Jamie Dimon: Banks Should be “Scared Shitless” by Fintech Rivals like Paypal & Square

Jamie Dimon: Banks Should be “Scared Shitless” by Fintech Rivals like Paypal & Square

JPMorgan Chase’s chief executive officer expects brutal competition in the payments sector in the next 10 years.

JPMorgan Chase CEO Jamie Dimon says banks should be frightened of the new breed of fintech players led by Square, PayPal, and tech giants.

“Absolutely, we should be scared s—less about that,” was Dimon’s blunt assessment in a conference call with analysts on Friday in response to the question about fintech players having ‘trounced” traditional banks in recent years.

“We have plenty of resources, a lot of very smart people. We’ve just got to get quicker, better, faster. … As you look at what we’ve done, you’d say we’ve done a good job, but the other people have done a good job, too,” said the chief executive officer of the banking giant with $3.4 trillion in assets.

According to Dimon, PayPal, Square, Ant Financial, Stripe, and US tech giants, including Google, Apple, and Amazon, are competitors that the banks need to keep an eye on. These rivals are also clients of the banks in many cases, he added.

“I expect to see very, very tough, brutal competition in the next 10 years,” Dimon said. “I expect to win, so help me, God.”

In some cases, the new players have “unfair competition,” which he says they will “do something about eventually.”

Dimon also called out digital currency-friendly payments start-up Plaid, whose $5.3 billion deal with Visa was scrapped amid a US antitrust suit, saying “people who improperly use data that’s been given to them, like Plaid.”

Both PayPal and Square support Bitcoin and cryptocurrencies, which Dimon has previously called “fraud.” Still, the bank has changed its tune on digital currencies and predicts a $146,000 price target for BTC in the long-term in its trajectory to achieve gold’s market cap.

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Author: AnTy

Cue to Buy BTC: Fed and Bank of England Vows to Do ‘Everything’ to Help their Economy Recover

Markets are flying right now. And the central banks are ready to give them even more reason to continue to do so.

We are less than a week into November, and the S&P 500 has already pumped 7.35% as the US dollar struggles, and yields on US Treasury debt securities remain unchanged.

Gold and Bitcoin particularly enjoy the greens as the precious metal goes back to the $1,950 level, and BTC makes 35-month highs, itching to break $16,000.

While green is splashed across the markets, the Federal Reserve pledged again to do whatever it can use “full range of tools” to sustain the speed at which the US economy is recovering.

Amidst the uncertainty around the still undecided US presidential election, the Fed kept the loose monetary policy intact — asset purchase and interest rate (near zero) remains unchanged.

Chairman Jerome Powell said the Fed has begun to consider whether it needs to extend the emergency credit facilities beyond their expiration on Dec. 31.

But the Fed chief said the economy is now recovering at a slower speed after being boosted earlier in the year by fiscal aid and re-opening of businesses adding the recent rise in coronavirus infections in the US and abroad was “particularly concerning.”

The same day the Bank of England governor also vowed to do “everything we can” to support the economy amidst the resurgence of Covid-19 cases.

As the central bank announced another £150bn of support, Andrew Bailey said it was important policymakers acted “quickly and strongly.”

However, with new restrictions in England and tighter lockdown rules, a slower and bumpier recovery is expected. “We are here to do everything we can to support the people of this country – and we’ll do it and will do it quickly,” said Bailey.

All of this basically, “is code for buy Bitcoin.”

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Author: AnTy

NYDFS Directing Banks & Crypto Companies to Address Risks of Climate Change

The New York Department of Financial Services (NYDFS) sent out a letter to banks, firms, and cryptocurrency businesses to pay attention to the financial risks associated with climate change, incorporate them into their business strategies, and develop ways to disclose and mitigate those risks.

This letter followed the same guidelines issued by the agency for the state’s insurance providers last month.

NYDFS is the only US member of the Network for Greening the Financial System, an international group of central banks and regulatory agencies that is focused on climate-related financial risks.

The letter noted that the US gross domestic product (GDP) sees damage of 1.2% with each rise of one-degree Celsius in global temperatures. As such, those communities that are hit harder by climate change can then lead to an increase in default rates, reduced lending activity, devaluations of assets, and losses.

As for the cryptocurrency businesses, it pointed out how studies suggest the environmental impact of mining digital currencies like Bitcoin can be substantial — annual consumption of energy is equivalent to Venezuela’s electricity usage, and carbon footprint is to that of New Zealand’s.

“The energy cost for mining virtual currencies is sizable compared to the value of the virtual currencies,” said Linda Lacewell, NYDFS Superintendent, in the letter.

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The agency wants digital currency firms to consider being more transparent about the location and equipment they use in Bitcoin mining, which is energy-intensive.

“DFS is developing a strategy for integrating climate-related risks into its supervisory mandate,” the letter concluded.

