The Reserve Stablecoin Project
The Reserve project is going through the initial testing stage for its Reserve (RSV) decentralized governance stablecoin. The first phase of its development is centralized, where it will be fiat-collateralized and pegged to the US dollar. To get rid of this dependence, RSV will have to make a contrary step towards decentralization and utilize a “basket of assets,” as of now to consist of three collateral tokens: USD Coin, TrueUSD and Paxos, while still keeping the USD peg until it’s finally abandoned. 

Consumer Payment Behaviour in Australia
The Reserve Bank of Australia’s 2019 Consumer Payments Survey provided further evidence that Australian consumers are increasingly preferring to use electronic payment methods. Many people now tap their cards, or sometimes phones, for small purchases rather than paying in cash. Consumers also have an increasing range of options available for making everyday payments. Despite this, cash still accounts for a significant share of lower-value payments and a material proportion of the population continues to make many of their payments in cash.

Paying interest on cash
In this 2018 post JP Koning discusses the idea of paying interest on cash, and explores three ways of doing this. The first way is to use stamping, but this means that banknotes are no longer fungible. The second way is for the central bank to sever the traditional 1:1 peg between deposit money and cash, and have cash slowly appreciate in value relative to deposits, but this imposes a calculational burden on merchants and users. Plus there may be taxation issues. The third way is to run lotteries based on banknote serial numbers, an idea proposed by Hu McCulloch and Charles Goodhart back in 1986, but it introduces the threat of bank runs (the day before the big lottery is set to occur, everyone will withdraw deposits for cash so that they can compete in the draw). JP also discusses Gesell’s “shrinking money” which has recently been proposed in a Celo C-Lab paper.

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Steve Forbes: ‘Bitcoin Is a High-Tech Cry for Help’
Forbes Inc chairman Steve Forbes described cryptocurrencies as a “high-tech cry for help” borne from “the instability of government-printed money today.” He criticized the volatility of crypto assets, but emphasized the appeal of crypto as a symptom of failed economic policy and not the virtues of Bitcoin as a money commodity.

Ripple set to build XRP payments corridor in Brazil
Ripple Head of Global Banking Marjan Delatinne said that the firm is actively working on developing a payment corridor in Brazil. Ripple’s infrastructure for Brazil would make use of its On-Demand Liquidity technology, which dynamically provides liquidity, rather than using traditional approaches such as the Nostro/Vostro system, and make it easier to process cross-border payments.

Ethereum’s $5.2 Million Fee Scandal Explained: Exchange Held to Ransom by Hackers
According to Ethereum (ETH) co-founder Vitalik Buterin, hackers are holding an unnamed crypto exchange to ransom after an alleged cyber-attack forced the ETH blockchain to facilitate two separate transactions at a cost of $5.2 million in fees. “Hackers captured partial access to exchange key; they can’t withdraw but can send no-effect transactions with any gas price. So they threaten to ‘burn’ all funds via transaction fees unless compensated.”

Bitcoin Post-Halving Report (Q2 2020)
According to CoinTelegraph Markets, the 2020 halving has already had a noticeable impact on Bitcoin much like the halvings before it, both of which preceded considerable appreciation in BTC’s price. The hash rate, mining difficulty and other on-chain metrics have been in flux and adapting to the new economic reality of reduced mining block rewards. Meanwhile, the BTC price has become more correlated with major markets, but this has happened in previous halvings, so it could decouple from stocks in 2020.

3 Things Every Crypto Investor Should Know About Trading Bitcoin Futures
Trading Bitcoin (BTC) futures might seem easy on the surface but there are a number of fees that investors seeking big returns from high leverage trades ignore. In addition to trading fees, investors should also be aware of the variable funding rate that many exchanges levy and even maker and taker fees should be taken into account.

Revolut: A Normal Bank – Unfortunately
U.K.-based digital bank Revolut’s “free-account” customers will face fees on FX transfers starting on August 12. Sending money abroad will cost 1 Swiss franc for Swiss Franc transfers, 4 francs for transactions in dollar and 6 francs in any other currency. Furthermore, the upper limit for free exchange orders will be lowered to 1,250 francs and the percentage charged for orders on weekends increased to 1 percent from 0.5 percent.

