Fintech Daily Digest

The Committee on Payments and Market Infrastructures (CPMI) published a summary of the high-level findings of a July 2024 conference on expediting the interlinking of fast payment systems (FPSs). It found that emerging markets and developing economies have made considerable progress in fast payment adoption. As the number of domestic FPSs grow, opportunities are emerging to facilitate the cross-border interlinking of safe and efficient FPS. Work is under way in many jurisdictions to enhance FPS readiness to participate in such links, particularly to improve their functionality and align with messaging and compliance standards. Successful links to date have prioritized interoperability and smoothly managed coordination between the public and private sectors and among jurisdictions. It is expected that FPS links in the near term will be based on bilateral links, while over the longer term, these may coexist with more open and future-proof multilateral arrangements. Over time, the market will likely evolve to link between regional groupings (see https://www.bis.org/cpmi/publ/brief5.htm).

BearingPoint published the latest edition of its European Payment Study, based on an online survey of 10,222 people aged 18 and over in nine countries. It shows that in Germany, Austria, and Switzerland, cash remains the most frequently used payment method, accounting for 69%, 73% and 57% of transactions, respectively. In contrast, the Nordic countries, particularly Sweden with 28% and Denmark with 35%, show significantly lower cash usage. Overall, the survey reveals that the frequency of cash usage has declined in almost all surveyed countries compared to the previous year. The digital euro has achieved relatively high awareness, with only one-third of respondents having never heard of it. Online shopping is the preferred use case for the digital euro, with an average of 37% across countries. Being free of charge (43%) and accepted everywhere (37%) are the leading objective requirements.

The U.S. Securities and Exchange Commission (SEC) has reportedly agreed in principle to dismiss its lawsuit launched in 2023 against Coinbase, which had accused the company of operating as an unregistered securities broker. Coinbase went public in April 2021. As part of that process, the SEC reviewed its business model and regulatory disclosures and allowed Coinbase to go public. According to Coinbase, "what changed over those two years was the political leadership at the SEC... [and the start of its unlawful] war against crypto". https://storage.courtlistener.com/recap/gov.uscourts.nysd.599908/gov.uscourts.nysd.599908.1.0.pdf https://www.coinbase.com/en-gb/blog/righting-a-major-wrong

Crypto exchange Bybit was hacked, resulting in a loss of $1.46 billion worth of crypto-assets in the biggest theft ever committed in the industry. North Korean hackers were likely responsible. They took control of one of Bybit's offline Ethereum wallets during a routine transfer between the firm's cold wallet and hot wallet, something it does when the balance in the hot wallet reaches a certain level. Only the Ethereum cold wallet was compromised and Bybit, with total assets under management are more than $20 billion, says it can cover the loss.

Figure Markets has launched YLDS, a public blockchain-based interest-bearing stablecoin that is reportedly registered as a public security with the U.S. Securities and Exchange Commission (SEC). YLDS accrues interest daily based on the U.S. Federal Reserve's Secured Overnight Financing Rate (SOFR) minus 0.50% with a 0.00% minimum, and pays monthly in USD or YLDS. Holders can buy/sell YLDS using USD and other stablecoins 24x7 on Figure Markets, and can off-ramp to fiat during US banking hours. YLDS can be transferred peer-to-peer on the Provenance Blockchain. YLDS is backed by the same securities that prime money market funds hold. https://www.newyorkfed.org/markets/reference-rates/sofr https://www.figuremarkets.com/c/ylds https://www.investopedia.com/articles/mutualfund/10/a-safer-money-market-2a7.asp

The European Central Bank (ECB) will expand its initiative to settle transactions on distributed ledger technology (DLT) platforms in central bank money. First, it will develop and implement a safe and efficient platform for such settlements through an interoperability link with the Trans-European Automated Real-time Gross Settlement Express Transfer System (TARGET) system. Perhaps these could include the Deutsche Bundesbank "trigger solution" or the Banca d'Italia's TARGET Instant Payment System (TIPS) Hashlink solution, both of which were tested in recent ECB-run trials. Second, the ECB will look into a more integrated, long-term solution, perhaps based on the Banque de France wholesale central bank digital currency (CBDC) solution, also tested in the ECB trials. https://www.ecb.europa.eu/paym/integration/distributed/exploratory/html/index.en.html

The Bank of Israel (BOI) published the results of a survey of public willingness to adopt a digital shekel. 34% of respondents showed a very high interest in using a digital shekel, 52% showed a high level of interest, and 17% expressed medium-high interest. The survey also examined what features of the digital shekel may increase its use.  Prominent among them was ease of use, customer protection against fraud and system errors, the Bank of Israel's backing of the currency, and the innovation embedded in it.  In contrast, the main concerns raised by the survey participants were cybersecurity and information security risks, difficulty of use, and lack of accessibility for certain population groups.  Unlike findings in some other countries, privacy concerns did not emerge as a dominant issue. Men showed higher interest than women in the digital shekel, and interest was positively correlated with age and with income level. 

