Fintech Daily Digest

The East African Community (EAC) Draft Cross-Border Payment System Masterplan was validated by its eight member countries (Burundi, the Democratic Republic of Congo, Kenya, Rwanda, Somalia, South Sudan, Uganda and Tanzania). The Masterplan aims to enhance the speed, security, affordability and integration of payment systems across the region. It tackles key obstacles such as fragmented regulations, high transaction costs, and limited interoperability by outlining twenty targeted initiatives. These include a regional instant retail payment switch, and exploring using central bank digital currencies (CBDCs) for regional transactions.

The European Central Bank (ECB) launched its digital euro innovation platform, and almost seventy organizations have signed up to participate. The platform simulates the envisaged digital euro ecosystem, in which the ECB provides the technical support and infrastructure, such as an application programming interface (API), for European intermediaries to independently develop innovative digital payment features and services. Findings will be published by the ECB in a report to be published later this year. https://www.ecb.europa.eu/press/pr/date/2025/html/ecb.pr250505~00207689f9.en.html

The Kyrgyz Ministry of Finance reportedly plans to launch a gold-backed stablecoin pegged 1:1 to the U.S. dollar in Q3 2025. The Gold Dollar (USDKG) will initially be backed by $500 million and be designed to facilitate seamless cross-border transfers. The Ministry aims to expand the gold reserves to as much as $2 billion, with independent audits planned to ensure trust and transparency in the collateral backing. All operational responsibilities-including gold custody, collateralization processes, and token issuance controls- will be handled by an independent Kyrgyz-registered private entity. https://www.usdkg.com/

The U.K. Financial Conduct Authority (FCA) published a discussion paper (DP) to seek views on the future regulation of specific crypto-asset activities, ahead of legislation to bring them within regulation. This is the latest policy publication in the FCA's Crypto Roadmap which provides a clear timeline for consulting on future crypto regulation. Other areas in the roadmap include market abuse and admissions and disclosures, stablecoins and custody, and prudential considerations. This discussion paper follows the publication of draft legislation by the Treasury that, once passed, will bring specific cryptoasset activities within the FCA's regulation. The DP reflects insights gained from a series of FCA-led industry roundtables.

VISA launched a suite of integrated APIs and a commercial partner program to AI platforms, enabling developers to deploy VISA's AI commerce capabilities securely and at scale. With VISA Intelligent Commerce, AI agents can find, shop and buy for consumers based on their pre-selected preferences. Each consumer sets the limits, and Visa helps manage the rest." VISA Intelligent Commerce offers (i) AI-ready cards that replace card details with tokenized digital credentials, (ii) AI-powered consumer personalization (consumers share basic Visa spend and purchase insights with their consent to improve agent performance and personalize shopping recommendations), and (iii) simple and secure AI payments allowing consumers to easily set spending limits and conditions, providing clear guidelines for agent transactions.

The U.S. Treasury Borrowing Advisory Committee (TBAC) published an overview of the potential terminal effects risks of interest-bearing stablecoins and tokenized money funds, from a perspective of Treasury demand, USD hegemony, the expansion of dollar-backed payment stablecoins, and potential effects for insured depository institutions. Also, it's worth taking a look at Coindesk's monthly report of central bank digital currency (CBDC) and stablecoins for useful presentations of the raw data. https://data.coindesk.com/reports/stablecoins-cbdcs-report-2-april

Coinbase published a paper that argues that the global financial system requires an update built upon permissionless systems, with tokenization at its core. They argue that building on open architecture provides benefits such as instant settlement, elimination of outdated processes, self-custody, increased transparency, improved transaction speed, programmability, and enhanced security and privacy through techniques like zero-knowledge proofs. The paper emphasizes the importance of base layer neutrality for fostering innovation and competition, while also addressing policy considerations such as integrating with traditional finance, enabling the tokenization of traditional assets, and recognizing the right to self-custody.

