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Circle wanted to create a financial revolution. Instead, it’s losing the stablecoin wars to Tether

Fortune magazine published a behind-the-scenes account of Circle's Silicon Valley Bank (SVB) trials and tribultations. Circle's management "devised a plan A, B, and C. The first failed when Circle’s attempted wire to get out its deposits didn’t go through. [They] remained optimistic that the government would guarantee its deposits—plan B. In case that didn’t work out, the executives spent the weekend negotiating deals with companies who would buy Circle’s SVB holdings for $0.85 on the dollar, which, along with Circle’s own balance sheet, would be enough to restore USDC’s reserves."

#Fintech #CryptoAssets #Stablecoins #Circle #USDC #SiliconValleyBank #DFC

·fortune.com·Sep 8, 2023

Circle wanted to create a financial revolution. Instead, it’s losing the stablecoin wars to Tether

There are now two types of PayPal dollars, and one is better than the other

Interestingly, JP Koning shows that of the two types of U.S. dollar digital currencies now offered by Pay Pal, its PayPal USD (PYUSD) stablecoins are actually safer than its the traditional account offering. Better quality assets back PYUSD, they are ranked more senior to other creditors if PayPal goes kaput in most states, and they are disclosed more transparently. Notably, PayPal's regular accounts are regulated piecemeal under each U.S. states' own peculiar version of a money transmitter license, that can almost always be legally backed by riskier assets, and typically do not require that they be held in trust solely for the benefit of customers. [See also Don Awrey's "Bad Money": https://www.cornelllawreview.org/2020/12/01/bad-money/]

#Fintech #CryptoAssets #Stablecoins #PayPal #UnitedStates #Regulation #DFC

·jpkoning.blogspot.com·Sep 12, 2023

There are now two types of PayPal dollars, and one is better than the other

NIST Stablecoin Report Highlights Security and Stability Concerns

The US National Institute of Standards and Technology (NIST) published a report on stablecoin security considerations. These include unauthorized or arbitrary minting; vulnerability in smart contract codes leading to the theft of the stablecoin’s on-blockchain reserves, the malicious hacking or updating of smart contract codes, denial-of-service attacks on the data oracles that provide the smart contracts with off-blockchain information, and attacks on the underlying blockchain. The stability and trust issues the report identifies vary based upon the stablecoin use case, as well as the kind of marketplace that the stablecoins are traded upon. https://nvlpubs.nist.gov/nistpubs/ir/2023/NIST.IR.8408.pdf

#Fintech #CryptoAssets #Stablecoins #CyberSecurity #NIST #DFC

·jdsupra.com·Sep 12, 2023

NIST Stablecoin Report Highlights Security and Stability Concerns

PayPal USD (PYUSD) is now available on Venmo

PayPal's PYUSD on-chain dollar-denominated stablecoin 100% backed by U.S. dollar deposits, short-term U.S Treasuries, and similar cash equivalents, is available on Venmo to select users and will be rolling out fully in the coming weeks. Transfers between PayPal and Venmo users are fast and free, connecting two wallets with millions of users each. Individuals using compatible external wallets, and merchants accepting payments in PYUSD, will also be able to receive transfers from Venmo users. Blockchain network fees apply. Also, PYUSD has been greenlisted by the New York State Department of Financial Services, making it easier for virtual currency entities licensed in New York to support PYUSD.

#Fintech #CryptoAssets #Stablecoins #PayPal #Venmo #PYUSD #DFC

·newsroom.paypal-corp.com·Sep 21, 2023

PayPal USD (PYUSD) is now available on Venmo

JP Morgan is part of Regulated Liability Network digital currency project

JP Morgan is participating in the Regulated Liability Network (RLN). Earlier in September 2023, the UK arm of the RLN shared the findings of its latest work without mentioning the participants. The network aims to bring together banks and central banks to support different types of digital currency on the same network. That includes central bank digital currency (CBDC), deposit tokens and regulated stablecoins. In July the US RLN published a report involving several other U.S. banks, the New York Federal Reserve’s innovation arm and Mastercard. The premise that underpins the RLN is interoperability so that banks don’t need to use the same type of blockchain to transfer tokens between them.

