COVID-19 Accelerated Digital Payments Growth and Fintech Regulatory Innovation: Study

A joint study by the Cambridge Centre for Alternative Finance (CCAF) and the World Bank has revealed that COVID-19 greatly accelerated Fintech regulatory innovation developments. Dubbed Global COVID-19 Fintech Regulatory Rapid Assessment Study’, the report was released on Oct 28 as part of an effort to empirically equip regulators and central banks in the digital currency era. Notably, the study highlights that increased digital payments activity did not result in a similar spike in crypto exchange use; however, these platforms also grew by smaller percentages.

The study’s results are based on responses from 118 central banks and financial regulators in 114 jurisdictions, from both developed and developing economies. Generally, there have been increased efforts to further accelerate the current regulatory innovations and introduce new initiatives to further support the burgeoning sector. According to the study, 72% of the sample has increased or debuted digital ecosystem initiatives, while 58% have already pivoted on RegTech/SupTech focused policies. Innovation offices are also on the rise, with 56% of the respondents noting progress.

Despite the bullish outlook in digital payments adoption, the study found that developed and developing economies faired differently. As per the findings, emerging market and developing economies (EMDEs) made more progress in accelerating or introducing Fintech initiatives. Most notably, EMDEs initiatives to support digital ecosystems have been focused on remittances and payments; some respondents reported waiving fees and altering transactional thresholds to mitigate the pandemic’s effects.

Crypto Exchanges Lag Behind

Although not as much as the digital payments arena that was already in place for most economies, the nascent crypto sector grew. As per stats from the study, digital payments are reported to have grown by around 60%, while activity on crypto exchanges only managed to gain 3%. Interestingly, there was a clear difference in the crypto exchange growth for developed and developing markets. The former grew by 6% while the latter saw an increase of 2% in crypto exchange usage.

Prevailing Challenges in Fintech Integration

At the core of regulators’ decision-making process is the risks associated with volatile Fintech environments, especially in upcoming markets like crypto. This study’s respondents identified cybersecurity as the top threat of digital ecosystems, followed by operational risks, consumer protection, and fraudulent activity. The report reads,

“In particular, 90 percent of surveyed regulators from advanced economies see cybersecurity as one of the top three increasing risks associated with FinTech activities.”

As for oversight, it appears that most central banks and regulators are comfortable with adopting and being resilient to innovations. Nonetheless, the respondents highlighted some shortcomings; they include the performance of core regulatory functions, access to reliable data, restriction to essential tech or information, and cooperation with local domestic agencies.

A Prospectus Future with CBDCs

This study has painted out the current status of digital payment networks globally and coincides with an increased interest in CBDC research and development. Central Bank Digital Currencies (CBDCs) are now a hot topic with the latest insights from the Bank of International Settlements (BIS) in a collaborative report with 7 major central banks.

Developed economies have currently leaped research, while some like China has gone further and launched a pilot for its prospectus digital yuan. This initiative has been in place for some months and is a reference for most ongoing projects in the space. In 2021, South Korea and Japan are also set to pioneer their CBDC tests to prepare for the virtual currency shift.

Well, UK’s Minister for Africa at the Foreign Commonwealth & Development Office, James Duddridge, is optimistic that the study will complement the current approaches to Fintech policies,

 “I trust that this report will inform and inspire countries around the world, help support their FinTech regulatory strategies, and encourage greater collaboration across jurisdictions.”

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Author: Edwin Munyui

Coinbase and Circle Launch Major Upgrade in USDC 2.0; Stablecoin Sees ‘Unprecedented Adoption’

Coinbase and Circle, the members of the Centre Consortium, has announced a major upgrade to the stablecoin USD Coin (USDC) protocol and smart contract.

Launched in September 2018, this regulated stablecoin saw an “unprecedented adoption” during the pandemic, surpassing $1.4 billion, up from about $450 million at the beginning of March, and recording more than $90 billion in on-chain transaction volume.

With the latest upgrade, USDC will become “significantly easier for people to use USDC in payments, commerce, and peer-to-peer transactions,” besides adding additional security to the smart contract.

More importantly, Centre says USDC 2.0 is introducing “gasless sends.” Transaction on the Ethereum network involves “gas fees” and in order to pay this, most digital wallets are required to purchase and hold a balance of Ether (ETH).

Now, with the latest upgrade, the idea is to remove the barrier to “mainstream adoption and broad usage of digital dollar stablecoins for internet payments.”

The official announcement states USDC 2.0 enables users to delegate the payment of the gas fees to another address, giving the developers the option to either pay the fee on behalf of the customer or deduct the fees in USDC.

As such, customers will be able to send and receive USDC payments on a peer-to-peer basis using only USDC.

“These simplified and improved user experience flows will accelerate the virality of making and receiving payments using USDC on the internet.”

Another thing USDC 2.0 introduces is a new set of on-chain multiple signature contracts which means administrative operations can be managed on-chain, in a result, improving the “security, auditability and in turn resilience.”

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Author: AnTy

China’s One Region Accounts for 35.76% of Bitcoin Hash Rate

A Bitcoin Mining Map is launched by the Cambridge Centre for Alternative Finance (CCAF) that allows checking the average monthly bitcoin hash rate produced by different countries around the globe.

Based on the geolocation data (IP addresses) provided by Poolin, BTC.com, and ViaBTC mining pools that collectively represent approximately 37% of Bitcoin total hashrate, this is the first geographical breakdown of bitcoin hash power distribution.

Unsurprisingly, China is the dominant force in the Bitcoin hash rate that accounts for 65.08% of the average monthly share of the total hash rate in April.

This share has decreased from 67.26% in March, 72.03% in February, and 72.82% in January.

In China, Xinjiang provided over 35.76% of this hash power followed by Sichuan (9.66%), Nei Mongol (8.07), Yunnan (5.42%), and Beijing (1.73%).

In April, the US came at second place with a share of 7.24%, followed by Russia 6.90%, Kazakhstan (6.17%), Malaysia (4.33%), and Iran (3.82%).

Canada, Germany, Norway, and Venezuela contributed less than 1% of the Bitcoin network’s hash power.

Source: Cambridge University – Bitcoin Mining Map

But this third halving that will cut the bitcoin block reward from 12.5 BTC to 6.25 coins will intensify the competition to capture the hash rate of the network and may result in a shift in hash power.

Just four days away, amidst the rising hash rate and difficulty, small and overleveraged miners would be washed out from the market and could see the balance of hash rate power tilt in North America’s favor.

Meanwhile, the number of computers running the bitcoin program is dominated by the US at 19.10% after the geographical location of 21.35% share not available, as per Bitnodes.

The US is followed by Germany(17.39%), France (5.82%), Netherlands (4.25%), Canada (3.01%), the UK (2.59%), Singapore (2.58%), Russia (2.31%), and China (2.02%).

These nodes that validate new transactions and store copies of the network’s shared transaction history have fallen to a level not seen since 2017. This decline could be because running a node is getting harder at a rate that is surpassing technological improvement.

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Author: AnTy