Fintech Daily Digest

The Bank of Canada published the results of a study that evaluated Canadians' access to cash in 2023, updating previous metrics on travel distances to automated banking machines (ABMs) and financial institution (FI) branches with improved quality checks on ABM locations. Despite a small decrease in the number of ABMs and branches since 2019, overall access to cash has remained unchanged, with Canadians needing to travel an average distance of 2.0 kilometers from their home locations to reach the nearest ABM and 4.6 kilometers to reach the nearest FI branch. Rural Canadians continue to travel farther to access to cash, with an average travel distance of 3.9 km to the nearest ABM and 9.7 km to the nearest branch, highlighting the need for continued monitoring in rural areas.

On March 21, 2025, the U.S. Treasury delisted Ethereum coin mixing service Tornado Cash from its list of parties sanctioned by the Office of Foreign Assets Control (OFAC) reversing course after first blacklisting the service in 2022. The removal was actually a bit tardy because the Treasury had been required to remove it by March 17, 2025. In November, a fifth circuit judge ruled that the Treasury had overstepped its authority by targeting Tornado Cash's smart contracts. The judge wrote that autonomous software cannot be classified as property and therefore cannot be sanctioned. Subsequently, Department of Justice prosecutors asked for and given until March 17, 2025 to remove Tornado Cash from the OFAC black list.

The U.S. Securities and Exchange Commission (SEC) issued a note saying that solo and pooled mining for proof of work blockchains will generally not be considered to involve securities. The crux of the argument is that in both cases the expectation of profit is based on the efforts of the miner, not of others. The Howey securities test requires the expectation of profit based on the efforts of third parties. Solo mining involves a miner mining covered crypto-assets using their own computational resources, working alone or together with others to operate a node and mine. Mining pools involves miners combining their computational resources with other miners to increase their chances of successfully validating transactions and mining new blocks on the network. Reward payments may flow from the network directly to the miners or indirectly to them through the pool operator. https://www.sec.gov/newsroom/speeches-statements/statement-certain-proof-work-mining-activities-032025

In a LinkedIn post, the Bank of Israel's Yoav Sofer discusses how the long-run plan for a prospective digital shekel would blur the distinction between retail and wholesale central bank digital currency (CBDC). Box 2 in the design paper published on March 3, 2025 rejects the notion that wholesale use cases (and users) and retail use cases (and users) cannot be served by one system. The proposed design offers the concept of a "multipurpose CBDC" - one reservoir of digital central bank money, available for all users and use cases in the economy - of course, with the adequate controls, risk management measures, and regulatory requirements attached to each type of user. https://boi.org.il/en/communication-and-publications/press-releases/3-3-25/

The Bank of Israel's Yoav Sofer provided an update on the digital shekel project, which he leads, in a couple of local media outlets. The project team want to finalize the plan by the end of 2026, after which they will present it to the Governor, who will decide whether to launch the digital shekel. The current thinking is that it would provide for an offline payment wallet by which it will be possible to set a certain amount in advance to be held by phone or prepaid card that can be used to make payments when there is no internet connection. It will also allow for anonymous payments up to a certain amount, both offline and online, in a way that will not even be accessible to payment service providers. The project team is also considering allowing the digital shekel to bear interest, which will create an incentive for banks to offer better interest rates on deposits, and push Bank of Israel policy rate changes out to the economy faster and more efficiently. See also https://www.makorrishon.co.il/

Ripple Labs CEO Brad Garlinghouse announced that the U.S. Securities and Exchange Commission (SEC) will drop its appeal in the lawsuit it's been pursuing against the firm for the past four years. The SEC sued the company over an alleged $1.3 billion unregistered securities offering in December 2020. In 2023 Federal district judge Analisa Torres ruled that programmatic sales to public buyers and distributions of XRP to Ripple Labs employees did not constitute the sale of unregistered securities. However, she concluded that Ripple's Institutional Sales of XRP constituted the unregistered offer and sale of investment contracts in violation of Section 5 of the Securities Act. In August 2024 she ordered Ripple to pay a $125 million fine which was significantly less than the $2 billion sought by the SEC. Hence, in October 2024 SEC filed a notice of appeal that has been hanging over Ripple's head until possibly now. In any case, it may take several weeks for the case to be officially withdrawn because any decision will have to be subject to Commission vote and approval. https://x.com/bgarlinghouse/status/1902345706636992720