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Stimulus Payments Delivery During A Pandemic Using FedAccounts And Digital Tools
On June 11, 2020 the U.S. House of Representatives held an open hearing of the Task Force On Financial Technology. One of the focuses was 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. And the Electronic Transaction Association advocated enhancing the current payment rails to solve the problem of the unbanked by the use of no-cost wallets and debit cards. For other coverage:

• Stimulus Payments Delivery During A Pandemic Using FedAccounts And Digital Tools
• Digital Dollar? Get Real, Financial Inclusion Advocates Tell Congress

JPMorgan Says Bitcoin Crash Survival Shows It Has Staying Power
JP Morgan reports that the past few months saw the first real stress test for the cryptocurrency market and the results were mostly positive. However, rather than a store of value, cryptocurrencies have traded more like risky assets like equities — a significant change relative to the prior couple of years. And, rather than a medium of exchange, price action points to their continued use as speculative vehicles. Somewhat surprisingly, liquidity on major Bitcoin exchanges was more resilient in March than traditional macro asset classes like FX, Treasuries, Gold and equities. Stablecoins emerged largely unscathed as well, though their volatility is still high relatively a truly pegged token.

Eastern Caribbean Central Bank charts a digital future
The Eastern Caribbean (EC) Digital Cash six-month pilot will launch late July 2020 in Antigua and Barbuda, Grenada, Saint Lucia and St. Kitts and Nevis. Bitt’s experts are conducting online training of local teams within Licensed Financial Institutions (LFIs), Agencies and Merchants.The ECCU payment system will require a reexamination of the regulatory framework, the engagement framework and the currency framework and a pilot project using the blockchain based digital currency, dubbed DXCD will test and expose the issues that arise from turning the promise inherent in money from paper to bits.

Fnality adviser: wholesale CBDCs not in central banks’ DNA
Fnality, formed of a consortium of 14 major banks, is aiming is to create the means of payment on-chain for financial markets by use of its Utility Settlement Coin (USC). The USC is similar to JPMorgan’s JPM Coin, but backed by central bank deposits. Fnality is currently seeking approval for such deposits from several central banks, including the Federal Reserve, the Bank of England and the European Central Bank, with the intentions to receive its first green light in Q3 of 2020.

National Science Foundation Funds Research Into Crypto Dollars
The U.S. National Science Foundation awarded a $225,000 grant to blockchain startup Key Retroactivity Network Consensus (KRNC) to design crypto features for the dollar. The idea is that the digital currency would be distributed free of charge to users in proportion to their existing wealth, and uses a “proof-of-balance” protocol that is based on holders’ wealth. https://www.krnc.io/ https://arxiv.org/abs/1909.07433

Quadriga Downfall Stemmed From Founder’s Fraud, Regulators Find
An Ontario Securities Commission investigation has concluded that the collapse of crypto-exchange QuadrigaCX was the result of fraud by its founder Gerry Cotten. QuadrigaCX shut down in January 2019, weeks after Cotten died unexpected while on his honeymoon in India, leaving behind a mystery of what happened to the Bitcoin and other cryptocurrencies on the platform. The collapse caused at least C$169 million in losses for 76,000 investors in Canada and abroad.

Indian Government Again Proposes Blanket Ban on Cryptocurrencies
India is reportedly looking to introduce a law to ban crypto-assets, as the government sees a legal framework as being more effective than a circular from the Reserve Bank of India (RBI) in this regard. The spur for the draft cabinet note was apparently the March 4 decision of the Supreme Court to quash the April 2018 circular from the RBI that prevented banks from providing services in support of crypto-assets.

Malaysian Government to Encourage Consumers to Use Digital Wallets via RM 750 Million Adoption Plan
Malaysia’s COVID-19 “PEJANA” recovery plan includes an allocation of RM 750 million towards promoting the adoption of digital wallets by local consumers. RM 50 will reportedly be credited into the electronic wallet accounts of around 15 million residents. The RM 50 will also be matched with cashbacks, various discount schemes, and vouchers from digital wallet providers that take part in the program.

