Tag: Banking

Hong Kong Central Bank Urges Crypto-Friendly Banking

by Blockchain News

The Hong Kong Monetary Authority (HKMA) has issued a circular on April 27th instructing authorized institutions, also known as “AIs,” to provide banking services to cryptocurrency firms while adopting a risk-based approach to Anti-Money Laundering (AML) measures. This circular comes as a significant move towards legitimizing cryptocurrencies in the region and bridging the gap between traditional banking and the rapidly growing digital assets industry.

The HKMA’s directive is part of its broader efforts to regulate the cryptocurrency market in Hong Kong, a region that has been grappling with the lack of clarity surrounding cryptocurrencies and their legal status. This directive requires authorized institutions to assess the risks associated with each corporate customer, including cryptocurrency firms, and implement appropriate measures to mitigate those risks.

This move is a critical step towards the integration of cryptocurrencies into the mainstream financial system in Hong Kong, where digital assets have long struggled to gain legitimacy. Cryptocurrency firms in Hong Kong have often faced significant challenges in accessing banking services, leading to operational difficulties, stifling innovation, and impeding growth. With this new directive, the HKMA aims to ensure that cryptocurrency firms can access necessary banking services, enabling them to operate efficiently and safely within the existing regulatory framework.

The HKMA has been actively working towards regulating the cryptocurrency market in the region, with plans to launch its own central bank digital currency (CBDC) in the coming years. The HKMA’s efforts to regulate the cryptocurrency market, coupled with its CBDC initiative, highlight the region’s increasing interest in the digital assets industry and its potential to transform the traditional financial system.

In conclusion, the HKMA’s directive to authorized institutions to provide banking services to cryptocurrency firms is a significant move towards legitimizing cryptocurrencies in Hong Kong. This directive will not only help bridge the gap between traditional banking and the digital assets industry but will also enable cryptocurrency firms to access necessary banking services, leading to operational efficiencies and growth. With the HKMA’s increasing interest in the digital assets industry, we can expect to see further developments in the coming years, ultimately leading to the integration of cryptocurrencies into the mainstream financial system.

Source

Tagged : / / / / /

Moody warns of stablecoin adoption risk

by Blockchain News

In its latest report, Moody’s Investors Service has warned that the recent instability in the traditional banking sector could have a negative impact on the adoption of stablecoins. The credit rating agency has highlighted the risks that fiat-backed stablecoins like USDC face, stating that the reliance of stablecoin issuers on a small set of off-chain financial institutions limits their stability. The depegging of USDC on March 10, which was caused by the sudden collapse of Silicon Valley Bank, has highlighted this risk.

Circle Internet Financial, the issuer of USDC, had $3.3 billion in assets tied up in the bank, and over the span of three days, the company cleared roughly $3 billion in USDC redemptions as the value of its stablecoin plunged to a low of around $0.87. However, USDC quickly regained its peg after the Federal Deposit Insurance Corporation announced that it would backstop all deposits held at Silicon Valley Bank.

Moody’s analysts believe that regulators are likely to pursue more stringent oversight of the stablecoin sector moving forward, given the recent market volatility and the potential risks associated with stablecoins. The credit rating agency has also warned that if USDC had not regained its peg, it could have suffered from a run and been forced to liquidate its assets. Such a scenario could have caused more runs on banks holding Circle’s assets, which could have led to the depegging of other stablecoins.

Despite the collapse of Terra, which led to calls for the regulation of stablecoins, Moody’s believes that fiat-backed stablecoins like USDC operate differently from algorithmic tokens and are less likely to fail. Nevertheless, the credit rating agency warns that stablecoin issuers must take steps to reduce their reliance on a small set of off-chain financial institutions to improve their stability.

In conclusion, the recent instability in the traditional banking sector and the depegging of USDC have highlighted the potential risks associated with stablecoins. While Moody’s believes that fiat-backed stablecoins are less likely to fail than algorithmic tokens, the credit rating agency warns that stablecoin issuers must take steps to reduce their reliance on a small set of off-chain financial institutions. With regulators likely to pursue more stringent oversight of the stablecoin sector moving forward, stablecoin adoption could be negatively impacted.