Ripple CEO Brad Garlinghouse called this step from NYDFS “pivotal” and said instead of exacerbating the problem; Bitcoin needs to use more energy-efficient assets as it gains the attention and support of big and mainstream companies.

“XRP was built specifically to use negligible amts of energy,” chimed in Ripple CTO David Schwartz.

“The less it costs to start and run a node, the less decentralized a system will be if you think people being able to use it trustlessly going forward is important to decentralization,” added Schwartz on XRP being hard to audit “because it’s too expensive and nobody cares.”

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Author: AnTy

Kraken’s Crypto Bank Is “An Accident Waiting to Happen,” says Bank Policy Institute

The structure of Kraken Financial is “prone to the same types of run risks as medieval banks and so-called “shadow banks,” said a non-partisan advocacy group representing the nation’s leading banks, Bank Policy Institute.

BPI’s remarks have been related to Kraken getting approval to be a special-purpose depository institution (SPDI) charter by the Wyoming State Banking Board.

With this approval, cryptocurrency exchange Kraken will custody digital assets on behalf of its customers and hold their US dollar deposits as well through Kraken Financial. According to BPI, it is an “accident waiting to happen” because,

“Kraken will take uninsured, demandable, retail deposits and invest them in “liquid assets,” including longer-term instruments like U.S. Treasury securities and corporate debt.”

And this model is “inherently unstable under stress,” it said.

It then points out the issues, including Kraken defaulting in case the interest rate goes up and that with longer-term corporate bonds, the risk of capital loss can even be greater as it also involves corporate default.

Because Kraken is not an insured bank and is subject only to capital regulation by the state of Wyoming’s Division of Banking, it doesn’t follow the capital requirements set by the federal banking agencies that have been raised and strengthened since the Great Financial Crisis, wrote BPI. This means,

“There would be a run on Kraken Financial, similar to the March 2020 (and 2009) run on prime money market funds, which also backed deposit-like obligations with a pool of high-quality assets.”

Bank Policy Institute further argues that Kraken has a moral hazard of “unrelenting incentive to shift its reserves toward slightly riskier assets.”

The group now wants the Federal Reserve to give the risks of Kraken’s business model “serious and thoughtful consideration,” as the exchange is applying for a master account with the Fed.

Kraken co-founder and CEO Jesse Powell only has this much to say on this, “Somebody’s scared. Degen gambler fractional banks: “Full reserve banks are dangerous!”

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Author: AnTy

7 Major Central Banks Collaborate to Release First CBDC Report, Highlighting Key Principles

The Bank of International Settlements (BIS), along with seven other prominent central banks, has published a report on the feasibility of issuing CBDCs to complement monetary policy. According to the 26-page document, CBDC’s should be based on foundational principles and core features that will enable the prospectus digital currencies to function effectively.

The report, which is dubbed ‘Central Bank Digital Currencies: Foundational Principles And Core Features,’ is a collaborative effort between the following:

  • Bank of Canada
  • Bank of England
  • Bank of Japan
  • European Central Bank
  • Federal Reserve
  • Sveriges Riksbank
  • Swiss National Bank
  • Bank for International Settlements (BIS)

It was published on October 9 and will mark the first of its series, given that the BIS is expected to advance the CBDC research in collaboration with central banks.

CBDC Foundational Principles & Core Features

According to the report, a functional CBDC will need to meet some criteria when it comes to the underlying principles and core features. It highlighted three principles which include;

  • Coexistence: CBDCs should co-exist with other types of money that already run today’s markets.
  • Innovation and Efficiency: Features should focus on promoting efficiency and innovation.
  • Do No Harm: CBDC introduction should not compromise the current financial or monetary ecosystems but complement them instead.

The 14 core features were, in turn, derived from these principles; some of the notable recommendations that were made include;

  • Secure and Resilient; To uphold the operational integrity of CBDC ecosystems.
  • Convenient; To enable seamless interaction with existing fiat currencies.
  • Value additional; To include the private sector and create a competitive environment for innovation.

The BIS co-chair and head of innovation hub, Benoît Cœuré, said that the newly released report would provide an opportunity to further delve into CBDC’s,

“A design that delivers these features can promote more resilient, efficient, inclusive, and innovative payments.

Although there will be no ‘one size fits all’ CBDC due to national priorities and circumstances, our report provides a springboard for further development of workable CBDCs.”

Recent months have seen a growing interest in the CBDC space; China, which piloted its digital yuan back in Q2, is now boasting close to $162 million e-RMB transactions. This initiative has particularly fueled the CBDC craze as other giant economies look to get a cutting edge.

South Korea announced this week that it will also pilot it’s ‘digital won’ in 2021, although they are yet to settle on whether a CBDC will be necessary. Likewise, the latest BIS CBDC report’s contributing members did not signal that their respective jurisdictions will be launching CBDCs.

