Zodia

ASX Suspends CHESS Replacement; Fireblocks First CCSS Level 3 provider; Basel Committee Updates Bank Crypto Capital Exposure Proposal; SEC vs LBRY

Thomas Murray Digital Newsletter

Photo by Felix Mittermeier on Unsplash

As we head towards the year end, here is a final round-up of institutional digital asset-related news for 2022. We will be back in the new year with a review of developments over the course of this year and a look ahead to what the major themes of 2023 may be.

In the post-trade sector, ASX has suspended its challenged attempt to replace its ageing but still serviceable CHESS clearing and settlement system with a blockchain-based platform, and more digital asset custodians receive regulatory approvals.

In other news:

  • The Basel Committee has made a new proposal to limit banks’ Tier 1 capital exposure to cryptocurrencies.
  • Technology provider Fireblocks has become the first organisation to attain CryptoCurrency Security Standard Level 3 certification.
  • SEC prevails in court over LBRY, setting a potential precedent for treating more tokens as securities.

Custody and Post Trade Developments

ASX Will Reassess All Aspects of the CHESS Replacement Project and Derecognise Capitalised Software of $245-255 Million Pre-tax in 1H23 (ASX)
The Australian exchange and financial market infrastructure provider ASX has paused its efforts to replace its Clearing House Electronic Subregister System (CHESS) clearing and settlement platform with a blockchain-based system that was being built in conjunction with Digital Asset. This follows a review by Accenture that cast doubt on the project’s timelines and suitability to provide the speed and scale required to replace the legacy system, which continues to work satisfactorily. Blame is apportioned to an under-estimation of the complexity of the market and weak project management, and not to the technical implementation. A new Project Director will oversee the next phase of development, which may or may not incorporate blockchain technology and components already built using Digital Asset’s Daml smart contract language.
BitGo to Take Custody of FTX Assets in Bankruptcy Procedure (CryptoSlate)
LCH Explores Crypto Derivatives Clearing (Risk.net)
The central counterparty is in discussions with Global Futures and Options Exchange (GFO-X) with a view to partnering to clear cryptocurrency derivatives including crypto index-based futures and options.
DBS Completes Repo Transaction on JPMorgan’s Onyx (Finextra)
DBS has used JPM Coin for instant settlement and intraday maturity of a repo transaction, reducing the time requirement from the current standard of one to two working days. DBS is the first Asian bank to achieve this, following BNP Paribas as the first European bank to do so in May of this year (BNP Paribas).
Komainu Secures MVP Licence from Dubai’s Virtual Assets Regulatory Authority (Komainu)
Digital asset custodian Komainu has secured a licence from Dubai’s Virtual Assets Regulatory Authority (VARA) to provide digital asset custody and management services to institutional investors. Komainu is reportedly the first Digital Asset Service Provider (DASP) to receive such a licence.
Bitpanda Receives Crypto Custody and Proprietary Trading BaFin Licence (Finextra)
The Global Ambitions of Partior, the JP Morgan, DBS Blockchain Payment System (Ledger Insights)
Partior, the joint venture of JPMorgan, DBS and Temasek, is drawing the attention of more settlement banks as the network – only announced last year – now has more than 60 banks across 15 jurisdictions engaged. The interbank network is designed to support multi-currency payments, which initially started with USD and SGD and are now expanding to include GBP, EUR, AUD, JPY, CNH and HKD. As noted in the article, the network is very similar to SWIFT in that it is not a payment system but rather a blockchain that supports the execution of instructions communicated through it, which makes it agile and a potential competitor to SWIFT.
HSBC, Wells Fargo Extend FX DLT Settlement to Chinese Yuan (Ledger Insights)
Zodia Expands Digital Asset Support to WBTC, USDC and UNI (LinkedIn)
Digital asset custodian Zodia has expanded its support for digital assets, to include WBTC, an ERC20 (Ethereum blockchain-based) token that is backed 1:1 by bitcoin; USDC, the second largest stablecoin; and UNI, the utility token of the Uniswap network, a decentralised finance (DeFi) network that supports peer-to-peer trading, lending, and applications.
Zodia Custody Rolls Out Service to Protect Client Assets from Exchange Insolvency (The Block)
Zodia’s Interchange service will reduce counterparty risk by allowing clients to settle trades directly from custody, while ‘mirroring’ client balances to the exchange to facilitate trading.
Fnality and HQLAX Demonstrate the First Cross-Chain Repo Swap Pilot (Fnality)
The proof of concept, with Santander, Goldman Sachs and UBS, demonstrated a repo swap between the R3 Corda and Ethereum Enterprise blockchains, showing possibilities for intraday settlement and the provision of a cross-chain single pool of liquidity for payments, cross-currency payments (PvP) and delivery versus payment (DvP).