Source

Tagged : / / / / /

The Fed Rejects Custodia Bank’s Membership Application

by Blockchain News

Custodia Bank, a bank that deals in cryptocurrencies, asked the United States Federal Reserve to reconsider its membership application to the Federal Reserve System. However, the United States Federal Reserve turned down this request. A district court has allowed a lawsuit between Custodia Bank and the United States Federal Reserve to continue.

Custodia’s application “was inconsistent with the requisite elements under the law,” according to an earlier decision made by the Federal Reserve Board, which was cited in the central bank’s announcement on February 23 on the denial of membership.

The Federal Reserve rejected Custodia’s membership application in January, about four years after the company first submitted the request in 2019. Applicants have the right, according to the regulations of the board, to request that membership choices be reconsidered.

The reason the Fed gave for rejecting Custodia’s application was that the company’s management structure was “insufficient.”

In addition to this, it referred to a joint statement that it had prepared jointly with the Office of the Comptroller of the Currency and the Federal Deposit Insurance Corporation. In this declaration, it said that cryptocurrencies were “inconsistent with safe and sound banking practices.”

Custodia has said that it would want to become a member of the Federal Reserve System in order to be subject to the same regulations that are imposed on conventional banks. In addition, this would pave the way for other cryptocurrency institutions to be subject to the same stringent requirements.

This week, on February 22, a judge in a district court in Wyoming dismissed a petition by the Federal Reserve board to dismiss a complaint filed by Custodia about a delay of more than two years in the opening of a master account with the Federal Reserve.

With a master account, Custodia would be able to access the payment systems of the Federal Reserve without having to use any other banks as intermediaries. Custodia’s request for a master account with the Fed was turned down on January 27, more than two years after the company first submitted its request for the account in October 2020.

After that, the Fed made a motion to dismiss the case since the account rejection rendered the complaint meaningless. Custodia, on the other hand, submitted a proposed amended complaint to the court on February 17, alleging that the Federal Reserve unfairly singled out and rejected its application as part of a “concentrated and coordinated” effort with the administration of President Joe Biden and requesting that the court reverse the decision.

Nathan Miller, a spokeswoman for Custodia, was quoted as saying in a statement that was released on February 17 that the case “zeroes in on the main legal issue: whether Congress ever authorized the Fed jurisdiction to determine master accounts at all.” He also said that the Fed “pressed the hand” of the cryptocurrency bank, stating that the institution “tried every avenue to find a sensible route ahead.”

A deadline of March 1 has been set by the judge for Custodia to submit its first revised complaint to the court.

Source

Tagged : / / / / / /

Silvergate Bank Suspends Dividend Payments to Preserve Liquidity

by Blockchain News

Silvergate, a cryptocurrency bank located in California, has temporarily halted dividend distributions in order to protect its “very liquid balance sheet.”

The company declared on January 27 that it would stop “the payment of dividends on its 5.375% Fixed Rate Non-Cumulative Perpetual Preferred Stock, Series A, in order to conserve capital.” This information was provided in a statement made on that day.

The business said that it came to the conclusion that it needed to weather the storm of crypto winter in order to survive, but it emphasised that it still retains a “cash position in excess of its digital asset customer-related deposits.”

As the company navigates the current turbulence in the digital asset business, “This move underlines the Company’s aim on keeping a highly liquid balance sheet with a solid capital position.”

According to another statement made by the company, “The Company’s Board of Directors will re-evaluate the payment of quarterly dividends as market circumstances develop.”

The statement comes only 11 days after the corporation reported a significant net loss of one billion dollars in its quarterly report for the fourth quarter of 2022 on January 17. The negative market attitude as a whole, which has led investors to take a “risk-off” strategy over the course of the last year, was what Silvergate said was to blame for the company’s dismal performance.

Alan Lane, the CEO of Silvegate, noted in the Q4 report that the company is still bullish on the cryptocurrency sector but is working to maintain “a highly liquid balance sheet with a strong capital position.” This language is very similar to the language that was used in the most recent announcement.

