Category Archives: Blockchain

EY announces integration with Polygon protocol and framework on Ethereum scaling solutions

The EY organization today announced it is using the Polygon protocol and framework to deploy EY blockchain solutions on the public Ethereum blockchain ecosystem.

As more enterprises adopt blockchain technology, transaction volumes and costs on the main public Ethereum blockchain have risen. Adopting Polygon’s commit chain solutions allows the EY organization to offer enterprise users increased transaction volumes with predictable costs and settlement times and the option to move transactions onto the public Ethereum mainnet.

EY has connected the Polygon public, permissionless commit chain into EY flagship blockchain services including EY OpsChain and EY Blockchain Analyzer. EY clients can connect their business operations into Polygon networks with just a simple configuration change on blockchain.ey.com. The main Polygon systems network and the main Polygon test and development network are now both directly accessible from blockchain.ey.com.

In addition to integrating the main Polygon commit chain into blockchain.ey.com, the EY organization is working with Polygon to create permissioned, private industry chains leveraging new models for handling transaction verification to increase efficiency and reduce transaction costs known as an optimistic rollup1. These industry chains would offer enterprises the comfort and security of a closed system but retain the close alignment with the public Ethereum mainnet that would make a future transition to public networks faster and lower risk.

Paul Brody, EY Global Blockchain Leader, says:

“Working with Polygon provides EY teams with a powerful set of tools to scale transactions for clients and offers a faster roadmap to integration on the public Ethereum mainnet. We discovered our shared priorities around open system and networks and the Ethereum ecosystem would make collaboration in this area much easier.”

Sandeep Nailwal, Co-founder, Polygon, says:

“The EY commitment to the public Ethereum ecosystem and to open standards was a big driver in evolving shared approaches. No other organization has made the same scale of commitment to the ecosystem and to open systems, or brings the depth of technology that the EY organization has in this space.”

Both the EY organization and Polygon are working on common roadmaps that will help prioritize enterprise-friendly features into the ecosystem with a particular focus on privacy technologies that enable sophisticated use cases and support regulatory compliance.

Osprey Funds Continues Streak of Leading-Edge Product Launches with Opening of Solana Fund

The Osprey Solana Fund is the first investment product in the US to invest exclusively in SOL.

Osprey Funds, LLC, a premier digital asset management firm, today announced the launch of the Osprey Solana Trust for private placement. The Trust is the first investment vehicle to offer exposure to SOL, the native token used on the Solana blockchain, the fastest blockchain in the world.

Following a breakthrough in mobile communications, Solana Founder and CEO Anatoly Yakovenko introduced Proof of History to blockchain, an algorithmic solution for timestamping transactions. This enables the Solana network to operate at incredible speed, processing 65,000 transactions per second with sub-second block finality, which will only get faster as network bandwidth increases.

“The pedigree of the science and potential of the technology behind Solana is unique among current blockchains,” said Greg King, CEO of Osprey Funds. “Solana has the potential to become the rails of an integrated, decentralized financial network that establishes one global price for assets. With the debut of the Osprey Solana Trust, we are continuing to build onramps for investors to access what we believe are the most promising blockchain technologies.”

The Osprey Solana Trust is currently available to accredited investors for subscription with a $10,000 minimum investment. The sponsor intends to pursue listing the fund on the OTCQX market as soon as possible and has also agreed to waive the management fee for all investors until January 2023.

Osprey Funds continues to deepen its disruptive digital asset investment platform with the Osprey Solana Trust being the fourth product launched this year. The firm also offers the Osprey Bitcoin Trust (OBTC), the Osprey Polkadot Trust and the Osprey Algorand Trust.

About Osprey Funds

Osprey Funds is the premier boutique digital asset investment firm. Based in New York, Osprey offers secure, transparent and cost-effective access to select digital assets via traditional investment vehicles. Learn more by visiting https://ospreyfunds.io/.

Digital Asset Savings and Loan Platform Ledn Raises US$30M Series A

Ledn continues its global expansion plans with a $30 million financing round led by London-based investment firm Kingsway Capital.

Ledn Inc. (“Ledn”), a global digital asset platform offering innovative saving and lending products for Bitcoin and other digital assets, is pleased to announce the completion of a $30 million Series A financing round led by Kingsway Capital, with participation from new investors including Alan Howard, Hashed, Susquehanna Private Equity Investments LLLP, ParaFi Capital, Alexis Ohanian, and John Pfeffer. All investors from Ledn’s prior round including White Star Capital’s Digital Asset Fund, Coinbase Ventures, Global Founders Capital and CMT Digital also participated to fuel Ledn’s growth.

Ledn has grown its assets on its platform by over 320% since its last round, just six months ago. Proceeds of the round will be used to grow Ledn’s team and global presence, as well as continue to enhance Ledn’s technology and product offerings. Additionally, Ledn’s investors bring regional-specific expertise that will enable Ledn to achieve its mission of unlocking the power of Bitcoin and other digital assets to build wealth through innovative financial products.