Other News and Links


Basel Committee Finalizes Policy Suggesting 2% Bitcoin Exposure Cap for Banks (Bitcoin Magazine)
The Basel Committee proposes a 2% limit on riskier ‘Group 2’ digital assets such as unbacked cryptocurrencies as part of banks’ Tier 1 capital, increased from 1%, and still comfortably in excess of total cryptocurrency market capitalisation.
Crypto Custody Tech Provider Fireblocks Receives First-of-Its-Kind Security Certificate (CoinDesk)
Fireblocks, the underlying digital asset technology provider to major clients including Bank of New York Mellon, has become the first digital asset service provider to achieve Level 3 certification under the CryptoCurrency Security Standard (CCSS), satisfying requirements for robust segregation of duties, controls, geographic and organisational distribution, and IT security, as audited by Confide. The certification joins others in its portfolio including SOC2 Type II, ISO 27001, ISO 27017, and ISO 27018.
Kenya Proposes Bill to Tax Crypto (CoinDesk)
Given approximately 8.5% of Kenya’s citizens own cryptocurrencies (fifth by adoption globally according to this UN Report), the country’s lawmakers have proposed an amendment to the Capital Markets Bill that would allow for the taxation of crypto exchanges, wallets, and transactions, as well as the reporting of holdings and capital gains tax when selling or using digital assets.
Italy to Impose 26% Crypto Gains Tax from 2023 (Crypto Slate)
UK Lawmakers Support Easy Seizure of Crypto Linked to Terrorist Activity (CoinDesk)
Lawmakers in the UK have approved new powers that will make it easier for law enforcement agencies to seize crypto assets. The Economic Crime and Corporate Transparency bill will be updated to give powers over crypto assets linked to terrorist activity that cannot readily be prosecuted under the criminal system, supplementing earlier amendments that do the same for assets linked to crime.
Bitcoin Cash Could Be Legal Tender in St Kitts by March, Prime Minister Says (CoinDesk)
Crypto Financial Services Firm Eqonex Files for Voluntary Debt Restructuring in Singapore (CoinDesk)
Nasdaq-listed Eqonex puts its HK-based Diginex and Singapore-based Eqonex Capital into voluntary liquidation, ending plans to offer custody, brokerage and asset management services through these entities, following the August closure of its crypto exchange. Its UK-based entities, FCA-registered crypto custodian Digivault and Bletchley Park Asset Management, are also to be voluntarily wound down.
Can Utility Tokens Be Securities? The Significance of SEC v. LBRY (Solidus Labs)
A recent US court ruling found in favour of the SEC’s argument that the LBRY Credit token is an unregistered security, based on LBRY’s own marketing that promoted the token’s potential to appreciate in value. This blog from Solidus Labs summarises the case and assesses its potential as a precedent that could tip the balance towards SEC Chair Gary Gensler’s argument that many utility tokens also, or exclusively, bear the characteristics of securities, and therefore would fall under his agency’s jurisdiction.
Gemini Secures Regulatory Approvals to Operate in Italy and Greece (Gemini)
Sygnum Awarded Abu Dhabi In-Principal Approval (Finextra)
Sygnum Expands its Offering into Luxembourg, Europe’s Largest Fund Market (Sygnum)
USDC Stablecoin Issuer Circle Says Businesses Can Accept Apple Pay (CoinDesk)
Business are now able to accept USDC, a USD pegged stablecoin, via Apple Pay.
Vanguard Australia Deploys Blockchain-based Back Office Tech (Finextra)
Vanguard’s Australian division has deployed a fund administration system based on the R3 Corda private blockchain. Use of a shared blockchain obviates the need for reconciliations between participants.
Binance Starts Recovery Fund for Crypto Projects Facing Liquidity Crisis (CoinDesk)
Accountant That Vetted Binance Reserves Halts Crypto Work (Bloomberg)
Audit firm Mazars suspends its work on crypto reserves attestations, concerned that their scope is not correctly understood by the public and at media scrutiny. BDO is understood to be reviewing the situation but is continuing its own similar work.
TP ICAP Wins Approval from FCA for Wholesale Spot Exchange for Digital Assets (Finextra)
Goldman Sachs on Hunt for Bargain Crypto Firms After FTX Fiasco (Reuters)
El Salvador Proposes Digital Securities Bill, Paves Way for Bitcoin Bonds (CoinDesk)
Delivered to the legislative arm of the government on November 17, El Salvador’s Minister of Economy has proposed a bill that seeks to establish a National Digital Assets Commission that would be tasked with the oversight of the digital asset industry in the country. The bill is designed to create a regulatory regime that supports administration, safeguarding and investments in public digital assets, a precursor to the country’s ambition to raise USD 1 billion via bitcoin-backed bonds.
Bitcoin Core 24, Bitcoin’s Controversial Upgrade is Now Live (Crypto Slate)
The Bitcoin protocol has once again received another update. Bitcoin Core 24 was activated on November 26, and fully implements Replace-by-Fee (RBF) logic, a way for nodes to prioritise conflicting transactions based on which pays the highest fee, instead of in chronological order. Some fear the update will encourage double-spend attacks, and it will also disincentivise zero-confirmation transactions, which are accepted by the blockchain prior to validation by miners, with the secondary outcome of increasing transaction fees paid to those miners.  

