🟩 The Cashless Revolution.
J.P. Morgan dances with TikTok... the meaning of 'Regulated Liability Network"
The New Money Brief covers the global rise of digital currencies and how they are disrupting the world of payments, and much else.
Delivered several times a week. Created and edited by Marc Andrew.
On China’s Cashless Revolution:
▫️ ‘Through a meticulous reconstruction of the events leading up to Ant’s downfall, [author Martin] Chorzempa concludes that China’s regulators were deeply concerned about the power that Tencent and Alibaba had accumulated in financial services.
Each company’s super-app (which offers a suite of basic services such as messaging, shopping, and payments) furnished it with an abundance of personal data and the power that comes with it. By 2013, a mere two years after its launch, Tencent’s WeChat app already had 270 million users.
Financial innovation had allowed the two companies to offer short-term credit in an extraordinarily convenient fashion, putting them in direct competition with state-controlled banks (especially in Ant’s case) and introducing a potential threat to financial stability.
As Chorzempa shows, the success of both Alibaba and Tencent followed from their having solved the problem of digital mobile payments. Suddenly, smartphones could be used to pay for goods and services everywhere in large Chinese cities – and this at a time when credit-card “tap and pay” was still considered cutting-edge technology in Europe.
By 2010, Alipay already had 500 million users transacting CN¥2 billion ($290 million) per day, making it the world’s largest online-payment company – larger than PayPal…”
Read the full essay at Project Syndicate
▫️ ‘One of America’s most powerful banks is quietly building financial tools for ByteDance products like TikTok, expanding China’s grip on the high stakes payments space.
J.P. Morgan has been quietly working with TikTok parent ByteDance on payments technology that is helping the Chinese giant expand into more than two dozen markets and reach millions more users. The partnership is just one piece of ByteDance’s broader push into the fintech space.
TikTok is a sprawling marketplace: An enormous amount of money moves across the platform each day as people buy coins to send virtual gifts (like diamonds and roses) to their favorite creators and others they meet through the app, who can then convert those items into cash. Users around the world spent $3.4 billion on TikTok in 2022, up from $2 billion the previous year, and spending in the U.S. alone more than tripled—to $670 million—from the year before, according to data analytics firm Sensor Tower.
ByteDance enlisted J.P. Morgan to streamline these transactions, improve the way payments are sent and received and set up one centralized bank account for ByteDance’s more than a dozen products, including TikTok and its Chinese counterpart Douyin. Notably, ByteDance has also scooped up several J.P. Morgan executives for the global payments team leading its larger fintech expansion…”
Source: Forbes
▫️ ‘America may soon be poised to go cashless. Now, the nation must decide if ditching the dollar bill is a good idea.
Two-fifths of Americans used no cash in 2022. Back in 2015, by contrast, fewer than one-quarter of consumers went cashless, according to Pew surveys. In a separate poll, three-fifths of consumers told Gallup they used cash only on occasion last year, twice the share of five years ago.
Paper currency and coins are unsanitary, inconvenient, costly to handle and easy to steal. Criminal enterprises thrive on the portable anonymity of the hundred-dollar bill. Cashless transactions solve those problems, advocates say. They also allow Big Brother to track the American consumer’s every move.
“When you pay cash, I give you money, you give me a good, end of story,” said Jay Stanley, a senior policy analyst at the ACLU. “If you’re using your credit card for all of your transactions, then data is being collected about an enormous range of your activities, including medical conditions, political donations, sexual activities, how much liquor you buy, how many cigarettes you buy…”
Source: The Hill
From Jason Brett, former U.S. Regulator at the FDIC:
▫️ ‘Blackberry showcased an embedded vehicle payments wallet at the 2023 Consumer Electronics Show. The company debuted its in-vehicle software platform Blackberry IVY at CES on Thursday (Jan. 05).
The technology, co-developed with Amazon Web Services (AWS), offers auto manufacturers an integrated artificial intelligence solution for digital cockpits and the company has been demonstrating its various uses at the show.
