Kiffmeister’s #Fintech Daily Digest (20221030)

Digital money and central bank balance Sheets

The IMF published a paper by Adrian Armas and Manmohan Singh that examines the impact of digital money on central bank balance sheets and monetary policy. They show that the impact will depend on the type of substitution into digital money. For example, interest rate and credit monetary policy channels may become weakened by nonbank stablecoins that are backed by investments in government securities, or if there is substitution out of bank deposits into central bank digital currency (CBDC). The common factor in these cases is a reduction of banking credit. However, when substitution is out of currency in circulation (i.e., cash) into private digital money that is deposited at banks, banking credit could expand. [Download at IMF.org]

Use of cash by companies in the euro area

In 2021 the European Central Bank (ECB) launched its first survey on the usage of cash among companies to understand their strategic view on the current and future use and acceptance of cash. It found that almost all businesses surveyed accept cash (even in cash-lite countries, like the Netherlands, 90% accept cash), most businesses prefer customers to pay with card but a quarter prefer cash, security and reliability are the top criteria when deciding on payment type, and very few that accept cash intend to stop accepting it in the future. The ECB concluded that the results provide further support for the Eurosystem’s cash strategy to continue to ensure that cash remains widely available and accepted as a means of payment and store of value. [Read more at the ECB]

Knocked down during lockdown: the return of cash

The Bank of England conducted surveys in 2021 to gain further insights into the store of value role of banknotes. They confirm that over the past decade, the fall in transactional cash use in the UK has been accompanied by a rise in the value of notes in circulation. Covid intensified this trend. As Covid restrictions have lifted, there has been a partial recovery in cash use, and more recently, a stabilization in cash use trends. The value of notes in circulation remains elevated, as people are holding more cash as a store of value.  And there remains a sizable share of the population who value cash and for whom cash remains their preferred means of payment. The Bank reiterated its commitment to  to ensure that cash remains available and accessible for those who want to use it. [Read more at the Bank of England]

Latin America: Financial Inclusion and CashTech Solutions

Most Latin American consumers remain conspicuous cash users. Thus, CashTech could be very successful as specialists are looking for ways to bridge the gap between the digital economy and the cash economy, and many incumbents and startups have launched CashTech solutions in the region. For examples, banks have implemented cardless cash withdrawals through their apps, Amazon allows users in the region to pay for goods with cash through Amazon PayCode and Amazon Cash, and retail chain OXXO, which provides cash and correspondent banking services in its more than 19,000 stores in Mexico, has partnered with BBVA and Santander to offer cash-withdrawal services and with Ria Money Transfer to delivers cash remittances. [Read more at Cash Essentials]

Custodia Bank’s master account lawsuit against Fed likely to advance

“Judge Scott Skavdahl of the U.S. District Court for the District of Wyoming said he likely would not dismiss the lawsuit Custodia Bank filed against the [Fed] earlier this year. Following oral arguments from all parties, Skavdahl declined to issue a ruling from the bench on the Fed’s motion to dismiss the lawsuit. He noted that the scope of the suit might be adjusted but the matter would likely survive “in some form.” Custodia, a Wyoming-chartered special-purpose depository, sued the Fed in June, hoping to compel it to make a decision on the company’s roughly two-year-old application for a master account with the Kansas City Fed.” [Read more at American Banker, some of Skavdahl’s comments are a hoot]

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 CBDC Think Tank is a New York-based technology- and vendor-agnostic digital currency knowledge-sharing hub for staff of central banks, international financial institutions (IFIs) and non-government organizations (NGOs). It runs webinars, workshops, and masterclasses to disseminate knowledge and facilitate communication. It also engages in advisory work, focusing on delivering impact that best aligns with the needs of its clients and the forward progress of human civilization. The CBDC Think Tank welcomes requests from central bank officials for CBDC advisory services.  [click here for more information].

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 (20220808)

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.

CBDC launch still on the table, BoJ says

A Bank of Japan (BoJ) official said the central bank has not scrapped its preparations for a potential CBDC launch, dismissing misleading reports by a number of media outlets. Tomohiro Sugo, head of the payment and settlement system division, told Central Banking that “the Bank of Japan continues preparing for the possible issuance of CBDC in the future and it has not quit its preparations.” [Read more at Central Banking] As I mentioned a few days ago the misleading reports started with an Asia Times op-ed that rehashed inaccurately a July 5, 2022 report from the BoJ’s Liaison and Coordination Committee on Central Bank Digital Currency.

Nepal’s central bank working to amend Act to issue digital currency

The Nepal Rastra Bank has reportedly initiated an exercise to revise the Nepal Rastra Bank Act in order to enable the central bank to issue digital versions of the Nepali currency. Revati Nepal, chief of the currency management department at the central bank. said that “a task force formed by the central bank has drafted an amendment bill to authorize the Nepal Rastra Bank to issue and manage a digital currency.” [Read more at the Kathmandu Post]

Cashlessness, Crime and Central Bank Digital Currency

David Birch argues that cash reduction via fintech means an increase in net welfare. People who are trapped in a cash economy, the poor in particular, are more likely to get robbed, to get bad deals, and to get shaken down. Although that argues for reducing cash usage,  what do we do about the people people who say they would “struggle to cope” in a cashless society (one in five according to a U.K. survey) and those who say it would be “problematic” (half of those surveyed)? [Read more here]

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]

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]