Key: Legal/Regulatory             Technology            Ecosystem              Markets 

CBDC Corner

The Atlantic Council’s CBDC Tracker has been updated to show that all G7 countries and 18 out of 20 G20 countries are actively developing CBDCs, with 7 pilot schemes running. 11 countries have launched CBDCs. China will expand its pilot to most of the country in 2023, and over 20 countries will move towards their own pilot schemes, including Australia, Thailand, Brazil, India, South Korea and Russia, and likely also the ECB.
Central Banks Consider Backing Stablecoins Instead of Launching CBDCs (FinanceFeeds)
Antoine Martin, a research advisor at the New York Fed, has posited that central banks, rather than commercial banks, could hold the reserves that back stablecoins to increase bankruptcy protections and decrease risks. This would be simpler than central banks supporting retail use cases for CBDCs directly themselves.
US Banks Launch Digital Asset Settlement Platform PoC (Finextra)
Several US Banks including Citi, Wells Fargo, BNY Mellon, HSBC and US Bank have partnered with the innovation arm of the New York Fed to explore the feasibility of an interoperable digital money platform called the regulated liability network (RLN). The 12-week proof-of-concept project is designed to test the settlement of simulated US dollars from commercial banks through simulated central bank reserves using a shared ledger. The test is supported by technology provided by SETL and Digital Asset, running on Amazon Web Services.
Several more CBDC proof of concept projects are in the works:
Bank of Japan to Run CBDC Experiments With Country’s Megabanks: Report (CoinDesk)
Bank of England issues RFP for a CBDC wallet (Bank of England) to support testing, including compatibility with the BIS Innovation Hub’s Project Rosalind (an API for retail CBDC distribution)
The Reserve Bank of Australia’s eAUD pilot programme (Reserve Bank of Australia) has attracted 140 proposals from around 80 entities, spanning retail and wholesale CBDC use cases
Banco de España has issued a call for expressions of interest in wholesale CBDC experiments (Banco de España) regarding fund transfers and settlement, and comparing CBDC advantages and disadvantages with traditional processes
Naira Redesign Policy – Revised Cash Withdrawal Limits (Central Bank of Nigeria)
The Central Bank of Nigeria is limiting cash withdrawals to 100,000 naira per week for individuals and 500,000 naira per week for corporations, with excesses subject to withdrawal fees of 5% and 10% respectively, in an effort to drive adoption of traceable electronic transactions and Nigeria’s CBDC, the eNaira.
Kazakhstan Central Bank Recommends a Phased CBDC Rollout Between 2023–25 (Cointelegraph)
India’s Digital Rupee Fails to Excite Interest, Bankers Say (Reuters)
EIB Innovates Further with Project Venus, the First Euro-denominated Digital Bond on a Private Blockchain (European Investment Bank)
The French and Luxembourg central banks have completed Project Venus in which they settled a EUR 100 million digital bond issued by the European Investment Bank (its second digital bond) using a synthetic CBDC on a jointly operated private blockchain on Goldman Sachs’ GS DAP tokenisation platform. Société Générale Securities Services acted as digital custodian.