“We are building a world class company to help people globally unlock the power of the fastest growing asset class for building generational wealth,” says Adam Reeds, Ledn co-founder and CEO. “With this new injection of capital, we will expand on our success in North & South America and grow our global footprint, prioritizing growth markets. Our focus is to build simple and secure solutions that allow clients to participate in the growing digital asset economy in a way that meets their individual needs and our own rigorous standard for security and reliability.”

“We prioritize the needs of the people we serve, investing in solutions like proof-of-reserves to protect them, and provide assurance that all of our lending activities are covered by real assets,” said Mauricio Di Bartolomeo, co-founder and CSO. “Growing up in Venezuela, I saw first hand how an unregulated system with little to no transparency can impact its people, and that’s why it’s such a core component of how we manage the funds our clients entrust to us.”

Ledn also recently launched Ledn Trade, a service that enables clients to exchange between USDC and Bitcoin, specifically catering to clients in growth markets who wish to quickly move between the two digital assets. The product-market fit of Ledn’s services to date is evidence of a growing global demand for this kind of innovative digital asset solution.

“Having spent nearly a decade investing in emerging and frontier markets, we’ve had first-hand experience witnessing the power of disruptive technologies delivered to billions of consumers coming online for the very first time,” says Manuel Stotz, founder of Kingsway Capital. “The emergence of digital assets, whether via Bitcoin or USD Stablecoins, is perhaps the greatest opportunity for financial inclusion, as well as an opportunity for a more decentralized and thus more equitable global internet. We are proud to support the talented team at Ledn in making this vision a reality and are honored to co-invest alongside such a world-class roster of global investors.”

About Ledn

Ledn provides financial products with a mission to help clients across the globe unlock the power of digital assets to build wealth for the long term. Operating in over 100 countries, Ledn offers interest-bearing savings accounts and Bitcoin-backed loans, enabling clients to access dollars or additional Bitcoin without needing to sell any of their existing holdings.

Ledn has active clients in 105 countries, and has exceeded $1 billion in assets on its platform. Since the start of 2021, Ledn has tripled its team while growing its total lending book by over 800% and savings products by 280%. Ledn remains an industry leader when it comes to transparency and accountability standards, being the first-ever lending platform to undergo a formal proof-of-reserves attestation by Armanino LLP, a top public accounting and consulting firm and a recognized global leader in digital asset assurance solutions. For more information visit ledn.io.

About Kingsway Capital

Kingsway Capital is a London-based investment firm whose limited partners include leading US endowments and foundations with a long-term investment horizon, measured in years and decades. Kingsway has a successful history in backing promising companies at the nexus of Emerging Markets and disruptive technologies, such as mobile internet and digital assets.

BNY Mellon Forms New Digital Assets Unit to Build Industry’s First Multi-Asset Digital Platform

New, innovative initiative will help accelerate the development of enterprise solutions to service the rapidly evolving digital asset space

BNY Mellon today announced the formation of a new enterprise Digital Assets unit that will accelerate the development of solutions and capabilities to help clients address growing and evolving needs related to the growth of digital assets, including cryptocurrencies. The cross-functional, cross-business team, which will be led by Mike Demissie, head of Advanced Solutions at BNY Mellon, is currently developing a client-facing prototype that is designed to be the industry’s first multi-asset digital custody and administration platform for traditional and digital assets.

“BNY Mellon is proud to be the first global bank to announce plans to provide an integrated service for digital assets,” said Roman Regelman, CEO of Asset Servicing and Head of Digital at BNY Mellon. “Growing client demand for digital assets, maturity of advanced solutions, and improving regulatory clarity present a tremendous opportunity for us to extend our current service offerings to this emerging field. Pending further evaluations and approvals, we expect to begin offering these innovative and industry-shaping capabilities later this year.”  

“The Digital Assets unit plans to deliver a secure infrastructure for transferring, safekeeping and issuing digital assets,” said Demissie. “Consistent with our open-architecture approach, the unit will leverage BNY Mellon’s digital expertise and leading technologies from fintechs and other collaborators to speed up product development and help our clients tap into the best available solutions in the market.”

The Digital Asset unit will build on BNY Mellon’s digital savvy and strong expertise in investment services and investment management. By leveraging advanced solutions such as blockchain, the technology behind digital assets, BNY Mellon will improve custody and other investment services.

“Enabling the use of digital assets is critical to transforming the future of custody,” said Caroline Butler, head of Custody at BNY Mellon. “Building the bridge between the traditional and digital spaces will create a front-to-back ecosystem for innovation. Our digital asset capabilities should help evolve the way the financial industry operates, including custody, collateral management, issuance, investment management and other segments where BNY Mellon is a key service provider.” 

