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Cato: A Simple Proposal for Regulating Stablecoins

Cato Institute | Norbert Michel and Jennifer J. Schulp | Nov 5, 2021

Cato simple proposal for regulating stablecoins - Cato:  A Simple Proposal for Regulating Stablecoins

There is nothing inherently problematic about a federal regulatory framework for stablecoins, and a properly structured one would likely spur further innovation to the U.S. payments system, benefiting millions of people.

See:  Regulating financial innovation – going behind the scenes

There is nothing inherently problematic about a federal regulatory framework for stablecoins, and a properly structured one would likely spur further innovation to the U.S. payments system, benefiting millions of people. However, the Biden administration is promoting a misguided approach that will discourage innovation and keep beneficial payments innovations—and the companies that create them—out of the United States. This briefing paper proposes a better regulatory framework for the most common types of stablecoins: straightforward rules based on preventing fraud and promoting transparency.

Superior Alternative Proposal

The greatest risk for most stablecoin holders is whether the issuing entity has the reserves that it claims to have. A lack of transparency about the reserves that are used to stabilize the coin’s value prevents a holder from evaluating the issuer’s claims about stability and does little to protect holders from fraudulent misconduct.

A good regulatory framework addresses this issue by providing basic collateral requirements and requiring a baseline for transparency. While state laws generally provide protection against deceptive or unfair practices (and the state of New York did sue Tether for deceptive trading practices), dealing with up to 50 separate state laws is cumbersome and costly for both issuers and holders.   Therefore, it makes sense to have a streamlined federal regulatory framework for stablecoin issuers.

See:

Biden’s PWG report on stablecoins and the verdict is….

Hester Peirce: Lawless in Austin

This briefing paper suggests creating such a proper federal framework by requiring a stablecoin issuer to be regulated as a newly created “limited purpose investment company.” A limited purpose investment company would be subject to basic reserve requirements and mandatory disclosure of relevant information about reserve holdings. This framework would be designed to regulate the reserves that stablecoin issuers claim to hold and, therefore, the actions that issuers undertake to maintain a stable coin value.

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NCFA Jan 2018 resize - Cato:  A Simple Proposal for Regulating Stablecoins The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org

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Latest from BIS and a group of 7 central banks including Canada on retail CBDCs

BIS | Oct 1, 2021

CBDCs and central banks and BIS - Latest from BIS and a group of 7 central banks including Canada on retail CBDCsA group of seven central banks (Bank of Canada, Bank of England, Bank of Japan, European Central Bank, Federal Reserve, Sveriges Riksbank and Swiss National Bank), together with the Bank for International Settlements, are working together to explore central bank digital currencies (CBDCs) for the public ("general purpose" or "retail'' CBDC).

Here is a summary of progress made since publishing a report in October 2020 setting out the common foundational principles and core features of a CBDC. Alongside the executive summary, three detailed reports are also being published:

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NCFA Jan 2018 resize - Latest from BIS and a group of 7 central banks including Canada on retail CBDCs The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org

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[ Event, Oct 21, 2021]: Alberta Securities Commission Hosts their 5th Annual ASC Connect Conference

ASC | Sep 27, 2021

ASC Connect - [ Event, Oct 21, 2021]:  Alberta Securities Commission Hosts their 5th Annual ASC Connect Conference

ASC Connect includes a full morning (8:00 a.m. to 12:00 p.m.) of informative and interactive panel discussions led by industry experts and senior ASC leaders, in a format you can enjoy from your home or office.

The Alberta Securities Commission’s fifth annual ASC Connect conference will be held virtually on Thursday, October 21, 2021.

See:  ASC and FCAA adopt new prospectus exemption to support small business capital raising

In the past year, Alberta’s capital market was not spared from the significant challenges that impacted communities world wide. Despite these challenges, our market continues to create and leverage opportunities for growth. Join senior ASC leaders and industry experts in a full morning of informative and interactive panel discussions covering the opportunities, trends, and issues affecting Alberta’s capital market in its continued economic recovery.

Register today for this FREE virtual conference and listen to industry experts discuss the critical opportunities and evolving trends affecting Alberta's capital market. This is your chance to gain new insights and perspectives from thought-provoking business leaders.

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NCFA Jan 2018 resize - [ Event, Oct 21, 2021]:  Alberta Securities Commission Hosts their 5th Annual ASC Connect Conference The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org

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Powell says The Federal Reserve is [still] evaluating whether to launch a CBDC

CNBC | Jeff Cox | Sep 22, 2021

waiting room - Powell says The Federal Reserve is [still] evaluating whether to launch a CBDC

Main Point:

  • The Fed is pushing ahead with its study into whether to implement its own digital currency and will be releasing a paper on the issue shortly, Chairman Jerome Powell said Wednesday.
  • No decision has been made on the matter yet, he added, and said the Fed does not feel pressured to do something quickly as other nations move forward with their own projects

"We think it's really important that the central bank maintain a stable currency and payments system for the public's benefit. That's one of our jobs," Powell said. He noted the "transformational innovation" in the area of digital payments and said the Fed is continuing to do work on the matter, including its own FedNow system expected to go online in 2023.

