Kiffmeister’s Global Fintech Monthly Monitor (March 2021)

The crypto-asset bull run continued, with Bitcoin hitting a new all-time high ($61,557) before settling back to close the month at $59,483 (+28%). The main drivers were moves by Visa and PayPal to bring crypto to the people, and continuing interest in decentralized finance (DeFi) reflected in the strong performance altcoins (market capitalization up +50%) although the Financial Action Task Force appears to be taking aim at DeFi applications. On the central bank digital currency front, the Eastern Caribbean Central Bank launched a 12-month pilot, and the Bank of Jamaica will launch an 8-month one in May.

Crypto-Asset Markets (see also the Annex in the PDF version)

Crypto-asset market capitalization increased by about 37% from February 28 to $1,972 billion with the price of Bitcoin finishing up 28% ($59,483) after hitting an all-time high of $61,557 (Figure 1). Altcoin markets led the way with capitalization up 50%. Providing overall impetus were moves by Visa and PayPal to bring crypto to the “people”. 

Visa will allow the use of USD Coin stablecoins to settle transactions on its payment network. Visa piloted the program with payment/crypto platform and plans to offer the option to more partners later this year. It used the Ethereum blockchain and strips out the need to convert digital coin into traditional money for settlement. sent USDC to Visa’s Anchorage Ethereum address.  

PayPal launched Checkout with Crypto that will allow U.S. PayPal Bitcoin, Litecoin, Ethereum or Bitcoin Cash holders to check out with crypto seamlessly within PayPal at millions of global online businesses. Customers pay no transaction fees, but a spread will be built into the conversion from crypto to USD. There are no additional integrations or fees required by the business. All transactions are settled in USD and converted to the applicable currency for the business at the standard PayPal conversion rates.


One of the hottest crypto-assets in March was Terra (LUNA) finishing at about $18.81 (+252% over the month) likely due to the launch of Anchor, a savings protocol on the Terra blockchain. Anchor offers a principal-protected stablecoin savings product that accepts TerraUSD deposits and pays a stable interest rate. According to its white paper, Terra combines the price stability and wide adoption of fiat currencies with Bitcoin’s censorship-resistance to offer fast and affordable settlements. This article presents an overview of the Terra ecosystem and where it’s heading. 

Stablecoin market capitalizations continue to increase (see Annex). Almost all are USD-pegged, and Tether’s USDT remains dominant ($40.5 billion), followed by USDC ($10.8 billion), BUSD ($3.5 billion), DAI ($3.0 billion) and UST ($1.6 billion).  Tether released an attestation dated February 28, 2021 and delivered by accounting firm Moore Cayman that shows that its stablecoins are fully backed, to assuage rumors that it was not. However, the report doesn’t describe how Tether’s reserves are held.

The Bank of Thailand (BOT) issued a warning against baht-denominated stablecoin Thai Baht Digital (THT), citing a sixty-year-old law, that makes the “creation, issuance, usage or circulation of any material or token for money is a violation of Section 9 of the Currency Act 1958.”  The BOT will is also planning to introduce stablecoin regulations as soon as this year. They will only cover stablecoins, and not crypto-assets. However, the purview of the framework will not only include Thai baht-backed stablecoins, but also all digital currencies backed by foreign currencies and other assets. 

Crypto-related regulatory developments

The Financial Action Task Force (FATF) is going after decentralized finance (DeFi) applications in its recent draft guidance. The FATF said its standards may not apply to the DeFi platform underlying software or technology, but entities involved with the decentralized application (DApp) such as owners or operators that may now be considered virtual asset service providers (VASPs). Virtual asset (VA) escrow services, including services involving smart contract technology, brokerage services, order-book exchange services, advanced trading services, and custody providers will all considered VASPs.

