Fintech Daily Digest

Sivergate Bank is planning a big push into the USD-backed stablecoin space, focusing on those backed on a one-to-one basis offered by regulated institutions who agree to third-party audits.

Silvergate Bank specializes in reaching debanked bitcoiners, joining several other financial institutions including Metropolitan Bank, Signature Bank, and Cross River Bank in catering to the financial needs of the growing cryptocurrency space. Silvergate's crypto clients include Gemini, Kraken, Bit Flyer, Paxos, trueUSD, Coinbase, Polychain Capital, and Bitstamp.

Last week California-based Silvergate Bank's parent went public on the New York Stock Exchange. It was a small IPO, raising about $40M and it's a small bank (about $250M market capitalization and $2.2M of assets).

A new data protection law in Kenya is setting a high standard for the rest of the continent. As the country looks to engender more safeguards in the collection, handling and sharing of data, Kenya's president Uhuru Kenyatta has approved legislation which complies with the European Union's General Data Protection Regulation.

"The real challenge for the United States isn't Facebook's proposed Libra; it's government-backed digital currencies like the one planned by China."

Forty wallets, tools and block explorers plus 1,700 GitHub commits have how now been built on its blockchain testnet that's seen 51,000 mock transactions in the past two months. Libra nodes that process transactions are now being run by Coinbase, Uber, BisonTrails, Iliad, Xapo, Anchorage and Facebook's Calibra. Six more nodes are being established, plus there are 8 more getting set up from members who lack technical teams, meaning all 21 members have nodes running or in the works.

Decentralized Identifiers (DIDs) have recently gained more attention for being one of blockchain's most exciting use cases, and the hype is well founded. In concept, DIDs aim to use cutting-edge cryptography and unique identifiers to enable users to validate themselves online, while still dictating when and how that identity data is used. Put simply, Decentralized IDs have the potential to help internet users around the world wrest back control of their data from the corporations that presently control it.

This is a crisis no one wants to solve, at least not quickly. The Chicago Teachers scheme is aiming for 90% funding, but not until 2059-long after many retired members will have died. New Jersey's teachers' scheme is not scheduled to be fully funded until 2048. Such promises might as well be dated "the 12th of never". The bill for taxpayers seems certain to rise substantially. For the states with the biggest pension holes, political conflict is in store.

"A global stablecoin network, if poorly designed and unregulated, could pose risks to financial stability. The failure of a stablecoin to operate as expected could disrupt other parts of the financial system. For example, the inability to convert stablecoins into domestic currency on demand or to settle payments on time could create credit and liquidity dislocations in the economy. If a stablecoin's credit, liquidity, market, and operational risks are managed ineffectively, it could face a loss of confidence. This loss of confidence could lead to a run, where many holders attempt to liquidate their stablecoins at the same time. In an extreme scenario, holders may be unable to do so, with potentially severe consequences for domestic or international economic activity, asset prices, or financial stability."

The PBOC's imminent CBDC is going to have a feature called controllable anonymity. None of the news articles have made much of an effort to explain What that means. But we've actually known about this feature for quite some time. Back in 2018, the project's head, Yao Qian, provided a short description of it. It's not as Orwellian as it seems.

JPMorgan has developed a new blockchain-based solution for derivatives designed to speed up cash and collateral transfers. The tool was developed in partnership with California-based fintech firm Baton Systems and aims to enable the real-time movement of transfers to multiple clearinghouses.

A working group at Norges Bank has looked more closely at the purpose and relevant forms of a central bank digital currency. The group finds that a central bank digital currency could function as a back-up solution in the event of a disruption in banks' payment systems. This contingency aspect may gain importance if banks' systems become more international. Moreover, a central bank digital currency may help to maintain competition in the payments market and offer the characteristics of legal tender.

There's a way cryptocurrency businesses can get around New York's notoriously hard-to-get BitLicense, and it runs through Wyoming. At least, so say members of the team that drafted the 13 crypto-friendly laws enacted by the Western state this year. One of those laws allows Wyoming to charter Special Purpose Depository Institutions (SPDIs), a new type of fully-reserved fiat bank that can also custody crypto assets. With an SPDI, crypto exchanges and other startups could operate in New York without going through the state's licensing rigmarole, under the same legal principles that exempt banks from needing state money transmitter licenses, Wyoming advocates said.

The PBOC is looking to combat money-related criminal activities with a new restriction. The restriction, which will first be piloted for two years, will restrict large-scale cash transactions for three specific regions within the country - the Hebei Province, Zhejiang Province, and Shenzhen City. One expert believes that this decision is meant to help with the launch of the Renminbi token (RMB), which has yet to be released.

Financial regulators in China appear set to crack down on cryptocurrency trading again after President Xi Jinping's praise for blockchain technology revived speculation in the sector.

The biggest threat to blockchain technology from quantum computing is its ability to break the traditional encryption. However, the sword of Quantum computing is not hanging on Blockchain only but on every platform that is protected with encryption. This would potentially include almost all of the Internet and Digital world we know today.

The BRICS nations - Brazil, Russia, India, China and South Africa - are reportedly planning to develop a single payment transaction system between the member countries, which could be carried out in a still-to-be-developed "BRICS" cryptocurrency.

The International Securities Services Association DLT Working Group has published a paper on best practice development of crypto-asset platforms (issuance, settlement, safekeeping, asset servicing and regulation).

The Association for Financial Markets in Europe has published a paper setting out five recommendations to deliver supervisory convergence on the regulation of crypto-assets in Europe.

Coinbase has added support for five new crypto options to its visa debit card, and also expanded availability to 10 more European nations.