Interbank Market News Scan: Yellen appoints a new Comptroller of the Currency chief …

Links of interest to follow …

Trading desks, investment banks. Barclay’s CEO Staley on trading revenue, compensation costs, and return to office. Barclays CEO Jes Staley Staley on Trading Revenue, Compensation Costs, Return to Office: Video – Bloomberg

Trading desks, banks. Citigroup, Nuveen accused of mishandling evidence in muni brawl. Citigroup, Nuveen Accused of Mishandling Evidence in Muni Brawl – Bloomberg.

Trading desks, banks, blockchain. European debt pioneer trumpets revolution coming from blockchain. EIB’s Richard Teichmeister Says Revolution to Come From Blockchain – Bloomberg

Banks.  U.S. Treasury Secretary Janet Yellen plans to make her mark by naming a new supervisor for a major U.S. banking regulator that Democrats say was too friendly to large banks under the Trump administration, according to two people familiar with the matter. Yellen to Shake up U.S. Bank Regulator With New Appointment – Sources | Investing News | US News

Banks, central banks. The U.S. nonprofit Digital Dollar Project said on Monday it will launch five pilot programs over the next 12 months to test the potential uses of a U.S. central bank digital currency, the first effort of its kind in the United States. Digital Dollar Project to launch five U.S. central bank digital currency pilots | Reuters

Foreign exchange rates of interest …

Currency PairsRates as of 11:05 pm EST 3 May 2021
EUR/USD1.2047
GBP/USD1.3879
AUD/USD0.7742
USD/CAD1.2293
USD/JPY109.1900
USD/NOK8.2964
USD/CHF0.9124
USD/SEK8.4250
USD/MEX20.2220
Source: Reuters

Interbank Market News Scan: France takes a closer look at Apple, Google as payment systems, platforms …

Foreign currency exchange rates of interest …

Currency PairsRates as of 10:28 am EST 28 April 2021Rates as of 9:13 am EST 29 April 2021Increase/decrease in pips
EUR/USD1.18771.1877No change
GBP/USD1.38961.3831-65
USD/CAD1.25461.2551+5
AUD/USD0.76130.7625+12
USD/JPY110.6250110.0830-5,420
USD/NOK8.51948.5035-159
USD/CHF0.92950.9135-160
USD/SEK8.71668.7177+11
USD/MEX20.257120.2571No change
USD/XCD2.70002.7000No change
USD/JMD147.1020145.180-19,220
USD/DOP56.157556.1575No change
USD/HTG79.338283.8141+44,759
USD/BSD1.00001.0000No change
Source: OANDA

News links you should be following …

Payment systems. The Bank of Thailand (BoT) and the Monetary Authority of Singapore (MAS) today launched the linkage of Thailand’s PromptPay and Singapore’s PayNow real-time retail payment systems. In a joint statement, the BoT and MAS said the linkage, the first of its kind globally, will enable customers of participating banks in Thailand and Singapore to transfer funds of up to S$1,000 or 25,000 baht daily across the two countries, using just a mobile number. Thailand, Singapore launch world’s first linkage of real-time payment systems | The Edge Markets

Payment systems. The launch of Saudi Arabia’s first instant payments system is another step towards the kingdom’s ambitious proposals to have a 70 percent cashless society as part of the Saudi’s Vision 2030, according to Takreem El-Tohamy, general manager, IBM Middle East and Africa. Saudi launches instant payment system in drive towards cashless society – Arabianbusiness

Payment systems. Embracing new payment rails, and enhancing the value of existing ones, remains a key part of promoting overall payment innovation. But as real-time payment networks proliferate, a new challenge is on the rise: enabling interoperability between these rails on both a domestic and international scale. Real-Time Payments Seek Interoperability | PYMNTS.com

Payment systems. Digital payment services developed by U.S. tech giants such as Apple and Alphabet’s Google risk reinforcing their market power by giving them greater sway over consumers’ data, France’s antitrust authority said on Thursday. French watchdog warns of big tech’s sway over payment services (yahoo.com)

