Kiffmeister’s #Fintech Daily Digest (20230906)*

Blockchain privacy and regulatory compliance: towards a practical equilibrium

Ethereum’s Vitalik Buterin has co-authored a paper on a smart contract-based protocol designed to reconcile financial privacy with regulatory compliance. The core idea is to allow users to publish a zero-knowledge proof, demonstrating that their funds (do not) originate from known (un-)lawful sources, without publicly revealing their entire transaction transaction history. This is achieved by proving membership in custom association sets (“privacy pools”) that satisfy certain properties, required by regulation or social consensus.  [Read more on SSRN]

Bank of Canada explores impact of quantum computing on CBDCs

The Bank of Canada has engaged evolutionQ for a research project involving quantum-safe cybersecurity technologies for greenfield digital currencies. The Bank of Canada is exploring technologies and technical ecosystems that may inform decisions relating to the development of a potential digital loonie. The evolutionQ research will explore the impact of integrating quantum-safe encryption methods and crypto-agility as design goals for central bank digital currency (CBDC). The code developed during the research will be released as open source to give developers and researchers the opportunity to explore the new cryptographic methods.  [Read more at evolutionQ]


*For those interested in intra-day updates, check out my searchable Diigo Fintech developments database, which is also a good place to go to query for past developments: https://www.diigo.com/user/kiffmeister/ART.

Kiffmeister’s central bank digital currency monthly monitor

Just a reminder that I produce a monthly digest of central bank digital currency (CBDC) developments exclusively for the official sector. So (only) if you work at a central bank, ministry of finance or international financial institution (e.g., the BIS, IMF, OECD, World Bank) and who would like to receive it by email on the first business day of every month, please DM me on LinkedIn or email me at chronicles@kiffmeister.com.

The Sovereign Official Digital Association (SODA) is a technology-agnostic firm offering advisory services at the intersection of central banking, digital finance and the web3 industry, aiming to make public digital money a reality. SODA believes institutions in the existing financial ecosystem should have access to the tools and resources they need to move from discussion to action. SODA offers ‘real life’ use cases to help test digital money and drive adoption as central banks and other public institutions explore the future of a more financially inclusive world powered by interoperable blockchain-based networks. SODA would love you to join us on this journey – please get in touch (chris@sodapublicmoney.org).

Satoshi Capital Advisors is a New York-based, global advisory firm that works with central banks, governments, and the private sector to architect, implement, and operate varying initiatives. Satoshi Capital Advisors’ central bank work revolves around CBDC architecture and implementation, providing advisory services from research phase through to growth phase. Utilizing a product-market fit and technology agnostic approach to CBDC architecture and implementation enables Satoshi Capital Advisors to build tailored solutions, bespoke to local financial system nuances. Satoshi Capital Advisors welcomes requests from central bank officials for virtual and in-person CBDC workshops. [Click here for more information]

WhisperCash offers the first fully offline digital currency platform that has the same properties as physical cash. It can perform secure consecutive offline payments without compromising on security, privacy or accessibility. WhisperCash allows direct person to person offline payments without any server infrastructure or internet connectivity. It comes in various form factors including the self-contained credit card-sized “Pro” that sports an eInk screen and capacitive keyboard, and lasts for two weeks between recharges assuming a few transactions per day. [Click here for more information]

Kiffmeister’s #Fintech Daily Digest (20230605)*

SEC sues Binance in US District Court for unregistered securities operations

The U.S. Securities and Exchange Commission (SEC) filed suit against Binance, its U.S. platform and CEO Changpeng Zhao (CZ) in the District Court for the District of Columbia. There were 13 charges, including unregistered offers and sales of the BNB and BUSD tokens, the Simple Earn and BNB Vault products and its staking program. In addition, the SEC alleges in the suit that Binance failed to register its Binance.com platform as an exchange or a broker-dealer clearing agency. CZ was sued as a “controlling person.” [Read more at the SEC]

