Receiving Wide Coverage ...
Digital doings
Facebook’s digital currency project “is moving to the U.S. after abandoning a bid to secure the imprimatur of regulators in Switzerland,” The Wall Street Journal reported. “The project, initially known as Libra and renamed Diem last year, is being revamped in a bid to address concerns among U.S. officials that it could be used for money laundering and other illicit purposes. The moves represent the latest effort to address regulatory concerns about the potential misuse of cryptocurrencies.”
“Diem plans to register with the Treasury Department’s Financial Crimes Enforcement Network, its anti-money-laundering unit. It also announced a partnership with Silvergate Capital, a La Jolla, Calif., bank, which will issue dollar-denominated stablecoins.”
The changes are “a big downgrade from its initial global vision,” the Financial Times reports. “Initially, Diem sought to create a synthetic coin backed by a basket of currencies, before gradually scaling down its vision to focus on launching a single coin backed one-for-one by the dollar.”
“Our plans take the project fully within the U.S. regulatory perimeter and no longer require a license from Finma,” Switzerland’s regulatory agency, said Stuart Levey, Diem’s CEO. “We are committed to a payment system that is safe for consumers and businesses, makes payments faster and cheaper, and takes advantage of blockchain technology to bring the benefits of the financial system to more people around the world.”
“If crypto assets have reached the mainstream — or at least primetime television — it is reasonable to ask whether they need to be better regulated,” the FT says. “Ironically for a decentralized ecosystem that came into being as a snub to traditional finance, regulation would confirm its coming of age.”
“What is clear is that international co-ordination is needed. Investors are based all over the world and crypto exchanges are peripatetic. Also needed is better oversight of how the crypto ecosystem has an impact on our actual environment. Mining bitcoin can use up vast amounts of energy, much of it the cheaper, fossil-fuel variety. There should not have to be a trade-off between the so-called democratization of finance and the climate emergency.”
“The stablecoin market, a crucial link between crypto and traditional currencies, is facing calls for tougher oversight, with regulations on both sides of the Atlantic lagging behind the rapid growth in digital assets,” the FT says.
On Wednesday Tesla CEO Elon Musk said “the company has suspended taking bitcoin payments for its vehicles,” the Journal reported. “We are concerned about rapidly increasing use of fossil fuels for bitcoin mining and transactions, especially coal,” he said, adding that it would resume using bitcoin for transactions “as soon as mining transitions to more sustainable energy.”
Separately, “Vitalik Buterin, co-creator of the crypto network Ethereum, donated more than $1 billion on Wednesday to a relief fund to combat the spread of Covid-19 in India. At least, it was $1 billion when he made the donation—in a cryptocurrency that few had heard of and whose value plunged right after news of the donation spread,” the Journal said.
“The currency, Shiba Inu coin, has been around for less than a year, and is one of a bevy of alternative cryptocurrencies that have exploded in popularity and price in recent months. Its value changes wildly by the hour. Unlike with cash, or even bitcoin, it is hard to use Shiba Inu coin to buy things.”
In the doghouse
Germany’s financial regulator BaFin “has told N26 Bank, a hot digital startup with operations in Europe and the U.S., to implement proper controls to prevent money laundering, taking the unusual step of appointing a special monitor to watch over the process,” the Journal reported. BaFin said “it made the decision after it found that deficiencies in money-laundering prevention remained two years after it ordered the bank to make improvements.”
“We recognize that more needs to be done in this field,” the bank said.
“BaFin’s decision to appoint a special supervisor is rare, the only other occasion being with Deutsche Bank in 2018,” the FT said. “The intervention from the regulator comes two years after it ordered the Berlin-based bank to strengthen its anti-money laundering practices after raising a number of concerns. N26, which was valued at $3.5 billion in a funding round last year, has been one of the fastest-growing challenger banks in Europe since it was founded in 2013. The bank has more than seven million clients in 25 countries.”
Wall Street Journal
Unfrozen
“A federal judge ruled Wednesday that lenders to Revlon Inc. that received roughly $500 million from Citigroup last year due to a back-office blunder are allowed to use the money as they see fit, unfreezing the funds. Judge Jesse Furman denied Citi’s request to continue to freeze the funds while the bank tries to persuade an appellate court it deserves the money back. The judge had frozen the funds in August while he considered the case.”
“Citi wanted the freeze to be maintained, saying it feared that even if it won on appeal, it might have difficulty recovering the money once the asset managers distributed it to their clients. A Citi spokesman said the bank disagrees with the decision and plans to file a motion with the Second Circuit Court of Appeals to try to ensure that the funds are preserved.”
No FICO, no problem
Some of the largest U.S. banks—including JPMorgan Chase, Wells Fargo and U.S. Bancorp—"plan to start sharing data on customers’ deposit accounts as part of a government-backed initiative to extend credit to people who have traditionally lacked opportunities to borrow.” The banks “will factor in information from applicants’ checking or savings accounts at other financial institutions to increase their chances of being approved for credit cards, according to people familiar with the matter. The pilot program is expected to launch this year.”
The replacements “New contenders are emerging in the race to get rid of the London interbank offered rate by year-end, with some analysts now saying multiple benchmarks are likely to replace Libor instead of just one.”
Quotable
“Cryptocurrency is a good idea on many levels and we believe it has a promising future, but this cannot come at a great cost to the environment. We are concerned about rapidly increasing use of fossil fuels for Bitcoin mining and transactions, especially coal, which has the worst emissions of any fuel.” — Tesla CEO Elon Musk, announcing that the company has stopped accepting bitcoin for car purchases.
