Jurisdiction Taskforce, which is part of The English Law Society’s LawTech Delivery Panel, published its Legal Statement on the status of cryptoassets and smart contracts (the Legal Statement).
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State Street has taken a new direction with its blockchain strategy and cut scores of developer jobs in the process. The focus is now more on digital assets such as tokenized stocks and bonds through to crypto-assets, rather than the heavy lifting work of re-plumbing front to back office with distributed ledger technology.
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With young people snubbing cash altogether, parents and grandparents now are being forced to join in if they want to compensate them for chores or babysitting.
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Though the growth of finance apps has become a global phenomenon, it is Asia-Pacific that’s leading the trend, according to a new report by mobile measurement company Adjust and mobile data and analytics platform App Annie.tags: Fintech MobileMoney
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Sending money home can be an expensive business. But it doesn’t have to be. Digital currencies offer the possibility of lower fees, giving rise to more frequent and cheaper transactions. This has implications for the FX world, particularly the dollar.
Kiffmeister’s Fintech Daily Digest 12/03/2019
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The government of the British Virgin Islands, in partnership with LIFElabs.io, will be launching a government-backed stablecoin. The BVI is a British overseas territory that currently relies on the USD as its national currency. LIFEtokens will be pegged 1:1 against the USD and be accessible to both residents and tourists.
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“A central bank digital currency would allow citizens to use central bank money directly in their daily transactions. However, depending on its design, a central bank digital currency could pose risks. For instance, they could alter the way in which monetary policy is conducted and transmitted to the real economy. They could also carry implications for the functioning of the global financial system and its stability. The question of central bank digital currencies and their optimal design therefore warrants further analysis.”
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“As digital assets transcend national borders, what does this mean for those interested in issuing or participating in a stablecoin project? What are the regulatory questions and other challenges that need to be considered? We take a look at the global picture in this comprehensive analysis.”
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This column proposes locking stablecoins into an ETF-like structure with restrictions on basket composition. Stablecoin providers would be functionally similar to ETF sponsors, and stablecoins would become a new vehicle for traditional fiat currencies.
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After a huge increase in the number of fintech start-ups founded between 2004 and 2015, there has since been a rapid decline: from 390 in 2015 to just 71 in 2018.tags: Fintech
Kiffmeister’s Fintech Daily Digest 12/02/2019
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China gives P2P lenders two years to exit industry
All Chinese P2P firms must clear outstanding loans within one year and become qualified small loan providers within two years. Regional small loan companies will have to meet a capital requirement of 50 million yuan, or 1 billion yuan to qualify the firm to operate nationally.
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Asia lenders usher in year of the virtual bank
A drove of virtual banks is preparing to launch across Asia – Singapore plans to award up to five new licences by the middle of next year. And established lenders want to exploit their potential as a test bed for their own risk management practices – from credit risk management to fraud monitoring capabilities.
tags: Fintech VirtualBanking
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Status of cryptoassets and smart contracts under English law
On 18 November 2019, the UK Jurisdiction Taskforce1 published an authoritative statement on the legal status of cryptoassets and smart contracts under English law. This is a leading development for the legal, business and technological communities, as it makes the UK the first jurisdiction to clarify that cryptoassets can be treated as property and that smart contracts are capable of being enforced in the UK.
tags: Fintech CryptoAssets Regulation
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Systemic consequences of outsourcing to the cloud
Financial institutions are increasingly outsourcing information technology to the cloud, motivated by efficiency, security, and cost. This column argues that the consequence is likely to be short- and medium-term stability at the cost of the increased likelihood of catastrophic systemic events. Cloud providers are systemically important and should be regulated as such.
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BoJ Report on “Legal Issues Around CBDC Issuance
This Bank of Japan report published in September delves into the main legal issues related to the issuance of CBDC in Japan. It concluded that under current legislation, banknotes are considered tangible whereas so the current law would need to be revised in order to grant legal tender status to CBDC.
tags: Fintech CryptoAssets CBDC
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German Banks Permitted to Offer Sale and Storage of Crypto from 2020
Beginning next year, banks in Germany will be permitted to provide the sale and storage of digital currencies of money under the new legislation. The bill has just been passed by the German federal parliament, the Bundestag, and is anticipated to be signed off by the country’s 16 states.
tags: Fintech CryptoAssets Regulation
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Sarb plan for new rules using digital currency
The South African Reserve Bank is purportedly planning to bring new laws controlling the digital currencies to stop their usage to evade currency controls.
tags: Fintech CryptoAssets CrossBorder
Kiffmeister’s Fintech Daily Digest 12/01/2019
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China due to introduce face scans for mobile users
People in China are now required to have their faces scanned when registering new mobile phone services, as the authorities seek to verify the identities of the country’s hundreds of millions of internet users.
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Virgil Griffith arrested over North Korea visit — engineer arrogance, but on the blockchain
After a well-received technical talk to a keen audience on the other side of the world, Ethereum Foundation developer Virgil Griffith is on the short list for a new contract with the US Government — who will even pay his room and board for the duration!
tags: Ethereum Fintech CryptoAssets