DFC

"A strange new bank called TNB, or The Narrow Bank, recently applied to get a clearing account at the Federal Reserve Bank of New York, only to be refused. Funny enough, TNB is run by the New York Fed's former director of research James McAndrews, who left in 2016 in order to get the bank up and running. McAndrews and TNB are now suing the New York Fed."

"It is called TNB USA Inc. (for “The Narrow Bank”), it is run by the former head of research at the New York Fed, and it is simultaneously a dumb simple one-sentence idea and the most interesting bit of financial engineering that I’ve seen this year. Of course it is a very 2018 form of financial engineering, which is to say almost the opposite of what financial engineering looked like in, say, 2006. The traditional form of financial engineering is complex and alchemical, taking lots of dodgy ingredients and stirring them up into something more attractive. This is financial engineering by dynamite blast: You just get rid of all the apparatus of banking and blow a tunnel directly from savers to the ultimate backstop of the banking system."

"Suppose someone started a narrow bank. How would the Fed react? You would think they would welcome it with open arms. Not so."

A month after Venezuelan president Nicholas Maduro announced the creation of the Petro, a state-backed cryptocurrency that would supposedly bring the country out of six-figure hyperinflation, the only place the Petro seems to exist is in the media.

India’s central bank, the Reserve Bank of India’s (RBI), has confirmed the creation of an inter-departmental group tasked with analyzing the feasibility of issuing a rupee-backed central bank digital currency (CBDC)

et another stablecoin is attracting big investors. Announced Tuesday, the founder behind a $1.4 billion startup unicorn called TMON is revealing he has raised a $32 million seed round to build a stablecoin called Terra. But while a number of startups have deployed stablecoins – cryptocurrencies engineered to track the price of another asset, usually fiat currency – Terra comes with a notable addition: an existing user base.

Notably, the paper further argues that central banks should not attempt to create anonymous digital cash, as it is unlikely that the public will ever believe that the government would willingly create a digital currency that did not have backdoors.

"Union Bank AG, a bank in Liechtenstein that offers corporate banking services mainly to companies based in Germany, Switzerland, Austria and the Middle East, has announced that it will be launching its own security tokens in alignment with Liechtenstein’s regulatory authority, FMA, and subsequently its cryptocurrency, “Union Bank payment coin,” which is fully backed by a fiat currency – the Swiss franc."

Saeed Mahdiyoun, the deputy director in charge of drafting regulations for Iran's Supreme Cyberspace Council, has reportedly revealed to local news agency IBENA that the idea of introducing a national cryptocurrency is being actively pursued by Iran's cyberspace authority. Mahdiyoun also stated that the state authorities will soon remove the existing uncertainty around cryptocurrencies, since the Central Bank of Iran is set to introduce its official stance on the issue at the end of September.

"It’s getting hard to pump amid the dump in the $209 billion cryptocurrency market. At least that appears to be the case when you look at Tether, one of the most-traded digital assets and also one that’s allegedly been used to manipulate the price of Bitcoin. Over half a billion dollars of Tether has been created in August alone, a move that in the past would have often coincided with a rally in Bitcoin, yet the larger cryptocurrency has fallen 15 percent."

"The Bank of Thailand has announced more detail on its development of a prototype wholesale central bank digital currency (CBDC), including its commercial partners.  "

Union Bank, which has concentrated increasingly on blockchain this year, said issuing its so-called “Union Bank Payment Coin (UBPC)” was a further step towards becoming a “full-service blockchain investment bank.” UBPC will act as a stable coin, the institution explained, and will have fiat currencies “such as the Swiss franc” as its backing.

"The Thai central bank said in a release on Tuesday that it has partnered with eight financial institutions in the country in a bid to create a CBDC based on Corda, a distributed ledger technology (DLT) platform developed by the enterprise-focused consortium startup R3."

Policy-makers should adopt a “watch-and-wait approach” to central bank-issued digital currencies, an article in the Bank of Spain’s economic bulletin argues. In "Monetary policy implications of central bank-issued digital currency" Galo Nuño notes several kinds of risk associated with central bank-issued digital currencies, or CBDCs. The technological risks are significant and “might cause considerable harm to the economy as a whole”, he says.

"Cryptocurrencies - digital tokens known as cryptos for short - have investors in the grip of a gold rush fever, with billions being traded every day. Prices fluctuate wildly, making them high-risk investments. But could a more stable, less volatile crypto persuade us to think of digital money less as a speculative investment and more as a mainstream "smart" currency?"