Payment systems. The government is committed to implementing the electronic wages or “e-wages” system as soon as possible to ensure employees get paid in “real-time”, following the wake of the apparent suicide of a foreign worker several weeks ago over allegations of unpaid wages. HR minister vows e-wages system to ensure ’real-time’ payment, after employee’s death (msn.com)

Central banks. Cryptocurrencies aren’t going anywhere in the coming years, but their usage will probably decline when central bank digital currencies (CBDCs) are eventually rolled out, according to Deutsche Bank International Private Bank. Cryptocurrencies will survive the rise of central bank-backed digital coins, but their use will likely decline, Deutsche Bank says | Currency News | Financial and Business News | Markets Insider (businessinsider.com)

Central banks. Central bank digital cash could give new types of businesses access to ultra-cheap central bank funding and lessen the role of big banks in settling large transfers, a senior Bank of France official said on Thursday. Central bank e-cash could ‘challenge’ role of big banks, Bank of France says | Reuters

Cryptocurrency, ether, bitcoin. Ether hit an all-time high Thursday as bitcoin’s dominance of the cryptocurrency market declined. The world’s second-largest digital currency by market value surged to a fresh record of $2,774 Thursday morning, according to data from Coin Metrics. Bitcoin, the top digital coin, was slightly lower at a price of $54,471. Digital currency ether hits a record high, stealing bitcoin’s limelight (msn.com)

Interbank Market News Scan: Awaiting the Fed; Central banks consider or start their asset purchase taper as they increase interest in central bank digital currencies …

Foreign currency exchange rates of interest …

Currency PairsRates as of 6:20 am EST 27 April 2021Rates as of 10:28 am EST 28 April 2021Increase/decrease in pips
EUR/USD1.18971.1877-20
GBP/USD1.38551.3896+41
USD/CAD1.25681.2546-22
AUD/USD0.76130.7613No change
USD/JPY110.6250110.6250No change
USD/NOK8.51868.5194+8
USD/CHF0.94210.9295-126
USD/SEK8.71668.7166No change
USD/MEX20.295320.2571-382
USD/XCD2.70002.7000No change
USD/JMD145.1800147.1020+19,220
USD/DOP56.316456.1575-1,589
USD/HTG79.085979.3382+2,523
USD/BSD1.00001.0000No change
Source: OANDA

News links you should be following …

Payment systems. SIBS actively pursues its contribution to payments digitization on a global scale with the development and operationalization of a new payments platform in the African continent, supporting the national payment system of São Tomé and Príncipe. Sibs to launch payments system in São Tomé and Príncipe (finextra.com)

Payment systems. Jim Aramanda, president and CEO of The Clearing House, explains why the RTP (Real-Time Payments) network is the payments system built for the 21st-century digital economy. In this excerpt from The Connected Economy’s Power Source – CEO Edition, Aramanda shares his insights on the growing need for financial inclusion and greater payments control for consumers. 21st-Century Payments System For Digital Economy | PYMNTS.com

Central banks. The Bank of Canada set the taper ball rolling last week, becoming the first major central bank to cut back on pandemic-era money-printing stimulus programmes. So who’s next? The Great Exit: Central Banks Line up to Taper Emergency Stimulus | Investing News | US News

Central banks. The world’s biggest central banks are revving up work on issuing digital cash, aiming to fend off emerging threats to traditional money and to make payments systems smoother. Explainer: an E-Yuan, Euro or Dollar? Central Banks Get to Grips With Digital Cash | Technology News | US News

Central banks. JPMorgan has created a new company to tackle cross-border payments using blockchain technology with Singapore state-backed fund Temasek and DBS. JPMorgan launches blockchain venture with Temasek for central bank digital currencies – Financial News (fnlondon.com)

Central banks. Egypt’s central bank kept its key interest rates on hold on Wednesday, the bank said in a statement. Egypt’s central bank keeps key interest rates on hold – statement | Reuters

Interbank Market News Scan: Iran finds an end around on US sanctions by providing crypto an underlying economy…

Foreign exchange rates of interest ….

