Kiffmeister’s #Fintech Daily Digest (20230531)*

RBI CBDC pilot to be expanded to include more locations and banks

The Reserve Bank of India (RBI) is gradually expanding the scope of its retail central bank digital currency (CBDC) pilot to include more locations and banks. The pilot launched on December 1, 2022 in four cities with four banks. Four more banks were subsequently added, and now four more will be added, along with ten more cities. [Read more at the RBI]

Mooney unveils bill to block US CBDC pilot program

Alex Mooney of West Virginia introduced in the US House of Representatives the Digital Dollar Pilot Prevention Act, to prevent the Federal Reserve from launching a pilot program that would test the operability of a CBDC in the U.S. financial system. According too Mooney, “CBDCs would threaten the liberties of law-abiding Americans and are being used by authoritarian countries right now to crack down on dissent.” [Read more from Alex Mooney]

UAE central bank issues AML/CFT guidance for crypto

The Central Bank of the United Arab Emirates (CBUAE) issued new guidance concerning anti-money laundering (AML) and countering financing of terrorism (CFT) measures for crypto businesses on May 31, 2023. It outlines the risks arising from dealing with virtual asset and virtual asset service providers (VASPs), taking into account the recommendations of the Financial Action Task Force (FATF). The new rules will come into effect in one month. [Read more at the CBUAE]

CFTC warns on expansion of clearing digital assets

The Commodity Futures Trading Commission (CFTC) issued a staff advisory on the risks associated with the expansion of Derivatives Clearing Organization (DCO) clearing of digital assets. Noting the increased cyber and other risks that may be associated with digital assets, the CFTC expects DCOs and applicants to actively identify new, evolving, or unique risks and implement risk mitigation measures tailored to the risks that these products or clearing-structure changes may present. [Read more at the CFTC]

Prudential treatment of crypto-asset exposures

The Bank for International Settlements (BIS) published an executive summary of the Basel Committee on Banking Supervision (BCBS) standard on the prudential treatment of crypto-asset exposures published in December 2022. The standard outlines minimum regulatory, supervisory review and disclosure requirements of banks’ crypto-asset exposures under Pillars 1, 2 and 3 of the Basel Framework. Internationally active banks in BCBS member jurisdictions are expected to adopt the standard by 1 January 2025. [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 (20230506)

On Tuesday (May 9, 2023) at 10am EST (3 pm UK time) I’ll be chatting (virtually) with author and commentator David Birch (15Mb Ltd) about what to expect from the introduction of new forms of money, such as central bank digital currency (CBDC) and stablecoins. Are the use cases strong enough to expect their adoption? Are we ready and eager to use and receive payments in these new forms of money? [Sign up at FNA]

Binance faces US probe of possible Russian sanctions violations

The US Department of Justice (DOJ) is reportedly investigating whether Binance was used illegally to let Russians skirt US sanctions and move money through the cryptocurrency exchange. Binance is also already being examined by the Internal Revenue Service (IRS) and federal prosecutors, regarding anti-money laundering obligations compliance, and the Securities and Exchange Commission (SEC) has been scrutinizing whether the exchange has supported the trading of unregistered securities. [Read more at Bloomberg]

Mapping the privacy landscape for central bank digital currencies

An article by Raphael Auer, Rainer Böhme, Jeremy Clark and Didem Demirag explores the multiple dimensions of retail CBDC privacy considerations. They point to the number of distinct stakeholders, combined with the technical challenges, as possibly responsible for stalling progress toward deploying retail CBDC. One step forward is understanding who the key stakeholders are and what their interests are in payment records. Knowledge of conflicting interests is helpful for developing requirements and narrowing the range of technical solutions. This article contributes to the literature by identifying three stakeholder groups – privacy enthusiasts, law enforcement, and data holders – and exploring their conflicts. A main insight is that nuanced data-access policies are best to resolve the conflicts, which in turn rule out many technical solutions that promise “hard privacy,” meaning solutions relying on cryptography and user-guarded secrets without room for human discretion. This observation shifts attention to a softer form of privacy-enhancing technologies, which gives authorized stakeholders the capability to access certain payment records in plaintext under defined circumstances. Such a system depends on compliance and accountability, supported with technically enforced access control, limited retention periods, and audits. This is referred to as “soft privacy”. [Read more at Pulpsy.com