See:

The Good, the Bad and the Ugly of Central Bank Digital Coins (CBDCs)

Cryptoassets as National Currency? A Step Too Far

BIS Research: CBDCs beyond borders: results from a survey of central banks

Bank of America says CBDCs could ‘Replace cash completely in the (distant) future’ in Research Note

Ripple Pilots a Private Ledger for Central Banks Launching CBDCs

Canadian researchers develop CBDC digital currency proposal for Bank of Canada

 

Some concerns even have been raised that if the Fed does not act more aggressively, the dollar's position as the global reserve currency could be challenged.

Powell noted the dollar's position in the world and said the Fed is "in a good place" to make a decision on whether to implement its own digital currency. He expressed some concern about the regulatory landscape and said the Fed likely will need congressional permission should it decide to proceed.

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NCFA Jan 2018 resize - Powell says The Federal Reserve is [still] evaluating whether to launch a CBDC The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org

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SWIFT to trial trade finance anti-fraud blockchain MonetaGo

Ledger Insights | Sep 13, 2021

trade finance - SWIFT to trial trade finance anti-fraud blockchain MonetaGo

Today MonetaGo announced an international proof of concept (PoC) with SWIFT for its blockchain fraud mitigation solution for trade finance. In 2018 MonetaGo launched a similar domestic solution in India, in which SWIFT India is a partner.

The solution uses APIs and aims to prevent fraudulent trade finance through the double financing of invoices, purchase orders, bills of lading and warehouse receipts.

See:  An Analysis of Bitcoin’s Use in Illicit Finance

In the first half of this year, MonetaGo ran a PoC in Singapore with 25 organizations that included the International Chamber of Commerce (ICC), ITFA, Citi, HSBC, SMBC, Stanchart, Bolero and blockchain platforms Tradeix (Marco Polo) and Contour.

MonetaGo proposes that interconnecting multiple domestic anti-fraud platforms is overly complex and an international platform is the answer. If the SWIFT PoC proves successful, it could enable connectivity to SWIFT’s 11,000 members and beyond.

“Finance fraud in cross-border trade cannot be fully mitigated with local registries, so it makes perfect sense to leverage SWIFT’s global reach to help institutions around the world to solve this problem,” said Louise Taylor-Digby, Global Head of Trade Strategy, SWIFT.

“By bringing global API standards, identity and security, SWIFT can help to mitigate against the growing challenge of digital islands.”

The big problem

2020 wasn’t just a bad year because of the pandemic. Multiple substantial trade finance frauds came to light, several of them in Singapore, the major international trade hub. And in many cases, the alleged fraud involved double financing.

Hin Leong Trading collapsed with $3.85 million in debt. Its founder has been charged with “instigating” someone to forge a document saying it transferred 1.05 million barrels of gasoil, and the paper was used for a $56 million trade financing.

See:  High tech meets high finance: The real revolution on Wall Street

Agritrade collapsed with $1.5 billion in debt. ING has alleged that Agritrade issued “overlapping” bills of lading to secure trade finance multiple times for the same goods. And allegedly, Commerzbank believes that shipments of coal it financed don’t actually exist.

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NCFA Jan 2018 resize - SWIFT to trial trade finance anti-fraud blockchain MonetaGo The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org

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What Industries Use Blockchain the Most?

Tech.co | Adam Rowe  | Aug 11, 2021

why is blockchain important - What Industries Use Blockchain the Most?Why is Blockchain important?

Total spending on various blockchain solutions across the globe in 2021 will reach $6.6 billion. And, if the Statista forecasts are accurate, global spending will reach nearly $19 billion by 2024. But the business value-add of the technology will be far higher, reaching $176 billion by 2025 and passing $3.1 trillion by 2030, according to Gartner estimates.

See: CB Insights report features over 50 sectors Blockchain is transforming (beyond just banking)

All the core elements of blockchain are designed to make the protocol impossible to fake or replicate. Each block's timestamp marks the date of any previous transaction, and the cryptographic hash in each block maps to the previous block, so that no single block can be changed without disrupting every other block.

Blockchain drastically reduces the time and resources to verify transactions

As a result, the technology is most important as a way of easily verifying any transaction. The practical impact of this for a business lies in the time and money a streamlined verification process saves. It also allows some people to avoid restrictions and regulations tied to other forms of transaction like legal tender — although the question of whether this impact is good or bad may be up for debate!