Ripple has unveiled a major redesign of its website, wiping out any mention of central bank digital currency (CBDC). Ripple said they have a "new look" in its products that reflects a refocus on building for the firm's "next chapter" with a focus on the "internet of value" and transforming the way value moves around the world. Ripple has been a major player in the CBDC space, launching a complete CBDC and stablecoin platform in 2023, and advising countries like Colombia, Bhutan, Palau, Montenegro in their CBDC projects. In 2023, Ripple launched its CBDC platform for the development of CBDCs and stablecoins. https://x.com/ripple/status/1890489428809863170 https://ripple.com/

The IMF published a high-level report on central bank digital currency (CBDC) technical assistance (TA) provided to the Bank of Namibia (BoN) in early 2024. The mission assisted the authorities in establishing the groundwork for a feasibility study and drafting a roadmap for the BoN's CBDC exploration. The mission also reviewed requirements for retail CBDC issuance, including institutional capacity, technology, cybersecurity, and legal foundations. The mission recommended the BoN assess how retail CBDC can improve the payment systems and financial inclusion in Namibia compared to alternative solutions. The authorities are advised to establish a compelling rationale for retail CBDC before embarking on a more resource-intensive undertaking. The mission suggested that the BoN continue developing expertise and capacity in retail CBDC across policy, technology, and legal domains, including through continued engagement with stakeholders.

The European Central Bank (ECB) has published Decision (EU) 2025/222 relating to access by non-bank payment service providers (NB-PSPs) to Eurosystem central bank operated payment systems and central bank accounts. The EU Instant Payments Regulation (Regulation (EU) 2024/886) introduced certain changes to the EU Settlement Finality Directive (SFD) and Payment Services Directive (PSD 2), including adding NB-PSPs to the list of institutions eligible to become participants in payment systems designated under the SFD and permitting NB-PSPs to deposit their clients' funds for safeguarding in a separate account in a bank or central bank, at the central bank's discretion. The Decision will enter into force on 26 February 2025 and will apply from 9 April 2025. https://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=OJ%3AL_202500222

Federal Reserve Financial Services (FRFS) has announced a revised timeline for the transition to the ISO 20022 message format for the Fedwire Funds Service. Originally scheduled for 10 March 2025, the implementation has been postponed to 14 July 2025, to allow additional time for industry participants to prepare. According to FRFS, the decision to delay was made after evaluating customer readiness and responding to industry requests. While progress has been made, the extension is intended to accommodate those who require more time to complete necessary adjustments. https://www.frbservices.org/news/communications/021325-fedwire-iso20022-implementation-rescheduled-July-14

The Pan-African Payment and Settlement System (PAPSS) is a Pan-African real-time gross settlement (RTGS) infrastructure for cross-border payments in distinct local currencies. It was publicly launched on January 13, 2022, by the African Union (AU) and the African Export-Import Bank (Afreximbank) to compliment trading under the African Continental Free Trade Area (AfCFTA). PAPSS works in collaboration with central banks in the continent to provide a payment and settlement service to which commercial banks, payment service providers and fintech organizations across the continent can connect as participants. Currently, the PAPSS network consists of 15 central banks, 12 switches, and 51 commercial banks.

On February 13, 2025 the U.S. Securities and Exchange Commission (SEC) acknowledged filings from crypto-asset manager Grayscale to list spot XRP and Dogecoin exchange-traded funds (ETFs). The SEC has 240 days following the submission of the filings to the federal register to decide whether they get the green light, which would put the deadline in mid-October 2025. In prior weeks, the SEC had also acknowledged applications for Litecoin and Solana ETFs. The decision on an XRP ETF may be complicated by the SEC's lawsuit against Ripple Labs regarding XRP's security status. Dogecoin's path to approval could be more straightforward as it adopts many facets of Bitcoin, for which the SEC has approved ETF products. https://www.sec.gov/files/rules/sro/nysearca/2025/34-102420.pdf https://www.sec.gov/files/rules/sro/nysearca/2025/34-102416.pdf

