Brazil central bank chief says WhatsApp payments service faces further review
The Banco Central do Brasil president reportedly said that Facebook Inc messaging service WhatsApp would be allowed to launch its new payments service in the country, but called for proof it can operate safely in terms of data protection in a competitive market. “We are not saying that it is not competitive, we just want them to ask for authorization and to show us how it will work for us to make sure it is competitive.”

What’s Next for CBDCs?
Fed Chair Jerome Powell recently dismissed the idea of private sector involvement in the development of a CBDC, but other current and former senior officials, such as Brian Brooks (Acting Comptroller of the Currency) and Christopher Giancarlo (former CFTC Chairman) disagree. Will we see the Federal Reserve launch a CBDC wholly on its own? Or will we see a few different Fed-endorsed “digital dollars” piloted simultaneously, perhaps some issued by the Fed and others by private companies or banks? It may be worth exploring a hybrid licensing framework whereby the federal government sets out technical, regulatory, and oversight requirements for the private sector to issue competing “digital dollars,” while still preserving the benefits of a Fed-run “public option.”

Raúl Carrillo (202007) Banking on Surveillance: The Libra Black Paper
A key point of this paper is that, in the rush to respond to Facebook’s Libra, conceptualizing what the project is and what it has the power to do has taken a backseat to trying to fit into one box within the existing regulatory system. For a company as powerful as Facebook, it advocates stepping back separating these questions, because Facebook and Libra will do whatever they can get away with. A two-pronged approach is recommended that focuses on Libra’s  privacy violations as much as its potential to threaten financial stability, and makes specific regulatory recommendations forU.S. regulators.

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Technical hurdles for CBDC
The Bank of Japan (BoJ) will commence a digital yen proof of concept. It anticipates two major technical challenges; ensuring universal access (with only 65% of Japan’s population having access to smartphones in 2018) and finding the right balance between resilience (which favors a distributed ledger platform) and capacity/speed (which favors a centralized ledger). It is leaning towards a centralized ledger. Some degree of offline functionality was also deemed important.

Motives Matter: Examining Potential Tension in Central Bank Digital Currency Designs
This Kansas City Fed note discusses the challenges of designing CBDC to achieve financial inclusion in the United States. For example,  CBDC that requires a smartphone or internet connection may only reach about half of the unbanked U.S. population.  Also, the tension over technology choices could lead to neither financial inclusion nor cross-border usage being fulfilled by a CBDC. Finally, CBDC has been discussed as a possible mechanism for setting negative policy rates, but that would require abolishing cash, anathema to CBDC designed for financial inclusion.

The BIS’s Hyun Song Shin on central banks and the new world of payments
If we look at the long arc of history, the social convention of money has undergone several key institutional changes. With the possible introduction of CBDCs, we may be at the cusp of another important step in the evolution of the relationship of the central bank with society. Digital innovation has made central bank public goods more important than ever, and central banks need to be at the cutting edge of technology to serve society. We may expect these efforts to make our payment systems more efficient, faster and more widely accessible for the new, digital world.

Low Internet Access Driving Inequality
COVID-19 and the Great Lockdown triggered a mass migration from analog to digital and highlighted that access to the Internet is crucial for socioeconomic inclusion. However, Internet usage remains a luxury: half of the world’s population does not have access to the Internet, either through a mobile device or through fixed line broadband. The digital divide — the gap between those who have Internet access and those who don’t — is more like a chasm, both within and between countries.

USDC Market Cap Exceeds $1 Billion
USD Coin (USDC) has broken the $1 billion market capitalization barrier. Multiple factors are driving recent growth, including COVID19-related currency volatility across many developing economies, the addition of support for blockchains other than Ethereum (with Algorand being the first to join) and the adoption of USDC by Compound (a decentralized finance (DeFi) lending crypto-asset lending platform.

Compound’s COMP Token Takes DeFi by Storm
Compound’s COMP token became the largest decentralized finance (DeFi) token by market capitalization only days after its June 16 launch. Compound, developed on the Ethereum blockchain, allows anyone holding a supported crypto-asset to deposit it into a Compound smart contract where it joins a liquidity pool and starts generating interest. The interest comes from other users that borrow funds and pay interest for the loans. Users can also borrow crypto from Compound by putting up collateral above a threshold defined by the project. https://decrypt.co/resources/compound-defi-ethereum-explained-guide-how-to

Lemonade reaches $3 billion market cap after shares soar more than 138% on its IPO day
Shares of online insurer Lemonade more than doubled in its market debut to reach a $3 billion market cap. Lemonade, launched in 2016, offers insurance to renters and homeowners with the use of artificial intelligence and chatbots, allowing the company to speed up the process. Customers are guided by a chatbot through the application process in under a minute, and claims get paid that quickly as well.