Currency PairsRates as of 4:46 pm EST 26 April 2021Rates as of 6:20 am EST 27 April 2021Increase/decrease in pips
EUR/USD1.18901.1897+7
GBP/USD1.38691.3855-14
USD/CAD1.25681.2568No change
AUD/USD0.76020.7613+11
USD/JPY110.5960110.6250+290
USD/NOK8.52458.5186-59
USD/CHF0.94170.9421+4
USD/SEK8.71778.7166-7
USD/MEX20.284420.2953+109
USD/XCD2.70002.7000No change
USD/JMD144.9940145.1800+1,860
USD/DOP56.316456.3164No change
USD/HTG79.085979.0859No change
USD/BSD1.00001.0000No change
Source: OANDA

News links you should be following …

Payment systems. The share of Russian exports settled in US dollars has dropped below 50%. The decline, recorded in the fourth quarter of 2020, reflects Moscow’s policy of cutting the Russian economy’s reliance on the greenback. Most Russian exports have now kicked reliance on US dollar as payment currency — RT Business News

Payment systems. Amazon is expanding its palm-scanning payment system to a Whole Foods store in Seattle, the company announced Wednesday, the first of many planned rollouts at other locations. Amazon will initially roll out Amazon One at the Whole Foods in Seattle’s Capitol Hill neighborhood, not far from the company’s headquarters, before launching the system at seven Seattle-area Whole Foods in coming months. Amazon is bringing palm-scanning payment system to Whole Foods stores (msn.com)

Payment systems. Business technology company Deluxe (DLX) has agreed to acquire First American Payment Systems for $960 million in cash, the company said in a statement. Deluxe believes that this deal will accelerate the company’s transformation into a leading payments technology company as part of its “One Deluxe” strategy. Deluxe To Buy First American Payment Systems For $960 Mln Cash | Nasdaq

Central banks, Riksbank. Sweden’s central bank kept monetary policy unchanged on Tuesday as expected, vowing to support the economy as long as needed amid uncertainty over the speed of recovery from the effects of the pandemic. Swedish central bank leaves policy unchanged amid COVID uncertainty | Nasdaq

Central banks, Central Bank of Iran. A developing strategy to mitigate the crippling effect of economic sanctions could see cryptocurrencies being used by Iranian firms to pay for imports such as raw materials and electronics. Iran is continuing to explore the potential use of cryptocurrency as a tool for mitigating the devastating impact of economic sanctions imposed by the United States.  Iran’s central bank says officially mined crypto can be used to pay for imports (cointelegraph.com)

Central banks, Riksbank. A period with inflation over the 2% target of the Swedish central bank would not be a big problem, Governor Stefan Ingves said on Tuesday after the central bank kept policy unchanged. Swedish c.bank’s Ingves says not big worry if inflation overshoots (msn.com)

Interbank Market News Scan: China is graying and will need to revamp its demographic policies ….

Links to follow today ….

Central banks, China. A pension deficit and looming debt crisis driven by a rapidly greying population. That’s the nightmare scenario for Chinese authorities, including the nation’s central bank, who are increasingly worried about the financial implications of the country’s demographic challenges. China population: what’s driving central bank concern about the nation’s ageing workforce? | South China Morning Post (scmp.com)

Central banks, CBDCs. The proposed authoritarian evolution of centrally issued digital currencies takes the world closer to dystopia. Central Bank Digital Currencies And The Orwellian New World Order | Nasdaq