National Bank of Kazakhstan digital tenge project update

Binur Zhalenov, CEO of the Kazakhstan Interbank Settlement Center of the National Bank of Kazakhstan, provided an update on the three-year digital tenge project. The plan in 2023 is to deliver a production-grade central bank digital currency (CBDC). Pilots will test various specific use cases, starting with building a scalable platform for social aid distribution for the central bank’s government partners. The project aims to  provide a scheme that provides business value across the value chain, and there will be several minimum viable products (MVPs) to optimize cross-border payments, wholesale transactions, and distributed ledger technology (DLT) integration. [Read more on LinkedIn]

Project Leap proves the viability of a quantum-safe financial system

The BIS Innovation Hub published a report on Project Leap, a joint project with the Banque de France and Deutsche Bundesbank that addresses the threat that future quantum computers represent to today’s cryptographic algorithms, and thereby to the confidentiality of financial data. The report presents a comprehensive overview of the experiments conducted and the initial technical findings, including the successful set up a quantum-safe communication channel between the project participants that shields financial data. [Read more at the BIS]


*For those interested in intra-day updates, check out my searchable Diigo Fintech developments database, which is also a good place to go to query for past developments: https://www.diigo.com/user/kiffmeister/ART.

Upcoming conferences, webinars and speaking engagements:

Kiffmeister’s global central bank digital currency monthly monitor

Just a reminder that I produce a monthly digest of central bank digital currency (CBDC) developments exclusively for the official sector. So for any of you out there who work for a central bank, ministry of finance or international financial institution who would like to receive it by email on the first business day of every month, please DM me on LinkedIn or email me at chronicles@kiffmeister.com.

The Sovereign Official Digital Association (SODA) is a technology-agnostic firm offering advisory services at the intersection of central banking, digital finance and the web3 industry, aiming to make public digital money a reality. SODA believes institutions in the existing financial ecosystem should have access to the tools and resources they need to move from discussion to action. SODA offers ‘real life’ use cases to help test digital money and drive adoption as central banks and other public institutions explore the future of a more financially inclusive world powered by interoperable blockchain-based networks. SODA would love you to join us on this journey – please get in touch (chris@sodapublicmoney.org).

Satoshi Capital Advisors is a New York-based, global advisory firm that works with central banks, governments, and the private sector to architect, implement, and operate varying initiatives. Satoshi Capital Advisors’ central bank work revolves around CBDC architecture and implementation, providing advisory services from research phase through to growth phase. Utilizing a product-market fit and technology agnostic approach to CBDC architecture and implementation enables Satoshi Capital Advisors to build tailored solutions, bespoke to local financial system nuances. Satoshi Capital Advisors welcomes requests from central bank officials for virtual and in-person CBDC workshops. [Click here for more information]

WhisperCash offers the first fully offline digital currency platform that has the same properties as physical cash. It can perform secure consecutive offline payments without compromising on security, privacy or accessibility. WhisperCash allows direct person to person offline payments without any server infrastructure or internet connectivity. It comes in various form factors including the self-contained credit card-sized “Pro” that sports an eInk screen and capacitive keyboard, and lasts for two weeks between recharges assuming a few transactions per day. [Click here for more information]

Kiffmeister’s #Fintech Daily Digest (20230104)

I’ve updated my tabulation of retail central bank digital currency (#CBDC) explorers. Mostly just updated links. There are still 91 central banks that have recently issued, piloted, experimented with and/or researched retail CBDC. (Note that I don’t pump up my count by separately count national central banks that are members of currency unions.) [Check out the tabulation here]

US agencies issue joint statement on crypto-asset risks to banking organizations

US federal bank regulatory agencies issued a statement highlighting key risks for banking organizations associated with crypto-assets and the crypto-asset sector and describing the agencies’ approaches to supervision in this area. Banking organizations are neither prohibited nor discouraged from providing banking services to customers of any specific class or type, as permitted by law or regulation. However, the agencies believe that issuing or holding as principal crypto-assets that are issued, stored, or transferred on an open, public, and/or decentralized network, or similar system is highly likely to be inconsistent with safe and sound banking practices. Further, the agencies have significant safety and soundness concerns with business models that are concentrated in crypto-asset-related activities or have concentrated exposures to the crypto-asset sector.[Read more at the Federal Reserve Board]