Most closed loop systems can offer fast and seamless transactions. The real challenge in payments arises in open loops. They require clearing arrangements by which financial institutions accept monies from other institutions. To allow stablecoins to be used to conduct payments more generally, there needs to be clearing arrangements between stablecoins and banks. The viability of stablecoins will depend on its efficient operation in open loop applications. Whether they become a core payment instrument or remain niche will be an outcome in large part of their ability to bridge the gap between crypto ecosystems and the banking system. (Ousmène Jacques Mandeng)

The Dubai Financial Services Authority (DFSA) has launched a tokenization sandbox. The DFSA is the regulator for the Dubai International Finance Centre (DIFC). Applicants could be involved in the issuance, trading, holding, or settlement of tokenized assets. Cryptocurrencies are excluded along with stablecoins. The financial instruments that are tokenized should be similar to conventional securities including equities, bonds, sukuk and collective investment fund units. Tokenization rules were introduced in the DIFC in 2021. They support trading by consumers without intermediaries but access must be permissioned, although this doesn't necessarily rule out the use of a public blockchain.

The U.K Chancellor of the Exchequer announced details of the launch of the procurement process for the Digital Gilt Instrument (DIGIT) issuance pilot. HM Treasury (HMT) has published additional information, engagement questions and has issued a Preliminary Market Engagement notice through its contract finder service. The short-dated gilts will be issued outside the government's conventional debt issuance program, and will not be issued by the Debt Management Office. Given the gilt will be hosted on a platform that's part of the Digital Securities Sandbox, the platform will first need approval from the Bank of England and Financial Conduct Authority that are jointly operating the Sandbox. https://www.gov.uk/government/publications/announcement-of-preliminary-market-engagement-exercise-for-the-digital-gilt-instrument-digit-pilot

Bank of Korea to Begin CBDC Pilot in April (BusinessKorea) The Bank of Korea (BOK) will reportedly launch its wholesale central bank digital currency (CBDC) pilot next month (April 2025). Participants will be able to convert their bank deposits into tokenized deposits and use them for payments at affiliated merchants. The purpose of the distributed ledger technology (DLT) based wholesale CBDC is to settle the tokenized deposit transactions across the seven participating banks. Currently, interbank transfers are settled via transfers across banks' BOK reserve accounts. To recruit approximately 100,000 pilot participants for the experiment, the BOK reportedly plans to issue a public announcement by the end of this month (March 2025).

On 13 March, 2025, the U.S. Senate Committee on Banking, Housing, and Urban Affairs voted to advance the Guiding and Establishing National Innovation for U.S. Stablecoins (GENIUS) Act. In his opening remarks, Chairman Tim Scott (R-S.C.) said that the Act establishes common-sense rules that require stablecoin issuers to maintain reserves backed 1:1, comply with anti-money laundering laws, and ultimately protect American consumers while promoting the U.S. dollar's strength in the global economy. Five Democrats on the panel - Sens. Mark Warner (Va.), Andy Kim (N.J.), Ruben Gallego (Ariz.), Lisa Blunt Rochester (Del.) and Angela Alsobrooks (Md.) - joined their Republican colleagues in voting to advance Sen. Bill Hagerty's (R-Tenn.) stablecoin bill. The bill now heads to the Senate floor for consideration.

The IMF published a paper that presents a practical legal-analytical framework to assess how private law rules can be designed to support the wide circulation and safe holding of token-based central bank digital currency (CBDC) primarily intended for retail use. It follows a previous IMF working paper that examined the legal foundations of CBDC under central bank law and its treatment under monetary law-the main public law aspects of CBDC. A private law framework is also needed, because unlike account-based CBDC, token-based CBDC constitutes from the legal perspective a new form of money and hence raises a lot of challenges under private law. This legal nature will shape how token-based CBDC can be transferred, held in custody, "deposited" with commercial banks, and pledged. It is also be crucial that private law rules establish with certainty how ownership and other rights in token-based CBDC can be transferred between economic agents. In most jurisdictions, the private law regime for token-based CBDC will likely need to be augmented by a comprehensive legislative intervention to provide a sufficiently robust and predictable legal foundation for this new digital currency. In designing such a legislative framework, countries will need to consider carefully whether to anchor it in a broader framework for digital money or assets.