Timothy Lane: Payments innovation beyond the pandemic

Introduction

Good morning, and thank you for hosting me today.

Digitalization: I’m sure many of you share my sentiments about these virtual events—that we would much rather be together in person, and yet we are grateful for the technology that allows us to gather online.

The need to switch to this digital platform is, of course, just one small example of the changes brought on by the global pandemic. COVID-19 has claimed the lives of far too many—in Canada, we have lost more than 20,000 people. The virus has had a devastating impact on households and businesses across the country. Almost overnight, the Canadian economy suffered its worst setback since the Great Depression.

One major impact of the pandemic is certainly familiar to all of us by now: the digitalization of our personal and professional lives has accelerated.

In my remarks today, I’ll focus on how these developments have affected the world of payments. I’m referring to changes in the way Canadian consumers and businesses pay for goods, services and financial assets. I’ll begin by talking briefly about the economic consequences of the pandemic. Then I’ll go on to discuss the implications for three main aspects of payments.

The first is the concept of a central bank digital currency—a “digital loonie,” as it were. For several years, the Bank of Canada has been analyzing which circumstances might lead Canada to decide to issue a digital currency. The pandemic may bring us to a decision point sooner than we had anticipated.

Next, I’d like to look at a major program of payment system modernization underway in Canada. Consumers and businesses will see the benefits of this modernization rolling out this year and next. The pandemic has underscored the importance of expanding the reach of real-time payments.

Finally, I will address the issue of cross-border payments, which are often slow, expensive and vulnerable to fraud. The Bank has collaborated with international partners on a roadmap to address the pain points in cross-border payments. We are fully committed to working with the public and private sectors to make any necessary changes in Canada to support this.

COVID-19 and the digital economy

The digitalization of the economy was well underway before COVID-19 hit, but the changes brought on by the pandemic have been rapid and far-reaching.

As a society, we had to quickly implement the virtual workplaces we had largely only been imagining. Nearly one-third of Canadians are mostly working from home,1 including me—I have been in my office only eight times since last March. In addition, many students continue to learn virtually.

COVID-19 has also changed how we shop. A survey of Canadian retailers shows that e-commerce has nearly doubled from pre-pandemic levels.2

Businesses are responding to the pandemic by incorporating new technologies into their operations. In our most recent Business Outlook Survey, nearly two-thirds of participating firms reported that they are making some kind of digital investment.3 Expanding their business online was commonly cited as the reason for these investments—on both the operations and client-facing sides.

Among these developments is a shift toward the increasing use of digital payments. For example, a November 2020 survey found that two-thirds of small businesses now accept payments online—and half of them started doing so only recently.4

Even when Canadians pay for goods in person, contactless options appear to be gaining traction. Interac reports that the volume of Interac Flash transactions grew by two-thirds in July 2020 compared with April.5 Consumer surveys also report that contactless payments have increased.6

The Bank of Canada has been carefully watching these trends. We are particularly interested in how the pandemic has changed the way that Canadians purchase goods and services. And we are keenly aware of the need to seize the opportunities that lie before us to give Canadians even better, cheaper and faster payment methods.

Cash: physical and digital

Let’s start with Canadian bank notes.

As we have all embraced technology and its many innovations, one thing that hasn’t changed as much is cash. It’s true that the Bank has updated bank notes in new and exciting ways. We’ve incorporated state-of-the-art security features to combat counterfeiting. We now make bank notes using polymer instead of paper. And we’ve made a concerted effort to ensure the images and portrait subjects on bank notes reflect Canada’s unique and changing identity.

But the basic nature of bank notes has not changed—they are still physical objects.

However, for the past decade or so, the Bank has been considering these bank notes, and we’ve been asking ourselves: could Canada and Canadians benefit from a digital form of cash?

In a speech in Montréal a year ago, I gave our preliminary view: we did not see a need for a central bank digital currency at that time, but we could imagine scenarios that could make a central bank digital currency beneficial in Canada. I concluded that we would move forward to develop such a digital currency as a contingency plan, given how quickly the world is changing and the time required to develop a viable product.7

A year later, our view remains unchanged: a digital currency is by no means a foregone conclusion.

That said, the world has been changing even faster than we expected. In fact, just two weeks after I spoke, the first lockdown was imposed, which accelerated the evolution of the digital economy. And so our work to prepare for the day when Canada might want to launch a digital loonie—backed by the Bank—has also accelerated.

We are not alone. In a recent survey, almost 60 percent of central banks reported the possibility that they will issue a central bank digital currency within six years. This is up from less than 40 percent only a year ago.8

One scenario we have been watching is whether a sharp decline in the acceptance of cash reaches a tipping point in Canada. We’ve already seen that as societies and economies modernize, cash has been losing ground to digital methods of payment—around the world and here at home.9

Since COVID-19 hit, we’ve seen a growing hesitancy in Canada to use cash. Although Canadians are holding more cash than ever, cash may not currently be circulating as much. In recent Bank of Canada surveys, consumers report some merchant preference for contactless payments, and some report experiencing merchants’ refusal of cash due to fears of virus transmission.10 Of course, it’s too early to tell whether these trends will continue beyond the pandemic, but we are watching closely.