National Bank of Ukraine Releases Draft Concept for Digital Hryvnia (Cointelegraph)
The paper considers three use cases: retail (including payments and smart contract usage), wholesale (for operations related to cryptocurrency exchanges and other digital asset service providers), and for cross-border payments.
Crypto To The Rescue: Why The UN Is Sending War-Torn People In Ukraine Aid In Stablecoins (Bitcoinist)
UNHCR is partnering with Stellar Development Foundation to send USD Coin to Vibrant digital wallets of eligible Ukrainians displaced by the Russian invasion. Withdrawals can be made at MoneyGram outlets in USD, EUR or UAH.

Wishing you a Merry Christmas and a Happy New Year!

Thomas Murray Digital

Andrew Wright | Hugo Jack

Tel. +44 (0)20 8057 7100
Email: digital@thomasmurray.com
Web: thomasmurraydigital.com

Whilst reasonable care has been taken in the compilation of this information, neither Thomas Murray Network Management Limited, its affiliates or information contributors shall have any liability for any errors, omissions, delays or inadequacies in the information or for any loss or damage however occasioned (whether arising directly or indirectly), to any person or company relying on this information, or any decision made, action taken or inaction by any party in reliance upon this information (except to the extent permitted by law). Copyright © Thomas Murray Network Management Limited, company no. 03313014. All rights reserved. No reproduction without prior authorisation.

Asset Managers Move Into Digital Assets; CBDCs Could Be ‘Holy Grail’ of Cross-border Payments

Thomas Murray Digital Newsletter

CBDCs: A Holy Grail for Cross-Border Payments? (Public Domain)

BlackRock, Charles Schwab and Abrdn have joined the likes of Fidelity and Schroders in moving into the digital asset sector through tie-ups with Coinbase and Archax, and the launch of a new crypto thematic index and associated exchange-traded fund. Meanwhile, the European Central Bank believes that CBDCs could solve the centuries-old challenge of establishing a cross-border payment system that is ‘cheap, universal, and settled in a secure settlement medium’.

Digital Asset Developments

      

      		Asset Managers Move into Crypto in Numbers
Prominent asset management firms including BlackRock, Abrdn and Charles Schwab have moved en masse in recent days with tie-ups and new services that extend access to cryptoassets to more institutional and retail investors. These names join the likes of Fidelity and Schroders in entering the digital asset space.
  • Last week, Coinbase announced that it has been selected by BlackRock to enable its clients to access crypto trading and custody via Coinbase Prime (Coinbase). Clients will be able to access cryptoassets through Aladdin, Blackrock’s investment management platform, starting with bitcoin. Clients of the USD 21.6 trillion investment platform will be able to manage their exposure to digital assets directly from their existing accounts, with a holistic ‘portfolio view of risk across asset classes.’ BlackRock has also now launched a bitcoin private trust for institutional investors (BlackRock), designed to track the price of the oldest cryptoasset.