Among the features available as part of Blackberry IVY is an in-vehicle digital wallet developed in partnership with Car IQ, which embeds payments directly in the car, allowing drivers to pay for fuel, electric vehicle charging, tolls, parking and more, the company stated in a press release on Friday (Jan. 06).
While the technology is being demonstrated in a Jeep Grand Cherokee, Blackberry IVY was designed as a general-purpose software platform suitable for various vehicles. It is anticipated that the software will be generally available in May 2023…”
Source: PYMNTS
▫️ ‘Reserve Bank of India (RBI) Governor Shaktikanta Das on January 6 said that rupee settlement of cross-border trade and the Central Bank Digital Currency (CBDC) have big potential in the years to come.
Das was speaking at the launch of a book by the International Monetary Fund on South Asia.
“Rupee settlement of cross-border trade and Central Bank Digital Currency (CBDC) where the RBI has already started moving forward, can also be areas of greater cooperation in the future,” Das said.
Das during the launch also said that they are moving the trail phase of digital rupee very carefully and cautiously. This is because if there is cloning or anything which happens, it can be very risky.
On November 1, the RBI had commenced the first pilot in the Digital Rupee - Wholesale segment…”
Source: MoneyControl
▫️ ‘In Q4 2022, India launched a pilot of its central bank digital currency (CBDC), the digital rupee, with a total of thirteen banks participating.
The move, to offer an alternative currency to cash, can be tracked on a digital ledger, and makes digital transactions possible without using credit cards or banks. But according to a recent article from Forbes, there isn’t much demand at the moment.
Forbes writer Zennon Kapron notes:
It sounds nice in theory, but thus far – as is often the case with blockchain – the e-rupee looks like a solution in search of a problem… Bankers participating in the wholesale e-rupee pilot interviewed by Reuters said that they have not seen any benefits from use of the CBDC. They emphasized that using it as similar to India’s existing internet-based banking with which users are already satisfied.
Given the marginal benefits for CBDCs highlighted in the trial, the underlying rationale for the development of the digital rupee is so that the central bank can control digital transactions, and retain control over monetary policy. Thus, the idea seems to be to get out ahead of crypto, so that it does not become more entangled in the Indian financial system…”
Source: Payments Journal & Forbes
▫️ ‘The Bangko Sentral ng Pilipinas (BSP) continues to ramp up efforts to transform the country into a cash-light from a cash-heavy economy to meet the deadline it set to shift half of total retail transactions to digital channels.
BSP Governor Felipe Medalla said the central bank is set to issue a merchant acquiring and aggregation framework to support the further digitalization of merchant payments. Digital merchant payments now account for over 70 percent of total monthly retail payments.
Medalla said the BSP is also finalizing a cooperative oversight framework to help prevent regulatory arbitrage caused by gaps, inefficiencies, duplications, and consistencies in regulations of different supervising authorities.
Furthermore, the BSP chief pointed out that the central bank is also set to launch other digital payment streams, including InstaPay Debit Pull as well as Request to Pay…”
Source: PhilStar
▫️ ‘Indonesia’s virtual currency ecosystem is bracing itself for sweeping changes as regulators scramble to flex their muscles over the industry in the coming months.
The first of the incoming changes is the proposed plan to set up a national digital currency exchange for the country. Didid Noordiatmoko, head of the Commodity Futures Trading Regulatory Agency of Indonesia (Bappebti), announced that it was keen on launching the platform before the end of the year.
The establishment of a national trading platform for digital assets forms part of the plan by regulators to prevent the recurrence of major collapses like FTX and Zipmex. Indonesian investors bore the brunt of the implosions, with thousands suffering losses running into millions.
Indonesia is not stopping at creating a national exchange but will overhaul the entire regulation of digital assets…”
Source: Coingeek, Bloomberg
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▫️ ‘The Israel Securities Authority (ISA) is pushing for a new legal framework to regulate digital currencies and will bring the asset class under its control.
The securities watchdog noted that the move will ensure uniformity across the board for financial instruments and will see digital currencies treated as securities. Opinion has been split in the country on whether or not digital assets should be viewed as securities, but the ISA’s proposal has seen the pendulum swing toward securities.