Algorand Integrates Tech for Anti-Money Laundering Compliance
Algorand has linked up with Chainalysis to help bake regulatory compliance into their blockchains. Chainalysis will provide a know-your-transaction solution, allowing its foundation to monitor large volumes of on-chain activity for the native ALGO token and report any suspicious transactions to the authorities. It will not provide a comprehensive solution to “travel rule” compliance, but it will help Algorand pick out transactions that trigger the rule, as well as identifying relevant senders and receivers.

Custody Battle Pits Institutional Boomers Against Crypto Upstarts
Crypto custodians are in a race to build the next State Street or BNY Mellon. There are only a handful of these types of large custody banks and most of them have been around for hundreds of years. But crypto is such a striking example of old world meeting new that it offers firms a rare opportunity to break into a market that would simply be impossible under normal circumstances.

Saudi Arabia goes blockchain! … maybe? Who knows
There’s a pile of countries that are really into press releases about “blockchain” — with zero verifiable evidence of anything in particular actually happening, even when you try to look into it. Saudi Arabia seems to be another one. Some crypto news stories speculated that Ripple Labs was involved, and others mentioned Saudi Arabia participating in IBM’s TradeLens supply chain blockchain pilot programme in 2019, both without any verifiable evidence.

InterWork Alliance Launches to Standardize Token-Powered Ecosystems Worldwide
The InterWork Alliance (IWA) today formally launched operations as a platform-neutral, non-profit organization dedicated to creating the standards frameworks needed to increase innovation across token-enabled ecosystems. The InterWork Alliance will set the standards for building distributed applications, including appropriate frameworks for tokenizing items of value, writing contracts over those tokens, and privacy-preserving analytics of multi-party data. It will provide the frameworks needed for businesses to create standardized token definitions and contracts in non-technical, business terms, and then turn them over to developers for coding on any platform of choice. Launch members include Accenture, Digital Asset, DTCC, IBM, ING, Microsoft,  Nasdaq, R3, SIX Digital Exchange, and UBS.

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Facebook’s Libra appoints Credit Suisse director as compliance chief
The Libra Association has appointed Sterling Daines as its Chief Compliance Officer. Daines will join Libra later this year after stepping down from his current role as Managing Director and Global Head of Financial Crime Compliance at Credit Suisse.

Vanguard completes first phase of securities digitization pilot with Symbiont
Vanguard, in partnership with technology provider Symbiont, announced today the completion of the first phase of a blockchain pilot designed to digitize the issuance of asset-backed securities (ABS). In close collaboration with a large US ABS issuer, as well as BNY Mellon, Citi, and State Street, Vanguard successfully modeled the full lifecycle of an ABS settlement on distributed ledger technology (DLT) network by replicating end-to-end transaction flows.

Microsoft ID System Launches Beta on Bitcoin Network
Microsoft’s decentralized identity network ION is moving to beta testing on the Bitcoin network. The aim of this open-sourced, layer 2 Identity Overlay Network (ION) is to provide users with a decentralized identifier (DID) that could replace the need for usernames. Developed in conjunction with the Decentralized Identity Foundation, ION was developed as a decentralized network to operate independently and doesn’t rely on “special utility tokens, trusted validator nodes, or additional consensus mechanisms”.

World Retail Banking Report 2020: 57% of consumers prefer internet banking in the Covid-19 era
According to the Capgemini/Efma World Retail Banking Report 2020 57% of consumers now prefer internet banking, up from 49% pre-COVID-19, and 55% prefer banking mobile apps, compared with 47% previously. The report also found that platform-based banks find it up to two-times easier to increase operating profits, unlock new sources of value, and improve operational efficiencies. It also found that 80% of bank executives cited cybersecurity and privacy concerns, outdated data management (68%) and identifying the right partners (73%) as primary barriers to moving to a platform system.

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One Third of Institutions Have Invested in Crypto Says Fidelity
A Fidelity survey of 774 institutional investors found that more than one-third of firms worldwide have invested in digital assets or derivatives. While 36% of institutions own crypto globally, multinational financial services company  Fidelity found that only 27% of the 441 U.S. institutions surveyed are exposed to crypto — although that’s up from 22% last year. Close to half of European institutions are long on virtual assets.

