Autor Cointelegraph By Derek Andersen

Report urges central banks to work together on digital currency interoperability

Report urges central banks to work together on digital currency interoperability

Uverejnil používateľ | júl 11, 2022 |

International agencies are urging central banks to consider interoperability early in the design of central bank digital currencies (CBDCs). The Bank for International Settlements (BIS) Committee on Payments and Market Infrastructures, the BIS Innovation Hub, the International Monetary Fund and the World Bank released a report Monday that looked at three options for cross-border interoperability that address challenges including high costs, low speed, limited accessibility and thelack of transparency.The present publication was a response to a 2020 Committee on Payments and Market Infrastructures report that identified 19 building blocks to enhance cross-border payments. Most work on CBDCs has been focused on domestic policy goals so far, according to the authors. They went on to examine variables such as accessibility by payment service providers (PSPs) and nonresidents to wholesale and retail CBDCs and interaction with non-CBDC infrastructure. Three approaches to interoperability were examined. Compatibility, or the adoption of common standards, would make it easier for PSPs to operate across systems. Interlinking would allow participants in the system to establish contractual agreements, technical links, standards and operational components to perform transactions across systems. Interlinking could be achieved through several models. Finally, a single technical system could host multiple CBDCs. Related: Crypto resonates better with BIS’ vision of ideal monetary systemInternational collaboration on CBDC design is necessary to overcome cross-border payment challenges, and many CBDC design features remain undecided in the numerous CBDC projects currently underway. Research is moving fast, so the opportunity for coordination should be seized while it remains, the report said. Coordinating design features could help CBDCs avoid unforeseen pitfalls and improve common Know Your Customer/Anti-Money Laundering efforts. The three approaches to interoperability discussed in the report are not mutually exclusive, although they all involve tradeoffs, the report noted.

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Fed vice chair Brainard urges faster crypto regulation, touts role for stablecoin

Fed vice chair Brainard urges faster crypto regulation, touts role for stablecoin

Uverejnil používateľ | júl 8, 2022 |

Regulate now or regret it later, United States Federal Reserve Board vice chairperson Lael Brainard told an audience at a Bank of England conference in London on Friday. Crypto has the same basic risks as tradition finance and needs “strong guardrails,” Brainard claimed, pointing to the recent downturn in market as proof. Brainard spoke the most general terms throughout her speech. She highlighted recent performance issues in cryptocurrency, such as volatility, correlation with risky equities, liability to bank runs and other risks associated with traditional finance, and over-collateralization as a stress amplifier. As crypto becomes more integrated into the more extensive financial system, the need for regulation in response to those risks will become more urgent, she said. Brainard endorsed “the principle of same risk, same disclosure, same regulatory outcome.” She also urged international cooperation among financial regulators to deal with the cross-border scope of the crypto industry. The latter appeal echoes the conclusions of a U.S. Treasury Department report released a day earlier.Two specific areas aroused particular concern in the Fed official. The first was bank involvement with crypto increases the risk of the stability of the core financial system. Brainard said that bank involvement should be encouraged because it “provides an interface where regulators have strong sightlines.” In spite of her endorsement of the “same risk, same disclosure” principle, she seemed to argue for different treatment for crypto here, stressing that a “strong regulatory framework for crypto finance” was necessary to advance heavy bank involvement.Related: Brainard tells House committee about potential role of CBDC, future of stablecoinsStablecoins are a second area of risk spillover, Brainard said. Calling them a bridge between crypto and fiat, she noted that the top two stablecoins account for 80% of the market capitalization. Fiat-backed stablecoins are “highly vulnerable to runs,” she said. Brainard saw an important role for a central bank digital currency (CBDC), saying:“A digital native form of safe central bank money could enhance stability by providing the neutral trusted settlement layer in the future crypto financial system.”She gave interoperability between stablecoins as a potential use for that neutral settlement layer. Finally, Brainard pointed out that, while crypto offers cheaper services among its advantages, the costs that regulation entails are worth it.

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FDIC reportedly scrutinizing Voyager Digital marketing; complex SBF ties come to light

FDIC reportedly scrutinizing Voyager Digital marketing; complex SBF ties come to light

