Kiffmeister’s #Fintech Daily Digest (20230204)

Kazakhstan’s digital currency in PoC stage, per Binance, National Bank joint report

The National Bank of Kazakhstan (NBK) will be conducting central bank digital currency (CBDC) proof-of-concept (PoC) work in 2023. This is according to a report published jointly by the central bank and Binance on digital asset regulation, the digital asset industry and decentralized finance (DeFi) in Central Asia. However, it mentioned that in 2023, the NBK is planning to build several PoC scenarios of integration between the experimental Digital Tenge platform and BnB chain in 2023 to explore opportunities of DeFi and TradFi industry players’ cooperation under central bank supervision. [Read more at Binance and download the report here]

Update on Zimbabwe’s central bank digital currency (CBDC) project

The [Reserve Bank of Zimbabwe’s (RBZ’s)] CBDC Project continued to progress steadily in line with the envisaged CBDC Road Map. In this regard, in November 2022, the Bank rolled out a consumer survey that intends to solicit opinions on the design and nature of the CBDC and its overall acceptance/acceptability by stakeholders. As at January 23, 2023, the survey had received 2,286 responses. [Read more at the RBZ]

Tornado Cash and Blockchain Privacy: A Primer for Economists and Policymakers

The St. Louis Fed published an article that explores non-custodial crypto asset mixers such as Tornado Cash. It analyzes what types of mixers exist and how they work, and discusses opportunities and risks and offer an approach, based on voluntary disclosure, that would allow financial market regulators to combat money laundering and illicit activities, while allowing honest users to interact with privacy-enhancing protocols. The article explains how crypto asset mixers play an important role on public blockchains and that privacy may be difficult to attain without them. [Read more at the St. Louis Fed]

Euro stablecoin launched in Finland, claims to be first approved in the EU

Finland-based Membrane Finance has released a fully-reserved stablecoin backed by the euro. The company is licensed by the Finnish Financial Supervisory Authority (Fin-FSA) and claims that the new ”EUROe” coin is “the first and only … crypto stablecoin.regulated by an EU-based financial authority. [Read more at Membrane]

Accounting for Digital Currencies

A Research in International Business and Finance paper has found that current accounting standards do not precisely cover the treatment of digital currencies. It identifies a need for an accounting standard to provide guidance on the identification, classification, measurement, and presentation of digital currencies, but in the interim, existing standards can be amended to incorporate them to avoid inconsistent global accounting approaches. [Read the paper 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 (20221014)

European Data Protection Board statement on the digital euro

The European Data Protection Board (EDPB) reiterated the importance of ensuring digital euro privacy and data protection by design and by default. The EDPB cautioned against the use of systematic validation and tracing of all transactions in digital euros. In this respect, the EDPB recommended that the digital euro be made available both online and offline, along a threshold below which no tracing is possible, to allow full anonymity of daily transactions. [Read more at the EDPB]

Tether Slashes Commercial Paper to Zero

Tether has completely eliminated commercial paper from its USDT stablecoin reserves, replacing them with U.S. Treasury Bills. [Read more at Tether.io]

Digital yuan transactions volume crossed $14B mark

China’s central bank digital currency (CBDC) project has reached the roughly 100 billion yuan ($14 billion) transaction mark during its pilot phase. “Multiple e-government service platforms have opened digital renminbi payment services, supporting online and offline channels to handle various public utility payments, using digital renminbi to issue tax rebate funds, special funds for monthly medical insurance payment, funds for helping people in need, and ‘specialized, special and new’ enterprise support funds, etc.” Going forward, the People’s Bank of China (PBOC) plans to launch the cross-border payments between Hong Kong and mainland China, following the principle of “anonymity for small amounts and traceability of large amounts” to protect the user’s personal data. [Read more on the PBOC’s WeChat page]

Canada’s real-time payments system’s launch delayed

The launch of Canada’s Real-Time Rail (RTR) payments system has been pushed back from the middle of next year to an as yet undetermined date. Payments Canada says an extension will “provide additional time to validate and test the components and end-to-end integration”. RTR will allow Canadians to initiate payments and receive irrevocable funds in seconds, 24/7/365. The system will tap the ISO 20022 messaging standard to support payment information traveling with every payment. [Read more at Payments Canada]

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 (20221005)

The Book of [Blockchain, Crypto and Web3] Jargon

Latham & Watkins LLP has published a very helpful interactive glossary of acronyms, slang, and blockchain, crypto and Web3 industry terminology. [Download at Latham & Watkins LLP]

SWIFT innovation paves way for global use of CBDCs and tokenized assets

SWIFT, working with Capgemini, has shown that central bank digital currencies (CBDCs) and tokenized assets can move seamlessly on existing financial infrastructure. The findings, from two separate experiments, bridged transactions between different distributed ledger technology (DLT) platforms (JPMorgan Quorum and R3 Corda) and real-time gross settlement systems. However, it appears that it still uses intermediaries for cross border payments, and and intermediaries are a significant cause of friction in the payment system. Fourteen banks will be involved in further experiments to scale the system. [Read more at SWIFT]