CPMI Consults on Increasing PvP for FX, Supported by DLT Solutions
The Bank for International Settlements’ Committee on Payments and Market Infrastructures (BIS CMPI) has launched a consultation (Ledger Insights) on ways to lower global financial stability risks arising from FX transactions by increasing payment-versus-payment (PvP) settlement. The FX market has the largest turnover, and bank exposures to FX risks in some countries such as the UK, Hong Kong and Singapore exceed their regulatory capital requirements. The aim is to reverse the decrease in FX transactions with PvP protection arising from increased trade with emerging markets that lack PvP abilities. Four of the ten proposed solutions are based on DLT, and one is Citi’s Regulated Liability Network concept (Citigroup).
Santander Brazil Launching Retail Crypto Offering and Tokenising Traditional Assets
Santander Brazil is to launch a retail crypto offering (Ledger Insights), citing significant client demand for the asset class. CEO Mário Leão added in the bank’s quarterly earnings call last week that it intends to use blockchain to tokenise traditional assets such as debt securities. This announcement comes a month after Latin America’s largest bank, Itaú Unibanco, launched its tokenisation platform and digital asset custody solution. The solution is part of a new unit, Itaú Digital Assets (Coindesk) and will be available to institutional clients first, with a retail version expected towards the end of 2022.
US Treasury Sanctions Cryptocurrency Mixer Tornado Cash; Dutch Authorities Arrest Developer
The U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) has sanctioned Tornado Cash (US Department of the Treasury), a protocol used to ‘mix’ crypto transactions to provide transaction anonymity. OFAC asserts that Tornado has been used to launder over USD 7 billion of stolen cryptocurrencies. The move raises the long-standing question of the liability of platform operators for the uses to which their services are put, just as regulators continue to debate the responsibility of other services such as Facebook or YouTube. Ethereum founder Vitalik Buterin has stated that he used Tornado Cash to donate funds to Ukraine (Forkast) in order to protect the recipients. In a development that has implications for the free speech rights of software publishers, Dutch authorities have today arrested the developer of the open source software behind Tornado Cash (Cointelegraph) on suspicion of money laundering.

Reserve Bank Innovation Hub: Interoperable DLT POC Closure Report
The Reserve Bank of India’s Innovation Hub (RBIH) has reported on the results of a proof-of-concept exercise (Reserve Bank of India) to move domestic trade finance processes – revolving around Inland Letters of Credit (LCs) – onto a distributed ledger platform. RBIH worked with a consortium of 11 banks and other fintech startups on the test, which was conducted using technology from IBM Hyperledger, R3 Corda, and Billon’s FIS. Following successful results, it now plans to facilitate the adoption of DLT ‘at scale’.

Crypto Takes a New Hit as Thousands of Solana Wallets Hacked
Security flaws in wallet software used to store assets for the Solana ecosystem were exploited to steal over USD 5.2 million of value from more than 7,900 wallets. Security researchers suggested that the Slope wallet was storing users’ seed phrases – used to create their private keys – in plain text (The Block) on a centralised server that was compromised. This follows an exploit of the Nomad ‘bridge protocol’ (Bloomberg) that transfers cryptoassets between blockchains that led to assets worth almost USD 200 million being lost. These stories, on top of several other hacks of similar cross-ledger bridge services that have led to estimated losses totalling over USD 2 billion this year (Chainalysis), highlight both the complexity of securing DeFi protocols and the dangers of relying on untrusted centralised services rather than regulated custodians.