Crypto-assets and CBDC – Potential implications for developing countries

The United Nations Conference on Trade and Development (UNCTAD) published a paper aimed at supporting developing country policymakers in their thinking about crypto-assets. Crypto adoption has been strong in developing countries, based on its purported capacity to increase financial inclusion, reduce costs of remittances, and ease access to investment finance and export credit. However, any substitution of national sovereign currencies by crypto-assets can jeopardize financial stability and the effectiveness of monetary policy, reduce the effectiveness of capital controls, pose risks to countries’ monetary sovereignty and, through the pseudonymous character of crypto assets, facilitate illicit financial flows. Some of these challenges can be addressed by regulation, improving financial inclusion and monetary stability, CBDC, fast retail payment systems and improved auxiliary digital infrastructure. [Read more at the UNCTAD]

A simple model of a central bank digital currency

The National Bureau of Economic Research (NBER) published a paper that highlights the trade-offs between physical and digital forms of retail central bank money based on a general equilibrium model. It finds that the key differences between cash and CBDC include transaction efficiency, possibilities for tax evasion, and, potentially, nominal rates of return. It establishes conditions under which cash and CBDC can co-exist and shows how government policies can influence relative holdings of cash, CBDC, and other assets. The paper illustrates how a CBDC can facilitate negative nominal interest rates and helicopter drops, and also how a CBDC can be structured to prevent capital flight from other assets. [Read more at the NBER]

Wholesale CBDC – the safe way to debt capital market efficiency

The European Stability Mechanism (ESM) published a paper that analyzes the usefulness of digital currencies for wholesale financial transactions in Europe. It identifies the risks impede broad adoption of distributed ledger technology (DLT), despite potential widespread debt capital market efficiency gains from DLT-based smart contracts. A wholesale CBDC on a private permissioned blockchain could overcome these risks and impediments and lead to significant efficiency gains in the financial system. [Read more at the ESM

Stablecoin runs and the centralization of arbitrage

A paper by Yiming Ma, Yao Zeng, and Anthony Lee Zhang analyzes the run risk of USD-backed stablecoins and uncover a dilemma between stablecoins’ price stability and financial stability. They show that panic runs exist even though general investors only trade stablecoins in secondary markets with flexible prices. Run incentives are reinstated by stablecoin issuers’ liquidity transformation and the fixed $1 at which arbitrageurs redeem stablecoins for cash in the primary market. The authors discover that more efficient arbitrage amplifies run risk. This explains why stablecoin issuers only authorize a small set of arbitragers even though it comes at the expense of maintaining a stable secondary price. In other words, the centralization of arbitrage embeds an inherent tradeoff between run risk and price stability. The paper’s findings are based on a model and a novel dataset on stablecoin redemptions, trading, and reserve assets. Calibrating the model, the authors find a higher run risk for USDT, the largest stablecoin, compared to USDC, the second-largest stablecoin. However, even USDC bears significant run risk due to its less concentrated arbitrage and more concentrated deposit holdings. [Read more here]

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 (20230425)

Offline digital currency technical considerations

In this month’s Central Bank Payment News (CBPN) spotlight, I wrote about past experiments with offline digital payments, technical considerations for offline digital currency, and what the future might hold for offline central bank digital currency (CBDC). [Read the article at CBPN. It’s paywalled, but if you attend the May 17-19 Currency Research Digital Currency Conference in Mexico City I believe there will be free hard copies floating around]

Coinbase files legal action against US SEC over lack of regulatory clarity

Crypto platform Coinbase has filed a court action to press the U.S. Securities and Exchange Commission (SEC) about its July 2022 petition requesting regulatory guidance. Coinbase chief legal officer Paul Grewal said, “from the SEC’s public statements and enforcement activity in the crypto industry, it seems like the SEC has already made up its mind to deny our petition. But they haven’t told the public yet. So the action Coinbase filed simply asks the court to ask the SEC to share its decision… which they are legally obligated to do.” [Read more at Coinbase]