Negative Interest Rates Are Destroying Europe’s Finances, Driving Demand For Cryptocurrency
According to the Fidelity survey of institutional investors, Europeans are much more likely to have a positive view and to own crypto-assets compared to Americans. 45% of the European institutional investors surveyed owned crypto-assets, while only 27% did in the United States. Also, 25% of European investors find crypto-assets being free of government intervention a very appealing factor, vs. 10% of American investors. About 82% of European institutional investors found something positive about crypto-assets, compared to 74% of American institutional investors. It’s a flip on the usual narrative of pro-market, pro-private sector Americans vs. government-loving Europeans. Europeans now see crypto-assets as a desirable asset class and for some it’s precisely because it avoids the intervention of the political or technocratic class that defines the European Union and the European Central Bank.

Less Than 6 Accounts Control 80% of Wealth on Top Stablecoins
CoinMetrics has found extreme wealth centralization among many top stablecoins, with at least 80% of the total capitalization for five top stable tokens being held in less than six accounts. And most at least 20% of transfers made using most stablecoins are valued at less than $100, showing significant stable token adoption as a means of payment. The report also found that more than 40% of transactions made using the Paxos Standard Token are directly linked to a single multi-level marketing, or MLM, Ponzi scheme.

MakerDAO Up by 30% After Vote for ‘Real-World’ Loan Collateral
MakerDAO’s latest spike comes amid a community vote showing strong support for supporting non-crypto-native assets as collateral for the creation of DAI. Currently, MakerDAO users can lock up Ether, Wrapped Bitcoin, Basic Attention Tokens, or the stablecoin USD Coin to fund DAI loans. The vote signaled support for a protocol developed by blockchain startup Centrifuge that would allow “real-world assets” to be tokenized as ERC-20-based securities that can be used as collateral for DAI minting.

Ball’s in Their Court: Crypto Custodians Waiting on Regulators to Act
The Capital Markets and Technology Association published a common industry standard for the management and custody of crypto assets. Dubbed “Digital Assets Custody Standard,” the document attempts to elucidate how the custody of digital assets differs from that of traditional assets. Having identified the differences, the CMTA then laid down foundational security and operational requirements for crypto custody providers.

Bitcoin Options Open Interest Rises 50% in a Month to Hit $1.5 Billion
According to the latest data from market analysis company Skew, total open interest in Bitcoin options passed $1.5 billion on June 9. This comes barely a month after open interest crossed $1 billion for the first time, marking a 50% increase in just 33 days. Deribit has open interest of $1.1 billion, and the Chicago Mercantile Exchange $368 million. LedgerX open interest remained roughly the same since May 7 at $52 million while OKEx saw a 15% fall to $65 million. Bakkt also saw a fall in open interest, from $80,000 to $68,000.

Reserve Bank of Australia gets ‘data bunker’ project underway
The Reserve Bank of Australia has reportedly gone to market for help with standing up a “data bunker”, which it said forms part of its ongoing efforts to improve the resilience of the country’s payment system. The successful vendor, as the systems integrator, will be charged with planning and designing the bunker; building and implementing it, along with supporting components; and running the bunker, including developing operational procedures, policies, and tools for the first year of its operation.

Addressing Cyber-Risk in Financial Institutions and in the Financial System
This paper organizes the latest research and views on cyber-risk management to enable insights into frequency and severity of cyber-risk events, the magnitude of cyber-risk losses, and the best practices methods and frameworks for organizing and implementing a cyber-risk management program. This paper also describes cryptographic best practices and the evolving research on protection of cyber-attacks in the coming Quantum computing era.