The other scenario I raised in my speech last year is the increasing use of digital currencies created by the private sector, including cryptocurrencies and so-called stablecoins. While these products have existed for several years, some could see a boost from the acceleration of digitalization in the midst of the pandemic.

Even in this increasingly digital economy, though, cryptocurrencies such as bitcoin do not have a plausible claim to become the money of the future. They are deeply flawed as methods of payment—except for illicit transactions like money laundering, where anonymity trumps all other features—because they rely on costly verification methods and their purchasing power is wildly unstable. The recent spike in their prices looks less like a trend and more like a speculative mania—an atmosphere in which one high-profile tweet is enough to trigger a sudden jump in price.

In contrast, widespread adoption of stablecoins for everyday transactions is possible, although none is near that point yet. Because in most cases they are partly or fully backed by safe assets, their purchasing power is designed to be more stable.

But many issues need to be addressed before we can be confident that stablecoins can be used safely by the general public. The Financial Stability Board is examining these issues at the global level, and I am chairing the international working group that is taking this work forward. Here in Canada, we still have work to do to ensure that our regulatory framework covers these new products.

Amid all of these developments, two fundamental questions need to be addressed: Are there benefits to issuing a digital form of money? And if yes, who should do so?

In response to the first question, we don’t yet know whether many Canadians will actually want to use a stablecoin or any other kind of digital currency when they have alternatives available—cash, debit, credit and electronic transfer. Would the addition of a digital form of cash to the existing suite of digital payment methods meet a real demand and enhance the evolution of a competitive, vibrant digital economy? More work is clearly needed to identify the potential benefits to users, compared with other alternatives. And of course we also need to study potential risks.

In response to the second question, if the public does want a digital cash-like currency, some good reasons illustrate why a central bank—a trusted public institution—should issue it.

Currency is a core part of the Bank’s mandate, and the integrity of our currency is a public good that all Canadians benefit from. Only a central bank can guarantee complete safety and universal access, and with public interest—not profits—as the top priority.

Let me spell out one aspect.

It has been said that in the digital economy, data is the new oil. Many technology companies follow a business model in which they use their customers’ data to refine and expand the range of products and services they offer to the public. This, in turn, pulls more and more business onto their platform, which generates more data, and so on.

If that business model were used as a foundation for the dominant method of payment in the economy, the issuer would gain control over an enormous range of data—bringing with it overwhelming market power.11 In effect, a technology company could become the gatekeeper of the entire economy, with concerning implications for privacy, competition and inclusion.

Let’s compare this with a central bank digital currency. A central bank—with no commercial motivation to harvest data—is uniquely positioned to build in safeguards for privacy, while at the same time defending against criminal uses. Privacy is clearly important to Canadians, and it’s also in the public interest to protect some degree of privacy.12

Universal access would need to be another key feature of a central bank digital currency. That means ensuring that remote and marginalized communities—including but not limited to the underbanked and unbanked—are not left out of this new way to pay for goods and services.

As part of our advancing work, the Bank has been researching and experimenting with different technologies. In addition, we recently engaged three university project teams to independently develop proposals for what a digital currency ecosystem could look like. Their reports will be released tomorrow. This blue-sky thinking will help inform our research going forward.

We are also carefully considering what the business model for a Canadian central bank digital currency might look like: What role would the private sector play in its development, distribution and transfer? How would this product interface with Canada’s core payments systems that transfer funds among financial institutions to settle both retail and large-scale payments?

Modernizing our core payments systems – digitalization

Long before the pandemic hit, efforts to modernize Canada’s core payments systems had already begun. This work is important, and with the rapid expansion of the digital economy accelerated by the pandemic, we can now see the benefits more clearly.

Led by Payments Canada, several key players in the payments ecosystem—such as Interac, commercial banks and other stakeholders—have been working to bring these payments systems fully into the modern digital age. The Bank of Canada is heavily involved as a central bank, a regulator and, in some cases, a participant.

Over the next year or so, these improvements will start to come online. This is important for Canadians because it will mean greater speed, convenience, competition and choice in how people pay for goods and services.

Right now, the fastest and most immediate money transfers we see are e-Transfers. But the new Real-Time Rail system—which will go live in 2022—will provide real-time payments beyond what is already offered through e-Transfer.

When this innovation is complete, we can imagine scenarios like these: businesses being able to pay part-time workers immediately upon completion of their shift; homebuyers putting down the deposit on their first home with a click of a button instead of physically taking a bank draft to their lawyer’s office; and governments being able to distribute emergency funds in a matter of seconds, directly into citizens’ bank accounts.