Binance reportedly lifts restrictions on Russians

Crypto exchange Binance has reportedly lifted its service restrictions for Russian users that were implemented last year following the start of Russia’s Ukraine invasion. Binance users in Russia can now deposit Russian rubles and other currencies using bank cards issued in Russia. Additionally, the exchange removed the limits on balances of more than EUR 10,000 on Russia-linked accounts. [Read more at Forklog]

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 (20230329)

Russia delays digital ruble launch testing due to lawmaking process

The next phase of the Bank of Russia’s central bank digital currency (CBDC) testing, slated to start on April 1, 2023, has been delayed because relevant legislation has only passed through the first reading in the State Duma — the Federal Assembly’s lower house. However, the legislation may be enacted by early May. Meanwhile, the number of private banks participating in the pilot has also changed from 15 to 13. Some of the banks’ employees would become the test participants for CBDC retail payments, as well as one of the largest insurance companies in the country, Ingosstrakh. Hence, although the April 1 launch was being billed as a “pilot” is appears to be either further proof-of-concept or prototyping work, since none of the general public isn’t involved in the testing. [Read more at TASS]

Opening of the BIS Innovation Hub Eurosystem Centre

The Bank for International Settlements (BIS) Innovation Hub Eurosystem Centre, a joint effort by the BIS and all Eurosystem central banks, opened on March 28, 2023. The Centre will have offices in Frankfurt and in Paris, hosted and supported by the Deutsche Bundesbank and the Banque de France. The European Central Bank will coordinate the interactions of the Eurosystem with the Centre. The Centre’s project focus areas will be decentralized finance (DeFi), wholesale CBDC, cyber security and green finance. Projects include Atlas, which will create an open-source data platform to provide information on DeFi and crypto-asset market capitalization, economic activity and international flows of crypto-assets, and Mariana, which will explore automated market-makers (AMM) for the cross-border exchange of Swiss franc, euro and Singapore dollar wholesale CBDCs. [Read more at the BIS]

EU lawmakers impose €1,000 cap on anonymous crypto, cash transactions

European lawmakers have adopted legislation imposing a €1,000 cap on anonymous cryptocurrency transactions, as part of the Anti-Money Laundering and Countering the Financing of Terrorism (AML/CFT) package. The draft bill also seeks to cap anonymous cash transactions above €7,000 when it is not possible to identify the sender. The bill had an overwhelming majority of 99 votes in favor, eight against and six abstentions. The European parliament will start negotiations on the final text of the AML/CFT package after a plenary session in April. [Read more at the European Parliament]

Oxbridge Re starts selling tokenized securities to back its reinsurance sidecar

Oxbridge Re Ltd., the Cayman Islands based reinsurance firm with a Gulf Coast risk focus, has begun the initial offering of DeltaCat Re tokenized reinsurance securities, that will represent fractionalized interests in reinsurance contracts written by its reinsurance sidecar. “Democratizing reinsurance through tokenization allows investors to participate directly in the reinsurance business, which traditionally has extremely high barriers to entry… and enable the underwriting of higher value reinsurance contracts.” [Read more at Artemis.bm]

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 (20230225)

A central bank digital currency for offline payments

The Bank of Canada (BoC) published an article that considers the pros and cons  of offline central bank digital currency (CBDC). An offline CBDC would allows users to transact while none of them are connected to the internet and could complement bank notes. A balance must be struck between compliance, security requirements and user needs, for example, by limits on holdings, transaction amounts and the duration of offline functionality. The article mentions that, while some central banks have deployed offline devices as part of pilots, no commercial, turn-key solutions are available to implement lengthy and indeterminate (“extended”) offline functionality. I don’t know what is meant by “commercial turnkey solutions” but a number of production-ready solutions offer extended offline functionality, such as those of Crunchfish, G+D, IDEMIA and WhisperCash. Also, those firms would disagree with the article’s assertion that “adopting a security posture in terms of limits, controls and functionality, where risks are sufficiently mitigated, is still a challenge for technology available today”! But otherwise it’s good to see a G20 central bank advocating for offline CBDC functionality, which I view as essential to successful CBDC take-up in many countries. [Read more at the BoC]