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Fintech is a sector where businesses succeed or fail on their ability to scale. Yet the ecosystem is failing to provide even minimal levels of African American representation necessary for it to do so… Historically, African Americans have been locked out of lending and credit building opportunities that make up the cornerstones of inclusion and wealth building. As a result, they are far more likely to lack credit histories (and high scores), financial advice and information necessary to build wealth… This makes people of color — and African Americans in particular — especially important stakeholders in the fintech conversation. And, precisely because of their lived experience with the failures of traditional financial services, they may well prove to be the ones with the best ideas and intuitions for helping the industry evolve and flourish… If fintech fails to innovate where it counts the most, it will be doomed to repeat the failures of the very system it seeks to replace. (Chris Brummer on Fintech’s Race Problem)

Inclusive Banking During a Pandemic: Using FedAccounts and Digital Tools to Improve Delivery of Stimulus Payments
The US House Financial Services Committee will be holding a hearing to discuss the use of digital tools to improve the delivery of stimulus payments on June 11 starting at noon (ET). Congressman Stephen Lynch (D-MA), who serves as Chair of the FinTech Task Force, will oversee. It will focus on recently proposed legislation calling for a FedAccount digital dollar wallet – an account maintained by a Federal Reserve Bank on behalf of any person.

Towards Central Bank Digital Currency – A Systematic Literature Review
This paper evaluates research from the major central banks and the scientific community regarding CBDC. The focus hereby is on providing a comprehensive view on the topic by introducing, combining and discussing various research fragments. For this purpose, relevant research and publications are identified via a systematic literature review and classified into different groups. We find that research on CBDC is still at an early stage in both academia and within central banks, providing several areas of future research. Motivations and rationales for issuing a CBDC as well as possible design opportunities and potential properties of a CBDC are presented. Furthermore, the analysis is extended to include economic aspects, implications for monetary policy and legal issues.

FATF Meeting Scheduled to Discuss VASPs Compliance With Travel Rule
The Financial Action Task Force (FATF) has a plenary meeting scheduled on June 24 to assess the progress of Virtual Asset Service Providers (VASPs) worldwide in enforcing the organization’s “travel rule”. The guidelines are not legally binding, but they can be effective because any nation that does not comply with them by the deadline may be excluded from the global financial network. Out of the over 200 countries that make up the FATF, only 20 or so have issued regulations covering the travel rule, although the remaining countries are making significant progress, according to CoolBitX CEO Michael Ou.

Banque Centrale de Tunisie to officially launch Fintech website Friday
The Central Bank of Tunisia will launch its “BCT-FINTECH” website. The press conference will allow interaction with the Fintech ecosystem and discussion of the difficulties encountered during the COVID-19 crisis. The website, set up by the BCT, will support Tunisian fintechs develop solutions and provide them with several mechanisms including a regulatory sandbox and an innovation lab.

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Digital Currencies and Stable Coins as Crisis Management Tools
The Centre for Economic Policy Research is hosting a Digital Currencies and Stable Coins as Crisis Management Tools webinar on June 11 at 02:00 PM London time. (“Payment systems and money are evolving rapidly. Developments in information technology, digital networks and the increase in internet-based retailing have created the demand and technological space for digital transactions that have the potential to radically change payment and financial intermediation systems. Will Covid-19 accelerate these changes? How radical or similar could this new landscape be? What kinds of design choices and/or regulatory response might make the difference? How might Central Banks support and adapt?”)

Development of the Bank of Lithuania’s digital collector coin has entered its final phase
The world’s first blockchain-based digital collector coin (LBCOIN) created by the Bank of Lithuania should be issued by July 2020. 24,000 digital tokens and 4,000 physical silver collector coins will be issued. The tokens will be divided into 6 categories with 4,000 tokens allotted to each of them. When purchasing the digital coin, buyers will get 6 randomly selected digital tokens and only upon collecting a token from each of the 6 categories they will be able to redeem for a physical silver coin. Collectors will be able to store their tokens in a dedicated wallet at the LBCOIN e-shop, and they will be exchangeable between collectors. They will be transferrable to a public NEM wallet, and later be used to redeem a physical silver coin.

Digital Currency and Economic Crises: Helping States Respond
This paper proposes a way to equip governments and central banks with a mechanism to help ensure the continuity and sustainability of their economies, along with both speed and transparency of payments with their National Digital Value Container (NDVC). The report lays out a gatekeeper type structure where the central bank or government manages the issuance of a new national digital currency through a new category of supervised businesses named Money Service Businesses (MSBs). With Digital Value Containers (DVC), digital claims upon value are guaranteed by a central bank, in the form of CBDC, or under the Government, in the form of Fiscal Digital Currency (FDC). A DVC would allow any asset to be issued, irrespective of whether it is launched by the central bank or the government. DVCs can theoretically be used for any fungible asset and represent a complementary national payments infrastructure.