1,600 ICOs Give Insight Into Future Of Capital Raises
According to this paper, the key to identifying promising initial coin offerings (ICOs) lies in the language used in the underlying white papers. ICO project owners, who focused on a comprehensive description of the technological core behind their tokens were 20% more likely to obtain funding as well as 40% more likely to list their tokens on CoinMarketCap, one of the leading price-tracking website for crypto-assets. These ICOs saw their prices increase 24% more than average over 300 days after being listed.

ECB welcomes initiative to launch new European payment solution
The European Payments Initiative was launched by 16 European banks. This initiative aims to create a unified payment solution for consumers and merchants across Europe, encompassing a payment card and a digital wallet and covering in-store, online and person-to-person payments as well as cash withdrawals.

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Brazil antitrust agency revokes decision blocking WhatsApp, Cielo venture
Brazils’s Administrative Council for Economic Defence (CADE) lifted the injunction that effectively blocked the partnership between Facebook and Cielo aimed at enabling payment by WhatsApp. The measure was reconsidered after the companies provided the antitrust authority with information that eliminated any concerns regarding the transaction. Cade is, however, still deciding whether or not the companies must notify the agency about the transaction. However, WhatsApp payments remain suspended as a result of parallel action taken by Brazil’s central bank.

UAE Central Bank and ADGM invite FinTech firms for an innovation challenge
The Central Bank of the UAE and the Abu Dhabi Global Market, the capital’s international financial hub, invited fintech companies to compete in the annual FinTech Abu Dhabi Innovation Challenge. This year’s challenge aims at developing innovative solutions to serve the financing needs of small and medium-sized enterprises. It also seeks to drive the adoption of regulatory technology solutions to “improve compliance outcomes and enhance regulatory processes”.

Wirecard’s real business relied on small number of customers
Wirecard relied on a small number of customers for the majority of its genuine sales, according to an internal company spreadsheet that shows for the first time the real business behind the fintech group’s facade. In 2017 Wirecard claimed publicly to serve 33,000 large and medium-sized merchants, and 170,000 small businesses, a global reach that helped make the company an investment sensation. The internal file, entitled “Customer list — Jan-Jun 2017 (global)”, suggests Wirecard’s customer base was in fact much smaller, and far more lopsided,  showing only 100 clients generating the majority of revenues.

Lithuania to Launch CBDC This Month — Intended for Collection Purposes, Not Trade
The Bank of Lithuania (BOL) will launch a pre-sale of its LBCOIN CBDC on July 9. The coin will be issued and sold on July 23. While LBCOIN is technically a CBDC based on the NEM blockchain and issued by the BOL, the BOL prefers to call it “the world’s first blockchain-based digital collector coin.”

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The Digitization of Money and Payments
The US Senate Banking Committee held a hearing on how a blockchain-based US dollar could be created and regulated. On June 11 the U.S. House of Representatives held an open hearing of the Task Force On Financial Technology. It focused on the idea of direct accounts provided by the Fed for citizens (FedAccounts) using post offices as the brick and mortar access points. The second focus was on the blockchain-based central bank digital currency (digital dollar) that would be distributed through a two tier system, similar to cash distribution today.

CBDC adoption and usage – some insights from field and laboratory experiments
This Bank of Canada note discusses insights from historical launches of new payment methods and related laboratory experiments on the potential adoption and use of a central bank digital currency in the Canadian context. It finds that a necessary condition to successfully initiate and sustain the adoption and use of a CBDC is to ensure the CBDC has a clear niche in the payment landscape. A possible route is to design a CBDC as “enhanced cash”—to reduce the carrying and handling costs associated with cash and enable electronic transfers, while retaining cash’s distinctive desirable features. Desirable design features of a CBDC could include universal accessibility, transparent and low per-transaction fees, a high degree of privacy and robust offline capabilities. Due to network effects, sustained adoption and use of a CBDC as a person-to-business (P2B) payment method would occur if, and only if, consumers and merchants both benefit from switching from the status quo. Enabling person-to-person (P2P) functionality could help capture the consumer side and promote P2B use.

