Our weekly list of announcements about how capital markets participants and regulators are engaging with digital assets.
Bank of France’s Beau on the emergence of crypto assets in payments and settlement
With the emergence of so-called crypto assets like bitcoin and so-called stablecoins, we may also see new settlement assets develop which may compete against and possibly, according to their promoters, replace commercial and central bank money as settlement assets at the center of our payment systems.
All around the world, market participants and big techs have launched or are preparing to launch new projects for tokens designed to serve as means of payment or settlement using the blockchain technology. We all have in mind first generation crypto assets like bitcoin and ether, but there are now many others coming or foreseen, like the JP Morgan Coin, the UBS’ Utility Settlement Coin or Facebook’s Libra.
One possibility regularly mentioned is that central banks issue their money in digital form, the so-called concept of Central Bank Digital Currency (CBDC). It is important here to draw a distinction between a retail CBDC, accessible to the general public, and a wholesale CBDC, accessible only to financial intermediaries.
In regards to a wholesale CBDC, we already begin to observe a tokenization of financial assets (securities or means of settlement) exchanged between financial actors. The risk there is that such a trend leads to disorderly approaches and heterogeneous adaptations of market infrastructures, in particular when it comes to the modalities of settlement.
Several initiatives or projects are in effect considered by the industry in the post-trade area, pointing to the role central banks could play in this regard, as they have done in the past. Against this background, the potential role of a wholesale CBDC is in my view worth considering if not desirable.
It is hard to anticipate the role that crypto assets might play in the payment system of the future, especially since the characteristics and features of these assets look set to change considerably. While it is clear that crypto assets undergoing technical and economic trials bring about opportunities to improve our payment systems, they can also bring material risks to our payment systems which, if unaddressed, might introduce new sources of fragmentation, instability and fraud.
To preserve the advantages of multiple issuers of settlement assets in providing innovative, efficient and safe means of payment, central banks as issuers of the reference settlement asset may contribute further in revisiting and improving the conditions under which they make available that settlement asset.
CFTC chair says ether is a commodity, falls in regulatory scope
At the Yahoo! Finance All Markets Summit in New York City, US Commodity Futures Trading Commission chair Heath Tarbert participated in a wide-ranging interview on cryptocurrency regulation and other CFTC agenda items.
On ether’s status as a commodity: “We’ve been very clear on bitcoin: bitcoin is a commodity under the Commodity Exchange Act. We haven’t said anything about ether – until now. It is my view as chairman of the CFTC that ether is a commodity, and therefore it will be regulated under the CEA. And my guess is that you will see, in the near future, ether-related futures contracts and other derivatives potentially traded … It’s my conclusion as chair of the CFTC that ether is a commodity and therefore would fall under our jurisdiction.”
On the treatment of forked assets: “It stands to reason that similar assets should be treated similarly. So if the original digital asset hasn’t been determined to be a security and is therefore a commodity, most likely the forked asset will be the same – unless the fork itself raises some securities law issues under that classic Howey Test.”