The upper chamber of Wyoming’s legislature reportedly passed a bill that, if approved, would clear the way for decentralized autonomous organizations (DAOs) to become incorporated under state law. The legislation would make it easier and cheaper to set up a DAO and give legitimacy to many crypto-asset projects. DAOs are entities that operate through smart contracts, with financial transactions and rules encoded on a blockchain, effectively removing the need for a central governing authority.

Other digital asset market developments (see also Table 1)

U.S. crypto-asset fund managers are applying with the U.S. Securities and Exchange Commission (SEC) to launch crypto-asset exchange-traded funds (ETFs). The SEC has until April 29 to deliver an initial decision on the VanEck Bitcoin ETF filing (45 days after the March 15 submission’s official publication on the SEC website on March 15). The Chicago Board Options Exchange filed with the SEC to list the Bitcoin ETF that Van Eck filed for SEC approval in January. Fidelity Investments has filed to list a new Bitcoin ETF. The Wise Origin Bitcoin Trust aims to track Bitcoin’s daily performance using the Fidelity Bitcoin Index PR, an index that is derived from several price feeds. Also, Grayscale Investments has posted at least nine ETF related positions to LinkedIn. 

Meanwhile, the CI Galaxy Bitcoin ETF launched on the Toronto Stock Exchange (TSE). The new ETF will join the Purpose Bitcoin and Evolve Bitcoin ETFs, both of which launched in February. And less than two months after launching its Bitcoin trust, Canada’s Ninepoint Partners is planning to change its offering to an ETF on the TSE. Deutsche Borse’s electronic trading platform, Xetra launched its first Ethereum-based exchange-traded products (ETPs). The products are physically backed and listed on the Regulated Market of the Frankfurt Stock Exchange and cleared by Deutsche Börse Group’s Eurex Clearing.

Valkyrie Digital Assets filed with the U.S. SEC for a new ETF that would invest in companies that hold bitcoin on their balance sheets. And JPMorgan has filed a request with the U.S. SEC to approve a debt instrument linked to 11 firms that have all invested in Bitcoin and other crypto-assets. The debt instrument will enable investors to have direct exposure to a basket of cryptocurrency-focused firms.

Retail Central Bank Digital Currency (CBDC) developments (see also Table 2 in the PDF version)

The Eastern Caribbean Central Bank launched its DCash CBDC pilot on March 31. Consumers can sign up to use DCash through participating financial institutions and authorized DCash agents. The 12-month pilot will roll out initially in four countries; Saint Kitts and Nevis, Antigua and Barbuda, Grenada, and Saint Lucia.

The city of Chengdu launched China’s largest digital currency trial to date, following those already completed in Beijing, Suzhou and Shenzhen. Prior to Chengdu, there had been six trials of the “Digital Currency, Electronic Payment” (DCEP) project in China, with a total distribution of 120 million digital yuan. Chengdu’s trial, which will conclude March 19, is for an additional 40 million digital yuan. 

The Bank of Jamaica will be piloting a retail CBDC from May to end December 2021, using eCurrency Mint’s centralized ledger technology platform. Issuance and distribution will be fully integrated with the Bank of Jamaica’s JamClear Real Time Gross Settlement System. It will be issued to deposit-taking institutions and authorized payment providers in the same manner that it issues cash. The Bank of Jamaica Act is to be amended, giving the central bank the sole authority to issue digital currency.

The Bank of Japan will start experimenting with retail CBDC, by first testing the technical feasibility of the core functions and features required for CBDC through proof of concepts (PoC). It has established a “Liaison and Coordination Committee on Central Bank Digital Currency” through which it will share details of and provide updates on the PoC with the private sector and the government and will seek consultation on future steps to facilitate smooth PoC implementation. 

The Bank of Thailand provided a preliminary assessment of its exploration of the use of a CBDC and distributed ledger technology (DLT) for business-to-business invoice payments. The tests demonstrated that DLT can increase payment efficiency for businesses by allowing users to set various conditions on the CBDC (programmable money) to enhance flexibility in handling business activities. However, they encountered some limitations with their DLT set up, particularly in supporting large transaction volumes and preserving transaction privacy, but explorations will continue.  