FATF agrees on action plan to drive implementation of global crypto norms

The Financial Action Task Force (FATF) has agreed on an action plan to drive the “timely implementation” of its global standards for crypto. The FATF noted that many countries have failed to implement its norms, including the “travel rule,” which requires virtual asset services providers (VASPs) to collect and share information of crypto transactions. FATF published its updated standards for crypto in 2019, but last June, it said only 11 of 98 surveyed jurisdictions were enforcing the travel rule and urged them to act faster. In that regard the FATF’s plenary agreed to a road map to strengthen implementation of FATF standards on virtual assets and VASPs, which will include a stocktaking of global current levels of implementation to e published in the first half of 2024. [Read more at the FATF]

Coinbase launches layer 2 blockchain Base to provide on-ramp for Ethereum, Solana and others

Coinbase launched Base, a layer 2 network built using Optimism’s OP Stack, to attract millions of new crypto users in the coming years. Coinbase is joining Optimism as a core developer on the open-source OP Stack, a developer toolkit for the Optimism network, the firm said. However, Base will not be limited to Ethereum, it will also provide easy and secure access to layer 2 networks such as Optimism, as well as other blockchains ecosystems like Solana. [Read Noel Acheson’s “Crypto is Macro” for why this may be important]

Classifying digital assets with a new framework

Morgan Stanley Capital International (MSCI) collaborated with Coin Metrics and Goldman Sachs to develop the framework, which classifies digital assets according to what they are primarily used for. It is hierarchical with three levels of classifications: classes, sectors, and subsectors. [Read more at the Visual Capitalist]

Upcoming conferences, webinars and speaking engagements:

  • I’ll be providing a (probably virtual) update on global central bank digital currency (CBDC) developments at the Digital Euro Association Digital Euro Conference on March 31 in Frankfurt. [Register here]
  • I’ll be moderating a panel on “what happens when the lights go out…different schemes for offline functionality” at the in-person Digital Currency Conference (DCC) in Mexico City on May 18. [Register here]

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 (20230201)

Cross-border cross-currency CBDCs and automated market-making

R3 published a report on the application of automated market makers (AMMs) to cross-border and cross-currency central bank digital currency (CBDC). AMM structures, which are are common in the decentralized finance (DeFi) ecosystem, increase price transparency, work for low liquidity instruments, and bring the process of trading and settlement closer together. Such outcomes could benefit segments of today’s FX market. However, adapting AMM to  spot FX markets will need to answer questions including: who would run it, what formula might be appropriate for larger transactions, and how to incentivize participants. [Read more at R3]

UK Government outlines plans to regulate crypto-asset industry

The UK Government has floated proposals to bring cryptoassets into the same regulatory regime as traditional financial services. The consultation sets out key design features of the regime covering themes such as prudential requirements, data reporting, consumer protection, location policy and operational resilience. The paper also proposes regimes for a range of cross-cutting issues which apply across crypto-asset activities and business models, including market abuse and crypto-asset issuance and disclosures. [Read more at HM Treasury]

Fintech funding drops 46%; banking startups among worst hit

In 2022, fintech companies secured a total of $75.2 billion in funding, a 46% decline from 2021. Deal counts also decreased, falling 8% year-on-year from 5,474 deals in 2021 to 5,048 deals last year. Fintech funding steady declined throughout the year, dropping from $30.4 billion in Q1 to $21.2 billion in Q2, $13 billion in Q3 and $10.7 billion in Q4 – the latter being the lowest level since 2018. Banking startups took the biggest hit, with funding plummeting 63% and deals falling 33% year-over-year. [Read more at FintechNews.ch]

