Kiffmeister’s #Fintech Daily Digest (20221003)

Tether Increases US Treasury Portfolio, Cuts Commercial Paper Holdings to Below $50M

Tether has cut its commercial paper holding to less than $50 million, as of September 30, and increased its holding of U.S. Treasuries to 58.1% of its total portfolio from 43.5% of its total portfolio as of June 30, according to a Tweet by its Chief Technology Officer, Paolo Ardoino. [Read more at CoinDesk]

Bigtech regulation: in search of a new framework

The Bank for International Settlements (BIS) published a paper on two potential Bigtech regulatory models. The first is segregation, which is a structural approach that seeks to minimize risks arising from group interdependencies between financial and non-financial activities by imposing specific ring-fencing rules. The second is inclusion, that creates a new regulatory category for Bigtech groups with significant financial activities. The paper concludes that the inclusion approach provides for a more tailored option to address specific risks associated with Bigtech business models. [Read more at the BIS]

Tickets available for CBDC Think Tank masterclass

The CBDC Think Tank, in partnership with the IMF and George Washington University, is hosting a full-day in-person CBDC Masterclass on October 12 in Washington DC for “official sector” staff and academics active in the CBDC / digital currency space only. The sessions are designed as instructional deep dives with full presentations and Q&A components.  Tickets are $99. [Register here]

Also, the CBDC Think Tank, in partnership with Georgetown University and the DC FinTech Week, is hosting a FREE (also in-person) 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 (20220901)

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]

The Financial Stability Implications of Digital Assets

The US Fed published a paper that explores whether the digital financial system creates new potential challenges to financial stability. It describes emerging vulnerabilities that could present risks to financial stability in the future if the digital asset ecosystem becomes more systemic, including: run risks among large stablecoins, valuation pressures in crypto-assets, fragilities of decentralized finance (DeFi) platforms, growing interconnectedness, and a general lack of regulation. [Read more at the Fed]

Asia Far Ahead in Mobile Payment Adoption

WorldPay data from FIS has found that the Asia-Pacific region reached a much higher market share of mobile payments than other parts of the world (see above graphic). 44% of the transactions made at point of sale (POS) were carried out with a mobile phone instead of a debit/credit card or cash and 69% of online shop payments were completed on a mobile device. According to Global management consulting firm McKinsey, Southeast Asia has become a “wallet-first region.” Africa had the second highest share of POS mobile payments, at 12%, while Europe only saw 8% of POS transactions carried out on mobile. [Read more at Statista]

SAMA Updates Its Regulatory Sandbox Framework to Drive Innovation

The Saudi Central Bank (SAMA) updated its Regulatory Sandbox framework as part of its efforts to achieve the national strategic goals in the Saudi Vision 2030 Financial Sector Development Programme. The updated framework will also support the objectives of the fintech strategy and contribute to the economic empowerment of the Saudi society and its citizens by promoting further Fintech innovations. [Read more at the SAMA]

Bigtechs vs Banks

The Bank for International Settlements (BIS) published a paper that analyses an economy in which large technology companies, Bigtechs, provide credit to firms operating on their platforms. It focuses on two advantages that Bigtechs have with respect to banks: better information on their clients and better enforcement of credit repayment since big techs can exclude a defaulting firm from their ecosystem. While Bigtechs have both superior enforcement and complete and private information of the firm type Bigtechs can encroach on banks’ turf only if they guarantee some privacy to firms by tempering their drive to collect information about firm characteristics and leaving some rents to them. The way Bigtechs share information i.e. by providing information publicly or in a private way entails different outcomes in terms of efficiency. [Read more at the BIS]

Should we trust the credit decisions provided by machine learning models?

An article by a couple of Banco de España economists proposes a framework to assess how reliable machine learning (ML) technology is to credit assessments. It is based on generating datasets intended to resemble typical credit settings, in which the relationship between the variables is defined. It uses non-interpretable ML models on these generated datasets, and explain their results using two popular interpretability techniques. It then calculates to what extent the explanations given by the interpretability techniques match the underlying truth.  [Read more at SUERF]

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 (20220805)

Jurisdictions Where Retail CBDC Is Being Explored

I’ve made some minor updates to my tabulation of retail central bank digital currency (CBDC) explorers. I count 85, which is lower than the count of some other trackers that, for currency unions, count all member countries. I count only the central bank that is responsible for currency issuance (e.g., the European Central Bank (ECB) in the Eurozone, and the Eastern Caribbean Central Bank in the Eastern Caribbean Currency Union (ECCU)). If I count all eight Eurozone member countries whose central banks are contributing to the ECB CBDC work, plus all eight member countries of the ECCU, my tally goes up to 101. If I also include all Eurozone countries I have a big fat headline number of 112! [See my tabulation here]

Thailand’s Central Bank Extends Retail CBDC Study to Pilot Phase

The Bank of Thailand (BoT) is extending the scope of retail CBDC development by starting a pilot study. It will adopt technology developed by Giesecke+Devrient and it is expected to run from the end of 2022 to mid-2023. However, the BoT emphasized that the purpose of the pilot is to assess the suitability of technology and CBDC design, and at present it does not have plans to issue retail CBDC until thorough consideration of benefits and associated risks for the financial system. [Read more at the Bank of Thailand]

ZB Exchange Loses Nearly $5M in Suspected Hack, Pauses Withdrawals

Crypto exchange ZB Exchange has paused user withdrawals, likely in response to a suspected hack that appears to have drained nearly $5 million in tokens from the firm’s hot wallet. The multimillion-dollar loss is the latest in a series of security breaches to hit crypto companies this year and the third multimillion-dollar hack reported this week. [Read more at CoinDesk]

PayTech and the D(ata) N(etwork) A(ctivities) of BigTech Platforms

The Bank of Canada published a paper that models the trade-off faced by BigTech payment platforms between costs associated with compensating users for their privacy concerns and revenues from the harvested data. The results of the modeling lead to two policy implications. First, data monetization is not necessarily inefficient from a social point of view because data are socially valuable and users are compensated for their privacy concerns with cheaper platform services. Second, when assessing BigTechs’ introduction of payment services, one needs to consider the bundling of data and payments and the implied complementarity. In economies with large payment frictions, data-driven payments tend to increase social surplus. In advanced economies, however, where payments are already fairly efficient, payment-driven data can lead to inefficient adoption by platforms that seek to generate data beyond what is socially efficient. [Read more at the Bank of Canada]

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]