The Financial Stability Board (FSB) published its work program for 2022. Priority areas of work and new initiatives, including key deliverables include continuing its work on enhancing cross-border payments, and continuing work on the financial stability and regulatory and supervisory implications of technological innovation, with a particular focus on various forms of crypto-assets, including decentralised finance (DeFi).
"This chapter is organised as follows. To set the stage, it first describes today's monetary system and the high-level objectives it needs to achieve, and to what extent changes in technology and the economic environment have opened up room for improvement. The next section discusses the promise and pitfalls of crypto and DeFi innovations. The chapter then discusses a vision for the future monetary system, built on central bank public goods. The final section concludes."
"The crisis that has engulfed crypto in the last year is a crisis of fractional reserve banking. Silvergate Bank and Signature Bank NY were fractional reserve banks. So too were Celsius Network, Voyager, BlockFi, Babel Finance and FTX. And still standing are the crypto fractional reserve banks Coinbase, Gemini, Binance, Nexo, MakerDAO, Tether, Circle, and, I would argue, every one of the DeFi staking pools. All of these are doing some variety of fractional reserve banking. Custodia Bank and Kraken Finance claim to be full-reserve banks - but 100% reserve backing for deposits is both hard to prove and not a guarantee of safety. What do I mean by "fractional reserve banking"? My DeFinition might surprise you. For me, fractional reserve banking simply means that the composition of a bank's assets is less liquid than that of its liabilities."
The EU is saying if you want to use stablecoins to buy crypto and do DeFi stuff, have at it. But if you want to use stablecoins to pay for goods and services like your coffee or your rent, then you need to use Euro (or other EU currency) stablecoins. The limits are really about monetary sovereignty.
The MakerDAO (MKR) community has locked in a March 19 auction to cover a multi-million dollar hole in DAI collateral after the sudden Ethereum (ETH) price crash on March 12. The system will auction newly minted MKR in exchange for DAI. The proceeds from the sale will be used to recapitalize the system and compensate the losses suffered by the borrowers who saw their Ethereum collateral auctioned off for zero DAI. As the stablecoin powers many decentralized finance applications, the stability of Maker is paramount for the entire ecosystem.
A decentralized exchange or DEX is a place where people can go to trade cryptocurrencies without an intermediary. To better identify what a decentralized exchange is, it's important to first understand how centralized exchanges work.
A swathe of shadow banks in the $1.6 trillion cryptocurrency market have figured out how to generate returns of 12% with minimal risk: Lend U.S. dollars to hedge funds so they can buy Bitcoin.
In this 3-part post, we describe why the crypto credit market offers high interest rates which are drawing in billions of dollars of deposits, who the major players are, and how we expect the market to evolve over time.
Decentralized exchanges (DEXs) ended the month of February with the highest monthly volume on record, according to data gathered by The Block. February's monthly volume hit a new high of approximately $72.89 billion, increasing by $12 billion from January. Uniswap continued to lead in the DEX space, making up most of the monthly volume with $36.6 billion. SushiSwap and Curve came in second, hitting $14.93 billion and $4.42 billion respectively.
Anchor will offer a principal-protected stablecoin savings product that accepts TerraUSD (UST) deposits and pays a stable interest rate. To generate yield, Anchor lends out deposits to borrowers who put down liquid-staked proof-of-stake (PoS) assets from major blockchains as collateral. Anchor's yield is thus powered by block rewards of major PoS blockchains.
The New Money Review published a nice summary of a podcast that we recorded last week on central bank digital currencies and the benefits and risks of new digital economy.
"If the GameStop saga proves to be more than just a momentary anomaly, we might presently be witnessing the emergence of a profound change in the financial system or the creation of an entirely new one. As financial technology companies made it easier for consumers to participate in financial markets, DEXs are tackling the flaws of centralized markets. In some ways, this generation of DEXs may become the new Robinhood's. Perhaps this is one of those moments where the people, and not institutional legacy, will define the future."
At a time when interest rates on conventional bank deposits are pinned to the floor-often below 0.5%- financial technology companies are offering to pay owners of Bitcoin and other cryptocurrencies annual percentage yields of 2% to 6% and sometimes more. You can deposit your coins with a few taps on one of their smartphone apps. What's the catch? There are several, actually.
May is turning out to be another big month for decentralized exchanges (DEX) with $85 billion of volume halfway through the month, and on pace to reach $140 billion for the full month. That's more than 2x more than the previous record set in April.
"Could the OCC even grant a national bank charter to open-source software that manages deposit-taking, lending, or payments, if it doesn't have officers or directors? Not yet. Under current law, drawn up on the assumptions of the early 20th century, charters can only be issued to human beings. But those antiquated rules should be revisited, just as regulations that still mandate the use of fax machines should be."
Decentralized exchanges (DEX) are on track to surpass previous all-time high volumes. They have already transferred more than $27 billion in transaction volume so far in January, the second-highest total since September 2020's $29 billion. DEX use smart contracts on blockchain networks like Ethereum to let users swap between digital assets without transferring tokens to an exchange wallet or verifying their identity. Uniswap is the most popular DEX, responsible for more than 45% of volume in the last week, with Sushiswap accounting for more than 22%.
"Wintermute partners with projects to help them achieve targeted liquidity. We support all major vetted exchanges and coins, covering both centralized and decentralized exchanges and trading platforms. "
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