Blockchain Use in Financial Services

Blockchain use in financial services - What Industries Use Blockchain the Most?Cryptocurrencies are by far the most common use of blockchain technology, and the financial industry has noticed: Around 90% of all banks in the US and Europe had started blockchain-related projects by 2018. It's a trend in accounting as well, as it helps with record-keeping.

Adapting blockchain is among the industry's streamlining processes that could add up to a cost savings of $12 billion for banks, $7 billion for insurers, and $4 billion for capital markets firms, according to a report from Accenture. Blockchain protocols can reduce as much as 30% of banking infrastructure costs, CoinJournal reports.

Implementing blockchain could save banks $12 billion.

See:  How blockchain and cryptocurrencies can help build a greener future

Settlements are another area that can be streamlined: Traditional trade processes can be clunky and long-winded, but blockchain tech can help everyone involved in a transaction stay on the same page and view the same data.

Blockchain for Travel & Mobility

Blockchain has streamlined car leasing and ride-hailing operations, cutting down on the payment and verification process for each.

Even entire airlines have adapted the technology: The Russia-based S7 Airlines operates with an Ethereum-based blockchain to power smart contracts when selling tickets. They have (reportedly) cut settlement times from 14 days to 23 seconds.

Hotels have adapted blockchain in a variety of ways as well, from internal inventory tracking to powering direct marketplaces or loyalty reward systems.

Tourism and travel had a monumentally bad year in 2020 thanks to the COVID pandemic, with 381 million international travellers, down from 1.461 billion in 2019 according to the New York Times, for an estimated global export revenue loss of $1.3 trillion. But the industry put $8.8 trillion into the global economy in 2018 according to the World Travel & Tourism Council's annual report, and it can hit those highs again in the future with a little help from blockchain tech.

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NCFA Jan 2018 resize - What Industries Use Blockchain the Most? The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org

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SEC v. Ripple Legal Weeds: SEC caught erasing documents relevant to XRP lawsuit

Finance Feeds | Rick Steves | Aug 18 2021

Legal weeds - SEC v. Ripple Legal Weeds: SEC caught erasing documents relevant to XRP lawsuit

The transcript is included in the most recent SEC motion in regard to the privilege dispute between the agency and Ripple and individual defendants.

The SEC has filed its opposition to Ripple’s and the Individual Defendants’ Motion challenging the SEC’s improper assertion of the Deliberative Process and other privileges.

The agency’s response to the privilege dispute follows an extensive and frustrating back and forth between both parties as they don’t see eye to eye in terms of what constitutes privileged information.

See:  SEC v. Ripple: Implications of Ripple’s Fair Notice Defense

This has led Ripple’s lead counsel Matthew Solomon to send a letter to Judge Sarah Netburn and request her help in the discovery dispute. Fact discovery is coming to an end but many documents are yet to be delivered (lawsuit agenda).

In regard to the recently filed opposition to Ripple’s motion, the SEC argues the deliberative process privilege (DPP) is a critical governmental privilege designed to promote the quality of agency decisions by preserving and encouraging candid discussion between officials.

“The Court should not override that privilege and punish frank governmental deliberations, particularly where the internal pre-decisional, deliberative material Defendants seek, which they never saw or knew about, is not relevant to any claim or defense”.

“Defendants have already sought and obtained an extraordinary amount of discovery from the SEC. Yet, Defendants now claim that privileged, non-public SEC communications about the regulation of digital assets (not just XRP), are somehow so relevant that the SEC’s important deliberative privilege should be overridden”, the plaintiff argued.

“Meanwhile, Defendants have moved to strike on the record the most probative, relevant evidence they have obtained from their SEC discovery: former SEC Division of Corporation Finance Director William Hinman’s deposition testimony that he met with Ripple representatives and told them that he considered Ripple’s sales of XRP to be sales of securities and that Ripple should stop its unregistered sales”.

Ripple confronts SEC for deleting relevant information

The William Hinman deposition transcript seems to indicate that the SEC tried to delete subtopics relevant to the Ripple lawsuit. On page 254, Ripple counsel Reid Figel claimed “it was deleted” and pointed the finger at SEC Special Counsel Michael Seaman.

See:  Ripple Wins Access to SEC Internal Documents on Bitcoin, Ether, and Other Cryptocurrencies

“What’s the basis of that understanding, Reid?”, SEC lead counsel Jorge Tenreiro asked.

“Our review of the metadata. If you look to — depends on how you present it, but if you go to the second document, it says on some version of it deleted by Michael Seaman”, Mr. Reid replied.

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NCFA Jan 2018 resize - SEC v. Ripple Legal Weeds: SEC caught erasing documents relevant to XRP lawsuit The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org

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