Coinbase reaches $100 million settlement with New York regulator over compliance programs

The New York Department of Financial Services (NYDFS) reached a $100 million settlement with Coinbase over issues regarding the company’s compliance programs. Coinbase will be required to pay $50 million as a penalty and invest an additional $50 million to bolster its abilities to comply with financial regulations. The department said it found “significant failures” in Coinbase’s compliance program that violated virtual currency regulations regarding, know-your-customer (KYC) due diligence, transaction monitoring, and suspicious activity reporting. [Read more at the NYDFS]

Breaking RSA with a Quantum Computer

A group of Chinese researchers have published a paper claiming that they can—although they have not yet done so—break 2048-bit RSA. Bruce Schneier says this is something to take seriously – it might not be correct, but it’s not obviously wrong. One of the issues with the algorithm is that it relies on a recent factoring paper by Peter Schnorr. It’s a controversial paper; and despite the “this destroys the RSA cryptosystem” claim in the abstract, it does nothing of the sort. Schnorr’s algorithm works well with smaller moduli—around the same order as ones the Chinese group has tested—but falls apart at larger sizes. At this point, nobody understands why. If that’s true, the techniques in this Chinese paper won’t scale either. [Read more at Schneier Security]

2nd Edition of DC³ Conference – From Cryptocurrencies to Central Bank Digital Currencies (CBDCs)

The International Telecommunication Union (ITU) will hold (virtually) the second edition of its DC3 Conference – From Cryptocurrencies to Central Bank Digital Currencies (CBDCs)​ from January 24 to 27 2023. On January 27 I will be moderating two panels on offline central bank digital currency (CBDC). Also, on January 24, Jacques Francouer and I will be providing an update to our ITU Digital Currency Global Initiative digital currency ontology work. [For more event detail go to the ITU DC3 conference site]

Kiffmeister’s global central bank digital currency monthly monitor

Just a reminder that I produce a monthly digest of central bank digital currency (CBDC) developments exclusively for the official sector. So for any of you out there who work for a central bank, ministry of finance or international financial institution who would like to receive it by email on the first business day of every month, please DM me on LinkedIn or email me at chronicles@kiffmeister.com.

The Sovereign Official Digital Association (SODA) is a technology-agnostic firm offering advisory services at the intersection of central banking, digital finance and the web3 industry, aiming to make public digital money a reality. SODA believes institutions in the existing financial ecosystem should have access to the tools and resources they need to move from discussion to action. SODA offers ‘real life’ use cases to help test digital money and drive adoption as central banks and other public institutions explore the future of a more financially inclusive world powered by interoperable blockchain-based networks. SODA would love you to join us on this journey – please get in touch (chris@sodapublicmoney.org).

Satoshi Capital Advisors is a New York-based, global advisory firm that works with central banks, governments, and the private sector to architect, implement, and operate varying initiatives. Satoshi Capital Advisors’ central bank work revolves around CBDC architecture and implementation, providing advisory services from research phase through to growth phase. Utilizing a product-market fit and technology agnostic approach to CBDC architecture and implementation enables Satoshi Capital Advisors to build tailored solutions, bespoke to local financial system nuances. Satoshi Capital Advisors welcomes requests from central bank officials for virtual and in-person CBDC workshops. [Click here for more information]

WhisperCash offers the first fully offline digital currency platform that has the same properties as physical cash. It can perform secure consecutive offline payments without compromising on security, privacy or accessibility. WhisperCash allows direct person to person offline payments without any server infrastructure or internet connectivity. It comes in various form factors including the self-contained credit card-sized “Pro” that sports an eInk screen and capacitive keyboard, and lasts for two weeks between recharges assuming a few transactions per day. [Click here for more information]