#Fintech #CryptoAssets #Stablecoins #Blockchain #RegulatedLiabilityNetwork #DFC

·ledgerinsights.com·Sep 21, 2023

JP Morgan is part of Regulated Liability Network digital currency project

Tether Resumes USDT Loans, Insists It Maintains Excess Reserves

Tether has resumed providing new loans denominated in USDT to clients, a move that comes nearly a year after the company had announced its intention to discontinue offering collateralized loans in 2023. As of June 30, 2023, the latest quarterly attestation showed assets that included $5.5 billion in loans, up from $5.3 billion in the previous quarter. A Tether spokesperson said the company's aim is to prevent any significant depletion of its customers’ liquidity or the need for them to sell their collateral at potentially unfavorable prices, which could result in firesale losses. https://www.bloomberg.com/opinion/articles/2023-09-21/tether-keeps-lending-tethers

#Fintech #CryptoAssets #Stablecoins #Tether #USDT #DFC

·decrypt.co·Sep 22, 2023

Tether Resumes USDT Loans, Insists It Maintains Excess Reserves

Coinbase: "What if we call them rewards instead of interest payments?"

"Coinbase isn't a bank, nor is it an SEC-approved money market mutual fund. And unlike Wise and PayPal, Coinbase's interest payments aren't powered under the hood by a bank. So how does Coinbase pull this off? In short, Coinbase seems to have seized on a third-path to paying interest. It cleverly describes the ability to receive interest as a "loyalty program", which puts it in the same bucket as Starbucks Rewards or Delta's air miles program. The program itself is dubbed USDC Rewards, and in its FAQ, customers are consistently described as "earning rewards" rather than "earning interest." "

#Fintech #CryptoAssets #Stablecoins #Circle #Coinbase #USDC #DFC

·jpkoning.blogspot.com·Sep 23, 2023

Coinbase: "What if we call them rewards instead of interest payments?"

Stablecoins Get A New Pal

"I think it is entirely consistent with the evidence to remain sceptical about the impact of cryptocurrency on the wider economy, while at the same time being excited about tokenisation and the transition to that web3 world of decentralised finance protocols exchanging digital assets backed by regulated institutions with digital currencies, similarly backed by regulated institutions. In this respect, PayPal’s move will I am sure be seen in hindsight as a cusp moment and a vote of confidence in the web3 world. "

#CryptoAssets #Stablecoins #PayPal #PYUSD #Fintech #DFC

·dgwbirch.substack.com·Sep 25, 2023

Stablecoins Get A New Pal

Binance exploring stablecoin issuance on MUFG Progmat Coin platform

Binance is exploring issuing stablecoins on the "Progmat Coin" tokenization platform founded by Mitsubishi UFJ Trust and Banking Corporation (MUFG). The Progmat Coin platform allows for transfers and exchanges of stablecoins on various blockchains, including public permissionless blockchains such as Ethereum, in accordance with Japan's revised Payments Services Act enforced in June 2023. For such stablecoins, issuers and intermediaries are required to take measures to prevent a transfer of such stablecoins to customers whose identity has not been verified, even though I assume they're not responsible for off-platform transfers between customers. https://www.prnewswire.co.uk/news-releases/mitsubishi-ufj-trust-and-banking-corporation-and-binance-japan-commence-joint-study-to-explore-new-stablecoin-issuance-using-progmat-platform-to-accelerate-web3-adoption-301938333.html

#Fintech #CryptoAssets #Stablecoins #Binance #Progmat #MUFG #Regulation #Japan #DFC

·ledgerinsights.com·Sep 26, 2023

Binance exploring stablecoin issuance on MUFG Progmat Coin platform

The Virtual Currency Regulation Review

Japanese law does not have a unified regime applicable to tokens issued or minted on a blockchain. The legal status of tokens under Japanese law is determined in accordance with their functions and uses. For example, cryptocurrency and utility tokens such as BTC and ETH are regulated as cryptoassets under the Payment Services Act (PSA). A business operator that engages in the business of buying, selling or exchanging cryptocurrencies or intermediating these activities, or managing cryptocurrencies for the benefit of others, is required to register as a cryptoasset exchange service provider (CAESP).