Central banks, bitcoin. Billionaire investor Mike Novogratz said Thursday the surge in cryptocurrencies is serving as a referendum on the perceived ability of the Federal Reserve to manage risks facing the world’s largest economy and suggested people continue to buy into bitcoin. Billionaire investor Mike Novogratz says the record-breaking rally in crypto shows a lack of faith in the Fed – and cites central-bank uncertainty as a reason for bitcoin’s latest surge (msn.com)

Central banks, Bank of Canada. The Bank of Canada sent out a warning to investors this week that inflation still matters. In a surprise move, it accelerated the timetable for a possible interest-rate increase and began paring back its bond purchases on Wednesday. That made Canada the first major economy to signal its intent to reduce emergency levels of monetary stimulus. Inflation Forces the Bank of Canada’s Hand Ahead of Fed and ECB (msn.com)

As we enter a new week, the rates to start your day ….

As of 11:30 am EST, Bloomberg reports that the yield on the three-month Treasury note closed at 0.02% last Friday while the two-year note closed at 0.16%. The ten-year and thirty-year Treasurys closed Friday at 1.56% and 2.23%, respectively.

The Federal Funds rate, the rate at which banks lend to each other overnight in support of their reserve requirements, is at .07%, while the Fed Funds target rate is still at .25%. The prime lending rate is 3.25%.

Exchange rates of interest as of 5:30 pm EST….

Currency PairsRates as of 5:30 pm EST 25 April 2021
EUR/USD1.1890
GBP/USD1.3718
USD/CAD1.2568
AUD/USD0.7625
USD/JPY108.0210
USD/NOK8.5402
USD/CHF0.9417
USD/SEK8.7274
USD/MEX20.5078
Source: OANDA

Interbank market news scan: Facebook’s Diem can help the dollar remain the global reserve currency …

Links to follow today ….

Central banks, ECB. Global stocks held steady on Thursday ahead of the European Central Bank’s monetary policy update and despite COVID-19 lockdown restrictions in Europe being extended and cases rising globally. Global stocks stabilize ahead of European Central Bank meeting despite steep rise in COVID-19 cases in Asia | Markets Insider (businessinsider.com)

Central banks, Norway. Norway’s central bank will test various technical solutions for a central bank digital currency (CBDC) over the next two years, it said on Thursday. Norway to test solutions for digital central bank currency | Nasdaq

Central banks, Canada. The Federal Reserve and the Bank of Canada will use drastically different playbooks for the remainder of their nations’ respective economic recoveries. The US central bank has indicated it will leave rates near zero for the foreseeable future, and that it isn’t even considering reining in its emergency asset purchases. Canada’s central bank is taking surprising steps to cool the nation’s red-hot virus recovery – and the approach directly conflicts with the Fed’s ultra-easy stance, even with the US further along (msn.com)

Central banks, remittances, Kenya. Remittance inflows into Kenya in March were up 27% year on year to $290.8 million, the central bank said on Wednesday. Kenya’s remittance inflows in March up 27% yr/yr -central bank | Reuters

Central banks, United Kingdom, ECB. Sterling slipped on Thursday, holding below $1.40 before a European Central Bank meeting, as investors weighed up the outlook for an economic recovery from COVID-19 in the UK. Sterling slips versus euro; currency markets quiet ahead of ECB meeting | Nasdaq

Central banks, Facebook, cryptocurrency. Now known as diem, the Facebook-backed digital coin is expected to launch later this year, albeit in a much more limited form. When it finally arrives, diem won’t come with the same fanfare and controversy of the original idea envisioned by the social media giant nearly two years ago. Facebook-backed Diem aims to launch digital currency pilot in 2021 (cnbc.com)

Central banks, ECB, digital currency. Only a few years ago, central bank digital currency (CBDC) was seen as something exotic. Sweden’s Riksbank was alone among high-income countries in exploring it, a fact attributed to its population’s uniquely low use of cash. Now official e-currencies have gone mainstream. www.ft.com

The market opening. The rates to start your day ….

