Interesting and accessible reads about the future of cryptocurrencies and digital currencies:
- Digital currencies. On 1 March, the Bank for International Settlements (BIS) published an interesting article in its Quarterly Review on the key technological design considerations relating to retail central bank digital currencies (CBDC)s: The technology of retail central bank digital currency. “The focus of our approach is the “retail” aspect of CBDC; we ask what consumer needs a CBDC could address. We thus sketch the development of a CBDC through an approach that proceeds from consumer needs to design choices.”.
- Cryptocurrencies mainstream? The European Commission has published its European Financial Stability and Integration Review 2020. I refer to chapter 3 page 33 – 49 . The chapter deals with all types of digital money (e.g. electronic money and (central bank) cryptocurrencies).
- Bitcoin mainstream? StateStreet asked the question to industry experts “Is Bitcoin Going Mainstream?”. 25% of their respondents said they are invested in cryptocurrency’s. The top 3 significant barriers for institutional investors are cybersecurity concerns, too much volatility and lack of sufficient regulatory oversight. Client interest is considered the least important barrier. According the report, 45% of respondents in another survey stated that they expect that a bitcoin ETF will be approved in 2020.
- Bitcoin ETF. However, on 26 February the SEC (again) disapproved a proposed rule change and listing of a bitcoin ETF (technically an ETP): Bloomberg article and the official SEC release. One of the SEC commissioners, Hester Peirce, dissented from the disapproval. The key question was whether the proposed rule change pursuant to which the shares would be admitted to trading are consistent with the legal requirement that the rules of a national securities exchange be designed “to prevent fraudulent and manipulative acts and practices” and “to protect investors and the public interest.”. In short, the key considerations for disapproving the proposal is that the underlying bitcoin spot markets are not resistant to manipulation. The underlying markets are not regulated markets and there is no surveillance-sharing agreement with a regulated market of significant size such as NYSE.
- Crypto custody. The German supervisor for the financial markets Bafin has published an English explanation of the new rules (as of 1 January 2020) pursuant to which companies providing cryptocurrency custody services require authorization. The law also includes transitional provisions for those companies that conducted such business before the law took effect