The Bank is also helping to improve other core payments systems. This includes an interbank payment system called Lynx, which will replace the current Large Value Transfer System this autumn. Lynx’s up-to-date technology includes enhanced safeguards against cyber and other risks. Another system we’re looking to improve is the one that clears cheques and other low-value payments. Improvements here will further expand consumers’ choices for convenient digital payments.

Two other important developments, which I will briefly describe, will complement these changes.

The first is retail payments supervision. This past August, the Bank assumed oversight responsibility for the Interac e-Transfer system under our current mandate. And the Government of Canada has announced its intention to give the Bank of Canada further oversight authority for retail payment service providers—companies that aren’t traditional banks but specialize in processing payments for the public. By ensuring that risks are well managed, the Bank, through its new supervisory role, will support confidence in payment service providers and should further encourage competition and innovation in retail payments.

The second development is open banking, which will remove the barriers for banking customers to safely and easily share their financial information if they choose to engage other service providers in managing their money and other assets. Open banking will help promote greater competition and choice by allowing consumers and businesses to more easily compare the products and services various financial institutions offer.

Several countries have already introduced open banking, and the federal government has launched consultations on how to implement it in Canada. This is being done to ensure that innovations are balanced with data control and privacy considerations.

We have come a long way, but more work remains. And this work takes on greater urgency as we find ourselves in an environment where the current system’s shortcomings could limit the ability of consumers and businesses to pursue the opportunities created by the digital economy.

Thankfully, Canadians can look forward to significant improvements in the speed, convenience, efficiency and choice of digital payments in the near future. This is an important part of the Bank’s responsibility to promote safe, sound and efficient financial systems.

Cross-border payments

I’d like to turn now to the issue of cross-border payments, an area that has an obvious and pressing need for improvement. Sending money abroad has always been notoriously slow and expensive for individuals and businesses—so much so that it interferes with lives and livelihoods.

Issues with cross-border payments affect millions of Canadians. This includes new Canadians who send money to family in their country of origin. It includes snowbirds who split their time between Canada and warmer climates—although not this winter, for the most part. And it includes many Canadian businesses that face unnecessary costs and delays in paying for supplies and services from abroad or in receiving payment for the things they sell outside the country.

Beyond our borders, the issues are even more pressing for developing countries, where many individuals rely on family members abroad to send them money so they can afford basic necessities such as food, clothing and education. Many of these needs have become more acute with the uneven global impact of the pandemic. Put simply, the problems with sending money across borders create disadvantages that can prevent already impoverished people and countries from fully participating in the global economy.

In fact, these issues have been used as an argument for the creation and use of cryptocurrencies and stablecoins. But there is plenty of room to improve cross-border payments without using these novel methods of payment, which would not by themselves fix the problems with cross-border payments.

As part of an initiative endorsed by the G20 and coordinated by the Financial Stability Board, the Bank of Canada and other central banks and regulators have developed a roadmap to solve some of these problems. Our main goal is to support faster and cheaper cross-border payments that are more accessible and transparent.

As I mentioned at the beginning of my speech today, we have identified numerous pain points in cross-border payments. Technological shortcomings certainly pose problems with different messaging standards in different countries. Anti-terrorism and anti–money laundering regulations—while crucial for our safety and security—can also slow the transfer of money, with multiple compliance checks. And of course, there are numerous time zones to consider. When you send money from Ottawa at noon all the way to Cambodia, the local payment system there isn’t open at midnight to process the funds.

The G20 roadmap is extensive and lays out work that several different organizations will carry out. For our part, the Bank is working with partners internationally—most notably the Committee on Payments and Market Infrastructures at the Bank for International Settlements. But just as important, we’re also putting the pieces in place in Canada to support the coordinated domestic effort that will be necessary to identify and address the most pressing issues from a Canadian perspective.

For all of these efforts to be successful, central banks and other authorities around the world who are working on this will need the cooperation of public and private sector partners in their own jurisdictions. Only then can we make lasting improvements to cross-border payments and ensure that people, businesses and nations around the world have the best opportunity to truly participate in the global economy.

Conclusion

Canadians may take our current payments ecosystem for granted because buying goods and services is already relatively simple. Long gone are the days when making a large impulse buy on a weekend was next to impossible, because your bank wasn’t open for you to withdraw cash.

But that doesn’t mean there aren’t opportunities to provide Canadians with greater choice in how they pay for goods and services. Digital payment methods are integral to a truly digital economy, and can open up endless possibilities for further digital innovation.

And as we all struggle with the personal, professional and economic ramifications of the pandemic, it’s even more important that the Bank move forward with this work.

The Bank will continue to explore the possibilities of a digital currency that would be an electronic version of the bank notes that Canadians trust and rely on. We will issue such a currency only if and when the time is right, with the support of Canadians and the federal government, and with the best evidence in hand.