Wirecard administrator starts to dismantle defunct payments group
Wirecard’s administrator said “numerous” companies have expressed interest in buying parts of the payments group that last week became the first member of Germany’s prestigious Dax index to file for insolvency. Michael Jaffé, one of Germany’s leading specialists for complex insolvencies, will soon ask investment banks to oversee the potential sale of some of Wirecard’s units.

Wirecard Complies with MAS Directions to Keep Customer Funds in Banks in Singapore
The Monetary Authority of Singapore (MAS) said today that Wirecard entities in Singapore have complied with MAS’s directions to hold customers’ funds in segregated accounts with banks in Singapore. MAS is closely monitoring the operations of Wirecard. Wirecard’s primary business activities in Singapore are to process payments for merchants and help companies issue pre-paid cards. Wirecard has informed MAS that it is assessing its ability to continue providing its services in Singapore in light of the filing for insolvency in Germany by its parent company Wirecard AG.

Coronavirus panic fuels a surge in cash demand
Covid-19 has led to banknote hoarding in Australia, Brazil, Canada, the eurozone, Russia and the US, fuelled by concerns about financial system stress, according to analysis by Jonathan Ashworth and Charles Goodhart. The data suggests that cash in circulation has surged in a number of countries affected by the coronavirus. Even after the initial March jumps in some countries, subsequent gains have been quite large. The rise likely reflects the use of cash for one of its other traditional functions – panic-driven hoarding.

European Commission: Caps on interchange fees have proved their worth
The European Commission says regulations to cap the interchange fees charged to merchants by the global card schemes have had the desired effect of reducing costs to merchants and driving cross-border acquiring. The main objectives of the initial 2015 Regulation were the creation of a single market for card payments and the prevention of competition restrictions, including the inability of merchants to negotiate fees below the interchange fees levels. The separation of card schemes from entities processing card transactions was specified by Regulatory Technical Standards, which entered into force on 7 February 2018.

The GSMA Inclusive Tech Lab launches an industry-leading Interoperability Test Platform for financial inclusion
The GSMA Inclusive Tech Lab launched the Interoperability Test Platform, a joint test environment combining the GSMA Mobile Money API, a harmonised industry specification for all common mobile money use cases, and Mojaloop, an open source code, developed to accelerate financial inclusion through digital payments. The platform will provide the industry with an open-source and secure environment for ecosystem participants to test their systems across different use cases in an interoperable mobile money ecosystem.

Australia takes first steps towards Open Banking
Australians can now choose to share their banking data to access more personalised financial products and services following the launch of the Consumer Data Right. All four major banks are capable of sharing their customers’ data, when requested by the customer. Other authorised deposit-taking institutions will join the Consumer Data Right over the coming year. Overseen by the Australian Competition and Consumer Commission, consumer data relating to credit and debit cards, deposit accounts and transaction accounts are now available to be shared. Mortgage and personal loan data will be added from November.

An estimated 1.9 million U.K. residents hold digital assets, according to FCA study
A U.K. Financial Conduct Authority market research note estimated that 3.86% of U.K. residents hold crypto-assets. This amounts to approximately 1.9 million adults with the UK population (over 18) taken to be approximately 50 million.

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BIS Innovation Hub to expand to new locations in Europe and North America
The Bank for International Settlements (BIS) is expanding its BIS Innovation Hub with the establishment of new Hub centres across Europe and in North America in cooperation with member central banks. In the next two years, the BIS will open centres in collaboration with the Bank of Canada (Toronto), the Bank of England (London), the European Central Bank/Eurosystem (Frankfurt and Paris) and four Nordic central banks (Danmarks Nationalbank, the Central Bank of Iceland, the Central Bank of Norway and Sveriges Riksbank) in Stockholm. The BIS will also form a strategic partnership with the Federal Reserve System (New York).

Wirecard’s U.K. Subsidiary Gets Approval to Resume Activity
The U.K. Financial Conduct Authority said Wirecard AG’s British unit will be allowed to resume activities after the subsidiary of the troubled German fintech was able to meet “certain” conditions.