International Monetary Fund (IMF) staff concluded that the issuance of the sovereign digital currency (SDC) SOV by the Republic of the Marshall Islands (RMI) as a second legal tender would raise risks to macroeconomic and financial stability as well as financial integrity. Also, SOV issuance could jeopardize the RMI’s last US dollar corresponding banking relationship. This combined with anti-money laundering and combatting the financing of terrorism risks could disrupt external aid and other important financial flows, resulting in significant economic drag.

Ripple is piloting a private version of the public, open-source XRP Ledger to provide central banks with a secure, controlled, and flexible platform for issuing and managing digital currencies. Moving money on the CBDC Private Ledger will reportedly be cost-effective, reliable, and close to instantaneous. It will initially handle tens of thousands of transactions per second but can scale to hundreds of thousands. 

Wholesale CBDC developments (see also Table 2 in the PDF version)

 A Bank for International Settlements (BIS) paper explored how interoperating multi-central bank digital currency (mCBDC) arrangements could reduce cross-border payment inefficiencies. This could be especially relevant for emerging market economies poorly served by the existing correspondent banking arrangements. Yet competing priorities and history show that these benefits will be difficult to achieve unless central banks incorporate cross-border considerations in their CBDC development from the start and coordinate internationally to avoid the mistakes of the past. 

General Fintech Developments (see also Table 3 in the PDF version)

State Street launched a peer-to-peer repo program for the buy-side that they say enables competitive financing costs across a broader range of collateral types and yield enhancement opportunities compared to traditional repo markets. State Street guarantees the payment obligations of cash borrowers to cash lenders within the program following a default, thus facilitating bilateral trading by counterparties with varying credit and capital strength. Program participants trade with one another pursuant to a common master repurchase agreement, negotiating trade terms with approved counterparties within the program’s broader requirements guidelines. 

Banco Central do Brasil cleared the way for Facebook’s WhatsApp messaging service to let its users send each other funds using the Visa and Mastercard card networks, months after vetoing WhatsApp’s initial attempt. However, WhatsApp is only allowed to do peer-to-peer payments, not involving merchants, unlike the free Pix service, which can be used to pay businesses and individuals. Facebook is still seeking approval to operate with merchants.

The Bank of Thailand (BOT) and the State Bank of Vietnam (SBV) have deployed a retail payment connectivity system that makes use of an interoperable QR Code in order to simplify cross-border payments between the two countries.

SPAC issuance surpassed last year’s fundraising record just halfway through March. At that point SPACs had raised $79.4 billion globally since the start of the year (versus $79.3 billion over all of 2020), and 264 new SPACs have been launched (versus 256 over all of 2020). SPACs are listed shell companies that raise funds to acquire a private company with the purpose of taking it public, allowing targets to sidestep a traditional initial public offering. The U.S. SEC reportedly opened an inquiry into SPACs, asking banks to provide the information on deal fees, volumes, and what controls banks have in place to police the deals internally. Also, the U.K. Financial Conduct Authority will be consulting on amendments to its Listing Rules and related guidance to strengthen protections for SPAC investors. 

Miscellaneous commentary and research (see also Table 4 in the PDF version)

The GSMA annual State of the Industry Report on Mobile Money revealed a dramatic acceleration in mobile transactions attributed to COVID-19 lockdown restrictions limiting access to cash and financial institutions. The number of registered accounts grew by 13% globally in 2020 to more than 1.2 billion. The fastest growth was in markets where governments provided significant pandemic relief to their citizens, value of government-to-person payments quadrupling during the pandemic.