"In addition to allegations that USDT has been used to manipulate the bitcoin price, the Tether company has faced criticism for operating behind a veil of secrecy. The firm has said that it plans to operate less opaquely moving forward, and, along with publishing its recent “Transparency Report,” the company has hired a former Bank of Montreal executive to head its regulatory compliance efforts."

"Countries need to be serious in developing a new crypto economy around their own cryptocurrency for long-term sustainability. Simply creating currency and selling that as a digital asset/commodity to global citizens through ICO or exchanges won’t create their own crypto economy.  The process for cryptocurrencies to be on its way to be a global reality can be accelerated with careful consideration of five key elements that glue us together to create an economy:"

"I offer a macroeconomic perspective on the "Reserves for All" (RFA) proposal to let the general public use electronic central bank money. After distinguishing RFA from cryptocurrencies and relating the proposal to discussions about narrow banking and the abolition of cash I propose an equivalence result according to which a marginal substitution of outside for inside money does not affect macroeconomic outcomes. I identify key conditions on bank and government (central bank) incentives for equivalence and argue that these conditions likely are violated, implying that RFA would change macroeconomic outcomes. I also relate my analysis to common arguments in the discussion about RFA and point to inconsistencies and open questions."

"The potential benefits and risks of digital central bank money for use by the general public have been widely debated. This column looks at one aspect that has been somewhat overlooked – the consequences of substituting outside for inside money. ‘Reserves for all’ could increase the incentive to extend credit but might undermine political support for implicit financial assistance to banks. However, the effects need not be disruptive. "

"The central bank is determined to address its challenges proactively by exploring the latest technology available, for example, to reduce the level of cash usage within the monetary union, and to facilitate more secure, more AML and KYC compliant, and more efficient financial transactions within and between Curaçao and Sint Maarten," Leila Matroos-Lasten, acting President of the CBCS, said.

Privacy in payments is desired not just for illegal transactions, but also for protection from malfeasance or negligence by counterparties or by the payments system provider itself. Proposals to abolish cash take inadequate account of these legitimate demands for privacy. While central banks can play a useful role in setting standards for payments privacy, they are unlikely to have a comparative advantage at providing privacy. Therefore the replacement of cash by central bank electronic money is likely to spur demand for alternative means of payments to solve specific privacy problems.

Stablecoin, a cryptocurrency pegged to a stable asset, has been increasingly gaining traction in India, as more domestic cryptocurrency exchanges add TrueUSD (TUSD) and Tether (USDT) to their trading platforms, in an effort to minimize the impact of the previously imposed cryptocurrency ban by the Reserve Bank of India (RBI).

An Australia-based Blockchain startup initially established to provide cross-blockchain payments announced that it is launching its dollar-pegged token to the EOS Blockchain. Announced August 8, the project dubbed Havven disclosed plans of issuing its USD-pegged stablecoin on the EOS Network, slated to go live by the end of 2018. The firm’s token was initially rolled out on the Ethereum Network in June.

We’re two-thirds of the way through the Year of the Stablecoin. Rather than taking yet another look at the many projects still cooking and the theory behind how stablecoins work (here is a good recent overview), I want to take a glance at the projects that are currently live already.

Venezuelan President Nicolás Maduro has announced that the national oil-backed cryptocurrency, the Petro, will be used as a unit of account within the country.

Bitt, Inc. announces it has signed a Memorandum of Understanding (MOU) with the Centrale Bank van Curaçao en Sint Maarten (CBCS) to explore the feasibility of the CBCS issuing a digital Curaçao and Sint Maarten guilder to facilitate digital financial payments within the monetary union of Curaçao and Sint Maarten.

"In order to correctly assess which stablecoin designs have the potential to work — which the industry really needs to be able to do right now — you’ll need to understand some important principles, and be willing to spend considerable time applying them."

"VariabL CCO Nathan Sexer undertakes an exhaustive study of stable digital assets and explains why they’re essential to the emerging decentralized economy"

"Cryptocurrencies, unlike government money, are currently mere assets with a constant risk of gaining or losing their value; as a result, they can not be a sound, trustworthy way to store value or to be exchanged for other goods and services. For instance, one might sell a number of goods and receive some coins in return only to find out that prices have fallen in just a couple of minutes, and feel fooled. On the other hand, a buyer might spend some Bitcoin, Ether, or other cryptocurrencies to purchase something and then, figure out prices have skyrocketed in just a few days, and feel a great deal of remorse."