Enhancing cross-border payments: building blocks of a global roadmap
This CPMI report, and its accompanying technical background report, represent the output of Stage 2 of the three-stage process coordinated by the Financial Stability Board (FSB) to develop a global roadmap for enhancing cross-border payments. It identifies 19 “building blocks” where further joint public and private sector work could enhance cross-border payments, and supports a global approach to addressing the underlying frictions identified in the Stage 1 report published by the FSB. The 19 building blocks are arranged into five focus areas, four of which (focus areas A to D) seek to enhance the existing payments ecosystem, while focus area E is more exploratory and covers emerging payment infrastructures and arrangements. The report concludes with a set of considerations around these building blocks that support the Stage 3 work to develop the roadmap.

Central Bank of the Bahamas Lessons from Hurricane Dorian
In the Hurricane Dorian aftermath, the Central Bank of the Bahamas Project Sand Dollar demonstrated one major benefit: rapid payments system restoration after a disaster. On Abaco and to a lesser extent Grand Bahama, local banking services closed as the branches and ATMs were destroyed or rendered nonfunctional. Restoring these physical assets required weeks to months, and in some cases are not yet in place. Mobile phone coverage, by contrast, was generally restored with a few days after Dorian. Sand Dollar’s mobile phone functionality will mean that the financial recovery aspects of a hurricane can progress more quickly and more safely than would otherwise be the case.

CoinMetrics Reports on the Rise of Stablecoins
CoinMetrics has produced an in-depth research report on the rise of stablecoins following the March 2020 crypto crash. Stablecoin supply has exploded in 2020 but it’s unclear exactly why. After it took 5 years for stablecoin supply to reach 6 billion, it only took another 4 months for it to grow from 6 billion to 12 billion following the March 12th crypto crash.

McKinsey warned Wirecard a year ago to take ‘immediate action’ on controls
McKinsey warned Wirecard more than a year before the payment group’s collapse that it should take “immediate action” to deal with an absence of controls at its largest business. The consultancy told the company in June 2019 that “risks related to business partnerships or third parties” were one of its main vulnerabilities. In August 2019, McKinsey gave a full presentation to the two boards at an off-site meeting in Austria, where it warned that “non-existent” controls over the third-party business had created a “significant risk”.

How Google’s balloons are bringing internet to new parts of Kenya
In partnership with Telkom Kenya, Google’s Loon technology has now launched with 35 balloons in constant motion above eastern Africa delivering mobile internet speeds of up to of 4.74 mbps uplink, and downlink speed of 18.9 mbps, and a latency of 19 milliseconds for everything from emails, web browsing, voice calls via WhatsApp and YouTube with up to 35,000 early users connected, according to the partners. There are still limits to the availability of the new Loon service as it is subject to vagaries of wind speeds and directions among other things, but Loon is promising its advanced machine learning algorithms will soon be able to overcome some of these challenges as well as be boosted by the addition of more balloons for the region. But for now this means there may be service disruptions. Also, because the service is solar-powered, it’ll only be available between 6am to 9pm local time.

South African data privacy laws come into force
South Africa’s data privacy laws went into force, giving anyone processing personal information in the country a 12-month grace period to ensure that they comply with the requirements of the Protection of Personal Information Act (PoPI). From July 1, 2021, any non-compliance with PoPI will have consequences. Enforcement mechanisms under PoPI include penalties up to R10m ($590,500) civil proceedings instituted by data subjects, and criminal offences and fines in some circumstances.

Zopa granted full UK bank license as it gears up to launch savings account and credit card
Back in June, UK PSP lender Zopa was awarded a full U.K. bank licence, as it gears up to launch a fixed-term savings account, followed by a credit card. Dubbed “Zopa  Bank,” the new challenger bank will sit alongside its existing peer-to-peer lending business, under Zopa Group, creating what the veteran fintech previously described as the first hybrid peer-to-peer and digital bank offering.