DeFi fans are courting traders in $7.2 trillion currency market

A paper by Uniswap and Circle staff compared the traditional trading and settlement of FX with blockchain-based implementations using payment stablecoins and automated market making protocols. Using public blockchain data, they quantified the liquidity, stability, and transaction costs of on-chain FX transactions in early adoption. Their estimates suggested that on-chain FX can reduce the cost of remittance by as much as 80%. [Read more at SSRN]

Crypto money laundering: four exchange deposit addresses received over $1 billion in illicit funds in 2022

According to Chainalysis, illicit addresses sent nearly $23.8 billion worth of cryptocurrency in 2022, a 68.0% increase over 2021. As is usually the case, mainstream centralized exchanges were the biggest recipient of illicit cryptocurrency, taking in just under half of all funds sent from illicit addresses. More illicit funds were sent to DeFi protocols than ever before, a continuation of a trend that began in 2020. [Read more at Chainalysis]

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 (20221110)

For those interested in following the trails and tribulations around the FTX exchange collapse, I’m collecting my favorite articles here on my Diigo social bookmarking page. See also below for the impact on the pegs of the two biggest US dollar-pegged stablecoins, Tether’s USDT and Circle’s USDC.

Project Tourbillon explores cyber resiliency, scalability and privacy in a prototype CBDC

The BIS Innovation Hub’s Swiss Centre launched Project Tourbillon to explore how to reconcile central bank digital currency (CBDC) design trade-offs between cyber resiliency, scalability and privacy. For example, higher resiliency against cyber-attacks requires additional cryptography, which can slow down payment processing. Privacy must be weighed against the need to counter money laundering, terrorism financing and other illicit payments. Project Tourbillon aims to reconcile these trade-offs by combining proven technologies such as blind signatures and mix networks with the latest research on cryptography and CBDC design suggested by David Chaum and Thomas Moser in a 2021 Swiss National Bank working paper. The conclusions of this project will be relevant for both wholesale and retail CBDC systems. The goal is to finish the prototype by mid-2023. [Read more at the BIS]

Reserve Bank of Zimbabwe launches a consumer survey on CBDC

As part of its efforts to explore CBDC, the Reserve Bank of Zimbabwe is conducting a consumer survey that closes on December 7. [Read more on Twitter]

G-sec transactions using digital rupee recorded highest volume since inception on November 7

Transactions in Indian government securities in the secondary market using the the Reserve Bank of India’s prototype wholesale CBDC recorded the highest volume on November 7, 2022 since its inception. [Read more at MoneyControl and some statistics on CBDC-related bond trades are available at the Clearing Corporation of India]

Countries to face ‘grey list’ in anti-terror crackdown on crypto

The Financial Action Task Force (FATF) is reportedly preparing to increase the frequency of its checks to ensure countries are enforcing anti-money laundering and terrorist financing rules in relation to digital assets, from every ten-years to annually. This will give non-compliant countries less time to comply, raising the risk that they are added to a grey list of countries subject to increased monitoring, although failure to comply will not automatically result in grey listing. [Read more at Al Jazeera]

Tether and Circle look to allay fears of USDT and USDC exposure to FTX and Alameda

Tether and Circle, the issuers of USDT and USDC, have both moved to allay fears that their US dollar-pegged stablecoins are directly exposed to the fallout from the FTX debacle. CTO Paolo Ardoino said that Tether has no exposure to FTX or Alameda, although Alameda has previously redeemed a lot of USDT, but no credit exposure has matured. CEO Jeremy Allaire said that Circle has never made loans to FTX or Alameda, and has never received FTX’s native token, FTT, as collateral, nor has it ever traded or held a position in FTT. Interestingly, both USDT and USDC became briefly unpegged today (November 10, 2022), with USDT spiking down, and Circle spiking up (see graphs below).

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.