We can and will make our core payments systems more effective and efficient to help consumers and businesses exchange funds in real time.

And we will push forward with work to make cross-border payments cheaper, easier and safer for people around the globe to send and receive money.

Thank you again for having me, and I look forward to your questions.

I would like to thank Scott Hendry, Darcey McVanel, Christopher Reid and Francisco Rivadeneyra for their help in preparing this speech.

  1. 1. Statistics Canada, “Labour Force Survey, December 2020,” The Daily (December 2020).[]
  2. 2. Statistics Canada, “Monthly Retail Trade Survey,” (October 2020).[]
  3. 3. Bank of Canada, Business Outlook Survey—Winter 2020–21 (January 2021).[]
  4. 4. PayPal Canada, Business of Change—PayPal Canada Small Business Study (November 2020).[]
  5. 5. Interac, “Interac Debit data: Signs of COVID-19 recovery,” press release.[]
  6. 6. H. Chen, W. Engert, K. P. Huynh, G. Nicholls, M. Nicholson and J. Zhu, “Cash and COVID-19: The Impact of the Pandemic on the Demand for and Use of Cash,” Bank of Canada Staff Discussion Paper No. 2020-6 (July 2020).[]
  7. 7. T. Lane, “Money and Payments in the Digital Age” (speech to the CFA Montréal FinTech RDV 2020, Montréal, Quebec, February 25, 2020).[]
  8. 8. C. Boar, H. Holden and A. Wadsworth, “Impending Arrival—A Sequel to the Survey on Central Bank Digital Currency,” Bank for International Settlements Working Paper No. 107 (January 2020). []
  9. 9. K. Huynh, “How Canadians Pay for Things,” Bank of Canada The Economy, Plain and Simple (October 2019).[]
  10. 10. H. Chen, W. Engert, K. P. Huynh, G. Nicholls, M. Nicholson and J. Zhu, “Cash and COVID-19: The Impact of the Pandemic on the Demand for and Use of Cash,” Bank of Canada Staff Discussion Paper No. 2020-6 (July 2020).[]
  11. 11. J. Chiu and T. Koeppl, “Payments and the DNA of Big Tech.” Presentation at The Future of Money and Payments: Implications for Central Banking, Bank of Canada Annual Economic Conference, November 5, 2020.[]
  12. 12. R. J. Garratt and M. R. C. Van Oordt, “Privacy as a Public Good: A Case for Electronic Cash,” Bank of Canada Staff Discussion Paper No. 2019-24 (July 2019).[]

Banque de France conducted a successful experiment with IZNES on the use of central bank digital money for interbank settlement purposes.

On 17 December 2020, the Banque de France successfully carried out an experiment on central bank digital currency (CBDC) with IZNES as part of the experimental programme launched in March 1.

The experiment consisted in the subscription and redemption by investors of money market fund units on a private Blockchain, provided by SETL, for a global amount exceeded 2 million euros. Cash settlements were simulated by central bank digital money issued on the blockchain. From a technological point of view, the experiment required the development and
deployment of smart contracts so that the Banque de France could issue and control the circulation of CBDC tokens and ensure that their transfer takes place simultaneously with the delivery of the fund unit tokens into the investors’ portfolio.
The experiment was carried out in collaboration with IZNES, SETL, CACEIS, CITIGROUP, GROUPAMA AM, OFI AM and DXC.
This experiment represents a significant step forward in assessing the levers that a central bank digital currency provides for enhancing the efficiency and resilience of the settlement of financial asset in a blockchain environment, thereby contributing to the smooth functioning of
the real economy. The programme’s other experiments are ongoing until mid-2021 and all the lessons learned will be an important part of the Banque de France’s contribution to the Eurosystem’s more global reflection on the benefits of CBDC.

Gemini to Support Ethereum 2.0 Trading and Staking

Gemini: This month marked the momentous launch of Ethereum 2.0 Phase 0. While the full implementation of Ethereum 2.0 (Eth2) will roll out in phases, we plan to support Eth2 trading and staking as soon as possible.

Ethereum is an innovative blockchain that has pushed decentralized applications, including decentralized finance (DeFi), forward. We look forward to continuing to support the Ethereum community and new developments as Eth2 transitions and reaches its next milestone — so that we can provide all of our customers with the ability to access and earn from the latest developments in crypto.

Onward and Upward,

Team Gemini

FCA establishes Temporary Registration Regime for cryptoasset businesses

The Financial Conduct Authority (FCA) has established a Temporary Registration Regime to allow existing cryptoasset firms, who have applied to be registered with the FCA, to continue trading. The FCA is advising customers of cryptoasset firms which should have applied to the FCA, but have not done so, to withdraw their cryptoassets or money before 10 January 2021. 