News Links

SEC’s Gensler Wants Crypto Exchanges to Segregate Market Making, Custody (Ledger Insights)
Gary Gensler, Chair of the SEC, has proposed that crypto exchanges should segregate market making from custody activities, as is the requirement for traditional securities markets. He argues that clients are not expected to hand their assets to the New York Stock Exchange, and given that private keys are a proxy for ownership it would be more appropriate for the assets to be kept with a third party digital asset custodian.
Joint Statement on the UK-U.S. Financial Regulatory Working Group (US Department of the Treasury)
On 21 July, the UK-US Financial Regulatory Working Group convened and reconfirmed their commitment to addressing the cryptoasset market, with a focus on broadening their collaboration – and in particular strengthening the ‘regulatory outcomes for stablecoins across jurisdictions.’
UK Proposes Changes to Personal Property Laws Around Digital Assets (Ledger Insights)
The UK’s Law Commission of England and Wales has published a consultation paper suggesting that the law needs to be updated to account for the unique characteristics associated with cryptocurrencies, NFTs, and the metaverse more broadly. The objective would be to introduce the right legal foundation, in order to limit the potential impact of imposing existing structures on these new forms of assets that might stifle their development.
UK Legal Taskforce Probes Rules Underpinning Securities Issuance on Blockchain (Finextra)
More regulatory consultation in the UK, where the UK Jurisdiction Taskforce (UKJT) is examining support in English law for digital securities models in an effort to address concerns that the legal basis for digital securities in the UK is less supportive than that in other countries.
Crypto Inquiry 2022 (CryptoUK)
The UK’s Crypto & Digital Assets All-Party Parliamentary Group (APPG) has announced details of its assessment of the UK’s crypto and digital assets sector. It seeks feedback from the wider community on current approaches to regulation, the UK government’s plan for the country to become a crypto hub, the role of regulators, CBDCs, and investor protection.
Celsius Facing Legal Action by Aggrieved Custody Customers over $180M Deposit (Cryptoslate)
Bankrupt crypto lender Celsius is facing a lawsuit from a group of 400 customers of its custody service – distinct from its Earn programme, under which customers relinquished title to their crypto – whose assets remain stuck in the network. Celsius’s lawyers are resisting requests for refunds and claiming that even title ownership of deposited assets may not assure recoverability of funds in Celsius’s bankruptcy case. This is a further chapter in the debate on the status of crypto following the SEC’s guidance that custodians should move client assets on-balance sheet pending clarification of this issue in law (Thomas Murray Digital).
SEC/CFTC Proposed Amendments to Form PF (Securities and Exchange Commission)
In a joint proposal by the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC), there are to be New Crypto Reporting Rules for Large Hedge Funds (The Block) that would oblige qualifying hedge funds – reported to be those with more than USD 500 million of net assets – to provide information to the regulators that pertain to the hedge funds’ investment strategies, counterparty exposures, and trading and clearing mechanisms.
Over 70k XRP Holders Join Class Action Lawsuit Against SEC (Cryptoslate)
Tens of thousands of holders of Ripple’s token from all around the globe have now joined the challenge to the SEC’s assertion that XRP represents an unlicensed security token, in an alleged expansion of the principles of the Howey Test.
   EBA Warns Talent Shortage Will Hamstring Crypto Regulation (Finextra)
The European Banking Association (EBA) has warned that difficulties in attracting and retaining talent will limit regulators’ ability to supervise the digital asset sector. This follows a multitude of high-profile exits of leading regulators and industry experts into the clutches of the cryptoasset industry.
   Zodia Custody Gets Approval to Provide Cryptoasset Custodian Services in Ireland (Irish Times)
Zodia Custody has received approval from the Irish regulator to provide cryptoasset custody in the country, making it one of the first licensed Virtual Asset Service Providers (VASPs) there and the first dedicated custodian. As CEO Maxime de Guillebon articulated in a LinkedIn post, this will mean that Irish authorised Alternative Investment Funds will now be able to take advantage of institutional-grade safekeeping.
   Binance US Delists Token After SEC Labels It a Security (Blockworks)
Following the SEC’s categorisation of several crypto projects as securities, Binance US has delisted one, Flexa Network’s Amp token, that it previously supported on its exchange.
   Pando Asset Lists First Crypto ETP on SIX Swiss Exchange (Coin Speaker)
The Pando Asset Crypto 6 ETP offers investors the opportunity to participate in the performance of a basket of digital assets consisting of the largest cryptoassets by market capitalisation.
