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Blockchain firm Monerium thinks Europe ‘already has’ a digital euro

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Consensys-backed e-money issuer Monerium thinks the route to a digital euro is simpler than the European Central Bank suggests.

The fintech, which focuses on bridging fiat money with blockchains by issuing programmable digital cash, published a response to the ECB’s recent public consultation on the digital euro on Oct. 13.

In summer 2019, Monerium had become the first company worldwide to receive a license from Icelandic regulators as part of a new European regulatory framework for e-money services across the European Economic Area. It provided fiat payment services using the Ethereum blockchain, and later partnered with blockchain protocol Algorand.

In its response to the ECB, Monerium argues that all Europe needs to do is to recognize it already has “a proven form of digital euro.” 

In 2000, the European Commission had described e-money as a “digital alternative to cash,” issuing a directive which defined it as “technically neutral,” an “electronic surrogate for coins and banknotes.” In light of this framework, Monerium claims: 

“The only thing that the ECB needs to do to give e-money comparable status to physical cash is to grant e-money issuers access to the ECB’s reserves.”

Embracing existing e-money issuers is preferable to the ECB directly issuing digital currency to households and non-financial corporations, in Monerium’s view. Direct issuance would entail a radical overhaul of the existing system, in which the central bank chiefly interacts with regulated financial institutions like commercial banks.

To back up its case, Monerium points to a report from two International Monetary Fund economists, which proposed that non-bank providers could issue digital money with the central bank’s backing in order to roll out a synthetic central bank digital currency (sCBDC). 

Europe’s existing e-money framework, in Monerium’s view, is already fit for the IMF’s key criteria for a stable digital currency. To move from e-money to an sCBDC, following the IMF’s lead, would require the central bank to grant e-money issuers access to ECB reserves:

“Such access would be consistent with preserving a ‘level playing field between electronic money institutions and credit institutions’ as stipulated by the e-money directive.” 

As reported, the ECB has made it clear that it will come to a decision on whether or not to launch a digital euro project towards the middle of 2021.

An ECB report in Oct. 2020 outlined the scenarios and requirements for a future digital euro. Crucially, the central bank considers a CBDC to be a matter of “strategic autonomy” for the Eurozone, at a time when stablecoins from private and overseas actors threaten to “undermine financial stability and monetary sovereignty in the euro area.”



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‘The cryptoruble is the future’ says Russian policymaker

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Anatoly Aksakov, the head of the Russian parliament’s Financial Markets committee, had some good news for blockchain fans in Russia. According to Aksakov, there are “no anti-blockchain voices” in the government and he believes that a digital ruble pilot will start in 2021.

During a panel held on October 21 as part of the Blockchain Life 2021 conference, the policymaker said that the central bank had already started consultations on the feasibility of launching ‘cryptoruble’ pilots. He considers it “the future of all our money circulation.”

Local media reports have pointed out the possibility of seeing a digital ruble in circulation in late 2021, which could be used on DLT platforms, and businesses could be able to leverage it to track goods and payments.

Aksakov also told the approximate 3,000 people in attendance:

“I know that a large number of serious businesspeople are preparing to issue digital assets. The Central Bank has taken a big step forward by announcing that it is starting consultations on the matter of digital assets.”

As Cointelegraph reported on October 16, at least five Russian banks are interested in taking part in Russia’s non-public digital ruble pilots in the first half of 2021.

The list of banks includes state-backed Promsvyazbank, the Credit Bank of Moscow, commercial bank Zenit, mortgage bank Dom.RF, and Crimea’s Russian National Commercial Bank.

However, Aksakov clarified that the Russian government draws a clear distinction between blockchain and cryptocurrency. For blockchain, he calls it the “technology of the future,” but for crypto, he commented:

“There are currently two equal positions on cryptocurrencies. The main opposition to cryptocurrencies is coming from the high-risk it poses for financial institutions, ordinary people. This side is trying to foresee all the risks involved and possible reactions to them.”



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US crypto derivatives merchants need to leave customer funds alone, says CFTC

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Per guidance released Wednesday evening, the Commodity Futures Trading Commission (CFTC) is advising businesses trading in crypto derivatives to hold customer funds very carefully.

The new guidance continues the CFTC’s interest in carving out rules for custodianship of virtual currencies — an area obviously distinct from any other asset class. Per the commission: 

“Custodians of virtual currencies are typically not subject to a system of comprehensive federal or state regulation and oversight, which includes safeguarding of these novel assets, and this raises potential risks to the protection of customer funds held at such custodians.”

The specific provisions of the guidance limit the locations that a “futures commission merchant” (FCM) can deposit customer virtual currency at to “a bank, trust company, or another FCM, or with a clearing organization that clears virtual currency futures.”

Moreover, the CFTC warns FCMs that they need to keep any such deposits in accounts clearly marked as customer funds, and will not allow gains in one account to make up for losses in another.

Effectively, the guidance seems most determined that customer crypto funds remain safe and untouched, barring FCMs from trading such funds in order to make collective gains. How big of a problem FCM trading of crypto deposits has shown itself to be goes unaddressed, but you can certainly imagine some catastrophic results of a crypto futures dealer deciding to play some volatile markets using crypto funds.

The CFTC has been busy trying to assemble a holistic framework for crypto assets. At the beginning of this month, the commission promised to protect the “burgeoning market” for these assets, an announcement that came immediately after the announcement of their pursuit of BitMEX for operating an unregistered derivatives exchange in the U.S. 



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Brazil is prepping an IPO for its state-run digital bank

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Brazil’s Minister of Economy, Paulo Guedes, said during an online event this Tuesday that Brazil “is about to” join the Organization for Economic Cooperation and Development (OECD) and that the Brazilian government has plans to launch a public offering of shares (IPO) for the newly-created digital bank of Caixa Econômica Federal.

Caixa Econômica Federal created a digital bank during the pandemic to help the government send financial aid to around 64 million Brazilians. Guedes’ comments came during the Milken Institute Global Conference, during which he said that the Central Bank is working to attract new investors for the country.

One of the minister’s bets is on the digital bank recently created by the state-owned Caixa Econômica Federal, which is part of Guedes’s privatization plans.

During the pandemic, the government spent heavily to combat the economic effects of COVID-19. The largest part of that fiscal support was emergency payments for low-income Brazilians, with Caixa playing a central role in identifying beneficiaries and paying benefits.

The initiative, Guedes assured the audience, generated a digital bank with 64 million users, opening up market opportunities.

According to Reuters, Guedes says that Caixa’s customer base has led to plans for an IPO for the digital bank, which wacreated “in six months” to pay government benefits:

“We digitalized 64 million people. How much is a bank with 64 million people worth? Low-income people, but people that were (bank-registered) for the very first time, so they are going to be loyal for the rest of their lives.”

According to Brazilian website InfoMoney, Guedes also said that the Central Bank will work to “guarantee” less risks to foreign investors:

“If the private sector abroad wants to pay extra money to have a guarantee […] we can give it to them for a certain price. If they want it, we’ll provide it.”

Guedes also said that Brazil has already fulfilled two thirds of the requirements to be accepted in the Organisation for Economic Co-operation and Development (OECD) and should definitely enter the organization “in one year”.

Among the benchmarks that Brazil must meet to enter the OECD are transparency, regulation, combating corruption and the establishment of acquisition protocols.



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