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MAS’s Project Ubin’s final phase highlights commercial potential, paving way towards live adoption
The Monetary Authority of Singapore (MAS) and Temasek today jointly released a report to mark the successful conclusion of the fifth and final phase of Project Ubin. The report provides technical insights into the blockchain-based multi-currency payments network prototype that was built and describes how the network could benefit the financial industry and blockchain ecosystem. It confirmed that an international settlement network, modelled after this payments network prototype, could enable faster and cheaper transactions than conventional cross-border payments channels. It also validated the use of smart contracts in use cases such as delivery-versus-payment (DvP) settlement with assets on private exchanges, conditional payments and escrow for trade, as well as payment commitments for trade finance.

Will smart contracts usher in a new wave of financial inclusion?
A World Bank report looked at the role smart contracts could play in improving financial services in poorer nations. It found that smart contracts will not alleviate a variety of common impediments to financial inclusion, including credit risk and income irregularity, distance and inaccessibility, limited awareness and financial literacy, and cultural factors. However, they could assist in determining whether a particular insurance product was suitable as well as increasing trust in the product amongst stakeholders. And on short-term loans, smart contracts could increase efficiency with the different phases of a loan cycle, but those phases are already highly automated, so the new technology would be redundant.

FCA ban on Wirecard UK left vulnerable without access to food
The UK Financial Conduct Authority forced Wirecard Card Solutions to halt all regulated activity after its German parent company collapsed into insolvency, before lifting the restrictions the following week. However, the move, announced with only a few hours’ notice, left millions of customers unable to use payment cards issued by WCS or access cash stored in their accounts. Some of the hardest hit included victims of human trafficking and modern slavery who rely on funds from a government scheme that was an indirect Wirecard customer, according to representatives for these individuals.

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CBDC and the New World of Money and Payment Systems
According to this paper, when introducing sovereign digital currencies (SDCs), the key motivations and design choice parameters are largely determined by an efficiency vs safety paradigm:

• Where increasing efficiency is the main motive, Hybrid SDC models, involving partnerships between the public and private sectors, are most likely to emerge, in which monetary arrangements will remain dominated by central banks (particularly major economy central banks) with the private sector involved in various payments configurations. 
• Where financial inclusion is the paramount policy goal, a Centralized SDC model, characterized by direct access to the central bank, may be initially adopted (and then be replaced by the hybrid SDC model over time). 
• A Decentralized SDC is probably a non-starter because of governance concerns. 

Comments:

• I like the term “sovereign digital currency” (SDC) as opposed to the stretching of the term “central bank digital currency” (CBDC) if efforts like the Marshall Island SOV are to be included. However, given that the paper focuses almost exclusively on central bank-issued currency, I wonder if the introduction of new terminology is really necessary.
• I seriously doubt that any central banks have considered, or are considering, the “centralized” SDC, although I think the paper suffers from a mis-classification problem, because it designates the Uruguay pilot as “centralized” whereas the user-facing account-management was all outsourced to the private sector. 

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The Wirecard lessons: A reform proposal for the supervision of securities markets in Europe
The Wirecard scandal calls for a fundamental overhaul of the fragmented European securities markets supervisory regime, and offers the potential to lead to the establishment of an independent European Single Market Supervisor (ESMS). Endowed with strong enforcement powers, and supported by the existing national agencies, the ESMS would be entrusted with ensuring a uniform market standard as to transparency and other issues of market integrity across Europe. This would not rule out maintaining a variety of market organization structures at the national level. The ESMS would need executive powers in the world of markets (i.e. securities and trading), much like the ECB Single Supervisory Mechanism (SSM). To fill this new role, ESMS would have to be established as a new, independent institution, including an enormously scaled up staff compared to the European Securities and Markets Authority (ESMA).

The Road to Digital Money – Twenty Two Suggestions for Leveling the Roadbed Before We Pave It
This essay argues that, soon enough, we will start to talk about the real-world realization of the dream of a digitally native dollar.  It then goes on to recommend that the US government create a task force whose goal is to overhaul the financial system we have today to better serve the 9–10 billion people who are coming this century. It starts with an overview, then presents 22 goals for the task force to achieve before we begin coding up a digital dollar infrastructure.

Without privacy, do we really want a digital dollar?
Unlike a traditional bank ledger, in a zero-knowledge system each transaction would reveal no information about the sender, recipient, or amount sent, yet proofs would protect the soundness of the currency from theft and counterfeiting. Unlike physical cash or banking, a digital dollar ledger could offer a real time and publicly auditable report of the supply of money in circulation, and by using zero-knowledge proofs this public accountability can be offered without revealing individual transaction details that could jeopardize the privacy of digital dollar users. A major benefit of this approach is that, unlike traditional cryptocurrencies, the total number of transactions allowed by the system can be made to scale to tens or hundreds of thousands per second.

