Group items tagged

"I study an entrepreneur's incentives to build a decentralized platform using a blockchain. The entrepreneur can either build the platform using a regular company and retain control of the platform, or build the platform using a blockchain and surrender control of the platform. In either case, the platform's users experience a locked-in effect. I show that a decentralized implementation of the platform is both (i) more profitable for the entrepreneur and (ii) a Pareto improvement, if and only if the size of the locked-in effect exceeds some threshold. Further, progressive decentralization through airdrops can be optimal."

The Bank for International Settlements (BIS) published a paper that analyzes the effect of big tech platforms on credit markets. It finds that: "(i) platform lending serves as an instrument to price discriminate vendors with heterogenous funding needs, resulting in higher fees and below-market interest rates; (ii) platform lending can spur innovation by providing access to subsidized credit, but may be detrimental to vendors who do not borrow; and (iii) when the platform has better information it will lend only to the highest-quality vendors and at a better rate than banks, which, anticipating adverse selection effects, will not lend. The results suggest that platform lending can be socially desirable if the users would not have received funding from banks, but it has ambiguous effects otherwise."

The Bank for International Settlements published a paper on digital platform economics. It found that digital platforms can dramatically lower costs and thereby aid financial inclusion - but these same features can give rise to digital monopolies and oligopolies. Digital platforms operate in multi-sided markets, and rely crucially on big data. This leads to specific network effects, returns to scale and scope, and policy trade-offs. To reap the benefits of platforms while mitigating risks, policy makers can: (i) apply existing financial, antitrust and privacy regulations, (ii) adapt old and adopt new regulations, combining an activity and entity-based approach, and/or (iii) provide new public infrastructures. The latter include digital identity, retail fast payment systems and CBDCs. These public infrastructures, as well as ex ante competition rules and data portability, are particularly promising. Yet to achieve their policy goals, the paper concludes that central banks and financial regulators need to coordinate with competition and data protection authorities.

The IMF published a blog post that makes the case for leveraging the technology behind crypto-assets to upgrade payment infrastructures and ensure interoperability, safety, and efficiency in digital finance. It points particularly to tokenization, encryption, and programmability, plus central bank digital currencies (CBDCs) to clear and settle transactions. Payments could be made from one private money to another, through the CBDC ledger or platform. Money could be escrowed on the CBDC platform, then released when certain conditions are met, such as when a tokenized asset is received. And the CBDC platform could offer a basic programming language to ensure smart contracts are trusted and compatible with one another. More detail on these ideas were published in a recent IMF working paper ("A Multi-Currency Exchange and Contracting Platform"). https://www.imf.org/en/Publications/WP/Issues/2022/11/04/A-Multi-Currency-Exchange-and-Contracting-Platform-525445

The Canadian Securities Administrators (CSA) is strengthening its approach to oversight of crypto trading platforms by expanding existing requirements for platforms operating in Canada. Also, the CSA announced that it is of the view that stablecoins, or stablecoin arrangements, may constitute securities and/or derivatives. In that context, crypto trading platforms that are registered or that have entered into a pre-registration undertaking are prohibited from permitting Canadian clients to trade, or obtain exposure to, any crypto asset that is itself a security and/or a derivative. Crypto trading platforms are expected to have established policies and procedures to determine whether each crypto asset they provide exposure to is a security and/or derivative.

"Community currencies are used to pay for products or services within specific groups defined by geographical boundaries or specific common interests. Financial crises, social emergence in developing countries, and increased access to digital devices have stimulated a growing number of communities worldwide to develop digital currency projects. These projects use technologies ranging from traditional plastic cards to mobile phones and blockchain technologies. Following the design science research approach, this paper analyzes digital community currencies (DCCs) by developing a taxonomy based on platform architecture, governance, transactionality and virtuality. By investigating 22 DCC platforms around the world, 4 groups were distinguished: local, proprietary, commons and cyber. The identification of these four different groups of digital community currencies allows us to better discuss the potentials and limitations of each one of them. The presented taxonomy can be useful to researchers and practitioners both to explain and to design DCC platforms. Discussing each of the emerging categories from the proposed taxonomy helps us to provide insights into DCCs, offering a new theoretical frame for investigating the particular case of digital payment platforms."

The Bank for International Settlements (BIS) Innovation Hub Singapore Centre and the Monetary Authority of Singapore (MAS) have developed a new prototype platform that integrates regulatory data and analytics. Known as Project Ellipse, the platform successfully demonstrates how regulatory and other data, such as articles and news, can be integrated into a single platform to help regulatory authorities identify potential risks to individual banks and the banking system. The new prototype is the first to be published on BIS Open Tech, a new platform for sharing software as public goods for further testing, customizing and scaling.

The Regulators have noted that there are no Platforms recognized as exchanges (and therefore regulated as such) in Canada. The consultation with stakeholders aims to benefit the trading public (by way of regulation and improved security over their crypto-assets), and the Platforms themselves, which have indicated such regulation would assist with consumer confidence as the Platforms seek to expand their operations.

JPMorgan is partnering with Singapore's DBS and Temasek to form Partior - Latin for "to distribute and share" - to apply distributed ledger technology (DLT) to reach final, instantaneous cross-border interbank settlements. The Partior platform will also enable "atomic" or instantaneous settlement of payments for various types of financial transactions. The platform will start with a focus on facilitating flows primarily between Singapore-based banks in both USD and SGD, with the intent to expand service offerings to other markets and in various currencies. Partior's platform will also be designed to complement ongoing central bank digital currency (CBDCs) initiatives and use cases.