Prices of both the company’s preferred (SI-PA) and regular (SI) stocks dropped significantly after the announcement that dividend payments would be halted on Friday.

The price of SI-PA fell by 22.71% to $8.85 by the time the market closed, while the price of SI fell by 3.76% to settle at $13.58. These figures are from data provided by Yahoo Finance.

When looking at the big picture, SI-PA and SI offer a bleak image as well since their share prices have dropped by 60 and 87.46% respectively over the course of the last year.

After announcing on January 5 that it has let off 200 people, which represents 40% of its employment, in an effort to stay afloat, the company has not taken this as the sole step it has done this month to shore up its coffers. Instead, it has also taken this measure.

Source

Tagged : / / / / /

Custodia Bank’s Application to Join Federal Reserve Rejected

by Blockchain News

The application that Custodia Bank submitted to join the Federal Reserve System was denied by the Board of Governors of the Federal Reserve System in the United States. The Federal Reserve noted in its statement that the application “was not compatible with the relevant conditions under the law.” In addition to this, it asserted that Custodia possessed a management framework that was “insufficient,” and it referred to an earlier joint declaration made by the Federal Reserve, the Federal Deposit Insurance Corporation, and the Office of the Comptroller of the Currency, which concluded that cryptocurrency assets are incompatible with safe banking procedures.

In spite of the fact that the bank’s application for a master account was denied, the bank said in a tweet that the application is still in the processing stage. Because of what is known as a “master account,” a financial institution is able to carry out crucial tasks such as making international money transfers. Custodia, which is led by Caitlin Long, submitted an application for the master account in 2020 and filed a lawsuit against the Fed in June due to the prolonged delay in the Fed’s consideration of the application.

According to a statement released by Custodia, the Fed set the bank a deadline of three days and three nights to withdraw its application. Custodia aggressively sought federal oversight, going above and beyond all of the rules that apply to ordinary banks, the report noted.

In August, when it became apparent that digital asset banks may have a difficult time acquiring an account, the Fed did not provide rules for the issuance of master accounts until after it had become evident that digital asset banks could have a difficult time receiving an account. “Institutions that engage in novel activities and for which authorities are still developing appropriate supervisory and regulatory frameworks would undergo a more extensive review,” the Fed said in a statement at the time. “Institutions that engage in novel activities and for which authorities are still developing appropriate supervisory and regulatory frameworks.”

In October, the Federal Reserve granted the BNY Mellon bank permission to provide cryptocurrency custody services. As a result, the BNY Mellon bank became the first major U.S. bank to offer simultaneous custody of digital assets and conventional investments on the same platform. Custodia Bank was established in Wyoming in 2020, taking advantage of the crypto-friendly state’s opt-in custody laws for “blockchain banks” that were implemented in 2019.

Source

Tagged : / / / / / /

Binance to Consider Buying Banks with $1 Billion , CEO CZ Discloses

by Blockchain News

Binance is considering buying banks to bridge the gap between the worlds of traditional finance and cryptocurrency, founder and CEO Changpeng Zhao (CZ) said in an interview with Bloomberg.

The billionaire did not disclose specific targets, saying he was open to minority investments or full takeovers. Zhao also pointed out that investment banking is a reasonable strategy for Binance because when partnering with banks, Binance usually attracts many new users, which will also boost the bank’s valuation.

“What we have found is when banks work with us, we drive so many users to them, so the bank’s valuation goes up, like why don’t we just invest in them as well, so that we capture some of the equity upside, “he said.

CZ said in an interview at the Web Summit in Lisbon: “There are people who hold certain types of local licenses, traditional banking, payment-service providers, even banks. We’re looking at those things.”

Zhao has said in the past that Binance has more than $1 billion to spend on acquisitions, with its acquisition strategy focused on areas such as DeFi and NFTs.