Anat Guetta, chairwoman of the ISA, disclosed that the proposed framework will offer wholesome definitions of digital assets to remove ambiguity in cases of dispute. The proposed regulation seeks to term digital currencies as “a digital representation of value” on distributed ledgers used for financial investments.
Guetta says the definitions are designed to protect Israeli investors from the events in the digital currency industry..”
Source: Coingeek
▫️ ‘Iran has foiled a cyberattack on its central bank, the country's telecommunications infrastructure company said on Friday.
Anonymous and other global hacking groups threatened in October to launch cyberattacks on Iranian institutions and officials in support of anti-government protests and to bypass internet censorship there.
Amir Mohammadzadeh Lajevardi, head of the Infrastructure Communications Company, said the central bank was targeted by a distributed denial-of-service (DDoS) attack on Thursday night, the official IRNA news agency quoted him as saying.
DDoS attacks attempt to cripple servers by overwhelming them with internet traffic.
"These days, the largest volume of foreign attacks is against banks and financial institutions, internet providers and communications infrastructures, which have been repelled," Lajevardi said. IRNA gave no further details…”
Source: Reuters
State Street Digital head to lead crypto infrastructure firm as CEO
▫️ ‘The crypto infrastructure startup Securrency has tapped Nadine Chakar as CEO, effective Jan. 9. Chakar will join the institutional blockchain-based technology company from the asset management titan State Street, where she built and led the firm's digital assets business. The 30-year wealth management veteran will pilot Washington, D.C.-based Securrency's next stage of growth, as it aims to scale its compliant crypto infrastructure for global financial institutions, the startup announced Thursday.
The financial services industry is at a critical tipping point as it tokenizes regulated real-world assets and automates legacy financial processes using the power of blockchain technology," Chakar said in a prepared statement. "As the new CEO, my priority is to accelerate the commercialization of what is in essence the digital asset intelligence and interoperability foundation for major financial institutions and the global ecosystem..."
Source: American Banker
▫️ ‘The Credit Card Competition Act proposed by Sen. Dick Durbin failed to pass before the congressional session ended last month, but he plans to keep pushing ahead with the bill.
Durbin (D-IL) plans to reintroduce the bill in the new 118th congressional session that began this year, said Emily Hampsten, a spokesperson for his office. There’s no date for that at the moment, Hampsten said, but it’s unlikely to be this month, given senators won’t return to business until Jan. 23.
The bill, which failed to pass in the last session, mandated that merchants have access to card networks other than Visa and Mastercard for routing credit card transactions. In 2010, Durbin successfully won passage of an amendment to the Dodd-Frank Wall Street Reform and Consumer Protection Act that imposed a similar requirement on debit transactions…”
Source: Payments Dive
▫️ ‘As the largest payments system in the U.S., ACH Network processed nearly $72.6 trillion in 2021, with payment volume growing 8.7% over 2020.
But one consistent criticism of ACH is the time it requires to process payments. It takes one to five days, depending on factors such as the day and time payments are posted, or whether they’re posted on weekends and holidays. The ACH Network is managed by Nacha and its operators are the Federal Reserve banks and The Clearing House (TCH).
So, with respect to improvements, the question is: What ACH challengers exist and are they really a threat to the ACH Network?”
Read on at Payments Dive…
▫️ ‘The U.K. is upgrading its instant payment system to incorporate a modern ISO 20022-compliant architecture.
Known as the New Payment Architecture (NPA), the initial plan is to upgrade the existing Faster Payments real-time rails, with an option to include the older Bacs system in the future.
The upgrade is necessary because although the Faster Payments System (FPS) was one of the first nationwide, real-time interbank payment networks when it launched in 2008, the world has moved on since then and standards have evolved.
Crucially, ISO 20022 has emerged as the preferred financial messaging standard deployed by the most modern payment systems worldwide. For example, SWIFT and the Eurosystem are expected to adopt the new standard in March, while The Clearing House (TCH) has said its clearing and settlement system CHIPS will implement the ISO 20022 message format by November.
Pay UK, the company responsible for operating the U.K.’s major retail payment systems, has made it clear that it intends for the NPA to be less cumbersome to use and connect to than existing infrastructures…”