#Fintech #CryptoAssets #Stablecoins #Regulation #Japan #DFC

·thelawreviews.co.uk·Sep 26, 2023

The Virtual Currency Regulation Review

Japan's amended Payment Services Act stablecoin provisions

Japan's revised Payments Services Act was passed by the Diet and promulgated in June 2022, with the aim of introducing new regulations on stable coins. This amendment has entered into force on June 1, 2023. Under the new regulations stablecoins that can be redeemable in fiat currencies will be regulated as electronic payment instruments (EPIs). Those who are permitted to issue EPIs directly to Japanese residents are limited to banks, funds transfer services providers, trust banks or trust companies that are licensed in Japan. Only licensed EPI business providers (EPIBPs) can sell or purchases EPIs, act as an intermediary for EPI issuance, sales and purchases, or provide EPI custody services. EPIBPs are subject to AML/CFT regulations, including a travel rule. In other words, EPIBPs are required to provide the customer's identification information when transferring EPIs to any other EPIBPs.

#Fintech #CryptoAssets #Stablecoins #Regulation #Japan #DFC

·mondaq.com·Sep 26, 2023

Japan's amended Payment Services Act stablecoin provisions

Runs and Flights to Safety: Are Stablecoins the New Money Market Funds?

NY Fed staff investigated similarities and differences between stablecoins and money market funds (MMFs), comparing investor behavior during the stablecoin runs of 2022 and 2023 to investor behavior during the MMF runs of 2008 and 2020. They found that, similarly to MMF investors, stablecoin investors engage in flight to safety, with net flows from riskier to safer stablecoins during run periods. However, whereas in MMFs, run risk has historically materialized only in prime funds, with stablecoins, runs occurred in different stablecoin types across the 2022 and 2023 episodes. The analysis also shows that, similarly to intrafamily flows in MMFs, stablecoin flows tend to be within blockchains. A discrete “break-the-buck” threshold of $0.99 was identified, below which redemptions accelerate.

#Fintech #CryptoAssets #Stablecoins #FinancialStability #DFC

·papers.ssrn.com·Sep 27, 2023

Runs and Flights to Safety: Are Stablecoins the New Money Market Funds?

UAE issues stablecoin and new digital asset regulations and legislation

Dubai’s Virtual Asset Regulatory Authority (VARA) and Dubai International Financial Center (DIFC) published updates to their crypto regulations. VARA updated its virtual asset rulebook and added new fiat-referenced virtual asset (FRVA) (or fiat-referenced stablecoin) regulations. VARAs exclude stablecoins pegged to the United Arab Emirates (UAE) dirham, which will remain under Central bank of the UAE regulation, and crypto-assets that reference central bank equity claims, central bank digital currencies (CBDCs), or tokenized bank deposits for interbank settlement purposes. [Read more at VARA] DIFC proposed a new securities digital asset law in a new consultation paper.

#Fintech #CryptoAssets #Regulation #Dubai #UAE #Stablecoins #DFC

·cryptopolitan.com·Oct 1, 2023

UAE issues stablecoin and new digital asset regulations and legislation

Canadian securities regulators clarify interim approach to value-referenced crypto assets

The Canadian Securities Administrators (CSA) indicated that it may allow, subject to terms and conditions, the continued trading of stablecoins or "value-referenced crypto-assets” (VRCAs). The interim framework sets certain standards to help ensure that investors receive the information they need about the assets they are purchasing, including the risks associated with them. Such information includes the composition and adequacy of reserves and their governance.

#Fintech #CryptoAssets #Stablecoins #Regulation #Canada #DFC

·osc.ca·Oct 6, 2023

Canadian securities regulators clarify interim approach to value-referenced crypto assets

Japanese tokenized deposit network DCJPY to launch mid-2024

In July 2024, DeCurret plans to commercialize its DCJPY tokenized deposit network of over 100 Japanese institutions and enterprises that have explored proofs of concept (PoCs) for various use cases. DeCurret outlined several consumer oriented use cases, including retail in-store usage, to buy non fungible tokens (NFTs), and consumer carbon credits. All of them have programmable money elements. The DCJPY platform envisages a financial zone where banks issue deposit tokens and the money transfers take place, and separate distributed ledger technology (DLT) business zone networks (e.g., a metaverse zone, an NFT zone and an environmental value zone). https://www.decurret-dcp.com/en/news/nl-20231012.html