Ripple Casts Eye Over Bankrupt Crypto Lender Celsius (Finextra)
In other Ripple news, the firm has registered an interest with the bankruptcy court in acquiring assets from failed crypto lender Celsius.
Major Insurers Pull the Plug on B3i Insurance Blockchain Consortium (Ledger Insights)
Swiss insurer B3i is to close after its consortium of over twenty insurers and reinsurers failed to commit sufficient funds to its latest investment round, triggering its insolvency.
Bitcoin Fanatic Michael Saylor Steps Down as MicroStrategy CEO (Decrypt)
Saylor takes on Executive Chairman role in order to devote exclusive attention to the firm’s crypto activities, leaving management of the original software business to former company president Phong Le, who assumes the CEO role.
Virginia Pension Fund Invests in Crypto Lending in Bid to Boost Returns (Financial Times)
Virginia’s Fairfax County Retirement Systems Pension Fund is reportedly investing in crypto lending markets following earlier investments in cryptocurrencies, made alongside the Fairfax County Police Officers Retirement System. Its new venture into ‘yield farming’ entails lending assets in return for a fixed stream of payments, akin to securities lending. Katherine Molnar, CIO of the police retirement fund, cited the recent bankruptcy or withdrawal of other lenders as a factor that makes returns from the activity attractive.
Binance and Mastercard to Bring Streamlined Crypto Payments to Argentina (Blockworks)
Sygnum Bank Expands Bank-grade Staking with Cardano (ADA) (Sygnum Bank)
The leading Swiss digital asset bank has expanded its blockchain capabilities to support clients who wish to wish to earn rewards by staking their ADA tokens, the native token of Cardano’s Layer 1 protocol.
Bank of America “Disagrees” that Crypto Has No Intrinsic Value (AltFi)
In the July edition of its Global Cryptocurrencies and Digital Assets report, Bank of America contradicts the Governor of the Bank of England’s recent comments that the crypto industry has no intrinsic value, referring to the GBP 9 billion in transaction fees that blockchains have generated to date, in addition to network validation services and NFT transactions.
Ex-PwC Crypto Head Launches $75m Hedge Fund for Institutional Investors (FNLondon)
Henri Arslanian has launched Nine Blocks Capital Management in Dubai with backing from other hedge funds.
ASX Calls In Accenture to Assess CHESS Replacement Project (Finextra)
The Australian Securities Exchange (ASX) has engaged Accenture to assess the gaps in the current development plan and draw up a new timeline for the project’s completion. Originally slated for April 2021, the replacement for the aging CHESS system has suffered several setbacks. Current estimations suggest it will be delayed until late 2024.
Digital Assets — A World of Possibility (Wells Fargo)
In its August report, Wells Fargo states that digital assets are ‘a transformative innovation on par with the internet, cars, and electricity’. Its argument is that the ‘Internet of Value’ is likely to be as disruptive to the world of finance as the original internet was to communications and information.
Chinese Municipal Bank Issues First-ever Digital Yuan Loan Using Intellectual Property as Collateral (Coin Telegraph)
Agricultural Commerce Bank of Zhangjiagang has made the loan of e-CNY 500,000 (USD 74,000) directly to a manufacturer’s digital wallet.
Galoy Launches Synthetic Dollars Backed by BTC, No Stablecoins Needed (The Tokenist)
Galoy, an open source banking company that specialises in Bitcoin acceleration and integration, has launched Stablesats, a synthetic dollar backed by bitcoin that uses inverse perpetual swaps and forgoes the traditional fiat peg that most stablecoin operations implement.
ZK-Rollups Likely to be Main Layer 2 Solution for Ethereum, says Vitalik Buterin (The Block)
Vitalik Buterin, the founder of Ethereum, has suggested that ZK-Rollups are likely to win out over Optimistic Rollups as the main Layer 2 solution for scaling up the blockchain’s capacity due to their faster speed. Rollups move processing of transactions off-chain, posting batches of aggregated results to the main network. Optimistic Rollups – as the name suggests – save effort by assuming the validity of transactions without further verification, but allowing a challenge period during which they can be disputed, with staked ether used as an incentive to process only legitimate transactions. In ZK-Rollups, transactions are always presented with proof of their validity. This is slightly more computationally expensive, but reduces transaction finality from 7 days to near-instantaneous.
Bitcoin Network’s Power Demand Drops by Over 20% in 2022 as Shift to Renewables Accelerates (Finbold)
Crypto Investments Products See Inflows of $474M in July (Crypto Slate)
The end of July saw the fifth consecutive week of inflows. Total cryptocurrency market capitalisation exceeded USD 1 trillion once more in a slight recovery from the bear market.