He stressed that traditional financial institutions are now more closely linked to the cryptocurrency industry as a whole. He said that despite the cold winter in the cryptocurrency market due to a number of factors, such as interest rate hikes, the correlation between digital assets and traditional finance -“TradFi” is still deepening. Well-known traditional financial services companies include Goldman Sachs Group Inc., BlackRock Inc, etc.

In June, U.S. multinational investment bank Goldman Sachs Group Inc showed interest in acquiring troubled cryptocurrency lender Celsius Network, hoping to buy the company at a steep discount, according to two people familiar with the matter.

In September, BlackRock, a New York-based US multinational investment company, has expanded its crypto service offerings by launching a new exchange-traded fund (ETF) that provides exposure to blockchain and crypto companies for its European customers.

Binance recently confirmed that the crypto exchange has invested in Musk’s Twitter deal. In a statement, Binance quoted its co-founder, billionaire Changpeng Zhao (CZ), as saying that Binance had committed to spending $500 for Musk to acquire Twitter as part of its strategy to bring social media and news sites into the web3 world.

Image source: Shutterstock

Source

Tagged : / / / / /

Blockchain’s Adoption & Capabilities Increase against Fraud in Public Finance Sector

by Blockchain News

Based on blockchain’s inherent capability of tackling fraudulent transactions, this cutting-edge technology is expected to continue being adopted in the banking and financial services sector, according to HashCash Consultants CEO Raj Chowdhury.

Chowdhury pointed out:

“Innovations such as blockchain empower public finance managers with greater visibility and control of public fund utilization in real-time. Efficient use of public money will lead to improved services for the public, economic boost, and improvement of the community as a whole.”

With research forecasting that the worldwide blockchain expenditure will clock $67.4 billion by the close of 2026, the banking and financial services industry is expected to remain the top spending area in the blockchain space, contributing to nearly 30% of the total expenditure. 

Chowdhury stated:

“The performance of decentralized blockchain architecture is proportional to the number of available network members.” 

He added:

“The underlying crypto platform offers real-time transaction visibility based on permissioned access along with hassle-free provisions for eKYC and auditing, leading to improved overall service.”

Not only does blockchain technology prompt fraud prevention it also instigates transparency, smart contract enforceability, capital optimization, and instant settlements.

Fraud prevention becomes a reality based on blockchain’s secure data encryption that utilizes multiple security layers. 

Chowdhury had previously acknowledged that the banking infrastructure required blockchain technology to meet the needs of the rapidly changing fintech environment. 

Meanwhile, the global blockchain technology market in the banking, financial services, and insurance (BFSI) sector is expected to hit $4.02 billion by 2026, thanks to a surge in FinTech spending, Blockchain.News reported. 

Image source: Shutterstock

Source

Tagged : / / / / / /

Step Secures $300m Fund, Introduces Crypto Investment Platform for Young Adults

by Blockchain News

Digital banking service Step has secured $300 million in new debt funding round, which coincided with the company’s launch of a crypto investment platform aimed at minors and young adults – their key clientele.

shutterstock_2173297427 t.jpg

The banking platform’s funding round was led by Triplepoint Capital and Evolve Bank & Trust, the company said.

According to the company, minors and young adults can only use the new crypto investment platform with the consent of a parent or legal guardian to buy and sell bitcoin, with additional stocks and cryptocurrencies to join the platform soon.

Alongside the new platform, Step also introduced Money 101 – a financial literacy program – a six-lesson course that spans the banking sector to cryptocurrency investing.

According to The Block, with the funding secured, Step’s raise now totals $500 million, including debt and equity financing, from investors such as Crosslink Capital, Stripe, Coatue, General Catalyst, Triplepoint Capital, Charli D’Amelio, Stephen Curry, Justin Timberlake, Will Smith, The Chainsmokers, Alex Rodriguez, and others.

Step previously, in April 2021, closed a $100 million round of Series C funding after growing to more than 1.5 million users just six months after launch.

The round was led by General Catalyst, which came shortly after Step’s $50 million Series B.

Step is competing in a crowded market of mobile banking services aimed at a younger demographic, but it’s one of very few that targets teenagers ages 13 to 18. 