Zimbabwean central bank clarifies measures on phone-based money transfer platforms
The Reserve Bank of Zimbabwe clarified the measures taken to deal with illicit trading on phone-based money transfer platforms, assuring the public that “bona fide” transactions will be processed normally. It was money agents who had been suspended from mobile banking transactions, and emphasized that all mobile money liquidations should be done through the banking system.

ASX further delays launch of its blockchain settlement system — this time by one more year
Australian Securities Exchange (ASX) has delayed by a year the launch of its blockchain-based settlement system to April 2022. ASX is reportedly under pressure from users to delay the launch because the new system lacks clarity. The CHESS (clearing house electronic subregister system) replacement project has been under development since 2016 and has faced several delays to date.

Digital on-boarding policy to enable account opening anytime, anywhere
Bank Negara Malaysia issued a policy document on Electronic Know-Your-Customer (e-KYC). The policy document aims to accelerate and streamline practices of industry players in their adoption of e-KYC technology.

Virtually everywhere? Digitalisation and the euro area and EU economies
This ECB paper concludes that: (i) there is significant country heterogeneity across the EU in terms of the adoption of digital technologies, and most EU countries are falling behind competitors, particularly the United States; (ii) digitalisation is affecting the economy through a number of channels, including productivity, employment, competition and prices; (iii) digitalisation raises productivity and lowers prices, similarly to other supply/technology shocks; (iv) this has implications for monetary policy and its transmission; and (v) structural and other policies may need to be adapted for the euro area and EU countries to fully reap the potential gains from digitalisation, while maintaining inclusiveness.

Soramitsu Starts Testing ‘White Tiger’ Digital Currency in Japan
Japanese blockchain company Soramitsu will start testing a new “White Tiger” digital currency for retailers at the University of Aizu. It will run on the company’s native Hyperledger Iroha blockchain. Testing is starting with the university’s cafeterias and shops before gradually being utilized at locations off campus. Soramitsu is one of the blockchain startups behind the development of Cambodia’s blockchain-based Project Bakong retail payment system.

Introducing Free Float Supply
Coin Metrics’ free float supply takes many of the best practices from traditional capital markets and applies them to cryptoassets to identify supply that is highly unlikely to be available to the market in the short to mid-term. In doing so, free float supply provides a better approximation of a cryptoasset’s liquidity and market capitalization. Index weighting can benefit from using free float supply – free float supply reflects the liquid market more accurately and reduces potential manipulability.

And now for some catching up to stories I previously missed, with a big thanks to the Milken Institute FinTech in Focus:

Vanguard Wraps Phase 1 of Digital Asset-Backed Securities Pilot
Vanguard completed the first phase of a blockchain pilot to issue digital asset-backed securities (ABS). This pilot was done in collaboration with blockchain startup Symbiont, BNY Mellon, Citi, and State Street. Vanguard’s end goal for the pilot is to improve the process of securitization with blockchain.

Nomura launches Bitcoin and crypto custody for institutional investors
Japan’s Nomura launched its “Komainu” large-cap crypto-asset custody service for institutional investors. It has partnered with crypto firms Ledger and CoinShares.

AFI and Mastercard Foundation partner for COVID-19 Policy Response in Africa
The Alliance for Financial Inclusion (AFI) partnered with the Mastercard Foundation to implement a COVID-19 Policy Response program in Africa. The two-year project will focus on micro, small and medium enterprises and digital finance. It will target 49 financial sector regulators and policymaking institutions across the region to strengthen their capabilities to effectively respond to the economic consequences of COVID-19. Gender and youth policy considerations will be integrated into all policy interventions.

Industry Leaders Launch PayID, the Universal ID for Payments
A multinational alliance of industry leaders are collaborating on the development of PayID universal payment ID through the Open Payments Coalition. PayID aims to simplify the process of sending and receiving money globally – across any payment network and any currency. PayID is open-source, free, and simple to integrate into existing payment platforms. In addition, it provides an end-to-end travel Rule compliance solution for satisfying both FinCEN requirements and FATF recommendations.

Taiwan’s FSC signs fintech cooperation accord with Canadian regulators
Taiwan’s Financial Supervisory Commission (FSC) signed a fintech cooperation agreement with eight of the members of the Canadian Securities Administrators (CSA). It aims to facilitate cooperation in fintech development by gaining access to the work of the CSA Regulatory Sandbox Initiative and the FSC FinTech Regulatory Sandbox.