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 (20220902)

A conversation on CBDCs, with Jamiel Sheikh, of the CBDC Think Tank

Forbes published an interview focused on central bank digital currency (CBDC) with Jamiel Sheikh , CEO of the CBDC Think Tank (CBDCTT). The CBDCTT delivers education, the CBDC Summit in Washington D.C in collaboration with the IMF,  and is expanding into advisory with a number of key clients and central banks.  A key interview takeaway for me was the stressing of the importance of central banks building internal CBDC competencies instead of relying on vendors. [Read more at Forbes]

Central Bank of Nigeria announces eNaira’s Integration with NIBSS

The Nigerian Central Bank (CBN) has declared the eNaira to be completely implemented into the Nigeria Inter-Bank Settlement System (NIBSS) Customers can now transfer money from their eNaira wallet to any Nigerian bank account of their choice thanks to the integration with NIBBS Instant Payments (NIP), the country’s main payment system. NIP is a virtual real-time Inter-Bank payment method based on account numbers. [Read more on the CBN Twitter feed]

The Perverse Impacts of the Anti-Money-Laundering System

In theory, anti-money laundering (AML) measures are meant to identify and stop the global movement of funds either earned through criminal activity or intended to fund bad actors. However, Matt Collin, a global development specialist who works with the Brookings Institution and the World Bank, says he is unaware of a single economic study clearly showing a reduction of crime following new AML rules (though he admits such a study might be difficult to design). [Read more on CoinDesk]

Reimagining Money in the Age of Crypto and Central Bank Digital Currency

The future of money is undoubtedly digital, and in the latest issue of the IMF’s Finance & Development some of the world’s leading experts explore what it will look like? It includes my article about offline central bank digital currency (CBDC). [Read more at the IMF]

Discounted tickets available for CBDC Think Tank masterclass

The CBDC Think Tank, in partnership with the International Monetary Fund and George Washington University, is hosting a full-day in-person CBDC Masterclass on October 12 in Washington DC. The sessions are designed as instructional deep dives with full presentations and Q&A components.  Ticket prices are as low as $99 and you can save 30% by entering KIFFMEISTER where the registration page asks for a discount code. [Register here]

Also, the CBDC Think Tank, in partnership with Georgetown University and the DC FinTech Week, is hosting a FREE Digital Currency Lecture Series, a set of digital currency lightning talks delivered by subject matter experts, on October 14 in Washington DC. [Request an invite here]

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.

Kiffmeister’s #Fintech Daily Digest (20220809)

Retail Central Bank Digital Currency: Current Landscape

I often get asked to share what I know about which central banks are doing what in the retail central bank digital currency (CBDC) space, so I’ve posted an abbreviated version of my retail CBDC presentation slides here.

Reserve Bank of Australia to Explore Use Cases for CBDC

The Reserve Bank of Australia (RBA) has launched a research project to explore use cases for a CBDC in Australia. It is expected to take about a year to complete, and will involve the development of a limited-scale CBDC pilot that will operate in a ring-fenced environment for a period of time. Interested industry participants will be invited to develop specific use cases that demonstrate how a CBDC could be used to provide innovative and value-added payment and settlement services to households and businesses. The Bank and the DFCRC will then select a range of different use cases to participate in the pilot, based on their potential to provide insights into the possible benefits of a CBDC. [Read more at the RBA]

Chainalysis says $2 billion stolen in cross-chain bridge hacks this year, more expected

Chainalysis says cross-chain bridges that allow transfer of assets between independent blockchains are among the highest risk protocols in the blockchain industry for scams and bad actors. Chainalysis in a new report estimates that $2 billion worth of cryptocurrency has been stolen from cross-chain bridges across 13 attacks so far this year, accounting for 69% of all stolen funds during that time. Cross-chain bridges were once considered the solution to interoperability between blockchains in the crypto industry, but as the protocols continue to seem vulnerable to hacks and attacks that view is beginning to change. [Read more at Chainalysis]