The U.K. Financial Conduct Authority (FCA) published consultation paper that proposes removing the £100 contactless payment limit. It was raised from £45 in 2021, just a year after a rise from £30 amid a surge in tap and pay during the Covid-19 pandemic. By removing the limit, U.K. families and businesses could benefit from greater choice, flexibility and smoother purchases. Also, the regulator said that making regulation less prescriptive would also give firms greater control and could promote innovative payment methods or fraud prevention solutions. One option put forward is to allow firms, who use technology to reinforce strong fraud controls, to set their own limits as happens in the United States.

The Iraqi News Agency (INA) reported that Muzhir Mohammad Saleh, the financial advisor to the Iraqi Prime Minister, said that the Central Bank of Iraq is planning to issue a digital currency (CBDC) as a "gradual alternative" to bank notes. He added that "digital cash will maintain its traditional functions as a unit of account, payments and savings, with the possibility of using it online and smart phones, which will contribute to developing a more stable and efficient financial environment."

The Bank of Canada published an update on crypto-asset ownership in Canada using data from the Bitcoin Omnibus Survey conducted in late 2023. Bitcoin ownership remained stable at around 10% in 2023 and continues to be concentrated among men, younger individuals and those with higher income and levels of education. The use of Bitcoin for payments remains limited, with most owners viewing it primarily as an investment. Bitcoin remains the dominant holding among Canadians, with a median value of C$500.

"The National Bank of Cambodia recently published its annual report, disclosing continued growth in the Bakong blockchain-based payment systems. Payment volumes of $104.81 billion during 2024 represent 330% of the country's gross domestic product (GDP). There are now around 30 million Bakong wallets, a figure that is 1.69 times the population. In terms of acceptance, 4.5 million merchants can receive payments because there's a standard QR code method supported for multiple payment types. While sometimes described as a central bank digital currency (CBDC), because it was set up by the central bank, Bakong is closer to a tokenized deposit initiative. Bakong currency balances are backed by accounts at commercial banks."

The European Central Bank (ECB) published a paper that reported the results of a series of experiments in a population-representative survey of European consumers to examine their attitudes towards the possible introduction of a digital euro. The study found that test subjects who were shown a short video explaining the key features of the digital euro increases the likelihood of adoption by 12 percentage points relative to a control group that is not shown the video. Second, it found that test subjects would allocate a relatively small fraction from a positive wealth shock to digital euros and their allocation to other liquid assets would be little affected. Third, it found that holding limits in the range of €1,000 to €10,000 would have insignificant differential effects on the composition of liquid asset holdings. Lastly, 55% of test subjects said that they will not adopt the digital euro due to strong preferences for existing forms of payment.

On March 11, 2025, the U.S, Securities and Exchange Commission (SEC) postponed decisions on multiple crypto-asset exchange-traded fund (ETF) filings until May 2025. However, this is widely viewed as standard procedure that all of the currently approved crypto-asset ETFs have gone through before. Of note, as of of March 12, nine companies have filed with the SEC for XRP ETF products. Beyond dedicated XRP ETF filings, at least two asset managers have included XRP in broader crypto ETF products. See also: https://cointelegraph.com/news/xrp-etf-filings-awaiting-sec-approval

The Bank of Korea will reportedly launch a three-month central bank digital currency (CBDC) pilot involving 100,000 consumers, as early as this month (March 2025). It will involve seven major commercial banks that will issue deposit tokens backed by CBDC, which consumers can use to make purchases at various participating merchants. The tokens, valued up to 1 million won per person, will be distributed through electronic wallets, allowing users to make payments by displaying QR codes.

The Riksbank considers it necessary to increase the possibility of making payments even in the event of major disruptions in data communication. Therefore, card payments should be possible even without functioning data communication, i.e. offline. Hence, the Riksbank will collaborate with the private and public actors concerned, including card network providers, card acquirers and retailers, to achieve a common view and identify measures. The Riksbank considers the technical conditions for offline payments already favorable, but issues to be resolved around administrative processes, how abuse of offline payments can be curbed and who should bear the liquidity and credit risk arising from an offline payment. The Riksbank's objective is that, by July 1, 2026, it shall be possible to make card payments offline for the purchase of essential goods in the event of disruptions lasting up to 7 days. The possibility shall apply to all those over the age of 18 who have a card with one of the banks covered by the Riksbank's regulations.