This article provides an overview on how a digital euro is intended to work. An examination of the prospective design features and architecture of the digital euro reveals the complexity of the project and the challenges associated with integrating the digital euro into the existing payment landscape. In order to justify the huge investments from both the Eurosystem and the private sector, a high adoption rate by users is essential. Therefore, a digital euro needs to offer a competitive advantage over existing electronic payment instruments, which could refer to the unique scope comprising online and offline transactions as well as the trust of retail customers in the Eurosystem. Hence, a convincing communication strategy is needed to convey these benefits of a digital euro. Moreover, banks and other payment service providers need to have sufficient economic incentives to distribute the digital euro to their customers and to provide acquiring services to merchants.

David Birch argues that, contrary to popular belief, cash is not always the most resilient payment method during disasters such as fires, floods, or wars. Drawing on real-world examples-from Japanese tsunamis and Nigerian market fires to the ongoing war in Ukraine-the author shows that people relying on physical cash often suffer greater losses, while digital payment systems, especially those with offline capabilities, tend to be more robust as long as power and communications can be maintained. In Ukraine, for instance, the resilience of the payment system has been bolstered by widespread adoption of softPOS (mobile-based point-of-sale) and contactless technologies, even amid blackouts and cyberattacks. The article concludes that future-proofing payments should focus on enabling device-to-device digital transactions that work without network connectivity, such as offline central bank digital currencies (CBDCs), rather than simply stockpiling cash.

"Central Bank Digital Currency (CBDC) is a new form of money, issued by a country's or region's central bank, that can be used for a variety of payment scenarios. Depending on its concrete implementation, there are many participants in a production CBDC ecosystem, including the central bank, commercial banks, merchants, individuals, and wallet providers. There is a need for robust and scalable Public Key Infrastructure (PKI) for CBDC to ensure the continued trust of all entities in the system. This paper discusses the criteria that should flow into the design of a PKI and proposes a certificate hierarchy, together with a rollover concept ensuring continuous operation of the system. We further consider several peculiarities, such as the circulation of offline-capable hardware wallets."

The Linux Foundation published an updated report on how its open-source distributed ledger technologies (DLTs) are powering central bank digital currency (CBDC) initiatives globally. It explains the advantages of open source development for CBDC projects, emphasizing transparency, collaboration, and the adaptability of community-driven solutions. The paper also showcases projects using Hyperledger Fabric, Besu, Iroha, and other tools across various implementation stages-from research (European Central Bank, France, Norway) to pilots (India, Brazil, Philippines) to live deployments (Nigeria, Eastern Caribbean). These implementations demonstrate how open-source blockchain technologies can improve payment efficiency, enhance security, enable programmability through smart contracts, and support financial inclusion.

Forbes published an article by Christian Catalini that examines the intensifying competition in the stablecoin market, where companies like PayPal, Coinbase, Circle, Tether, and even traditional financial giants like Visa and Mastercard are vying for dominance. Drawing an analogy to the commoditization of electricity, Catalini argues that stablecoins risk becoming undifferentiated utilities, with margins squeezed by competition and regulatory pressures. The two primary revenue levers for issuers -- reserve yields and transaction fees -- are both under threat as users demand higher returns and payment rails become commoditized. The "stablecoin sandwich" model (converting local currency to stablecoins for cross-border transfers, then back to local currency) represents current momentum, but Catalini predicts that only institutions closest to central banking, like banks themselves, will ultimately have the cost advantage in minting stablecoins. He concludes that the real winners won't necessarily be those creating the best stablecoins, but rather those controlling the distribution channels-the wallets, apps, and merchant relationships-through which these digital currencies flow.

Ripple has reportedly bid up to $5 billion in an effort to acquire stablecoin issuer Circle, but the offer was rejected because it was too low. The reported attempt came less than 30 days after Circle applied for an initial public offering (IPO) in the US. Ripple reportedly had an $11 billion valuation in 2024, an estimate CEO Brad Garlinghouse called "outdated" as of January. The blockchain company purchased prime broker Hidden Road for roughly $1.2 billion in April, claiming the move would help scale activity for XRP and XRP Ledger.