Banking crypto exposes banks to an unpriceable type of credit risk related to chargebacks. If a consumer claims that a transaction was unauthorized or that they did not receive the goods and services ordered, they can initiate a chargeback with their bank. When that happens, the consumer's bank has a right to claw the funds back from the merchant's bank. That leaves the merchant's bank holding the bag unless it can recover the funds from the merchant. If the merchant is bankrupt or absconds, the merchant's bank-the payment processor-is stuck with the loss. As long as chargeback levels are predictable, payment processors can price for them. However, not only is there probably a relatively high baseline level of chargebacks for crypto, the chargebacks are also likely to be highly correlated whenever there is a market crash or allegations of fraud about a particular coin. So, if cryptos crash, chargebacks are likely to soar at the very time when the risk of the crypto company customer going bankruptcy rises. So the scenario that the payment processor is facing is that it will be hit with a tidal wave of chargebacks and that it will not be able to recover them from the crypto company, but will instead just have an unsecured claim in the crypto company's bankruptcy. The implication here is that no amount of crypto-friendly bank regulation is going to change the fact that prudent risk management committees will eschew crypto companies.

The Bank for International Settlements (BIS) published an update on Project Rialto, which is exploring connecting instant payment systems (IPSs) across borders using central bank money (CBM) on a tokenized platform and an automated foreign exchange (FX) conversion layer. Such integration raises some specific challenges and design considerations, which will be addressed in the development phase and form an integral part of the project's contributions to improving cross-border payments. This report identifies the main policy and technical aspects to be considered, with the next steps being to develop at proof of concept.

The Committee on Payments and Market Infrastructures (CPMI) published a paper that analyzes and outlines practical approaches that have been used to address some of the key challenges of extending or aligning real-time gross settlement (RTGS) system operating hours. Limited RTGS system operating hours and gaps between jurisdictions' operating hours due to time zone differences can lead to delays in settlement of cross-border payments. Several RTGS systems have extended operating hours in recent years and have experienced notable adoption of the additional hours. With the extended hours, payment system participants can offer better services to end users, such as 24/7 fast payments. Many more RTGS systems are evaluating or planning to extend operating hours.

Back in 2021, El Salvador became the first country in the world to require its citizens to use bitcoin for payments. What have we learnt from El Salvador's four-year bitcoin experiment? JP Koning suggests that it definitively proved that bitcoin is not destined to be money. As far as making payments goes, bitcoin will always be an unpopular option, even when the government gives it a helping hand. And don't blame the IMF for this; bitcoin sputtered-out long before the IMF pressured El Salvador to drop it.

[December 2024] Sharia-compliant D360 Bank became the first-ever licensed digital bank to begin operations in the country after receiving permission by the Saudi Central Bank (SAMA). The advent of digital banks in Saudi Arabia aligns with growing consumer demand for online financial services. A 2024 survey of more than 1,200 Saudi retail banking customers conducted by Capco found that 81% of respondents accessed banking services using mobile apps, with 36% using desktop PCs or laptops and 30% via a bank branch, reflecting shifting preferences towards digital channels. Saudi consumers are also showing interest in called "super-apps", or all-in-one digital platforms. 82% of respondents expressed interest in a banking app that integrates financial services with the non-financial services they use in daily life such as ride hailing and e-commerce. In particular, four in ten (41%) would find such an app "extremely attractive".

SIX launched its Digital Collateral Service (DCS), permitting financial institutions to post selected crypto-assets as collateral alongside traditional collateral. Firms managing both bonds and bitcoin, for example, can now post both as collateral to cover a single exposure. However, crypto cannot be used as collateral on SIX exchanges or for repo transactions. The aim is to provide a conventional collateral solution for OTC and bilateral trades of crypto. https://www.six-group.com/en/newsroom/media-releases/2025/20250212-digital-collateral-service.html

The Official Monetary and Financial Institutions Forum (OMFIF) published a report on how central banks' opinions on issuing a retail central bank digital currency (CBDC) are evolving, based on a survey of 34 central banks. Three-quarters of central bank survey respondents expect to issue a CBDC. Where 34% expect to issue one in 3-5 years, 91% have done or will conduct feasibility studies. Financial inclusion and preserving central bank monetary sovereignty are the leading motivations for emerging market central banks (44%) and developed market central banks (50%), respectively. Previously ranked as the most challenging feature to deliver, 20% of surveyed central banks report improved satisfaction with progress in offline payments, up from 0% in 2023.