U.S. Treasury Sanctions Virtual Currency Mixer Tornado Cash

The U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) sanctioned Tornado Cash, a crypto-asset mixer that mixes potentially identifiable or “tainted” cryptocurrency funds with others, so as to obscure the trail back to the fund’s original source. OFAC claims that Tornado Cash has been used to launder more than $7 billion worth of virtual currency since its creation in 2019. The sanctions mean U.S. crypto investors can no longer use Tornado Cash. 38 ETH addresses and 6 USDC addresses were added to OFAC’s Specially Designated Nationals (SDN) list. Circle, the issuer of the USDC stablecoin, reportedly froze over $75,000 worth of USDC funds linked to those 6 USDC addresses. Several leading figures in the crypto industry expressed their concerns about the sanctions. [Read more at Finance Magnates]

Survey on potential CBDC use cases in the Asia-Pacific region

Deborah Healey and Heng Wang of the University of New South Wales have launched a study of the impact of retail central bank digital currency (CBDC) on stakeholders and consumers across the Asia-Pacific region. In that regard they are inviting such stakeholders and consumers in the region to take part in a survey on the potential uses of retail CBDC in Asia. The survey should take 12-15 minutes to complete and will be active until midnight August 24, 2022 (AEST). Responses will be anonymous and not attributed to users or their organizations. If you have any questions, would like an invitation to the launch and a copy of the final report please email d.healey@unsw.edu.au. Also, please feel free to share this request with others in the region. [Click here to take the survey]

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.

Upcoming events I’m affiliated with:

The CBDC Think Tank, in partnership with the International Monetary Fund and George Washington University, is hosting a full-day in-person CBDC Masterclass on October 12 in Washington DC. The sessions are designed as instructional deep dives with full presentations and Q&A components.  [Register here]

The CBDC Think Tank, in partnership with Georgetown University and the DC FinTech Week, is hosting a Digital Currency Lecture Series, a set of digital currency lightning talks delivered by subject matter experts, on October 14 in Washington DC. [Request an invite here]

Kiffmeister’s #Fintech Daily Digest (20220801)

Israel puts the brakes on cash to spur digital payments

The Israeli Tax Authority has placed further restrictions on cash payments to allow authorities to more easily track tax evasion, black market activity and money laundering, and spur digital payments. Since January 2019, Israeli businesses and consumers have been subject to limits on cash payments under the Law for the Reduction in the Use of Cash. They have now been tightened to 6,000 shekels ($1,760) for business and 15,000 shekels ($4,400) for personal transactions. [Read more at CoinTelegraph]

Binance Compliance Officer: KYC Cost Exchange ‘Billions in Revenue’

Reuters recently published a series of investigative reports on Binance and its association with illicit activity, claiming that Binance has become a hub for criminal activity and that it overlooked several money-laundering red flags. In a CoinDesk interview, Tigran Gambaryan and Matthew Price, key members of Binance’s compliance team and former investigators at the U.S. Internal Revenue Service’s cybercrime unit, disputed a number of these claims. In particular, they claimed that proportional to trading volumes, illicit trading on Binance is no worse than on other exchanges. [Read more at CoinDesk]

Millicent Successfully Tests a General Purpose Full-Reserve Stablecoin

Millicent, a fintech company co-funded by the Innovate UK, has successfully performed a test of a full-reserve stablecoin aimed at the retail market. The reserves are held in a ringfenced account safeguarded by a regulated third party, directly at the Bank of England. Millicent runs on a hybrid Layer-1 distributed ledger network. A sandbox demonstration simulated fiat on-ramping via Faster Payments from a UK consumer bank, as well as the on-chain conversion and minting of GBP-pegged stablecoins, and a variety of payment and settlement scenarios. [Read more at Yahoo Finance]

European banking regulator ‘concerned’ about finding staff to oversee crypto

European Banking Authority Chair José Manuel Campa views the regulator’s ability to hire and retain specialized staff as a “major concern”, particularly in the areas of technology, anything related to crypto and digitization. “This is in high demand across society.” [Read more in Finextra]

Upcoming events I’m affiliated with:

The CBDC Think Tank, in partnership with the International Monetary Fund and George Washington University, is hosting a full-day in-person CBDC Masterclass on October 12 in Washington DC. The sessions are designed as instructional deep dives with full presentations and Q&A components.  [Register here]