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Author: Edwin Munyui

European Central Bank (ECB) Must be Ready to Issue a Digital Euro, Says Board Members

ECB board member Fabio Panetta said on Friday that the European Central Banks should be preparing to issue a digital euro.

In a study published on Friday, the ECB said a digital euro could help an environment where citizens have abandoned cash, other means of payments became unavailable, or foreign forms of electronics have taken over.

“We should be ready to issue a digital euro if and when developments around us make it necessary,” said Panetta in a post accompanying the study. “This means that we already need to be preparing for it.”

Open for public consultation that will start Oct. 12; the ECB has given itself until the mid of next year to decide whether to go forward with the project, which would start with an “investigation phase.”

“Our role is to secure trust in money,” said ECB President Christine Lagarde. With this, she means making sure “the euro is fit for the digital age,” and should the need arise, be prepared to issue its digital version.

Digital euros will give holders a direct claim on the central bank and could be transferred directly between users — typically an option only for governments and commercial lenders, making them safer than any deposits.

As it has implications for financial stability and monetary policy, the ECB report urged to assess whether a digital euro should be accessible by firms and households directly or indirectly via intermediaries.

The ECB also said deposits in digital euros might be capped and subject to its interest rate on deposits, which is minus 0.5% currently. Instead of just by the ECB, they would also be offered by the private sector, it said in the study.

A digital euro “is becoming an obligation which, indeed, central banks — need to carry out,” said ECB Vice President Luis de Guindos in an online discussion on Friday.

In a sign that ECB is serious about a central bank digital currency, it applied to trademark the term “digital euro” last week.

While the People’s Bank of China is already working on the testing of its CBDC, the US Federal Reserve and the Bank of England are still discussing the possibilities around the digital version of their respective fiat currencies.

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Author: AnTy

National Banks & FSAs Can Hold Reserves for Stablecoin Issuers: US Federal Banking Regulator & SEC

The Office of the Comptroller of the Currency (OCC) issued new guidance regarding stablecoins on Monday.

“National banks and federal savings associations currently engage in stablecoin-related activities involving billions of dollars each day,” said Acting Comptroller of the Currency Brian P. Brooks.

“This opinion provides greater regulatory certainty for banks within the federal banking system to provide those client services in a safe and sound manner.”

As per the letter from the US federal banking regulator, national banks and federal savings associations (FSA) are allowed to hold “reserves” on behalf of their customers who issue stablecoins, and those coins are held in hosted wallets, those controlled by a trusted third party.

This means unhosted wallets, which are controlled by the individual user who owns the cryptos being stored, are not part of this announcement.

The SEC also issued a response to OCC’s guidance, in which it says whether a stablecoin is security will depend on “facts and circumstances determination,” which will require the analysis of the instrument.

The regulator asked the market participants to structure and sell a digital asset in such a way that “it does not constitute a security and implicate the registration, reporting, and other requirements of the federal securities laws.”

Bullish!

Jeremy Allaire, the co-founder and CEO of Circle, which along with Coinbase, has launched its own stablecoins called USD Coin (USDC), called this a “significant progress for the advancement of digital dollar stablecoins in the US financial system.”

This will “help the United States and the US dollar to continue its leadership role in the world economic system,” he said.

According to him, national banks allowing to hold reserves for fiat-backed stablecoins will provide businesses, fintech firms, and banks have “more confidence in building on this innovation.”

In 2020, stablecoins have exploded, currently around $20 billion, with Tether (USDT) accounting for more than $15.5 billion of it and USDC with 500% growth YTD $2.3 billion.

Market participants see it as bullish news, with one trader commenting, “Basically enables a LOT more money to funnel into crypto, if stablecoin providers don’t have to scramble for banks to hold the reserves.”

Related: European Countries Support EU Stablecoin Regulation

Also Read: BoE Gov. Calls for Global Standards for Stablecoins, Instead of Playing Catch Up

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Author: AnTy

French Multinational Bank to Launch a Digital Euro Pilot Using Tezos Blockchain

Blockchain firm Tezos has been selected to spearhead the French central bank’s digital currency pilot program, one of a kind in Europe.

Societe Generale – Forge, a tech startup founded by French investment bank giant Societe Generale, has opted for Tezos to spearhead the central bank digital currency (CBDC) pilot program.

The French central bank Banque de France selected Societe Generale – Forge in July after a successful review of applicants in development of a CBDC to ease interbank settlements. France is carrying out an experiment to become the first European country to launch a digital Euro.

