European Commission publishes digital euro package

The European Commission published proposals, one aimed at ensuring continuing access to euro banknotes and coins across the euro area, and the other establishing the legal framework for a possible digital euro. If the latter is adopted by the European Parliament and Council, it will ultimately be for the European Central Bank (ECB) to decide if and when to issue the digital euro. According to the digital euro proposed legislation, the digital euro would not be required to have a bank account, and must be usable to make low-value payments while offline as long as there is physical proximity between payer and the payee devices. Also, it must be possible to hold digital euro locally stored on electronic devices up to a certain threshold. Basic services, including when making purchases in digital euro, whether nationally or across border, will not incur fees. However, commercial banks could charge customers for their accounts to which the digital euro may be linked, and for voluntary, non-basic services such as conditional payments. [Read more at the EC]

According to the accompanying questions and answers, user personal data would be accessed and processed mainly by the bank or payment service provider (PSP) with whom they hold a digital euro account, for account management purposes, fraud prevention and to abide by financial integrity (e.g., AML/CFT) regulatory requirements. The ECB would not be able to identify individual digital euro users, nor what users do with their money. They would only have access to encrypted data, and only to the extent that this is necessary to settle digital euro transactions, and support payment services providers in performing their tasks. And just like cash, the details of offline digital euro payments would not be visible to anyone – neither the user’s bank, PSP, nor the ECB. The digital euro should not be programmable… “as a digital form of the single currency, the digital euro should be fully fungible“. [Read more in the FAQ]

TrueUSD depegs on Binance.US, drops to 80 cents against Tether

Dollar-pegged stablecoin TrueUSD (TUSD) is trading at a discount relative to Tether (USDT), hitting a low of 80 cents on June 28, 2023. TUSD is the #5 stablecoin in terms of market capitalization ($3.1 billion versus Tether’s $83.4 billion and USD Coin’s (USDC’s) $28.2 billion on June 28, according to CoinGecko.com). The spike is being attributed to questions around TUSD’s reserves, some of which is purportedly being held and/or managed by troubled Prime Trust Bank, and rumors regarding holders’ inability to redeem TUSD. [Read more at Bitcoinist]

Grayscale Bitcoin Trust shares discount dips to 30%

The discount on Grayscale Bitcoin Trust’s (GBTC)  share price relative to its net asset value dropped to 30% on June 27, 2023. The last time GBTC closed the day around this level was in September 2022. This follows reports that Fidelity Investments is preparing to follow BlackRock’s application for a spot bitcoin exchange-traded fund (ETF) with its own, renewing optimism about converting GBTC into an ETF, which would eliminate the discount. [Read more at CoinDesk]

Fintech lending with Lowtech pricing

The National Bureau of Economic Research (NBER) published a paper that questions Fintech lending’s ability to spot good credit risks missed by big banks and traditional lenders, providing people with affordable loans they might not otherwise be able to access. Using a comprehensive dataset of FinTech personal loans, the paper shows that Fintech lender loan rates continue to rely heavily on conventional credit scores, including 45% higher rates for nonprime borrowers. Other known default predictors are often neglected. Within each segment (prime/nonprime) loan rates are not very responsive to default risk, resulting in realized loan-level returns decreasing with risk. [Read more at the NBER]

*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:

• I’ll be participating in Currency Research’s in-person Global Payments Summit in Cape Town from June 28 to 30. [Register here]
• I’ll be lecturing at the Digital Euro Association (DEA) Digital Money Academy on July 27, 2023. [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]