Israel Securities Authority and the Israeli Innovation Authority Introduce “Data Sandbox” Program for Fintech Firms
The Israel Securities Authority (ISA) and the Israel Innovation Authority (IIA) have introduced a “Data Sandbox” program for Fintech firms that will help them work cooperatively with regulators, licensed entities, and other financial services providers based in the country.

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A Survey of Research on Retail Central Bank Digital Currency
This paper examines key considerations around central bank digital currency (CBDC) for use by the general public, based on a comprehensive review of recent research, central bank experiments, and ongoing discussions among stakeholders. It looks at the reasons why central banks are exploring retail CBDC issuance, policy and design considerations; legal, governance and regulatory perspectives; plus cybersecurity and other risk considerations. This paper makes a contribution to the CBDC literature by suggesting a structured framework to organize discussions on whether or not to issue CBDC, with an operational focus and a project management perspective.

Celo Dollar (cUSD) Stablecoin Launches
Celo Dollars (cUSD) stablecoins are now live on the platform’s mainnet, barely two months since the mainnet went live. The project has been making aggressive moves in both development and community growth. With cUSD now accessible, the foundation is optimistic that its vision of an all-inclusive financial ecosystem will be realized. Currently, the 75+ member Alliance’s focus is on remittances and international aid.

FCA says Wirecard making ‘good progress’ as fintechs work overtime on migration plans
Following the U.K. Financial Conduct Authority (FCA) suspension of business at Wirecard Card Solutions (WCS) in the wake of its German parent’s insolvency filing, the FCA reports good progress in meeting conditions for a return to operational activity. Although the freeze was designed to protect consumers and its suddenness presumably to prevent tipping off any fraudsters still employed by Wirecard, customers at all the agent businesses that use WCS to process payments found that payments were blocked and they were unable to access their money. Among U.K. fintech who were likely affected by the freeze were Revolut, Pockit, Soldo, ANNA, Tymit and Curve, although to differing degrees as many including Curve and Revolut had begun migrating away from Wirecard’s services. In fact, Curve was already back to normal operations within a business day, although it advised customers to carry another card with them for the next few days. Forbes is keeping a running list of banking services currently known to be suspended here.

Germany missed chances to put Wirecard on watchlist, source says
German regulators twice looked into tightening the supervision of collapsed payments firm Wirecard and discussed it with the German and European central banks but no action was taken. In 2017, officials from BaFin and the Bundesbank, considered placing Wirecard on a list of financial companies to supervise but decided against it. In the second half of 2019, there were discussions for months, which involved the European Central Bank (ECB), about putting Wirecard on a watchlist to give authorities more power to investigate it. But the talks dragged into 2020 and were still inconclusive when they were “overtaken by events”!

Wirecard… the biggest accounting fraud? Is the customer’s money safe? The end of Banking-as-a-Service?
The Wirecard debacle begs fundamental questions about regulation, audit and more. How can BaFin say the bank is fine and not check the balance sheet of the holding company? How would EY sign off accounts for years, without any checks and balances? And how come no one listened to the FT and, instead, took them to court? Another big issue is that the ecosystem model of Banking-as-a-Service could implode because of Wirecard. When you have a company within a company within a company dealing with financial service, and no one can point at which company actually has the money: that’s a problem.

Square Is Withholding Up To 30% Of Payments Made To Some Merchants
Payments firm Square recently began holding back between 20% and 30% of the money it collects from some customers — claiming that it does so to protect against risky transactions — in a move that has sparked an outcry from small businesses in financial distress during the pandemic. The firm described the withholdings as part of its “rolling reserve”  policy, adding that it had started the practice late last year and expanded it after the pandemic began to “protect buyers.” The company claimed that it applied the reserves policy on more “risky” sellers who sell goods or services more prone to disputes or who take prepayment for a service to be delivered at a future date.

Bitcoin Is Not Dead: Get Yours At Your Local Post Office
On June 24th, Australia Post announced that bitcoin will be available for purchase at all postal service outlets. In partnership with Bitcoin.com.au, customers will be able to purchase Bitcoin and other cryptocurrencies at 3,500 locations using the Post Billpay feature. Both cash and credit card payments will be accepted.