#Fintech #CryptoAssets #Stablecoins #Japan #DFC

·ledgerinsights.com·Oct 13, 2023

Japanese tokenized deposit network DCJPY to launch mid-2024

G20 adopts IMF-FSB Synthesis Paper on crypto regulation

The Group of Twenty (G20) unanimously adopted the “G20 Finance Ministers and Central Bank Governors Communique” during its meeting in Marrakesh, Morocco, and accepted the crypto regulatory roadmap proposed in the “IMF-FSB Synthesis Paper: Policies for Crypto-Assets“ joint report published by the International Monetary Fund (IMF) and the Financial Stability Board (FSB) in September 2023. The paper advocates for comprehensive oversight of crypto instead of a blanket ban. Its high-level recommendations include cross-border cooperation and information sharing between regulators, a demand for comprehensive governance and risk management frameworks for crypto companies, and a guarantee of access to relevant data provided by companies to the authorities. https://twitter.com/FinMinIndia/status/1712589236765893035

#Fintech #CryptoAssets #Stablecoins #Regulation #G20 #FSB #IMF #DFC

·cointelegraph.com·Oct 15, 2023

G20 adopts IMF-FSB Synthesis Paper on crypto regulation

The use of stablecoin arrangements in cross-border payments

The Committee on Payments and Market Infrastructures (CPMI) published a report on considerations and challenges regarding the use of stablecoin arrangements in cross-border payments. The paper acknowledges it’s possible that stablecoins might cut costs, speed up payments, encourage competition and improve transparency, no stablecoin arrangements yet exist that are deemed to be properly designed and regulated and fully compliant with all relevant regulatory requirements. Further, even if such stablecoin arrangements did exist and could help to address specific cross-border payment frictions, they might not necessarily positively impact cross-border payments as the drawbacks could outweigh any potential benefits.

#Fintech #CryptoAssets #Stablecoins #CrossBorder #Payments #CPMI #BIS #DFC

·bis.org·Nov 1, 2023

The use of stablecoin arrangements in cross-border payments

Update on plans for the regulation of fiat-backed stablecoins

The U.K. HM Treasury published an update on its legislative approach for bringing fiat-backed stablecoins into the U.K. regulatory perimeter for financial services. It will inform development of the Financial Conduct Authority and Bank of England’s approaches for regulating stablecoin issuers and custodians, and systemic digital settlement asset payments systems and service providers respectively.

#Fintech #CryptoAssets #Stablecoins #Regulation #UnitedKingdom #DFC

·gov.uk·Nov 1, 2023

Update on plans for the regulation of fiat-backed stablecoins

Proposed UK regulatory regime for systemic payment systems using stablecoins

The Bank of England (BoE) published a discussion paper that sets out its proposed regulatory framework for systemic payment systems using sterling-denominated stablecoins and related service providers. It was published alongside a discussion paper from the Financial Conduct Authority (FCA) on their regulatory approach to stablecoin issuers and custodians, a letter from the Prudential Regulation Authority (PRA) to bank Chief Executive Officers on innovations in the use by banks of deposits, e-money and stablecoins, and a roadmap paper, which sets out how the various regimes interact together. Notably, the BoE discussion paper favors stablecoins fully backed by unremunerated central bank deposits as the most appropriate for systemic payment systems using stablecoins.

#Fintech #Stablecoins #CryptoAssets #UnitedKingdom #RegTech #DFC

·bankofengland.co.uk·Nov 6, 2023

Proposed UK regulatory regime for systemic payment systems using stablecoins

Will the real stablecoin please stand up?

The Bank for International Settlements (BIS) published a paper that provides an overview of the evolution of the stablecoin market and examines whether stablecoins are actually “stable”. It studies 68 stablecoins and shows that none of them have been able to maintain parity with their pegs at all times. Moreover, it argues that there is currently no guarantee that stablecoin issuers could redeem users’ stablecoins in full and on demand. For these reasons, it concludes that the current crop of stablecoins don’t meet the key criteria for being a safe store of value and a trustworthy means of payment in the real economy. The paper also highlights some significant data gaps.