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The Block Presents: Central Bank Digital Currencies – Design, Policy & Implementation
On July 17th at 11:30am ET The Block will host a panel with leading Central Bank Digital Currency (CBDC) experts to discuss The Block’s soon-to-be-launched report exploring CBDC history, motivations, policy designs and technological implementations. The panelists will be Carmelle Cadet (Emtech), @Kiffmeister (International Monetary Fund), and Sheila Warren (World Economic Forum).

UK FCA toughens rules on payment companies after Wirecard collapse
The UK Financial Conduct Authority brought forward stronger measures to protect the users of payment cards and digital apps, in the wake of the Wirecard debacle. Under the new guidance, payment providers and e-money issuers must keep up-to-date records of all funds received and maintain a clearly separate “safeguarding account” for customer money. Companies must also be more careful when selecting and appointing third-party service providers.

Bitfinex Must Face N.Y. Suit Over $800 Million in Lost Funds
A New York state appeals court ruled that Bitfinex must face claims by New York state that it hid the loss of commingled client and corporate funds. Companies connected to Bitfinex are accused by the New York Attorney General of hiding the loss of more than $800 million in client and corporate funds. Companies tied to Bitfinex also operate the stablecoin Tether, which serves as a conduit for trading in much of cryptocurrency market globally. The appeals court rejected the argument that Tether, with a market capitalization of more than $9 billion, is not a security or commodity, and said the court has jurisdiction over its issuer.

Malaysia’s Securities Commission to Legalize Digital Asset and Crypto Trading
Malaysia’s Securities Commission Shariah Advisory Council will reportedly announce that the trading of digital assets will soon be legal in the country. SC chairman Datuk Syed Zaid Albar said that “The… Council has resolved that in principle, it is permissible to invest and trade in digital currencies and tokens on registered digital asset exchanges” during a teleconference panel session.

DeFi Crypto Lenders – Who Offers the Highest Yield for Depositors?
With the growth of DeFi applications, crypto lending, margin exchanges, and stakable cryptocurrencies over the last few years, it can be difficult to know where the best yields for your idle capital are. Following on from our guide to crypto yield farming, this survey looks into the major crypto lending platforms and examines the different interest rates offered by them.

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China’s CBDC Project to Collaborate With More Domestic Enterprises
Meituan and Bilibilibili have apparently both begun to cooperate with a number of banks involved in the digital Yuan project. Meituan is a major service platform with over 240 million consumers and five million local merchants, and Bilibilibili is China’s largest video sharing website.

The causes and consequences of mobile money taxation
This GSMA paper looks at the subject of mobile money taxation through the lens of taxation and development. With a focus on four sub-Saharan countries where mobile money transaction taxes have been proposed, it seeks to understand what the motivating forces are for these taxes and identify some of the unintended consequences. These have implications on the attainment of financial inclusion and wider development goals.

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The Promise of Fintech : Financial Inclusion in the Post COVID-19 Era
A new IMF paper discusses the ways that technology is changing the landscape of the financial sector, and increasing access to financial services in profound ways. These changes have been in motion for several years, affecting nearly all countries in the world. However, during the COVID-19 pandemic, technology has created new opportunities for digital financial services to accelerate and enhance financial inclusion, amid social distancing and containment measures. At the same time, the risks emerging prior to COVID-19, as digital financial services developed, are becoming even more relevant.

Central Bank of the Bahamas to take ‘Sand Dollar’ nationwide by Q3
The Central Bank of the Bahamas is preparing to make the Sand Dollar available nation wide by the end of the third quarter of this year, according to Deputy Prime Minister and Minister of Finance K Peter Turnquest. Turnquest was addressing Parliament on the proposed legislative reforms to Central Bank Governance, Financial Sector Crisis Management and Modernization of the Domestic Payments System.