As of 8:10 am EST, Bloomberg reports that the yield on the three-month Treasury note is at 0.01%, down from yesterday’s 0.03% while the two-year note remained at yesterday’s 0.15% rate. The ten-year and thirty-year Treasurys are trading at 1.57% and 2.27%, respectively and relatively unchanged from yesterday.

The Federal Funds rate, the rate at which banks lend to each other overnight in support of their reserve requirements, is at .07%, while the Fed Funds target rate is still at .25%. The prime lending rate is 3.25%. All three rates unchanged from yesterday.

Exchange rates of interest as of 8:45 am EST….

Currency PairsRates as of 8:45 am EST 22 April 2021Rates as of 9:55 am EST 21 April 2021Percentage change in rates
EUR/USD1.17931.2024-1.9%
GBP/USD1.37851.3891-.0076%
USD/CAD1.25721.2629-.0045%
CAD/XCD2.14622.1462unchanged
USD/XCD2.70002.7000unchanged
USD/TTD6.66916.6721-.0004%
USD/BBD2.00002.0000unchanged
CAD/TTD5.30125.3050unchanged
CAD/BBD1.58991.5874unchanged
Source: OANDA

The Opening Takeaway: Could Facebook’s cryptocurrency be the longer term digital play?

Facebook appears to be leveraging the experience it has garnered on America’s Capitol Hill. When the Facebook-backed digital coin Libra found itself targeted by backlash from members of Congress, the company and its stable coin project partners had to go back to the drawing board which included a rebrand of the coin (from Libra to Diem); a little reorganizing of the stable coin project’s membership; and pursuing a payment services license from Switzerland’s financial regulators. See Facebook-backed Diem aims to launch digital currency pilot in 2021 (cnbc.com).

By going the stable coin route, where a cryptocurrency pegs its value to the value of a country’s currency, in this case, the United States, Facebook and its Diem partners, knowingly or not, have made baby steps to pacifying government critics in the US who are concerned about Diem’s threat to the stability of the US political-economic system. This is simply code for “We have to stop Facebook from disrupting our tax and customs regime.” The claims of concern over privacy also seem a bit bogus given that Congress has passed up a number of times over the last decade and a half to promulgate any comprehensive laws that would not only have codified network neutrality but also privacy over America’s digital networks. Besides, as the US slowly gets to testing its own central bank issued digital coin, it too will have to address why taxpayers should be less concerned about government intrusion into privacy as opposed to Facebook.

Facebook is in a position to leverage its network effect generated by over 2 billion daily users and its e-commerce and advertising platform. Its subscribers can enjoy some sort of “dual nation” status where they exchange goods and services on Facebook’s platform using Diem, thus creating a sense of exclusivity. Sort of like an Amazon Prime membership on steroids where only members i.e. Diem-using subscribers, can come and play. And knowing that Diem can be exchanged for US dollars will put Facebook subscribers’ minds at ease. If the Facebook subscriber is not concerned about convertibility, then the US government should have less of a consumer protection argument to throw around.

Another potential benefit may carry over to the Federal Reserve. As it hems and haws over the development of a central bank issued digital currency, it could study the Facebook template, observing in real time how a digital nation-state operates. Also, there is the potential for a test case for conducting digital foreign currency exchange made easier due to Diem being a stable coin.

Lastly, from a foreign policy perspective, the US should look favorably on more of the world’s economies having indirect access to the dollar via Facebook’s stable coin. Using, buying, and selling Diem amounts to using, buying, and selling US dollars. This indirect use of the greenback would keep the dollar out front as the world’s reserve currency.

Alton Drew

Interbank market news scan: Could banks be relegated to money changers and merchant lending?