#Fintech #CryptoAssets #Stablecoins #BIS #DFC

·bis.org·Nov 8, 2023

Will the real stablecoin please stand up?

EU Unveils Capital Requirements for Stablecoin Issuers

The European Banking Authority (EBA) launched consultations on draft stablecoin regulatory requirements. Smaller stablecoins must hold at least 30% of their reserves at commercial banks (for significant stablecoins it’s 60%). (A significant stablecoin is one with at least €5 billion in reserves or more than ten million users.) Also, no more than 10% can be held at one bank (5% if the bank is a small one), and deposits from a single stablecoin can’t make up more than 2.5% of a bank’s assets. There are also rules on the maturity of assets. Plus there are requirements for non cash liquid assets (government, local or quasi-government debt) and restrictions on the maximum exposure to a single issuer. https://www.ledgerinsights.com/eu-stablecoin-reserves-consultation/

#Fintech #CryptoAssets #Stablecoins #Regulation #Europe #DFC

·financemagnates.com·Nov 8, 2023

EU Unveils Capital Requirements for Stablecoin Issuers

Large fiat-backed stablecoins depegged 600+ times in 2023

There have been 609 depegs among large cap fiat-backed stablecoins so far this year, according to Moody’s Analytics. Depegs are defined by the price of stablecoins fluctuating by more than three percent in a day against their fiat currency peg. Among a total of 1,914 depegs up to mid-September 2023, large cap stablecoins represented 609 depegs. By comparison, in 2022, there were 707 large cap depegs (including the top five stablecoins by market cap, including Ethereum blockchain’s DAI) and a total of 2,847 depegs.

#Fintech #CryptoAssets #Stablecoins #Moodys #DFC

·moodysanalytics.com·Nov 9, 2023

Large fiat-backed stablecoins depegged 600+ times in 2023

Fnality adds Goldman, BNP Paribas, DTCC in $95m funding round

Goldman Sachs, BNP Paribas and DTCC joined Fnality's £77.7 million Series B funding round. Formerly called Utility Settlement Coin, Fnality plans to offer a wholesale payment and settlement platform using stablecoins backed by deposits at central banks. So far it's operational only in the U.K., where banks can transfer money from their Bank of England accounts to the Fnality UK central bank account where it’s tokenized. Because the money is tokenized it enables instant atomic securities transaction settlement. One of the intended use cases is cross currency payments, but that will need the cooperation of other central banks, which has been slow in coming. https://www.fnality.org/news-views/fnality-international-raises-77.7m-in-series-b-funding-round

#Fintech #Blockchain #Stablecoins #Fnality #Settlement #DFC

·ledgerinsights.com·Nov 14, 2023

Fnality adds Goldman, BNP Paribas, DTCC in $95m funding round

IOSCO publishes crypto markets policy recommendations

The International Organization of Securities Commissions (IOSCO) published its conclusive report containing policy suggestions for crypto-asset and digital asset markets, after a consultation period that started in May 2023. The recommendations aim to help establish a coordinated global regulatory response to the risks posed by crypto-asset service providers (CASPs), including market abuse, conflict of interest, client asset protection and disclosures. The regulatory approach taken is consistent with IOSCO’s principles and associated standards for securities markets regulation, and IOSCO denied crypto industry requests for a bespoke regime for stablecoins. https://www.iosco.org/library/pubdocs/pdf/IOSCOPD747.pdf

#Fintech #CryptoAssets #Stablecoins #IOSCO #Regulation #DFC

·coindesk.com·Nov 17, 2023

IOSCO publishes crypto markets policy recommendations

On par: A Money View of stablecoins

"This paper presents a money view analysis of the recent crypto innovation of stablecoins, which have seen a remarkable rise and more recently some spectacular collapses. By analogizing on-chain with offshore, and developing an extended analogy of stablecoins with Eurodollars, we reveal the primitive character of the existing on-chain liquidity mechanism which supports the promise of par settlement by existing on-chain stablecoin models. Liquidity, not solvency, is the issue confronted by par settlement."