Kiffmeister’s Global Fintech Monthly Monitor (February 2021)

The crypto-asset bull run continued, with Bitcoin hitting a new all-time high ($58,332) before settling back to close the month at $46,526 (+35.4%). The main driver continued to be increasing institutional investor interest, with some help from a few random Elon Musk tweets and the Tesla announcement that it had bought $1.5 billion of Bitcoin. Ethereum and other altcoins had a strong month on continuing interest in decentralized finance (DeFi). Bitfinex and Tether reached a $18.5 million settlement with the New York Attorney General over allegations that they hid the loss of commingled client and corporate funds and lied about Tether’s USDT reserves. India will reportedly go ahead with a complete ban on investment in crypto-assets, and the Central Bank of Nigeria banned all regulated financial institutions from providing services to crypto exchanges in the country.

Crypto-Asset Markets (see also the Annex in the PDF version)

Crypto-asset market capitalization increased by about 41% from January 30 to $1,389 billion with the price of Bitcoin finishing up 35.4% ($46,526) after hitting an all-time high of $58,332 (Figure 1). The main driver continued to be increasing institutional investor interest amid prospects of years of ultra-low interest rates and concerns about future inflation given expansionary monetary policies. For example, Tesla announced that it had invested $1.5 billion in Bitcoin and signaled its intent to begin accepting it as a form of payment. Also, new crypto-focused investment funds, including exchange-traded funds (ETFs), continue to pop up, something I discuss in a separate post. However, there were some signs that institutional investor interest was fading, as the Grayscale Bitcoin Trust premium turned negative, and Bitcoin “whales” were reported to be offloading. Altcoin market capitalization was up 45%, although Ethereum’s was up only 5% as its soaring “gas” fees turned attention to alternative tokens like Cardano (+260%), Binance Coin (+375%) and PolkaDot (+106%).


The amount of crypto-assets on decentralized finance (DeFi) platforms increased 26% to $34.8 billion (from $27.7 billion on January 30). January decentralized exchange (DEX) trading volume soared to set an all-time high of $56 billion, according to data from Dune Analytics. DEXs use smart contracts on blockchain networks to let users swap between digital assets without transferring tokens to an exchange wallet or verifying their identity. However, DeFi Money Market (DMM) ceased operations as a result of U.S. Securities and Exchange Commission (SEC) inquiries, raising concerns that other DeFi applications may be next.[1]

Stablecoin market capitalizations continue to increase. Almost all are USD-pegged, and Tether’s USDT remains dominant ($34.8 billion) despite the controversy that surrounds it (see below). USDC is followed by USDC ($9.0 billion), Dai ($2.3 billion) and BUSD ($2.3 billion). Of note, Canada’s VersaBank Canadian dollar-pegged VCAD crypto-asset will become the world’s first bank-issued stablecoin. 

The last Monthly Monitor talked about how USD-pegged Empty Set Dollar (ESD), launched in September 2020 and one of the first algorithmic stablecoins to come to market, briefly held the #6 position in the stablecoin league table. (An algorithmic stablecoin adjusts its supply to maintain its peg.) However, ESD broke its peg massively, and is now trading below $0.20 ($50 million market capitalization). However, there’s another very viable-looking USD-pegged stablecoin, TerraUSD which sits at #7 ($700 million market capitalization). I discuss it in a separate post.

Bitfinex and Tether reached a $18.5 million settlement with the New York Attorney General (NYAG) over allegations that they hid the loss of commingled client and corporate funds and lied about Tether’s USDT reserves. By May 18, 2021 and on a quarterly basis thereafter for two years, the firms will be required to publish reports on the composition of USDT reserves. Without admitting or denying any wrongdoing, Tether committed to publicly share these reports. Also earlier in the month, Ripple reported that the last $550 million of the loan at the center of the lawsuit was paid off. However, the lawsuit did not cover the rumored role of Tether in a huge BTC pumping scheme, which I discuss here.

Diem (formerly Libra) is reportedly preparing to launch a minimum viable project based around a U.S. dollar stablecoin in March. In that regard, crypto-asset custodian Fireblocks and payments platform First Digital Assets Group will be partnering with Diem to provide digital plumbing to allow financial service providers such as banks, exchanges, payment service providers and digital wallets to plug into Diem. In a move obviously with Diem in mind, in a legal opinion on the European Union rules, the European Central Bank said it should have the final word on whether a stablecoin should be allowed to launch in the euro zone, and that this binding for national authorities assessing applications to issue stablecoins.   

