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 (20220918)

BIS Innovation Center at the NY Fed is looking into wholesale CBDC

Project Cedar, which is being run out of the BIS Innovation Center at the New York Fed, is looking into wholesale central bank digital currency (CBDC) from a research standpoint. It’s led by Per von Zelowitz, and what they’re trying to do, according to the Boston Fed’s Robert Bench, is “understand what are the requirements, or what are the things they need to think about, for the obligations of New York, which is the world’s leading capital market center?” Thanks to the Atlantic Council’s Josh Lipsky for bringing this to my attention.  [Read more at the Atlanta Fed]

Bullet train: New tokens and platforms may transform cross-border payments

A few weeks ago the IMF’s Finance & Development magazine published an article by Tobias Adrian and Tommaso Mancini-Griffoli that pitched the idea of a multi wholesale CBDC platform to achieve greater cross border payment efficiencies. The IMF will soon publish two papers on these topics that will lay out an initial blueprint for such platforms. This concept is also being pursued by the BIS Innovation Hub Hong Kong Centre’s Project mCBDC Bridge, along with the Hong Kong Monetary Authority, Bank of Thailand, People’s Bank of China and Central Bank of the United Arab Emirates. [Read more at the IMF]

Central Bank Digital Currencies – The Quest for Public Digital Payment Infrastructures

This paper by Xavier Lavayssière summarizes the many considerations that go into the decision as to whether a central bank should issue CBDC and the many design dimensions. The decision-making process raises fundamental questions about the functions of central banks, the roles of the public and private sectors, technological design and international monetary competition that will be defining for the payment industry, economic development and sovereignty. [Download at Blockchain@X]

The Demand for Programmable Payments

This paper Charles Kahn and Maarten van Oordt studies the desirability of programmable payments where transfers are automatically executed conditional upon preset objective criteria. They do so in a framework that captures a wide range of economic relationships between two parties, in an environment without legal recourse. They find that optimal payment arrangements for long-term economic relationships consist predominantly of simple direct payments. Programmable payments will be desirable, and may in fact be the only viable payment arrangement, in situations where economic relationships are of a short duration. [Read more at SSRN]

 

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]