Ride-Hailing Giant DiDi to Trial China’s Central Bank Digital Currency
Chinese ride-hailing mobile service DiDi has reportedly entered into a strategic partnership with the Digital Currency Research Institute of the People’s Bank of China (PBoC) in an effort to accelerate the application of its Digital Currency Electronic Payment (DCEP). DiDi is the dominant ride-hailing mobile service in China.

FATF Report to the G20 Finance Ministers and Central Bank Governors on Stablecoins
In a report to the G20 finance ministers and central bank governors, the Financial Action Task Force (FATF) said regulators need to cooperate to make measures such as the “travel rule” more effective. The organization will work to develop an international framework for authorities to coordinate and share information about virtual asset service providers (VASPs). The FATF also said it will be providing specific guidance on stablecoins for regulators at some future point.

Criminals infiltrating Africa’s booming mobile money industry
A new INTERPOL report has found the billion dollar mobile money industry in Africa is being exploited by organized crime groups – a trend only set to increase as the service is rolled out across the continent. The report presents an overview of the criminal exploitation of mobile money services, including fraud, money laundering, extortion, human trafficking and people smuggling, the illegal wildlife trade and terrorism. A lack of robust identity checks to verify users combined with a need for greater law enforcement resources and training on mobile money-enabled crimes have created a financial system distinctly vulnerable to criminal infiltration.

Card schemes to take Click to Pay standard global
American Express, Visa, Mastercard and Discover are to roll out the online Click to Pay standard globally, having signed up 10,000 merchants in the US since launch in 2019. Major payments service providers, gateways and acquirers across the ecosystem have also joined the initiative. Click to Pay aims to make online shopping easier for consumers by replacing time-consuming key entry of personal account numbers and information at checkout with a universal payments button.

Sri Lanka’s Central Bank to develop Blockchain Technology based KYC Proof of Concept
The Central Bank of Sri Lanka is developing a blockchain-based shared know-your-customer proofs of concept. Over 40 companies, including 17 foreign companies applied, either individually or jointly, to develop the POC. After several rounds of selection, the CBSL selected three applicants to be tasked with this project.

Saudi Payments helps society adapt to COVID-19
Saudi Arabian Monetary Authority (SAMA) subsidiary Saudi Payments highlighted the importance of electronic payment platforms and their increasing usage popularized during the COVID-19 pandemic. SAMA had tripled the limit of purchases through bankcards that use NFC technology on point-of-sale devices, in order to avoid contact with contaminated surfaces. As a result, during the first quarter of 2020, there were large increases in online purchases and purchases via POS devices.

Mobile money ban sends Zimbabwe’s economy spiraling
The ban on electronic money transactions in Zimbabwe has sent trade in the economy into a tailspin. The government has suspended mobile money transactions except those for receiving essential payments for goods and services as well as paying for utilities like water, electricity and airtime. However, it also suspended the Ecocash mobile payments platform, which accounts for about 94% of the market. While the government insists individual transactions are still open, on the ground, things are more “intricate” now.

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The early history of “Central Bank Digital Currency”
Central banks had talked about the idea of CBDCs for years — but with the Libra announcement, the economic astronauts went “this is our moment!” and dusted off their suddenly-popular old musings. But where did the idea of central bank digital currencies come from?

The potential effect of a central bank digital currency on deposit funding in Canada
This Bank of Canada paper looks at how deposit competition from a cash-like central bank digital currency would impact the income and liquidity of the six largest Canadian banks. In plausible scenarios, it finds that the banks could absorb the potential shock to net income and liquidity but experience temporary declines in profitability.

Unleashing the euro’s untapped potential at global level
According to Fabio Panetta, Member of the Executive Board of the ECB, if a euro CBDC is allowed to be used outside the euro area, the euro’s international role could be strengthened if the CBDC represented an attractive payment vehicle or store of value for non-euro area residents. It could have implications for capital flows and the exchange rate of the euro, with potential knock-on effects on euro area and global economic developments. It could amplify the real and financial cross-border spillovers of domestic monetary policy shocks by creating a new channel for their propagation. The magnitude of such effects would depend on the design of the CBDC.

COVID-19: accelerating digital health insurance take-up in China
China’s online health insurance market is growing strongly. All-sector online insurance premiums have grown at an average annual of 45% since 2013. In 2019, online health insurance premiums were up 92% from 2018, the fastest growing of all business lines. Swiss Re surveyed consumer attitudes towards insurance, finding that more than 60% of interviewees prefer to buy simple and cheap insurance covers online, and health insurance is among the top three product types that consumers prefer to purchase online.