Crypto-asset borrowing and lending service Akropolis says a hacker used a "flash loan" attack against its platform and stole roughly $2 million worth of Dai USD stablecoins. Flash loan attacks have become common against crypto-asset services running DeFi platforms that allow users to borrow or loan using crypto-assets, speculate on price variations, and earn interest on crypto-asset savings-like accounts. Flash loan attacks take place when hackers loan funds from a DeFi platform but then use exploits in the platform code to escape the loan mechanism and get away with the funds.

"The European Banking Authority (EBA) published a report on the platformization of the EU banking and payments sector. In the report, the EBA identifies a rapid growth in the use of digital platforms to 'bridge' customers and financial institutions, a trend it expects to accelerate in line with the wider trend toward the digitisation of the EU financial sector. The EBA believes platformization presents a range of potential opportunities for both EU customers and financial institutions. However, new forms of financial, operational, and reputational interdependencies are emerging and the EBA has identified steps to strengthen supervisory capacity to monitor market developments."

Ripple has enhanced its CBDC Platform launched in March 2022, that is based on the private ledger private version of the public, open-source XRP Ledger. The enhancements enable issuers to manage the full life cycle of their fiat based digital currency, from minting and distribution to redemption and destruction, taking advantage of the XRP Ledger's built-in multi-signing capabilities. It's billed as a "full stack" platform in that it manages the full CBDC lifecycle, including the provision of end-user wallets. https://www.businesswire.com/news/home/20230518005115/en/Ripple-Launches-CBDC-Platform-for-the-Development-of-CBDCs-and-Stablecoins

"Proof of reserves is all the rage on crypto platforms. The idea is that if the platform can prove to its customers' satisfaction that their deposits are fully matched by equivalent assets on the platform, their deposits are safe. And if the mechanism they use to prove this uses crypto technology, that's even better. Crypto tech solutions have surely got to be much more reliable than traditional financial accounts and audits - after all, FTX passed a U.S. GAAP audit. No, they aren't. Proof of reserves as done by exchanges like Binance does not prove that customer deposits are safe. It is smoke and mirrors to fool prospective punters into relinquishing their money, just like claims that exchanges and platforms are "audited" or have "insurance". There are no audits in the crypto world, there is no insurance, and as I shall explain, proof of reserves proves absolutely nothing." [Frances Coppola]

The IMF published a paper that introduces, and illustrates the use of, the ASAP (Access, Service, Asset, Platform) conceptual Digital Asset Platforms (DAP) model. Just as the utilization of a seven-layer TCP/IP model has been fundamental to the interoperability of the internet, it is anticipated that the four-layer ASAP DAP model will similarly promote cross-platform and cross-border interoperability. The model is illustrated through examples and use cases, such as asset tokenization and the concept of purpose bound money (PBM) being explored by the Monetary Authority of Singapore (MAS).

Visa launched its Tokenized Asset Platform ( VTAP), a business-to-business (B2B) solution designed to enable banks to bring fiat currencies on chain in a safe, seamless, and efficient manner. VTAP provides a platform for banks to mint, burn and transfer fiat-backed tokens, such as tokenized deposits and stablecoins, and experiment with use cases. VTAP is also designed to enable banks to use their fiat-backed tokens within smart contracts. In addition, Visa's vision is to enable interoperability across different blockchains for banks utilizing the VTAP platform.

Paxos launched a new stablecoin payments platform targeting payment service providers (PSP) and Fintechs that want to enable stablecoin payments. Global payment processing company Stripe will be the first PSP to integrate the new platform into its system. The infrastructure will be featured on Stripe's Pay with Crypto product, which allows users to accept stablecoin payments settling in fiat currencies. Once a stablecoin payment is received via Paxos, users can choose whether to immediately convert to fiat currency and settle in local currency, or pay out stablecoin balances directly to merchants. Merchants will have the ability to issue refunds by instantly converting fiat into the stablecoin originally used, then sending directly to the wallet used in the initial payment. https://paxos.com/blog/paxos-launches-new-stablecoin-payments-platform/ https://docs.stripe.com/crypto/integrate-pay-with-crypto

In April 2021, the Digital Currency Research Institute of the People's Bank of China reportedly signed a strategic cooperation agreement with Ant Group. The two will jointly work on promoting the platform for the digital yuan. The platform will be based on Ant Group's proprietary distributed database called OceanBase and mobile development platform mPaaS.

Binance is exploring issuing stablecoins on the "Progmat Coin" tokenization platform founded by Mitsubishi UFJ Trust and Banking Corporation (MUFG). The Progmat Coin platform allows for transfers and exchanges of stablecoins on various blockchains, including public permissionless blockchains such as Ethereum, in accordance with Japan's revised Payments Services Act enforced in June 2023. For such stablecoins, issuers and intermediaries are required to take measures to prevent a transfer of such stablecoins to customers whose identity has not been verified, even though I assume they're not responsible for off-platform transfers between customers.

The Committee on Payments and Market Infrastructures (CPMI), the BIS Innovation Hub (BISIH), the International Monetary Fund (IMF) and the World Bank published a paper on challenges to addressing and approaching the establishment of a multilateral cross-border payments platform. Such a platform could reduce the need for intermediaries and allow payment service providers in different jurisdictions to transact directly with each other. Two paths are examined - the growth approach that involves expanding existing multilateral platforms to additional jurisdictions, currencies and participants, and the greenfield approach that involves building a new, potentially global, infrastructure for cross-border payments.

The Depository Trust & Clearing Corporation (DTCC) announced that its Project Ion platform, which is being developed as an alternative settlement platform leveraging distributed ledger technology (DLT), has gone live in a parallel production environment. The Project Ion platform is now parallel processing an average of over 100,000 bilateral equity transactions per day, and almost 160,000 transactions on peak days, with DTCC subsidiary, The Depository Trust Company's (DTC's), classic settlement systems remaining the authoritative record.