MAS Launches S$1.75 Million FinTech Innovation Challenge for a Covid-Resilient and Greener Financial Sector
The Monetary Authority of Singapore (MAS) launched a S$1.75 million MAS Global FinTech Innovation Challenge to seek innovative solutions that can help financial institutions respond to COVID-19 and climate change challenges. Proposed solutions will be curated, contextualised, and validated on the API Exchange (APIX), a cloud-based innovation platform. 

SAMA Deploys Blockchain Technology for Money Transfer with Local Banks
The Saudi Arabian Monetary Authority (SAMA) recently used blockchain technology to deposit part of the liquidity that SAMA had previously announced, to be injected into the banking sector, as part of SAMA’s actions aimed at enhancing the sector’s capabilities to continue its role in providing credit facilities. 

RBI announces creation of Payments Infrastructure Development Fund
The Reserve Bank of India (RBI) has created a Payments Infrastructure Development Fund (PIDF) to encourage more merchants to deploy Points of Sale infrastructure. The RBI will make an initial contribution of ₹250 crores to the PIDF covering half the fund and remaining contribution will be from card issuing banks and card networks operating in the country. The PIDF will also receive recurring contributions to cover operational expenses from card issuing banks and card networks. The Reserve Bank will also contribute to yearly shortfalls, if necessary.

Why The Actual Cost Of Mining Bitcoin Can Leave It Vulnerable To A Deep Correction
In early 2020, researchers predicted the cost to mine Bitcoin will be at around $12,000 to $15,000 after the block reward halving in May. But, it is now much cheaper to mine BTC than the initial estimates. The low breakeven price to mine Bitcoin may leave it vulnerable to a correction. Bitcoin has become more affordable to mine in recent weeks due to two main factors: difficulty adjustments and cheaper electricity in Sichuan, China due to the rainy season. A low breakeven price of Bitcoin can raise the probability of a price pullback because miners have more incentive to sell BTC, which may increase selling pressure in the short-term.

Coinbase Exchange Inaccessible Due to 5x Traffic Spike During Bitcoin Surge
Coinbase said its autoscaling was unable to keep up with a huge traffic spike that left many users unable to log in on June 1, when the exchange experienced a 5x traffic spike over four minutes around 16:05 PDT while Bitcoin was approaching $10,000. Coinbase said it redeployed the API at 16:20 to increase the number of machines dealing with this spike in traffic. Another two-minute outage followed “due to instances saturating and being marked unhealthy” before the exchange was back online. The exchange said it was working on improvements in response to the June 1 outage.

Chinese Bank Issues Commercial Paper Worth $16.9 Billion on Blockchain
China Zhe­shang Bank, a national commercial bank, used blockchain technology to issue worth about $17 billion of asset-backed commercial paper. It was issued as a part of the Na­tional As­so­ci­a­tion of Fi­nan­cial Mar­ket In­sti­tu­tional In­vestors’s (NAFMII) pilot project for ABCPs.

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FYI the following papers from the Bank of England (BoE) and Bank for International Settlements (BIS) should be required reading for all economists studying central bank digital currency. The devil’s in the details and too many assume the single tier operating model in which the central bank provides end-to-end service:

• Central Bank Digital Currency: opportunities, challenges and design (BoE)
• The technology of retail central bank digital currency (BIS)

CBDC Model Applicable for the Current Banking Environment
This paper builds out a multi-tier central bank digital currency operating model thet can be implemented without requiring an overhaul of the current banking system. Central banks will issue coins and govern transactions within the system, while commercial banks will circulate the currency and provide additional services to individuals by the means of smart contracts. The proposed system uses python-sdk for providing user interface through a web application and operating under a single node.