Kiffmeister’s #Fintech Daily Digest (20220416)

European Commission receives more than 10,000 public comments amid digital euro consultation

The European Commission (EC) has received about 10,000 public comments so far on its call for evidence regarding a digital euro, which is to run from April 5 to June 14 and is aimed at getting feedback for the possible establishment and regulation of a digital currency as a new form of central bank money. During a similar period, the EC is also conducting a consultation targeted at relevant authorities and experts, to help policymakers consider issues including users’ needs and expectations for a digital euro, a digital euro’s role for the EU’s retail payments and digital economy, the application of money-laundering rules, privacy and data protection aspects and international payments. [Read more]

Monetary policy and financial stability implications of central bank digital currencies

This article, written by European Central Bank (ECB) staff, is a nice summary of recent research on the possible implications for financial stability and monetary policy of retail central bank digital currency (CBDC). It concludes that careful design will be crucial in maximizing the benefits of CBDCs while managing any unintended consequences. The article also identifies avenues for further research that could usefully inform future policy decisions on such currencies. [Read more]

Is Quantum Computing a Threat to Bitcoin?

The functional reality of a quantum computer cracking encrypted systems may only be five years away. The main threat is not whether quantum computers can ‘open up’ private key information… it’s more about the power of a quantum computer to replicate a private key without you knowing, undercutting trust in the entire signature process. Imperial College researchers have suggested a soft fork of the Bitcoin blockchain that would allow the “secure transition of funds to quantum-resistant wallets.” Others have proposed increasing the size of Bitcoin keys.  [Read more]

Circle Will Apply for US Bank Charter Soon, CEO Confirms

Circle, the issuer of USD stablecoin, is pushing forward with its plans to submit an application to operate as a U.S. crypto bank, CEO Jeremy Allaire told Bloomberg. If approved, the startup would be the fourth federally chartered crypto bank in the U.S. Allaire added that his company and the U.S. Office of the Comptroller of the Currency, which facilitates bank charters, have been talking about Circle’s digital asset banking prospects among other related topics such as the interoperability between blockchains. [Read more]

Upcoming events I’m affiliated with:

The CBDC Think Tank is hosting several webinars over the next month:

Satoshi Capital Advisors is hosting a virtual workshop on wholesale CBDC, stablecoins and digital capital markets on May 24 (starting at 08:00 EST). [Register here with the passcode: CBDC]

Kiffmeister’s #Fintech Daily Digest (02/18/2022)*

Eight countries jointly propose principles for mutual recognition of digital IDs

The Digital Identity Working Group (DIWG) has proposed a set of high-level principles to enable future mutual recognition and interoperability of digital identities. The members of the DIWG are from Australia, Canada, Finland, Israel, New Zealand, Singapore, the Netherlands, and the United Kingdom. This is the group’s first set of publicly released work since its 2020 inception. [Read more]

Say Hello To JAM-DEX

Bank of Jamaica’s central bank digital currency (CBDC) now has a name – Jamaica Digital Exchange or JAM-DEX for short, with the tagline “no cash, no problem!” The pilot was completed in December 2021 and launch is expected during the first quarter of 2022. [Read more]

JPMorgan unveils research on quantum resistant blockchain network

JPMorgan Chase has unveiled research on a Quantum Key Distribution (QKD) blockchain network that is resistant to quantum computing attacks. QKD utilizes quantum mechanics and cryptography to enable two parties to exchange secure data and detect and defend against third parties that are using quantum computers to attempt to eavesdrop on the exchange. [Read more]

Crypto bill incoming: Russia’s finance ministry kicks off public comment period

The Russian Finance Ministry filed two development notices to start the process of developing a digital currency legal framework. The documents will be published in the next three weeks. [Read more]

Ukrainian Parliament Adopts Amended Virtual Assets Law

Ukraine’s parliament has adopted new crypto-asset legislation. The draft law initially approved in September 2021, envisaged the establishment of a dedicated regulatory body run by the Ministry of Digital Transformation. The amended legislation makes the National Securities and Stock Market Commission and the National Bank of Ukraine the main crypto-asset regulators. [Read more]

* To get these updates sent to your inbox, please sign up here. Also, for those interested in intra-day updates and news that didn’t make the Daily Digest cut, please check out my Diigo fintech bookmarks: https://www.diigo.com/user/kiffmeister/Fintech.