The U.S. Securities and Exchange Commission (SEC) has postponed deciding on whether to approve two proposed crypto-asset exchange-traded funds (ETFs) holding Dogecoin and XRP until June 2025. The postponements were responses to March requests from U.S. exchanges NYSE Arca and Cboe BZX Exchange to list Bitwise's Dogecoin (DOGE) and Franklin Templeton's XRP ETFs, respectively. https://www.sec.gov/files/rules/sro/nysearca/2025/34-102942.pdf https://www.sec.gov/files/rules/sro/cboebzx/2025/34-102944.pdf

Fuse published a guide to digital commerce payment preferences by region, unpacking the key trends shaping payment behaviors in key regions around the world: APAC, Europe, Latin America, MEA, and North America. Globally, digital commerce's share of total sales was 20.3% in 2024 and expected to surpass 21% in 2025. Digital wallets make up half of all digital commerce payments (by value) around the world. Credit and debit card usage, separate from their usage in digital wallets, account for 22% and 12%, respectively, but there is a lot of regional variance.

"The UK Treasury (HMT) published a draft Statutory Instrument (SI) and a Policy Note detailing the UK's upcoming financial services regulatory framework for crypto-assets, including stablecoins. Following proposals outlined in October 2023 and reaffirmed in November 2024, the draft SI establishes new regulated activities, such as operating crypto-asset trading platforms and issuing stablecoins, mandating authorization and oversight by the Financial Conduct Authority (FCA). The Policy Note clarifies the intended policy outcomes, with additional provisions for market abuse and admissions and disclosures regimes to follow. The UK Treasury welcomes technical feedback on the draft SI until May 23, 2025, to refine the regulations." https://www.gov.uk/government/news/new-cryptoasset-rules-to-drive-growth-and-protect-consumers

Banque Centrale du Luxembourg (BCL) published a paper that simulated consumer adoption of CBDC based on data from the 2022 Study on the Payment Attitudes of Consumers in the Euro area (SPACE) survey of payment habits. The micro-simulation classified 1% of consumers as cash-only, 22% as cash-preferring, 29% as cashless-preferring and 47% as cashless-only. Our theoretical results suggest that if CBDC is accepted by all retailers, then cashless-preferring consumers will adopt it instead of cash, but adoption by other consumers would also depend on CBDC design, cost, security and their use of credit cards. If CBDC transactions can be funded by drawing cash directly from the user's bank payment account (i.e., via a "a waterfall" mechanism), 24% of the value of total payments will be in CBDC. If CBDC transactions can be funded via a direct link to consumer credit (e.g. drawing on the user's credit card) 92% of total payment values will be made in CBDC.

[October 12, 2024] The National Bank of Slovakia (NBS) surveyed 1200 people, asking about people's awareness and willingness to use the digital euro. 34% of respondents have heard of the digital euro; 26% intend to use it. They found that the likelihood of its usage depends on trust in institutions such as the central bank, and preferences for cash payments, in addition to standard socio-economic factors. They also investigated whether respondent's answers are linked to political preferences and trust in the central bank. To quote: "liberals are more inclined to consider using the digital euro, while EU skeptics are significantly less likely to do so". The survey also reveals that privacy and transaction security are among the top concerns for potential users. The majority of respondents plan to allocate nearly 20% of their net monthly income to digital euro holdings.

The New York Federal Reserve Bank (NY Fed) published an article that discusses the evolution and growth of stablecoins, noting their significant increase in market capitalization since 2019, primarily concentrated in Tether and USDCoin. It highlights a shift in collateral towards U.S. Treasury securities and reverse repurchase agreements and finds that stablecoins, especially riskier ones, experience capital inflows following large increases in bitcoin prices, reflecting a link between stablecoin demand and overall crypto ecosystem activity, which updates previous findings about outflows during negative bitcoin price shocks for riskier stablecoins.

JP Koning argues that Canada's significant reliance on the SWIFT network for both international and domestic financial transactions leaves its economy vulnerable to potential economic pressure from the United States, particularly under a future Trump administration. Unlike many other nations that use SWIFT primarily for international payments and have their own domestic systems, Canada's deep integration with SWIFT could allow the U.S. to exert influence by potentially limiting access. JP advocates for Canada to develop its own domestic financial messaging network, similar to systems already in place in countries like Iran and Russia, to ensure the continuity of internal commerce and bolster economic sovereignty against potential external threats.