Uverejnil používateľ | júl 7, 2022 |

Some Voyager Digital account holders were surprised when they discovered that their deposits did not have the protection they thought they did after the crypto brokerage and lender filed for bankruptcy Tuesday. This could mean additional consequences for Voyager Digital. Voyager Digital filed for bankruptcy under Chapter 11, citing debts of up to $10 billion to 100,000 creditors in a crisis brought on after Singaporean hedge fund Three Arrows Capital (3AC) default on a loan of 15,250 Bitcoin (BTC) and 350 million USD Coin (USDC) a week earlier.According to Voyager Digital’s website, “Your USD is held by our banking partner, Metropolitan Commercial Bank, which is FDIC insured, so the cash you hold with Voyager is protected.” The bank holds $350 million in Voyager Digital customers’ deposits. The United States Federal Deposit Insurance Corporation (FDIC) insures accounts for up to $250,000 per depositor in case of the failure of the bank, the Metropolitan Commercial Bank explained in a statement, adding that the FDIC does not provide protection against Voyager Digital’s failure or against the loss of cryptocurrency.Statement from Metropolitan Commercial Bank about #FDIC insurance for #Voyager customers. Bad news, I’m afraid. pic.twitter.com/3PMVYNZkQw— Frances Schadenfreude Cassandra (@Frances_Coppola) July 2, 2022According to The Wall Street Journal on Thursday, unnamed sources said Voyager Digital depositors were expected to receive all the cash from their accounts held in the bank eventually, as Voyager Digital promised. A source also told the newspaper that the FDIC was looking onto Voyager Digital’s marketing.Related: Circle looks to reaffirm commitment to transparency as USDC market share soarsVoyager Digital said its proposed reorganization plan foresaw that, subject to various contingencies, “customers with crypto in their account(s) will receive in exchange a combination of the crypto in their account(s), proceeds from the 3AC recovery, common shares in the newly reorganized Company, and Voyager tokens.” Two most interesting things in the Voyager bankruptcy petition: (1) Voyager’s second largest exposure is to Alameda Research. So there’s some recycled capital. Voyager loans Alameda $377M, & Alameda reloans Voyager $75M. Plus Alameda is Voyager’s largest shareholder (9.5%). 1/— Adam Levitin (@AdamLevitin) July 6, 2022

It was also noticed that Voyager Digital had a complex financial relationship with Alameda Research, which is backed by Sam Bankman-Fried. Alameda Research is simultaneously Voyager Digital’s largest shareholder, second largest creditor at $377 million, and it owes Voyager Digital $75 million.

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Belgian regulator reviews crypto asset classifications while awaiting harmonization

Belgian regulator reviews crypto asset classifications while awaiting harmonization

Uverejnil používateľ | júl 6, 2022 |

The Financial Services and Markets Authority (FSMA), the Belgian regulator, is seeking comments on its communication on the classification of crypto assets as securities, investment instruments or financial instruments. Aimed at issuers, offerors and service providers, the agency’s communication will serve as guidance to the existing order until European regulatory harmonization is achieved. The communication is meant to address frequently asked questions and is not exhaustive. It is accompanied by a stepwise chart to help its readers determine the classification of an asset. Crypto assets that are incorporated into an instrument, as is generally the case for assets that are exchangeable or fungible, may be classified as securities under the European Union (EU) Prospectus Regulation or as investment instruments under the EU Prospectus Law. In those cases, MiFID (Markets in Financial Instruments Directive) rules of conduct apply. If an asset has no issuer, as in the case of Bitcoin (BTC) or Ether (ETH), where the instruments are created by a computer code that does not give rise to a legal relationship, then in principle the Prospectus Regulation, Prospectus Law and MiFID rules do not apply. When the European Union Regulation on Markets in Crypto Assets (MiCA) takes effect, trading platforms will be required to issue white papers for issuer-less tokens. Related: Belgian financial regulator FSMA to regulate crypto exchange servicesThe classification chart is straightforward, if not conclusive. An asset incorporated into instruments that represents the rights equivalent of a share in profits or losses or a payment is a security if it is transferable and an investment instrument if nontransferable. If the asset represents the right to delivery of a service or product, it is an investment instrument if it has investment characteristics, according to case-by-case analysis. FSMA also warned that, regardless of the classification of an asset, it will be subject to additional laws as well, such as rules governing virtual asset service providers. Comments on the communication and chart are welcome through July 31.

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High-ranking crime fighter to join UK’s FCA as payments and digital assets director

High-ranking crime fighter to join UK’s FCA as payments and digital assets director

Uverejnil používateľ | júl 6, 2022 |

UK regulator the Financial Conduct Authority (FCA) has recruited almost 500 additional staff members this year as part of its new three-year strategy. Among the new hires are six directors, whose appointments were announced July 5. Two of them come from backgrounds in policing.Director of payments and digital assets is newly created position that will oversee the e-money, payment and crypto-asset markets and related policy development. Matthew Long was appointed to that post, moving over from the National Crime Agency, where he is now a director in the National Economic Crime Command. Long has also led the UK Financial Intelligence Unit. He began his career as a detective in the Kent Police and holds a PhD in risk management. Long will start in his new role in October.In September, Karen Baxter will support FCA enforcement and market oversight activities when she joins the FCA as director of strategy, policy, international and intelligence. She was a commander and national coordinator for economic crime in the City of London Police. She is also is an Office of Communications board member for Northern Ireland.Two interim directors will receive permanent appointments, and new directors of consumer finance and wholesale buy-side have also been appointed.Related: Former Chancellor says UK is falling behind on crypto opportunityThe agency’s new strategy seeks to be more innovative, assertive and adaptive, and to: “proactively shape the digitalization of financial services through developing our regulatory approaches to digital markets.” On digital markets, the strategy addressed competition among key digital firms and the risks and benefits Big Tech will bring to the sector. It will examine the role of artificial intelligence in finance and will lead investigations “informed by behavioural economics to test digital consumer journeys.”

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