Fintech Daily Digest

The months-long CFTC probe is focused on whether BitMEX broke rules by allowing Americans to trade on the platform, which isn't registered with the agency, said one of the people who asked not to be named discussing the investigation, which hasn't been made public. The regulator considers virtual currencies like Bitcoin to be commodities, and it has jurisdiction over futures and other derivatives based on them.

"We demonstrate that a limited adoption problem arises endogenously in a Proof-of-Work (PoW) payments blockchain. Increased transaction demand increases fees because PoW imposes an artificial supply constraint. The increased fees in turn induce validators to enter the network because of PoW's permissionless nature. The increased network size protracts the consensus process and thereby delays payment confirmation. Given access to traditional payment systems, users prefer to transact via the blockchain only if they possess extreme insensitivity to delays. A PoW payments blockchain therefore cannot obtain widespread adoption."

This paper assesses the potential impact of FinTech on the finance industry, focusing on financial stability and access to services. I document first that financial services remain surprisingly expensive, which explains the emergence of new entrants. I then argue that the current regulatory approach is subject to significant political economy and coordination costs, and therefore unlikely to deliver much structural change. FinTech, on the other hand, can bring deep changes but is likely to create significant regulatory challenges.

We show that high-risk FinTech loans substitute for bank loans while low-risk loans may be credit expansionary. However, the influence on banks is heterogeneous. Our results highlight the changing landscape of financial intermediation and the regulatory challenges faced by FinTech firms.

In March, the NY Fed hosted a research conference on FinTech to understand the implications of FinTech developments on issues that are relevant to the Fed's mandates such as lending, payments, and regulation. This post summarizes the principal themes and findings of the conference.

There's no real guarantee the Libra Reserve would be stable in practice, especially when broader conditions get rough. The problem, according to numerous experts, boils down to this: What looks safe on paper can hide unpredictable risks.

SWIFT has concluded a trial to integrate its "global payment initiative" with Singapore's Fast And Secure Transfers (FAST) domestic instant payment service, that linked 17 banks across seven countries. It said all payments in the trial were settled within between 13 and 25 seconds.

In our last post, we explored mobile money as the driving force for financial inclusion in Sub-Saharan Africa, and the increasing digitisation of use cases across different sectors - many of which were not imagined in the early days of mobile money. This post focuses on the future of mobile money. Looking ahead, we see three key areas of future growth in mobile money across Sub-Saharan Africa.

The European Banking Authority published today the findings of its analysis on the regulatory framework applicable to FinTech firms when accessing the market. The Report illustrates the developments on the regulatory perimeter across the EU, the regulatory status of FinTech firms, and the approaches followed by competent authorities when granting authorisation for banking and payment services.

Stablecoins such as Facebook's Libra will need to be tightly regulated or they could destabilise the global economy and risk being used for money-laundering and the financing of terrorism, according to a working group consisting of senior officials from the G7 central banks as well as the International Monetary Fund, the Bank for International Settlements and the Financial Stability Board.

Gotbit inflates trading volumes on obscure cryptocurrency exchanges for a fee and has about 30 token projects as clients. The firm programs bots to trade tokens back and forth with each other, creating the illusion of active markets so the assets can get listed on CoinMarketCap. Its co-founder says exchanges are aware of this manipulation but are not interested in stopping it.

Companies are investing billions of dollars to find uses for blockchain, but a review of 33 projects involving large companies announced over the past four years and interviews with more than a dozen executives involved with them show the technology has yet to deliver on its promise. At least a dozen of these projects, have not gone beyond the testing phase, the review shows. Those that have made it past that stage are yet to see extensive usage.

Chainalysis's business today is split between crime fighting and regulatory compliance. Half the company's revenue still comes from working with state governments and regulators including the IRS and the FBI to provide investigation software.

France's Financial Markets Authority is poised to approve a first tranche of crypto-related companies under new rules on digital coins. Under the rules, set to come into force late this month, crypto-related firms will voluntarily abide by standards on capital requirements and consumer protection and pay tax in France, in exchange for approval from the regulator.

Everyone says Libra should be heavily regulated. But nobody seems to know how-including Facebook. That much was clear in the often muddled questions of legislators who hauled in Facebook executive David Marcus to testify this week, as well as in Marcus' frequent deflections.

Japan's government is leading a global push to set up an international network for cryptocurrency payments, similar to the SWIFT network used by banks, in an effort to fight money laundering, a person familiar with the plan said on Thursday.

Ocasio-Cortez references previous instances of people being paid in corporate-controlled currency, known as "scrip" -- a very dark history there.

Grayscale Investments Releases Q2 2019 Digital Asset Investment Report Digital currency asset manager Grayscale's assets under management nearly tripled from $926 million to $2.7 billion in Q2 2019 on inflows of $85 million, the rest being asset price appreciation. Institutional investors comprised the 84% of Q2 inflows (75% over 12 months).

Ocasio-Cortez suggests that Libra being "controlled by an undemocratically selected coalition of largely massive corporations" is problematic because a nation's currency is a "public good" that should be under the purview of a government.

Rep. Alexandria Ocasio-Cortez (D-N.Y.) brought an interesting bit of monetary history into the discussion. She suggested that the Libra currency would be a digital version of scrip, a type of private money that corporations once used to pay employees. (Coal miners and loggers, for instance, were paid in scrip they could use to buy goods at the company store.)