Central Bank Digital Currency Workshop, Hosted by the CBDC Think Tank

The CBDC Think Tank (CBDCTT)  is hosting an in-person CBDC Workshop in Washington DC on February 24 exclusively for central bank and finance ministry staff looking to understand and position for CBDC issuance.  [Register here]

Also, in Q2 2022, the CBDCTT will launch the OpenCBDC Sandbox for evaluating, studying and learning from the OpenCBDC Boston Fed and the MIT Digital Currency Initiative open source CBDC platform. It will provide easy to use access, with the CBDCTT providing training and all updates. It’s available exclusively to central banks and official institutions. [Read more]

Kiffmeister’s #Fintech Daily Digest (03/16/2021)*

Bank of Japan governor says CBDC preparation can’t wait until hour of need

Although it still has no immediate plan to issue central bank digital currency (CBDC) the Bank of Japan continues to “carefully consider the way in which we should provide central bank money.” And “from the viewpoint of ensuring the stability and efficiency of the overall payment and settlement systems… [it] consider[s] it important to prepare thoroughly to respond to changes in circumstances in an appropriate manner.”  The Bank of Japan will begin experiments in spring 2021.

Optimal Countries for CBDC Implementation

This article analyzes the current central bank digital currency (CBDC) landscape. A sample of potential candidate countries for establishing a CBDC was selected, motives for implementing a CBDC were collected, and variables were assigned to these motives. Statistical methods were applied to obtain a sample of the countries with the highest correlation with three CBDC “pioneer” countries (Bahamas, China, and Uruguay). The results show that the Baltic Sea area (Lithuania, Estonia, and Finland) is a good CBDC candidate, in South America it’s Brazil, and in Asia, China and Malaysia show high correlations with the three pioneer countries. In Africa, South Africa stands out as an optimal area for CBDC implemention. 

JPMorgan Is Eyeing Bitcoin And Crypto Clearinghouse Options Amid Huge Price Rally

JPMorgan is reportedly exploring crypto-asset clearinghouse options, looking for a middleman to sit between over-the-counter (OTC) desks and traders to guarantee the enforcement of a trade and create liquidity in the market. Clearinghouses, designed to sit in between trades in order to guarantee payment in the event either counter party defaults, ensure trading desks are able to handle orders. 

Crypto Bank Sygnum Offering Yield on Its Swiss Franc Stablecoin

Swiss crypto bank Sygnum is reportedly launching a yield product based on its own stablecoin, DCHF. The three-month fixed-term deposit product will generate 0.75 percent yield per year. Sygnum claims to be the first regulated bank to offer returns on its own stablecoin. 

ESMA consultation on draft crowdfunding technical standards

The European Securities and Markets Authority (ESMA) launched a consultation on draft technical standards on crowdfunding under the European crowdfunding service providers regulation (ECSPR). The new Regulation on crowdfunding regulates for the first time at the EU level lending-based and equity-based crowdfunding services. It introduces a single set of requirements applicable to crowdfunding service providers (CSPs) across the EU, including strict rules to protect investors. 

Are quantum computers good at picking stocks? This project tried to find out

KPMG, together with a team of researchers from the Technical University of Denmark (DTU) and a yet-to-be-named European bank, has been piloting the use of quantum computing to determine which stocks to buy and sell for maximum return (“portfolio optimization”). The researchers ran the model on D-Wave’s 2,000-qubit quantum annealing processor, finding that it performed better and faster than other methods, while being capable of resolving larger problems – although the study also found that D-Wave’s technology comes with some programming and scalability issues. 

* The views expressed herein are those of the author and should not be attributed to the International Monetary Fund, its Executive Board or its management.