Crypto-related regulatory developments

India will reportedly go ahead with a complete ban on investment in crypto-assets, while providing existing investors a three- to six-month transition period to exit their holdings. Also, the Central Bank of Nigeria (CBN) banned all regulated financial institutions from providing services to crypto exchanges in the country. The CBN warned of stiff penalties to financial institutions that fail to comply with the directive. As a result, the country’s Securities and Exchange Commission put plans to regulate crypto-assets on hold. 

The U.S. SEC and Ripple said that there’s little chance of settlement ahead of the expected trial over alleged securities infractions. The SEC is accusing Ripple Labs and its lead executives of being in violation of securities laws with $1.3 billion generated from XRP sales. The SEC also amended its complaint to include allegations that Ripple purposely manipulated XRP’s price by increasing and decreasing XRP sales depending on market conditions.

Other digital asset market developments (see also Table 1 in the PDF version)

Incumbent financial institutions aren’t shrinking from fintech challenges. MasterCard announced plans to support crypto-assets in 2021, and said it is “actively engaging” with several major central banks to support CBDC initiatives. Visa is piloting a suite of application programming interfaces (APIs) to let banks connect to digital asset bank Anchorage’s infrastructure, to allow their customers to buy and sell digital assets. Visa is already working with crypto companies to issue bank cards and has partnered with 35 crypto firms to date, but this is the first time the company has offered crypto services to banks. Bank of New York Mellon announced plans to hold, transfer and issue Bitcoin and other crypto-assets as an asset manager on behalf of its clients. 

Retail CBDC developments (see also Table 2 in the PDF version)

The IMF’s Sonja Davidovic posted the first topical piece on our new Global Fintech Intelligencer blog. As central banks advance their CBDC work, they are faced with questions on how to interoperate with other digital assets. To unravel the interoperability conundrum and provide a robust digital ecosystem for the economy, China has launched the Blockchain Service Network (BSN). Although in its early stages, the BSN remains a unique attempt to build a global interoperability network that connects digital assets both across borders and networks. 

A Sveriges Riksbank staff memo argued that it would be misguided to expect cash-like features of a CBDC. For a CBDC to be cash-like, it would need to be both anonymous and usable off-line, but the memo claims that the technical construction of digital currencies requires that they be verified by a remote ledger, in order to avoid double spending. It dismisses the possibility of using tamperproof local devices that cannot be programmed so that a token cannot be spent more than once. However, Mondex used tamper-resistant hardware to do exactly what the memo says is impossible. It failed due to a flawed business model, and not any technical shortcomings.

A Swiss National Bank working paper proposed a double spending-resistant token-based CBDC system. It showed how earlier-deployed, software-only electronic cash can be improved upon to preserve transaction privacy, meet regulatory requirements, and offer quantum-resistant protection against systemic privacy risk. The proposed CBDC system is based on blind signatures and a two-tier architecture, that purportedly guarantees perfect, quantum-resistant transaction privacy and provides anti-money laundering and counter terrorism financing protections stronger than those of banknotes.

Canadian fintech firm Bidali has reportedly launched a pilot to test a digital Bermuda dollar with the support of the Bermuda government. Under the pilot program, popular local rum company Gosling’s Limited will be accepting digital Bermuda dollars through the Stellar network. From there it hopes to expand to other businesses in Bermuda. Bermuda is a British island territory that does not have a central bank and the Bermuda dollar is pegged one-to-one to the U.S. dollar – it is effectively a non-digital government-issued stablecoin with one USD in reserve for every Bermuda Dollar that’s issued. Also, since 2019, Bermudans have been able to pay taxes with USDC stablecoins.