Links to follow today …

Banks, yields. Shares of banks and other financial institutions ticked down as Treasury yields remained well below recent highs. Financials Down As Treasury Yields Remain Under Pressure – Financials Roundup | Morningstar

Central banks, digital currency. Wall Street is warming up to the idea that the next big disruptive force on the horizon is central bank digital currencies, even though the Federal Reserve likely remains a few years away from developing its own. https://www.cnbc.com/2021/04/19/central-bank-digital-currency-is-the-next-major-financial-disruptor.html

Central banks, economy. The aggressive rebound in global economic growth still isn’t enough for most of the world’s central banks to pull back on their emergency stimulus. https://finance.yahoo.com/news/robust-rebound-won-t-augur-230100088.html?guccounter=1&guce_referrer=aHR0cHM6Ly93d3cuZ29vZ2xlLmNvbS8&guce_referrer_sig=AQAAANIO_W4fWKspPdO0lmCF0BtRtybmUhLQrCrS7IiHsU3ox1D7lAQb3Wr7TRZVJl15aCZ4xuL-XKYMkGxjA9ibNTxZoMNfYd4a7dwMtWJG6VTw9RAdKO8fNl33Lu9oNBs6ZyOcLW0nqTwH9A17TmPzaaGMMUFN9VmVdSnCPC9aRR6X

Central banks, economy, pandemic. With a policy change pretty much off the table this week, European Central Bank watchers will have to closely monitor finer details about its pandemic stimulus program as policymakers wait for more data before taking decisive action. https://www.cnbc.com/2021/04/21/european-central-bank-meets-as-covid-lockdowns-complicate-recovery.html

The market opening. The rates to start your day ….

As of 9:40 am EST, Bloomberg reports that the yield on the three-month Treasury note is at 0.03% while the two-year note comes in at 0.15%. The ten-year and thirty-year Treasurys are trading at 1.56% and 2.25%, respectively.

The Federal Funds rate, the rate at which banks lend to each other overnight in support of their reserve requirements, is at .07%, while the Fed Funds target rate is still at .25%. The prime lending rate is 3.25%.

Exchange rates of interest as of 9:55 am EST….

Currency PairsRates as of 9:55 am EST 21 April 2021
EUR/USD1.2024
GBP/USD1.3891
USD/CAD1.2629
CAD/XCD2.1462
USD/XCD2.7000
USD/TTD6.6721
USD/BBD2.0000
CAD/TTD5.3012
CAD/BBD1.5986
Source: OANDA

The Opening Takeaway: Could banks become mere currency agents?

Yesterday I shared my expectations on the possibility of the Federal Reserve, the US Treasury, and other central banks and finance ministries prohibiting cryptocurrency as a medium of exchange. Using the policy rationale of the government being the sole issuer of currency, cryptocurrency issuers may find themselves limited to generating digital assets for sale as investments or safe havens. But what about the banks? What would their role be?

Wall Street appears to be hedging its bets on digital currencies (see second link above) as they prepare for the disruption a central bank issued digital currency could cause. Cryptocurrency exchanges such as Coinbase (Nasdaq: COIN) were receiving big boosts from what appears to be growing acceptance of cryptocurrency as at least a digital asset. Uncertainty in the markets drove capital toward bitcoin and other crypto-assets, making crypto the equivalent of gold in some minds. But with the vaccine rollouts and increases in the number of people, at least in western European countries and the United States on the increase, “risk on” seems to be the quiet rally cry accompanying a pullback in crypto prices. Acompanying the pull back are an increasing number of central banks exploring issuing a digital currency.

One arguable benefit from a central bank issued digital currency is the likelihood of turning more consumers into bank deposit holders. Rather than holding a deposit at a commercial bank, the “unbanked” along with those already holding commercial bank accounts, would have a default account at one of the Federal Reserve’s 12 central banks. yes, more account holders but not necessarily account holders at commercial banks. If the efficiencies promised by a central bank issued digital bank come to fruition, then why bother with holding another account? As part of the payment system, the check I write to and deposit into my son’s account goes through the Federal Reserve’s payment system anyway so why include another middle man? Commercial banks will have to consider these scenarios spawned by digital coin efficiencies when contemplating their new roles.