#Fintech #CryptoAssets #Stablecoins #BIS #DFC

·bis.org·Nov 20, 2023

On par: A Money View of stablecoins

Circle launches ‘bridged USDC standard’ for deploying to new networks

Circle has introduced a new standard to streamline the process of launching its USDC stablecoin. The new “bridged USDC standard” allows developers to launch the token through a two-phase process. In the first phase, the third-party developer has control of the token contracts, and the token on the new network is backed by a native version on another network. In the second phase, Circle takes control of the contracts, and the token becomes backed directly by Circle’s reserves. The second phase may not occur with all deployments. https://www.circle.com/blog/bridged-usdc-standard

#Fintech #CryptoAssets #Stablecoins #Circle #USDC #DFC

·cointelegraph.com·Nov 22, 2023

Circle launches ‘bridged USDC standard’ for deploying to new networks

Stablecoin proof of reserves proposals seek more details

The American Institute of Certified Public Accountants (AICPA) published proposed criteria for stablecoin issuers when they disclose their proof of reserves. It asks for more details than any stablecoin issuers currently provide in their disclosures. For example, the call for issuers to disclose the banks where they hold cash, the amount of redeemable stablecoins on each blockchain, and details about tokens that are not redeemable, either temporarily or permanently (e.g., pre-minted or blacklisted tokens). Plus proof of reserves will need to disclose the conditions required to redeem the stablecoin directly. https://www.aicpa-cima.com/news/article/aicpa-debuts-proposed-reporting-framework-for-issuers-of-stablecoins

#Fintech #CryptoAssets #Stablecoins #Accounting #Reporting #UnitedStates #DFC

·ledgerinsights.com·Dec 6, 2023

Stablecoin proof of reserves proposals seek more details

State of Stablecoins: Signs of Returning Liquidity

Coin Metrics published an update on stablecoin market developments, concluding that the expanding supply of stablecoins serves as a clear indicator of rising activity and usage within the digital asset ecosystem, with Tether on Tron leading the charge. Despite challenges in the U.S. regulatory environment and a complex political landscape, stablecoin liquidity has shown impressive resilience. The update attributes this to the wide utility of stablecoins, through avenues such as decentralized finance (DeFi) pools to exchanges and in diverse yield generating products. These trends also evidence the central role stablecoins play in the crypto-economy.

#Fintech #CryptoAssets #Stablecoins #DFC

·coinmetrics.substack.com·Dec 6, 2023

State of Stablecoins: Signs of Returning Liquidity

Coinbase rolls out crypto transfers via links sent on WhatsApp, Telegram

Coinbase Wallet now allows for the transfer of crypto through a link that can be sent through popular social media sites and messaging apps apps like iMessage, Telegram, WhatsApp, Facebook, Instagram and TikTok. And there are no payment fee when sending USD Coin (USDC). Clicking the link will take the recipient to their device’s app store to download Coinbase Wallet — if not already downloaded — where they can create a wallet in one click. If the funds aren’t claimed within two weeks, they will be returned to the sender. There appear to be no transaction-size limits. https://www.coinbase.com/blog/with-coinbase-wallet-sending-money-is-now-as-easy-as-sending-a-text

#CryptoAssets #Fintech #Coinbase #Stablecoins #USDC #CrossBorder #DFC

·cointelegraph.com·Dec 6, 2023

Coinbase rolls out crypto transfers via links sent on WhatsApp, Telegram

Basel Committee to consult on bank treatment of crypto

The Basel Committee on Banking Supervision reviewed various elements of the prudential standard for bank exposures to crypto-assets published in December 2022. It agreed to consult on potential targeted revisions related to the criteria for stablecoins to receive a preferential "Group 1b" regulatory treatment. The Committee will also consult on various technical amendments to help promote a consistent understanding of the standard. The Committee concluded that crypto-assets that use permissionless blockchains create risks that cannot be sufficiently mitigated at present and therefore agreed to retain the existing "Group 2" treatment for them (1,250% risk weight). A consultation paper will be published before end-2023. https://www.bis.org/press/p231207.htm

#Fintech #CryptoAssets #Stablecoins #Regulation #Basel #BIS #DFC

·ledgerinsights.com·Dec 8, 2023

Basel Committee to consult on bank treatment of crypto