According to the company, Step’s app allows teens access to an FDIC-insured bank account without fees and a secured Visa card that helps them establish credit before they turn 18.

The app also offers Venmo-like functionality for sending money to friends.

Image source: Shutterstock

Source

Tagged : / / / / /

Global Blockchain Technology Market in BFSI Sector Expected to Hit $4.02B by 2026

by Blockchain News

The global blockchain technology market in the banking, financial services, and insurance (BFSI) sector is expected to hit $4.02 billion by 2026, thanks to a surge in FinTech spending, according to ReportLinker. 

The market is expected to record a compound annual growth rate (CAGR) of 36.6% during the 2022-2026 forecast period. 

The advent of artificial intelligence (AI) is anticipated to be a key driver of the blockchain technology market in the BFSI sector. 

Moreover, the growth of blockchain as a service and quantum computing will prompt notable demand in the market. The report added:

“The market is driven by the increase in FinTech spending, easier access to technology, and disintermediation of banking services.”

The report seeks to offer insights companies need when positioning themselves in the market by scrutinizing vital parameters such as promotions, competition, pricing, and profit. 

Some key players in the blockchain technology market in the BFSI sector include Ripple Labs Inc., Tata Consultancy Services Ltd, Oracle Corp, Hewlett Packard Enterprise Co., Microsoft Corp, and Coinbase Global Inc., among others.

The report segmented the market into a consortium, private, and public blockchains by type for enhanced insights.

Meanwhile, heightened demand for the worldwide blockchain in the retail market is expected to drive its value past the $3.27 billion mark by 2028, according to a recent report by market research organization Facts and Factors. 

Since blockchain plays an instrumental role in showing the precise location of different products and their safety and reliability, retailers were anticipated to continue embracing this technology. 

The urge for enhanced transaction transparency-based solutions was expected to spur more growth in the worldwide blockchain in the retail market, Facts and Factors added. 

Image source: Shutterstock

Source

Tagged : / / / / / / /

Digital Assets Should be Regulated as Part of Banking Industry: Ex-Regulator

by Blockchain News

Experts in the financial industry are advocating for digital currency innovation and activities to be subsumed into the banking industry, a move that will let regulators permit their overall growth.

BANK2.jpg

At the Bank Policy Institute annual conference in New York on Tuesday, Gene Ludwig, an executive with Chain Bridge Partners, a regulatory advisory firm, believes crypto will thrive more if some of the solutions and services being offered are fronted by banking institutions.

 

“The federal government doesn’t want basically unregulated third parties basically creating their own currency,” he said, adding that rather than invest resources in Central Bank Digital Currency (CBDC), regulators, in general, need to “allow banks to play more aggressively in the crypto market.”

 

“If we’re going to allow crypto at all, the banking industry is the right place to do it, because it is regulated.”

 

Events in the digital currency ecosystem, especially in relation to hacks and the latest bankruptcies ushered in by the menacing crypto winter have made regulators frown at risky and mildly regulated assets like cryptocurrencies.

 

Experts believe that the stability that was enjoyed by the banking sector during the crypto onslaughts recorded in the crypto space in Q2 and Q3 is a testament to how reliable the space is over the nascent industry.

 

From what has been observed thus far, regulators may be more receptive to banks who are willing to sit and chart out a viable part when considering making a dive into the crypto space. 

 

“I think the coin argument is the most tricky and fraught with peril,” said Jeremiah Norton, managing member of Chain Bridge Partners, a regulatory advisory firm, adding that U.S. regulators are literally telling banks, “If you’re thinking about thinking about crypto, come to us first.”

 

“I don’t see a lot of running room for algorithmic players in the regulated space anytime soon,” Norton said.

Image source: Shutterstock

Source

Tagged : / / / /
Bitcoin (BTC) $ 27,095.26 2.65%
Ethereum (ETH) $ 1,864.19 2.51%
Litecoin (LTC) $ 89.62 2.82%
Bitcoin Cash (BCH) $ 112.70 1.93%