Wholesale CBDC developments (see also Table 2 in the PDF version)

The Digital Currency Institute of the People’s Bank of China and the Central Bank of the United Arab Emirates joined the m-CBDC Bridge central bank digital currency (CBDC) project for cross-border foreign currency payments. The m-CBDC Bridge initiative is run in partnership with the BIS Innovation Hub (BISIH), the Hong Kong Monetary Authority and the Bank of Thailand. It will further explore the capabilities of distributed ledger technologies by developing a proof-of-concept prototype to support real-time cross-border foreign exchange payment-versus-payment transactions in multiple jurisdictions, operating 24/7. It will analyse business use cases in a cross-border context with both domestic and foreign currencies. 

The South African Intergovernmental Fintech Working Group launched “Project Khokha 2” to explore the use of tokenized money, blockchains and wholesale central bank digital currency (CBDC) in South Africa. The CBDC will use R3’s Corda enterprise blockchain, and the settlement token and debenture will use a variant of Cosmos blockchain interoperability solution. Accenture will be responsible for tokenizing the wholesale CBDC on Corda. Block Markets Africa will help with distributed ledger technology, tokenizing the bonds and the wholesale payment token using its custom Cosmos-based solution. And Deloitte will document the insights. Other participants in the trials will include commercial banks Absa, FirstRand, Investec, Nedbank, and Standard Bank, the Johannesburg Stock Exchange (JSE), and Strate, South Africa’s central securities depository. 

General Fintech Developments (see also Table 3 in the PDF version)

The People’s Bank of China (PBoC) China National Clearing Center (CNCC) and its Digital Currency Research Institute (DCRI) has partnered with SWIFT to launch a new financial payment service, Finance Gateway Information Service Limited. No further details on the functions or scope of the funding were offered on the registration document. SWIFT owns 55% of the incorporation contribution, CNCC owns 34%, DCRI 3%, CNCC’s subsidiary Cross-border Interbank Payments and Settlement Limited (5%), and the Clearing Association of China (3%).

The pandemic continued to drive consumers to PayPal and Venmo. Paypal added a record 72.7 million active accounts in 2020, with the addition of 16 million accounts in the fourth quarter. Venmo, PayPal’s peer-to-peer (P2P) service, processed $47 billion in payments, up 60% from a year earlier. Similarly, payment volumes and values at U.S. interbank retail P2P payment service Zelle increased 58% (to 1.2 billion transactions) and 62% ($307 billion sent) and 457 new financial institutions joined its network in 2020, bringing the total number to nearly 7,000. Also, according to Zelle research, more than 85% of consumers either use or plan to use P2P services.  

Miscellaneous commentary and research (see also Table 4 in the PDF version)

A U.S. Fed paper identified high-level environmental preconditions that support a U.S. retail CBDC, aimed at sparking further inquiry. These preconditions were broadly grouped into five areas: clear policy objectives, broad stakeholder support, strong legal framework, robust technology, and market readiness. Within each area, detailed elements were discussed. It recognized that these areas and elements were not exhaustive because many systems, tools, processes, and structures will need to be in place for a CBDC. In addition, many of these elements are interconnected.

A Minneapolis Fed article found that “the benefits of a central bank digital currency (CBDC) in the United States are not immediately obvious. Largely due to the legal and regulatory framework supporting the payments infrastructure, an end user’s buying power and ability to trust in the integrity of a transaction are the same for banknotes and bank account balances. Because the banking sector facilitates the exchange of funds between parties, the absence of central bank-issued digital money for general purposes is not currently an issue for most Americans.” Also, this VoxEU article asked tough questions about the need for CBDC, and the high risk that a CBDC introduction could be a gigantic flop.

[1] DMM users were depositing DAI, USDC, USDT, or ETH to the DMM smart contract in exchange for DMM mTokens that offered over 6% interest rates on the real-world car loans that backed them. DMM runs off a custom-built Chainlink oracle. The SEC subpoena requested information about the mTokens, the DMG governance tokens, and other details surrounding DMM’s operations and governance.