Fintech Daily Digest

A review of their technical documentation describing the Libra protocol and the associated ecosystem, reveals that they left out the foundational components of user security: Protection of the private key, proof of user consent, decentralized compliance and global privacy.

The Token Taxonomy Act of 2019 would require amending US federal securities legislation to exclude crypto assets from the definition of a security, and to create a de minimis exemption from taxation for gains realized from the sale or exchange of virtual currencies.

Even relatively simple fiat-backed stablecoins could be characterized as swaps or demand notes, both of which would be treated as securities. And the SEC's head of digital assets, Valerie Szczepanik, confirmed at a hearing last week that it does not matter that the stablecoin 'does not have an expectation of profits' (with the usual caveat of "facts and circumstances").

European Libra users will have to treat their Libra holdings as an asset for capital gains tax purposes - and for the UK, HMRC confirms that, as a basket of currencies, Libra doesn't qualify as a currency itself. "The problem would potentially be even more serious with no annual capital gains exemption in France, Italy or Spain and a much smaller €600 limit in Germany."

Nouriel Roubini debated Arthur Hayes of BitMEX - and BitMEX is refusing to release the full recording, instead releasing "edited highlights." Roubini is threatening to sue. However, Mike Dudas from The Block has posted his notes from the debate.

With PSD2's Regulatory Technical Standards (RTS) deadline fast approaching, Swedish open banking platform Tink is claiming that European lenders have failed to provide the proper technology environment for third party providers to access payments data as required by the new law.

The Inland Revenue Authority of Singapore is proposing to end the GST that is imposed on crypto-assets. Under the existing rules, users of crypto-assets are taxed twice when they use them to pay for goods and services. This is because the IRAS treats such a transaction as a barter trade that results in two separate cases of supply - a supply of the digital payment token as well as the supply of the services and goods paid for using the digital asset.

Facebook's plans to create its own cryptocurrency have forced China's central bank into stepping up research into creating its own digital currency as Libra could potentially pose a challenge to Chinese cross-border payments, monetary policy and even financial sovereignty, Wang Xin, director of the PBOC's research bureau.

South Korea's Financial Services Commission looks at what might occur if 2.4 billion Facebook users worldwide transfer one tenth of their bank deposits to Libra. Should that scenario come about, banks' solvency would diminish, as would their loan reserves, representing a threat to emerging markets from the relocation of the capital out of those countries. The FSC also raised concerns that bank runs could occur during financial or foreign exchange crises, as people move their national fiat currency to Libra.

The Bangko Sentral ng Pilipinas (BSP) remains lukewarm to the idea of issuing its own digital currency despite the decision of Facebook to unveil its own cryptocurrency, Libra.

"I am not sure why there is such a discrepancy between the interest in Bitcoin (as measured by google searches in the U.S.) and the price. Until recently, there was a reasonably high degree of correlation between Bitcoin prices and interest in bitcoin."

"The Saudi Arabian Monetary Authority (SAMA) has selected 18 companies to form the second batch of ventures to join its fintech regulatory sandbox. The companies will be testing fintech solutions they intend to launch in the country."

According to a study conducted by JD Power, 54% of customers don't fully trust their primary banks, and 83% customers say their bank representatives do not spend enough time identifying their specific needs before offering products and services.

The circulating supply of the Winklevoss twins' stablecoin Gemini Dollar (GUSD) is plummeting. From a peak market capitalization of more than $100 million in December of 2018, the coin recently hit new lows of $10 million. https://www.cryptopolitan.com/gemini-dollar-down-88-percent-in-market-cap/

The plummet in Gemini Dollar market cap started some time ago...

"Curious about the potential of blockchain, our internal IT organization developed the idea to take existing paper contracts between Accenture and our clients and put them on a shared blockchain database that every party can use to securely view contracts, revise and accept changes, all captured on a blockchain ledger. We worked with other Accenture specialists, including legal, to prove out the idea, develop the platform, test and ultimately deploy a new product-Accenture Blockchain for Contracts. Built on R3 Corda technology and hosted through Microsoft Azure, Accenture Blockchain for Contracts provides a new way to draft and sign contracts with low friction, high efficiency and encrypted data."

Regulators may be seeing a distorted picture of global credit markets because they are failing to fully account for "fintech shadow banks", Amit Seru said in recent remarks. The professor of finance at Stanford University told an audience of central bankers in Basel that lending originating in the shadow banking sector had "dramatically increased" in recent years. Many of these firms were taking advantage of financial technology and lighter regulations to grow rapidly, he said.

Built on R3's Corda platform, FundAdminChain aims to bring the distributors, transfer agents, custodians and other intermediaries involved in the buying and selling of units in a fund onto a distributed ledger. The blockchain is targeting transfer agencies and messaging, to begin with, and then aims to build out into asset services. https://www.coindesk.com/ex-r3-execs-new-mission-run-100-trillion-fund-trade-on-private-blockchains.

High-frequency trading is becoming commonplace in crypto, too. Placing trading servers physically close to exchanges' matching engines can win an edge on speed. This helps HFT firms make large profits in the legacy markets. Crypto exchanges such as ErisX, Huobi and Gemini are trying to attract large algorithmic traders with colocation offers.

The UK has long played a highly influential role in charting the course of finance. The recommendations in this review will, I hope, create substantial benefits for UK consumers and businesses and underpin a more resilient, effective and efficient wholesale and retail financial system. I hope they will also prove useful to the many central banks around the world wrestling with similar challenges.