Privacy in cross-border digital currency: A transatlantic approach

The Atlantic Council published an article illustrating how various technical design choices can affect the privacy and transparency of cross-border CBDCs. Many of the cross-border CBDC pilot studies to date have adopted the technical designs provided by enterprise DLT platforms. However, some of these designs make tradeoffs regarding privacy, efficiency, and/or security. Whether these tradeoffs are acceptable is a matter of policy, and requires coordination between different regulators and central banks. [Read more at the Atlantic Council]

Smart Contracts Could Improve Efficiency And Transparency In Financial Transactions

S&P Global has published a smart contract explainer. Using smart contracts in financial transactions can improve efficiency and reduce reliance on third parties like asset servicers and custodians, as well as make transaction resolutions faster–enhancing creditworthiness and the integrity of business dealings. However, smart contracts have had slow and limited adoption in the financial markets owing to key risks including technology issues (such as incorrect coding) and legal and regulatory ambiguities that make accountability difficult. [Read more at S&P Global]

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 (20220925)

I’ve updated my tabulation of retail central bank digital currency (CBDC) explorers; just minor updates and link repairs. [Click here]

How the US can regulate stablecoins now without congressional action

The Brookings Institution published a paper that proposes a US federal framework for the issuance of stablecoins within the existing regulatory framework for insured depository institutions, a structure that would not require any new legislation. Under current law, the Comptroller of the Currency could authorize a national trust bank charter, organized as an operating subsidiary of an insured depository institution, to create stablecoins through the use of a dedicated trust vehicle. The Comptroller would adopt standards limiting the investment of stablecoin reserves to high quality liquid assets and address redemptions and operational resilience, among other matters. The proposed framework guarantees that holders of a failed stablecoin are paid out rapidly and in full, because it uses the same resolution process by which failed banks are wound up. [Read more at Brookings]

Financial Inclusion and Central Bank Digital Currency in The Bahamas

The Central Bank of the Bahamas (CBOB) published a paper that attempts to assess the introduction of CBDC in the Bahamas. It uses a theoretical model that assumes that CBDC will lead to a decrease in the number of unbanked. As these individuals acquire access to financial institutions, the fraction of hand-to-mouth agents in the economy falls. If the number of unbanked individuals is cut in half, the economic benefits include: a reduction in the volatility of all shocks; monetary policy is more effective at controlling inflation and contributes less to the volatility of the overall economy; fiscal policy becomes more Ricardian, mitigating the size of fiscal shocks. [Read more at the CBOB]

Privacy and Central Bank Digital Currency in the Digital Economy

A paper written by European Central Bank staff studies how the choice of payment instruments affects privacy and welfare in the digital economy. Cash allows merchants to preserve their anonymity but cannot be used for online transactions that generate higher sales. Bank deposits can be used online but do not preserve anonymity. Payment tokens issued by digital platforms allow merchants to hide from the bank but also enable platforms to stifle competition. However, a CBDC that allows agents to share their payment data with selected parties can overcome all frictions and achieve efficient allocation. [Read more at SUERF]

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 (02/27/2022)*

What’s the marketing strategy for the Fed’s CBDC?

JP Koning wonders whether the U.S. Fed has a central bank digital currency (CBDC) marketing pitch beyond that it is safer than other forms of money (“free from credit risk and liquidity risk”). He argues that “safe” is something that Americans already have with commercial bank money thanks to deposit insurance. And because the Fed is going with an “intermediated” model, users will still have to deal with (and probably pay fees to) the same old banks and other payment service providers. [Read more]

Central bank digital currencies risk becoming a gigantic flop

Peter Bofinger and Thomas Haas made a similar argument a year ago with respect to advanced economy countries more generally – i.e., where a large share of the population have access to government-insured bank accounts. However, they concede that a supranational CBDC with multi-currency operability and an openness to payment objects that are not system-specific, may be a worthwhile response to monopolistic or oligopolistic global retail payment networks such as PayPal. [Read more]

BOJ on track for digital currency roll-out

The Bank of Jamaica (BOJ) is reportedly still on track for the roll-out of its JAM-DEX central bank digital currency (CBDC) during the first quarter of 2022. The remaining steps include the passage of amendments to the Bank of Jamaica Act to make CBDC legal tender and the BOJ the sole issuer, and increasing the number of deposit-taking institutions onboarding clients. Also, launch awaits an independent third-party quality assurance assessment of the system, the results of which will be made public. [Read more]

New European Commission Data Act aims for more control over smart contracts

The European Commission has released its proposal for the union’s new Data Act. Among other things, it would mandate that applications using smart contracts include “internal functions which can reset or instruct the contract to stop or interrupt the operation to avoid future (accidental) executions.” Fears are being expressed that such “kill switches” could threaten the promise of immutability because, with the ability of a single source to make a change, the contract is no longer autonomous. [Read more]