From 10 January 2020, the FCA became the anti-money laundering and counter terrorist financing (AML/CTF) supervisor for these types of firms, which includes firms that exchange money to and from cryptoassets and those that safeguard their customers’ cryptoassets. From this date, ‘existing cryptoasset businesses’ (ie firms operating immediately before 10 January 2020) have had to comply with the Money Laundering Regulations; such firms were required to be registered with the FCA by 10 January 2021.

New businesses (who began operating after 10 January 2020), are required to obtain full registration with the FCA before conducting business. 

The Temporary Registration Regime is for existing cryptoasset businesses which have applied for registration before 16 December 2020, and whose applications are still being assessed. This is to enable those existing businesses to continue to trade after 9 January 2021 until 9 July 2021, pending the FCA’s determination of their application.  

The FCA was not able to assess and register all firms that have applied for registration, due to the complexity and standard of the applications received, and the pandemic restricting the FCA’s ability to visit firms as planned.

Firms that did not submit an application by 15 December 2020 will not be eligible for the temporary registration regime. They will need to return cryptoassets to customers and stop trading by 10 January 2021. Firms that do not stop trading by that date are at risk of being subject to the FCA’s criminal and civil enforcement powers.

The FCA is advising consumers who deal with cryptoasset firms to:

  1. Check if the firm they use is on the FCA’s Register or list of firms with Temporary Registration
  2. If they are not, check whether they are entitled to carry on business without being registered with the FCA (this may apply if they are registered in a different country). 
  3. If the firm is not entitled to carry on business, then consumers should withdraw their cryptoassets and/or money before 10 January 2021. This is because the firm will be operating illegally if it does not cease trading from 10 January 2021. 

Many cryptoassets are highly speculative and can therefore lose value quickly. The FCA does not have consumer protection powers for the cryptoasset activities of firms. Even if a firm is registered with the FCA, we are not responsible for ensuring cryptoasset businesses protect client assets (ie customers’ money), among other things.  

It is unlikely that you will have access to The Financial Ombudsman or Financial Services Compensation Scheme, irrespective of whether a firm has temporary or full registration.

Notes to editors

  1. Since 10 January 2020, existing businesses (operating before 10 January 2020) carrying on cryptoasset activity in the UK have needed to be compliant with the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017, as amended and need to be registered with the FCA. 
  2. Find out more information about the FCA.

EURO STABLECOIN (EURB) ON STELLAR

Bitbond and Bankhaus von der Heydt release Euro Stablecoin (EURB) on Stellar

EURB is the first stablecoin issued directly by a banking institution on Stellar, and the first of its kind on the European cryptomarket

Bitbond, Germany’s leading technology provider for the tokenization and custody of digital assets and Bankhaus von der Heydt (BVDH), one of Europe’s oldest banks, have joined forces to issue a Euro Stablecoin (EURB) via the Stellar network. The EURB available today is the first stablecoin issued directly by a banking institution on Stellar and one of the first of its kind on the cryptomarket.

BVDH, which has been active since 1754, specialises primarily in supporting institutional customers in securitisation transactions. Bitbond’s white label tokenization technology proved to be the ideal fit for converting the securitization business to DLT technology. The Stellar Development Foundation, a non-profit organization that supports Stellar’s development and growth, facilitated the development of EURB and advised both Bitbond and BVDH on the technical integration.

EURB can be used by both BVDH customers and third-party platforms to process payment transactions on-chain. With the go-live on Stellar, Bitbond also integrates the stable coin into the securitization platform developed for BVDH, including the automatic mining and burning of tokens. For the Stellar ecosystem this means a new on- and off-ramp for EUR in the network. Users or companies that want to access EUR via the Stellar network can now do so.

“This is a prime example of how traditional banking and block chaining can work together, bringing together one of the oldest banks in Europe with a FinTech start-up to deliver exciting innovations in digital currency,” said Denelle Dixon, CEO and Executive Director of the Stellar Development Foundation. “The addition of a high-quality euro asset issued by a bank to Stellar is of great importance to the users and developers in our network and is driving a new wave of financial innovation that is immediately flowing into Stellar-based applications such as DSTOQ, Vibrant and Lobstr”.

“Bitbond has worked with Stellar since 2019. At that time we issued the first tokenized security approved by the German Federal Financial Supervisory Authority (BaFin),” said Radoslav Albrecht, founder and CEO of Bitbond. “With the development of the technology for issuing stable coins, we at Bitbond have completed our Digital Assets Tech Suite, which previously included the technology for custody and issuance of digital assets.

BVDH can now internalise the paying agent function to accelerate the issuance of new securitisations and create new offerings for bank customers who wish to issue tokenised products with full on-chain processing. Financial application developers can use BVDH’s EURB to process the transfer of digital assets on-chain with a fully regulated and 1:1 EUR stablecoin.