MVIS and CryptoCompare Launch the MVIS CryptoCompare Bitcoin Benchmark Rate
MV Index Solutions GmbH and CryptoCompare launch the MVIS CryptoCompare Bitcoin Benchmark Rate (BBR), an index designed to offer a robust hourly price for Bitcoin in USD. The raw data powering the index is derived from transaction prices across five top exchanges: Bitstamp, Coinbase, Gemini, itBit, and Kraken.

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InterWork Alliance Launches to Standardize Token-Powered Ecosystems Worldwide
The InterWork Alliance (IWA) launched operations as a platform-neutral, non-profit organization dedicated to creating the standards frameworks needed to increase innovation across token-enabled ecosystems. The new organization already has 36 members, including tech firms such as Accenture, IBM, and Microsoft; banking and exchange firms ING, Nasdaq, SDX, and UBS; and, blockchain companies Digital Asset, Neo Global Development, Hedera Hashgraph and R3.

Coinbase wants to identify Bitcoin users for DEA, IRS
Coinbase aims to sell its Coinbase Analytics services, including its “identity attribution” software, to the U.S Drug Enforcement Administration and the Infernal Revenue Service. Coinbase Analytics uses technology from Neutrino, a blockchain analysis startup that Coinbase acquired last year. Coinbase uses the product internally for compliance and global investigations. However, Coinbase Analytics data is fully sourced from online, publicly-available data, and does not include any personally-identifiable information for anyone, regardless of whether or not they use Coinbase.

New York, French Finance Watchdogs Open Doors for Each Other’s Fintech Startups
The New York State Department of Financial Services and France’s Autorite de Controle Prudentiel et de Resolution will work to “ease the entry” for fintech innovators into their respective markets. The aim is to encourage innovation in the financial services markets by supporting financial firms that abide by their respective regulations, while still protecting consumers. The NYDFS and ACPR will refer fintech innovators to each other to, in principle, improve speed to market. https://www.dfs.ny.gov/reports_and_publications/press_releases/pr202006031

Binance-backed, crypto-friendly Founders Bank is still waiting to receive a license in Malta
Binance-backed Founders Bank has yet to win a license in Malta even though it originally expected to have one by 2019. The project also slashed its funding target due to lack of a regulatory timeline. The delays may stem in part from changes to the political landscape in Malta, which the crypto community has dubbed “Blockchain Island”.

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Central Bank Digital Currency: Central Banking for All?
This St. Louis Fed paper discusses how the introduction of a central bank digital currency allows the central bank to engage in large-scale intermediation by competing with private financial intermediaries for deposits. In such a world, because a central bank is not an investment expert and cannot invest in long-term projects itself, it relies on commercial banks to do so. The paper derives an equivalence result that shows that absent a banking panic, the set of allocations achieved with private financial intermediation will also be achieved with a CBDC. During a panic, however, it shows that the rigidity of the central bank’s contract with the investment banks has the capacity to deter runs. Thus, the central bank is more stable than the commercial banking sector. Depositors internalize this feature ex-ante, and the central bank arises as a deposit monopolist, attracting all deposits away from the commercial banking sector. This monopoly might endanger maturity transformation.

A Survey of Fintech Research and Policy Discussion
The aim of this St. Louis Fed paper is to provide a comprehensive fintech literature survey with relevant research studies and policy discussion around the various aspects of fintech. It also discusses policy implications, such as those related to open banking policy, ethical use of consumer data, and whether a cashless economy is expected in the near future. It concludes that it is debatable whether the future mainstream financial technology will be blockchain and DLTs, quantum computing, or something else — and how the industry and policymakers can best be prepared to keep pace with evolving technologies and the new adoption.

MakerDAO Weighs Accepting Real-World Assets as Crypto Loan Collateral
MakerDAO is in the process of voting on whether to further diversify the collateral it accepts for loans beyond crypto-assets and tokens to include real-world assets. Specifically, Maker would also allow supply chain invoices and musicians’ future royalty streams as security when it lends out DAI. These assets would be represented on the Ethereum blockchain by non-fungible tokens, the innovation that spawned CryptoKitties. Small businesses and artists could take the borrowed DAI, which usually trades 1-for-1 with the U.S. dollar, to crypto exchanges like Coinbase and convert it to cash.

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