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Kenya’s central bank extends mobile payments relief by six months
The Central Bank of Kenya extended the mobile money COVID-19 relief measures introduced in March by a further six months. The central bank also tweeted that before the COVID-19 crisis, 88% of Kenyan transactions by number (50% by value) were being conducted outside bank branches. In the pandemic period, 94% are being conducted outside branches. Before, 44% of transactions were being transacted on mobile phones. Now, 61% are on mobile.

Zimbabwe has banned all mobile money services as its currency troubles worsen
Mobile money platforms have been banned in Zimbabwe as the country’s local currency continues to lose value, with authorities desperately hoping to arrest the decline. But the move has left subscribers and users stranded in an economy which sees a huge portion of transactions flow through mobile money platforms due to long-term cash shortages at the banks.

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Is our money about to spout memories?
“Fears over privacy are a massive obstacle to switching to CBDCs. The problem is only amplified by suspicions that central banks will, despite claims to the contrary, use the switch to CBDCs to abandon what is by far the most reliable and private form of money available to the public right now – cash. After all, we all have memories we would rather were forgotten.”

Distributed Ledger Technology Experiments in Payments and Settlements
A new IMF Fintech Note discusses recent explorations into the use of distributed ledger technology (DLT) in payment and settlement systems. It is intended to help inform policymakers and the industry on DLT’s potential benefits and risks, which could have implications on international standards for financial infrastructures to ensure safety and efficiency in the public’s interest. The analysis points to key issues that could require further attention.

Compendium of Practices for Central Bank Digital Currencies for Multinational Financial Infrastructures
This paper surveys DLT-based wholesale CBDC experiments with completed proof-of-concept prototypes from across the world for which there is publicly-available information. It also seems to cover projects that go beyond CBDCs into private-sector projects. But it looks to provide a possibly useful classification framework for CBDCs and use cases in the financial services industry.

Toward a Cash-Lite Ghana: Building an Inclusive Digital Payments Ecosystem
The Government of Ghana is seeking to harness the benefits of a shift from cash to digital payments by developing a national inclusive digital payments ecosystem where everyone can make – and receive – payments digitally. A Digital Payments Roadmap has been drawn up by the Ministry of Finance with support from the Better Than Cash Alliance.

Signature Bank Blockchain Integration Increased Transaction Volume By 15%
New York-based Signature Bank announced a new client service – a blockchain-based digital payments platform called Signet, with Fireblocks. Fireblocks is an enterprise-grade platform that settles digital security transfers between members and exchanges. Fireblocks serves digital asset exchanges, custodians, banks, trading desks and hedge funds like SWIFT serves the currency markets. Signature Bank can now enable their commercial clients to access its blockchain-based, real-time payments platform through the Fireblocks network.

Blockchain Accounting Issues Could Be Preventing Mainstream Adoption
The financial reporting process and conversation is, by its very nature, a complicated process that involves inputs, reviews, and comments from an array of market actors. Blockchain based applications have the potential to streamline and improve financial reporting, but before that can occur there are several fundamental issues that must be resolved.

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Wirecard: the cryptocard consequences
Wirecard Card Solutions, Wirecard’s UK subsidiary, supports a number of crypto cards, among them those issued by TenX and Crypto.com. With most of these cards being rendered unusable by the Wirecard revelations, many of these entities will once again be “looking for alternative solutions to ensure customers can continue using their cards”. Whether any other corporate will be as keen to step in to bridge the gap this time around, is harder to determine.

EU opens Apple antitrust investigations into Apple Pay practices
The European Commission is opening an antitrust investigations into Apple’s Apple Pay practices to assess whether Ait violates EU competition rules. Apple has limited access to the Near Field Communication (NFC) functionality of its iPhone and Apple Watch devices, a move that means banks and other financial service providers can’t offer NFC payments through their own apps. It also reserves the ‘tap and go’ functionality of iPhones to Apple Pay.  Apple Pay accounts for about 5% of global card transactions and is on pace to handle 1-in-10 such payments by 2025.

The true cost of killing off cash
Cash use is in decline, a trend that has been accelerated by the coronavirus pandemic. Advocates for physical cash argue that the demise of physical cash risks leaving vulnerable members of the population behind. A University London College study suggests that CBDCs will need to replicate the privacy and anonymity of physical cash to achieve widespread acceptance. It argues that CBDCs incorporating privacy by design will be seen as more free and business-friendly than those that rely upon data protection by third parties.