Tezos is a peer-to-peer public blockchain that has features such as on-chain governance, capacity to verify smart contracts as well as consensus algorithm that is primed on proof of stake. The blockchain platform comes with a vibrant ecosystem inclusive of research and development offshoot dubbed Nomadic Labs that is located in Paris and will play a vital role for the CBDC piloting. Nomadic Labs President, Michel Mauny explained about the deal:

“The Tezos project, strengthened by its technical capabilities, its adaptability, and its strong community, is already present in various projects, both in France and abroad. We are especially pleased to see this technology selected by Societe Generale – Forge, and to reaffirm, once again, that the quality and expertise of our engineering is rewarded.”

Francois Villeroy de Galhau, Banque de France’s governor, in December last year said that he was optimistic that France will be the inaugural European country to offer digital currency. The governor explained that the central bank is exploring how technology can be leveraged in enhancement of the financial markets more so when it comes to interbank regulations.

Although France seems to be on the forefront in development of a CBDC, other European countries such as Italy, Netherlands and Lithuania are also exploring the idea of CBDC. Additionally, the European Central Bank is also working on trials although details remain scanty.

Currently, Tezos is only one of the handful public blockchain platforms participating in development of a CBDC that could culminate to a digital euro.

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Author: Joseph Kibe

Mastercard Launches a Virtual Testing Platform for CBDCs

  • Global payments company Mastercard launched a virtual testing platform for central banks to test out their CBDCs.
  • The technology company invited central banks, commercial banks, techs, and advisory firms to evaluate the suitability of CDBDs through its custom testing platform.

As the Bank for International Settlements survey revealed, a whopping 80% of central banks are engaged in some form of Central Bank Digital Currencies (CBDCs). In the race to embrace digital payments, central banks clearly don’t want to lose its control of the monetary policy in issuing and distributing currency while supporting innovation.

Supporting central banks modernizing payments, Mastercard announced this “proprietary virtual testing environment” today where the use cases for the digital fiat currencies could be evaluated.

“Central banks have accelerated their exploration of digital currencies with a variety of objectives, from fostering financial inclusion to modernizing the payments ecosystem,” said Raj Dhamodharan, Executive Vice President, Digital Asset, and Blockchain Products and Partnerships at Mastercard. And with this new platform, the company wants to support that decision.

On this virtual platform, the interested parties can simulate the issuance and distribution of the CBDC along with the exchange ecosystem with banks and customers.

It can be used to demonstrate how CBDC can be used to pay for goods and services anywhere Mastercard is accepted.

The development efforts of the CBDC that includes the technical, design, and security aspect, can also be evaluated while to determine its value and feasibility in the market, use cases and tech designs can be examined as well.

“Mastercard wants to harness its expertise to enable the practical, safe and secure development of digital currencies.”

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Author: AnTy

China Construction Bank Disables Chinese DCEP Wallet After Users Notice Feature in Bank App

China Construction Bank, one of the central state-owned banks in China, recently realized that the official wallet for the national CBDC is open for public use within its official banking app. The users could navigate to the wallet by merely entering the national digital currency, which would take the users to the wallet feature where they can register and activate the wallet by subscribing with the mobile number associated with their bank accounts.

Soon, the bank came to discover about the activation of the official wallet from the amount of community’s buzz that the activation caused among the crypto community in the country. Many customers went on to make small transactions in the yet to be released CBDC.

As soon as the news was brought to the attention of the state-owned bank, they swiftly disabled the feature. After disabling the official wallet feature, people searching for the CBDC wallet were shown a message which roughly translated to, “This feature is currently unavailable for the public, kindly wait patiently.”

How Does the Official Wallet Look and Function

The official wallet app was online for a brief period, but in today’s day and time, anything which makes it to the internet ones hardly disappear, and that has been the case with the ongoing official digital Yuan wallet launch by mistake. People were quick to post the layout of the wallet app on the internet, which showed that the users who managed to register with the new wallet app were given an official wallet ID, which could be used for the transfer of funds between the official wallet app and the user’s account.

The wallet would not just allow transactions between the bank and the app a user can send their digital yuan to another wallet by adding the unique wallet ID.

China is going to become the first country to launch its official digital currency issued by the People’s Bank of China. The big-four state-owned banks have been tasked to develop their respective wallet app to facilitate transactions using the CBDC.

China started its research on Central Bank Issued Digital Currency almost five years ago, and rumor mills were rife that the launch of the digital yuan would take place by the end of last year. However, the Chinese government mostly discarded these rumors without offering any official stance on the date of the launch. However, by the first quarter of 2020, the PBOC launched the testnet, and last week the mainnet for the digital yuan was established as well.

During the trial run, the government used digital yuan as a form of a travel subsidy for government employees in selected areas. The testing phase was later expanded to more cities and even included restaurants and fast-food chains.

With the official launch of the digital yuan just round the corner, many countries are actively observing China’s progress in the digital currency domain.

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Author: Hank Klinger