Tag: AMLCFT

Kiffmeister’s #Fintech Daily Digest (20231019)*

~ kiffmeister

FinCEN proposes designating crypto mixers as money-laundering hubs

The US Treasury Department Financial Crimes Enforcement Network (FinCEN) proposed designating crypto mixing as an area of “primary money laundering concern” following Hamas’ attack on Israel. FinCEN assessed that the percentage of convertible virtual currency (CVC) transactions processed by CVC mixers that originated from likely illicit sources is increasing. FinCEN proposed requiring domestic financial institutions and agencies to implement certain recordkeeping and reporting requirements for transactions involving crypto mixers. [Read more at FinCEN]

Correcting the record: Inaccurate methodologies for estimating crypto’s role in terrorism financing

Chainalysis claims that terrorist groups’ use of crypto-assets has been overstated. Some terrorist organizations do raise, store, and transfer funds using crypto-assets, but according to Chainalysis, terrorism financing is a very small portion of the already very small portion of crypto transaction volume that is illicit. Instead, terrorist organizations will likely continue to use traditional, fiat-based methods such as financial institutions, hawalas, and shell companies as their primary financing vehicles. Also, crypto-assets are not effective solutions to finance terrorism at scale due to blockchain technology’s inherent transparency. [Read more at Chainalysis]

*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 (20230906)*

~ kiffmeister

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 (20230626)*

~ kiffmeister

MAS proposes framework for digital asset networks

The Monetary Authority of Singapore (MAS) published a report proposing a framework for designing open, interoperable networks for digital assets (i.e. tokenized real-economy and financial assets ). The report also considers how the CPMI-IOSCO principles for financial market infrastructures (PFMIs) can be applied to evolving models of digital asset networks, based on industry pilots launched under Project Guardian, MAS’s collaborative initiative with the financial industry to test the feasibility of applications in asset tokenization and decentralized finance (DeFi).  The MAS also announced an expansion of Project Guardian to more asset classes. [Read more at the MAS]

Crypto Travel Rule implementation ‘remains relatively poor,’ says FATF

The Financial Action Task Force (FATF) renewed its request for countries to implement the “travel rule”, explaining that “many” member states have failed to implement the rule. The rule requires virtual asset service providers (VASPs) to communicate the personally identifiable information (PII) of senders to the VASPs of recipients and vice versa whenever the amount transacted is above $1,000. FATF claims that the travel rule is a “key requirement to prevent funds being transferred to sanctioned individuals or entities”, and noncompliance “creates significant loopholes for criminals to exploit”. Closing the gaps in global regulation of virtual assets is an urgent priority. [Read more at the FATF]

Belgium regulator orders Binance to stop services in country

Belgium’s Financial Services and Markets Authority (FSMA) ordered Binance to cease all offers of virtual currency services in the country — immediately. “The FSMA has noted that Binance is offering and providing exchange services in Belgium between virtual currencies and legal currencies, as well as custody wallet services, from countries that are not members of the European Economic Area.” FSMA said Binance did not dispute that it offered those services in Belgium. [Read more at the FSMA]

*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 (20230531)*

~ kiffmeister ~ 1 Comment

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)

~ kiffmeister

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)

~ kiffmeister

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)

~ kiffmeister

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)

~ kiffmeister

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)

~ kiffmeister

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)

~ kiffmeister

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]