Brussels to call for probe into German regulator over Wirecard
Brussels will call for a probe into whether BaFin, Germany’s banking regulator, failed in its supervision of Wirecard, warning that the payment company’s collapse poses a threat to investor trust in the EU. Valdis Dombrovskis, the EU’s executive vice-president in charge of financial services policy, said the EU should be prepared to pursue a formal investigation into the German regulator for “breach of union law” if the preliminary probe by the European Securities and Markets Authority discovered shortcomings in BaFin’s upholding of EU rules on financial reporting.

Customer funds frozen at Wirecard UK after FCA steps in
The U.K. Financial Conduct Authority (FCA) ordered Wirecard UK to cease all regulated activity after the parent company filed for insolvency in Germany. Wirecard Card Solutions Limited is authorised and supervised by the FCA to issue e-money and provide payment services including, issuing e-money onto prepaid cards. The FCA immediately placed requirements that it should not pay out or reduce any money it holds for its customers except on their instructions.

EY failed to ask for Wirecard bank statements for 3 years
EY failed for more than three years to request crucial account information from a Singapore bank where Wirecard claimed it had up to €1bn in cash — a routine audit procedure that could have uncovered the vast fraud at the German payments group. EY said that there were “clear indications that this was an elaborate and sophisticated fraud, involving multiple parties around the world in different institutions, with a deliberate aim of deception”. The company argued that “even the most robust audit procedures may not uncover this kind of fraud”.

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Wirecard collapses into insolvency
Wirecard collapsed on Thursday as the once high-flying German payments service provider announced it would file for insolvency following revelations of a multiyear accounting fraud. The Aschheim-based technology company, which a week ago had a market value of €13bn, said in a regulatory statement that it faced “impending insolvency and over-indebtedness”.

Designing a CBDC for universal access
The Bank of Canada is exploring how a central bank digital currency (CBDC) could be designed for universal access. One potential concept the it is investigating is a custom universal access device (UAD) to securely store and transfer CBDC. The device could incorporate attributes of cash and take advantage of specialized technologies. Such a device should be manufactured at a low cost and issued by the Bank to ensure maximum inclusion. A UAD could embed a local, secure store of value, be network-independent and operate for long periods on a local power source. If there is an infrastructure failure, a UAD may prevent the interruption of digital transactions.

Security of a CBDC
This Bank of Canada paper explores the security aspects involved in constructing and deploying a central bank digital currency (CBDC). It proposes a taxonomy to categorize and analyze the many CBDC solutions available in the marketplace. It concludes that a public distributed ledger technology (DLT) platform remains unsuitable for CBDC. The integrity of a CBDC is a core risk and must be managed across all CBDC use cases. Local store-of-value solutions offer extreme resilience in times of crisis but carry local integrity risks. A hybrid system maximizes access across all CBDC use cases while remaining available during times of crisis. An operational CBDC system would be a prime target for organized crime and other nation states. Proper safeguards are required to minimize risks, and threats must be continuously monitored.

Telegram Agrees to Pay $18.5M Penalty in SEC Settlement Over Failed TON Offering
Telegram will pay $18.5 million and notify the U.S. Securities and Exchange Commission (SEC) if it plans to issue any sort of digital currency in the next three years in a proposed settlement with the securities regulator. The settlement ends a six-month court fight with the agency, and also indicates the messaging platform will be responsible for a $1.22 billion disgorgement that is offset by $1.19 billion paid as “termination amounts” in investors’ purchase agreements and the amounts that some investors loaned to Telegram earlier this year. Telegram has 30 days to pay the SEC penalty and up to four years to pay back investors under the settlement. 

The Digitization of Money and Payments
The U.S. Committee on Banking, Housing and Urban Affairs will meet remotely on June 30 starting at 10:00am ET to conduct a hearing entitled The Digitization of Money and Payments.  The witnesses will be: The Honorable J. Christopher Giancarlo, Senior Counsel, Willkie Farr & Gallagher LLP and former Chairman, U.S. Commodity Futures Trading Commission; Mr. Charles Cascarilla, Chief Executive Officer and Co-Founder, Paxos; and Professor Nakita Q. Cuttino, Visiting Assistant Professor of Law, Duke University School of Law.

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