Why Fixed Costs Matter for Proof-of-Work Based Cryptocurrencies
This Bank of Canada paper examines how the cost structure of crypto-asset mining affects the response of miners to price fluctuations and the immutability of crypto-asset ledgers that rely on proof-of-work. It shows that the amount of mining power supplied to crypto-assets that rely on application-specific integrated circuits (ASICs), such as Bitcoin, responds less to adverse price shocks than other crypto-assets respond to such shocks, a fact that is instrumental to avoiding double-spending attacks. These results weaken doomsday predictions for bitcoin and other crypto-assets with declining block rewards. However, smaller crypto-assets that rely on the same specialized hardware as larger ones may be less protected.

700,000 Expedia Hotels Can Now Be Paid With Cryptocurrencies via Travala
More than 700,000 Expedia Group hotels and accommodations are now available via crypto-friendly travel booking platform Travala. Bookings can be paid with more than 30 cryptocurrencies, including bitcoin. Despite covid-19, Travala saw a 170% increase in booking revenue from its 2 million properties in 230 countries. /

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DApp Q2 Market Report Shows Massive DeFi Impact in The Decentralized App Ecosystem
The DeFi realm has registered tremendous growth in the past quarter (Q2) with some products posting some impressive figures. $4.9 Billion was channeled through DeFi dApps, a stellar 67% increase from Q1’s figures. Basic Attention Token (BAT) – a token used to incentivize digital ad consumption on the Brave browser – was the most used coin in DeFi in Q2 2020. BAT’s volumes in DeFi came to $931 million, over $300 million more than ether. The token’s overnight popularity came from generating the best return on Compound, not because of any feature of BAT. Ether saw its active user numbers soar to an All-Time High of 1,258,527 more than doubling Q1’s figures. Their daily average active users have also increased from the 7,682 in the first quarter to over 40% in the second quarter, mostly attributing the COMP governance token launch.

SocGen’s digitised bond passes settlement test
Societe Generale quietly achieved a first: the settlement of a securities trade using a wholesale central bank digital currency (CBDC). The French bank issued a covered bond in the form of a securitised token on a public blockchain. It then bought back the debt using digital euros issued by the Banque de France. The deal was not large – at €40 million it could be described as a token gesture – but it’s a significant step in the creation of smart contracts that enable instant trade settlement. CBDC could slash the time and cost of settlement, unlocking trapped capital that could be used for other activity and so boosting intraday liquidity.

Wirecard’s core business has been lossmaking for years, audit shows
Wirecard’s internal numbers reveal that the operating performance of its core business — mainly payments processing in Europe and issuing credit cards in Europe and North America — was far worse than previously known. The figures show that those core activities have also become increasingly lossmaking in recent years, despite accounting for half of the company’s reported revenue and almost two-thirds of the transaction volume.

What Is DeFi and How Will It Impact Traditional Finance?
DeFi (decentralized finance) encompasses anything that provides loans, borrowing, staking or some reward to the user for putting in capital to the system. It removes all the layers of intermediaries and middlemen that would normally be involved through the use of smart contracts. The DeFi space remains heavily reliant on the Ethereum blockchain (which has famously struggled to scale to onboard mass users). However, once Ethereum transitions to ETH 2.0 using the Proof of Stake consensus mechanism, the number of users it can onboard will be potentially without limitation. Moreover, other serious contenders are further building out the space, such as Compound, and Maker DAO, propelling DeFi to more and more users.

Decentralized apps surged in June
Decentralized apps experienced a dramatic surge in activity in June 2020, led by a $500 million increase in DeFi protocol Compound’s balance sheet. Curve serves as an automated money market that can only support swaps between different stablecoins and “wrapped” cryptocurrency tokens. Curve can offer more competitive slippage and lower fees for trading virtual assets. Leading non-custodial exchange Uniswap also saw increased activity because of a dramatic rise in Compound’s COMP token trading volumes. Kyber Network, which connects fragmented tokenized assets by facilitating seamless transactions, and decentralized exchange protocol 0x also reported increased activity.

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