Key: Regulation             Technology            Ecosystem              Markets 

CBDC Corner

Working Paper Series: Towards the Holy Grail of Cross-border Payments (European Central Bank)
The ECB’s latest paper assets that CBDCs could solve the challenge – ‘as old as international commerce and the implied need to pay’ of finding a cross-border payment system that is ‘cheap, universal, and settled in a secure settlement medium’. It expects this system to be developed over the next 10 years.
Reserve Bank and Digital Finance Cooperative Research Centre to Explore Use Cases for CBDC (Reserve Bank of Australia)
The Reserve Bank of Australia has initiated a year-long research project to consider use cases for a CBDC in Australia. Industry participants will submit proposals, and some will be selected to take part in a ring-fenced pilot scheme that will use a pilot CBDC that is a real claim on the Reserve Bank. The study aims to explore the economic benefits of applications of a CBDC for households and businesses in addition to technical aspects, as these are seen as a gap in existing CBDC studies for markets such as Australia that already have efficient and well-functioning payment and settlement systems.
Millicent Completes World’s First Test of a General Purpose Full-Reserve Digital Currency (FRDC) (Crypto.news)
Millicent, a fintech company partly funded by the UK Government, has used a sandbox to issue and test use cases for a pegged token fully collateralised by cash deposits held at the Bank of England. It claims it is effectively the first retail test of a synthetic CBDC.
Seven Out of Ten Tell Fed They Don’t Want Digital Dollar: Cato Institute (Ledger Insights)
The Libertarian think tank finds concerns over financial privacy, financial oppression, and fears of the disintermediation of banks. This may be a case of self-selection of respondents, or of a misplaced belief that the financial system simply needs a ‘faster horse’ rather than substantively newer technology.
Thailand’s Central Bank Extends Retail CBDC Study to Pilot Phase (CoinDesk)
Nepal Prepares Laws to Enable CBDC Issuance (Ledger Insights)
China’s Central Bank to Expand Digital Yuan Pilot Program (Yahoo)

Thomas Murray Digital

Andrew Wright | Hugo Jack

Tel. +44 (0)20 8057 7100
Email: digital@thomasmurray.com
Web: thomasmurraydigital.com

Whilst reasonable care has been taken in the compilation of this information, neither Thomas Murray Network Management Limited, its affiliates or information contributors shall have any liability for any errors, omissions, delays or inadequacies in the information or for any loss or damage however occasioned (whether arising directly or indirectly), to any person or company relying on this information, or any decision made, action taken or inaction by any party in reliance upon this information (except to the extent permitted by law). Copyright © Thomas Murray Network Management Limited, company no. 03313014. All rights reserved. No reproduction without prior authorisation.