Why UN and Federal Reserve Experts Think CBDCs Could Kill Commercial Banking

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June 5, 2020 Sponsored by By Daniel Kuhn If you were forwarded this newsletter and would like to receive it, sign up here.  TOP SHELF U.N. and Federal Reserve experts independently researched central bank digital currencies and found they could effectively compete with the commercial banking system, while New York State and France have entered into a regulatory agreement and Europol is concerned about the bitcoin privacy wallet Wasabi. Here's the story: Demise of Banking? In a new research paper, the Federal Reserve of Philadelphia investigated the implications of an account-based CBDCs, focusing on its potential competition with the traditional maturity transformation role of commercial banks, and found it could one day replace commercial banks. A similar conclusion was found by Massimo Buonomo, the U.N.’s global blockchain expert, who said digital currencies, particularly CBDCs, could soon “eliminate the need for a bank account” altogether. Regulatory Matters The Office of the Comptroller of the Currency (OCC) is reviewing its regulations around digital bank activities and seeking public input, to ensure these regulations “continue to evolve with developments in the industry.” Meanwhile, the New York State Department of Financial Services (NYDFS) and its French regulatory counterpart will work to “ease the entry” for fintech innovators into their respective markets by syncing their regulatory frameworks. Elsewhere, InterWork Alliance, a 36-member organization including Accenture, IBM, ING, Nasdaq, and Digital Asset launched this week with the aim of creating token standards. (Forbes) Privacy Europol, the European Union’s law enforcement agency, said “things are not looking good” for tracking potentially criminal transactions, due to the popularity of the privacy-protecting Wasabi Wallet. An internal document shows money is filtering through Wasabi for criminal purposes, with a Europol representative confirming the agency often lacks the tools to decrypt the scrambled transactions. Meanwhile, Bitfinex-incubated DeversiFi claims its re-released decentralized exchange (DEX) is receiving interest from 70 institutions, thanks to a privacy layer that can protect their trading strategies from rivals. Separately, Signal, an encrypted messaging app, will roll out a feature allowing users to blur people out of pictures. (Decrypt) Exchanges: Hacks & New Allegations A German crypto trader is trying to seize nearly 500 bitcoin from Xapo and Indodax through a new lawsuit that accuses the two crypto exchanges of harboring his stolen funds. The suit alleges that the exchanges aided and abetted an unnamed thief and remain in possession of the funds. Meanwhile, Canadian crypto exchange Coinsquare said a former employee stole customer data last year, and potentially made it available to hackers to tarnish the firm’s reputation, The Block reports.  INTERVIEWS Bitcoin Is a Way to Repair Economic Injustice: Author Isaiah Jackson Isaiah Jackson, founder of KRBE Digital Assets Group and the author of Bitcoin & Black America, thinks that bitcoin can play a crucial role in addressing economic disparity in black communities. While there are no immediate technological solutions to solving America’s economic and social problems, highlighted by George Floyd’s murder, bitcoin can make disadvantaged communities more resilient and weaken the existing hegemony.  The Free Market Will Determine Cardano’s Fate: IOHK’s Charles Hoskinson Charles Hoskinson thinks price matters for the project he founded, Cardano. A higher price for tokens means there’s recognition among a broader base of users a project has utility and inherent value, creating certainty and staying power for a project. “Ultimately people do what they make money with,” Hoskinson said. Token projects that prove to be commercially successful end up inspiring imitations, meaning that “the market will basically decide what the standards are.” WEEKEND READS Deep Dive Into DeFi MakerDAO, the organization behind the dollar-pegged stablecoin known as DAI, is voting on whether to further diversify the collateral it accepts for loans beyond cryptocurrencies to include real-world assets (RWAs), CoinDesk’s Ian Allison reports. Specifically, Maker is considering allowing supply chain invoices and musicians’ future royalty streams as security when it lends out DAI.  If approved, the proposals would pave the way for the first application of DeFi to solve a tangible business problem caused by the coronavirus crisis: freeing up working capital for cash-strapped supply chains. The system would remove banking and credit intermediaries. The first companies ready to work with Maker on RWAs are ConsoleFreight, a platform for supply chain finance, and Paperchain, which makes musicians’ royalty payments from Spotify instantly available. The catch for lenders is that in the event of default, they would have to rely on the flesh-and-blood legal system to enforce their rights to the collateral, rather than an automated smart contract that can do so with on-chain assets. Get the full story here. SPONSORED BY PRIME TRUST Open banking made easy, Prime Trust API's for payment processing, compliance, counterparty settlement, fiat & crypto custody for exchanges, OTC desks and fintech innovators...globally. Relax, you've found your financial institution partner. Learn More MARKET INTEL Derivatives Suggest Bullish Mood Bitcoin derivatives traders are turning bullish, as the put-call open interest ratio, which measures the number of put options open relative to call options, fell to 0.43 on Thursday – the lowest since March 24. “The put-call ratio can gauge the overall sentiment of traders and the lower ratio dictates that more traders are buying calls (bullish bets) than puts (bearish bets),” according to Lennard Neo, head of research at Stack. The Known Unknown Since late April, bitcoin has traded in a range between roughly $8,500 and $10,200. Predictions for where the currency is heading range from a drop down to $0 to as high as $300,000 within five years. Recently, Bloomberg analysts claimed bitcoin prices could approach $20,000 later this year. A glance at bitcoin’s price chart since early 2017 shows how far off bitcoin remains from that $20,000 threshold. But it also shows how rapidly the price ran up in 2017. In the volatile bitcoin market, it’s hard to rule anything out. Regional Growth Bitcoin trading in India exploded last month, with Paxful and LocalBitcoins totalling nearly $3 million in value transfers in one week alone. (Decrypt) COINDESK RESEARCH CoinDesk Research: May 2020 Review Bitcoin’s returns continue to outpace stocks, bonds and gold, and so does its volatility. Spot exchange volumes probed historic highs in May and bitcoin options markets passed a milestone and didn’t look back. Outperforming crypto assets a couple of use-specific crypto tokens that topped crypto returns for the month. Download the full report here. COINDESK PODCAST NETWORK Decentralization and What Section 230 Really Means for Freedom of Speech CoinDesk sat down with New York Law School professor Nadine Strossen and author of the Open Index Protocol Amy James to discuss the fallout from the spat between President Trump and social media giant Twitter. On the docket is: the fairness implications of editorializing on social media, the business models that enable and are empowered by all of this, and how decentralized protocols can chart an alternative path forward. WHO WON #CRYPTOTWITTER Blockchain Bites A newsletter from CoinDesk See previous editions Copyright © 2020 CoinDesk, All rights reserved.  Our mailing address is:  250 Park Avenue South New York, NY, 10003, US  Want to change how you receive these emails? You can update your preferences here.