“We were convinced by Bitbond and Stellar because issuing and managing assets via the network is so easy”, said Philipp Doppelhammer, Managing Director of Bankhaus von der Heydt. “In our first use case, SatoshiPay, a block chain payment provider and one of the first members of the Stellar network, will implement our EURB in its DTransfer service. DTransfer facilitates global money transfers for its business customers by exchanging different Stablecoins and connecting to banking systems around the world.

About the Stellar Development Foundation

The Stellar Development Foundation (SDF) is a non-profit organization that supports the development and growth of Stellar, an open source network that connects the world’s financial infrastructure. Established in 2014, the foundation helps to further develop Stellar’s code base, supports the technical and business communities that develop the Stellar Network, and serves as a voice to regulators and institutions. The Foundation seeks to create equitable access to the global financial system by using the Stellar Network to unlock the world’s economic potential through block chain technology.

About Bitbond

Bitbond provides solutions based on block chain technology for banks and financial service providers. The white label software improves the issuance, settlement and custody of securities and other financial instruments. The modules offered consist of digital asset custody technology, asset tokenization and on-chain payment processing. Bitbond was founded in Berlin in 2013 and has already implemented software for regulated customers in Europe and Asia.

About Bankhaus von der Heydt

Bankhaus von der Heydt is one of the oldest banks in Europe and has been in operation since 1754. Today, von der Heydt is one of the first banks to use Blockchain technology, thus breaking new ground in the world of finance.

Standard Chartered and Northern Trust partner to launch Zodia, a cryptocurrency custodian for institutional investors

SC Ventures, the innovation and ventures unit of Standard Chartered, and Northern Trust, a leading provider of asset servicing, have entered into an agreement to launch Zodia Custody, an institutional-grade custody solution for cryptocurrencies.

Cryptocurrencies already represent 0.3% of the world’s currency and bank deposits and are forecast to continue growing with a CAGR of 32% from 2019 to 2024[1]. While there is increasing interest from institutional investors, they account for only 9% of investments in cryptocurrencies at present.

Zodia is designed to enable institutions to invest in the emerging cryptocurrency assets that are transforming how financial markets operate, including transaction and settlement activities. Under the agreement, which is subject to registration with the UK Financial Conduct Authority (FCA), all applicable regulatory filings and customary closing conditions, Zodia is expected to begin operations in London in 2021.

Zodia combines the traditional custody principles and expertise of a bank with the agility of a fintech company to provide an infrastructure that meets the high standards and expectations of institutional investors through a platform that adapts to the changing needs of clients and the market.

At launch, pending regulatory approval, Zodia will provide custody services for the most-traded cryptocurrency assets – Bitcoin, Ethereum, followed by XRP, Litecoin, and Bitcoin Cash – which represent the majority of client demand and activity, accounting for approximately 80% of the total assets [equivalent to USD395B] traded on the top cryptocurrency exchanges.

Maxime De Guillebon, Chief Executive Officer of Zodia, said: “Zodia was established to address the need for a cryptocurrency custodian that truly understands custody. We combine the risk management, compliance, governance and security approach of a regulated financial institution with the cutting-edge innovation of crypto asset and key management technologies. By doing so, we enable operational efficiency and speed of transaction without compromising on security or reliability.”

Alex Manson of SC Ventures, said: “The launch of Zodia demonstrates our commitment to rewiring the DNA in banking. Drawing on Standard Chartered’s heritage of providing custody services to institutional clients for 160 years, Zodia’s mission is to be a ‘force for good’ by lifting industry standards for digital assets in a sustainable, safe and responsible way.”

Pete Cherecwich, President, Corporate & Institutional Services, Northern Trust, said, “The introduction of digital custody backed by the know-how and experience of global banks is a breakthrough in the evolution and support of institutional cryptocurrency markets. Zodia’s robust capabilities will make it possible for institutional asset owners, family offices and asset managers to invest in a range of cryptocurrencies as interest continues to grow in these emerging and innovative financial instruments.”

Zodia further establishes Standard Chartered and Northern Trust as leaders in the development of digital-asset infrastructure. Alongside its partnerships with blockchain service providers, Standard Chartered has invested in core technology provider Metaco and is collaborating with the Bank of Thailand and the Hong Kong Monetary Authority to explore distributed ledger interoperability for cross-border fund transfers.

Northern Trust has a record of focused investment in digital innovation, having launched the industry’s first deployment of blockchain technology for the private equity market in 2017. Working with key clients and regulators, Northern Trust continued to develop and implement additional capabilities on its blockchain and collaborated with Broadridge to make the technology available to all market participants. In 2020, Northern Trust and BondEvalue partnered to complete the first trade of a fractionalized blockchain-based bond, working in cooperation with the Monetary Authority of Singapore.

Zodia Custody is in the process of registering with the FCA under UK Money Laundering Regulations and will apply standards that are equivalent to the custody of traditional securities.