I see the larger banks easily leveraging their scale to ramp up already existing roles. They could focus more on lending, hopefully in a higher yield environment. They could also lobby for relaxation of Dodd-Frank restrictions on proprietary trading, opening up additional income making opportunities to offset income (if any) made currently from depositors. Large banks will not want to waste investments in their infrastructure by being relegated to mere currency issuer status, competing with check cashing facilities located at Walmart or around the corner at a pawnshop.

For the smaller banks, they will want to leverage their community relationships to counter any new found competition from larger banks as they face the irony of central bank issued digital coin taking away their customers.

Alton Drew

Interbank market news scan: The United Kingdom moves closer to adopting a central bank digital currency; other news…

Links you should be following:

Central banks, Bank of England. The UK is ahead of the curve when it comes to digital currency adoption, according to new research. A report by PwC reveals the UK is fifth in the world when it comes to preparing for the adoption of a central digital currency although a consumer offer remains a while off yet. UK leads race across Europe to introduce interbank digital currency (msn.com)

Central banks, Central Bank of Nigeria. It is the norm to hear talks around the need for convergence in Nigeria’s foreign exchange (FX) markets. This implies that there is mispricing. Historically, this mispricing has always been between the parallel market rate, which trades at a premium to the CBN’s managed rates across different FX windows. Liquidity, price discovery in Nigeria’s FX market Opinion — The Guardian Nigeria News – Nigeria and World News

Central banks, Federal Reserve. Excess cash in the financial system has pressured overnight interest rates, in some instances pushing them negative, which, analysts said, could prompt the Federal Reserve to lift the short-term rates it manages. EXPLAINER-U.S. repo market flirts with negative rates as Fed seeks to absorb excess cash | Nasdaq

Central Banks, Central Bank of the Bahamas. The Bahamas and Cambodia rank as the two top central bank digital currencies. Bahamas Ranks First in CBDCs, China’s Digital Yuan Third: PwC Report – BeInCrypto

Central banks, Central Bank of India. The rupee advanced by 23 paise to 74.64 against the US dollar in opening trade on Tuesday, tracking weaker dollar against key rivals and a positive trend in the domestic equity market. Forex traders said the government’s decision to open COVID vaccination to all above 18 years from May 1 lifted investor sentiment. Rupee Rises 23 Paise to 74.64 Against US Dollar in Early Trade (msn.com)

The market is opening. The rates to start your day:

As of 8:59 am, Bloomberg reports that the three month yield on U.S. Treasurys is at 0.02% while the two-year comes in at .16%. The ten-year Treasurys are trading at 1.60% and 2.30%, respectively.

The Federal Funds rate, the rate at which banks lend to each other overnight in support of their reserve requirements, is at .07%, while the Fed Funds target rate is still at .25%. The prime lending rate is 3.25%.

The Opening Takeaway: I Expect the Federal Reserve, US Treasury to Pull the Trigger on Cryptocurrency.

Yesterday, the markets saw some pull back in shares for Coinbase (Nasdaq:COIN) with the cryptocurrency exchange closing yesterday at $332.75, down from a high of $409.62 back on 14 April. The pull back was reportedly expected among some analysts as some investors took a little cream off the top. From a market perspective, I was not impressed with the offering. In the end, Coinbase is a market exchange platform for cryptocurrency relying on transactional fees for its survival and maintaining credibility among market participants as an information finder and margin provider for traders.

How well Coinbase does is a direct function of how well cryptocurrency does. As long as cryptocurrency stays in its digital asset lane, it may need not worry about too much regulation. Should it dip its toe further into the currency lane, that is where bitcoin, ethereum, dogecoin, etc., may find themselves in a world of hurt.

A currency’s legitimacy comes from the “king.” The king airdrops the currency throughout his jurisdiction for the purpose of washing and compounding it through a jurisdiction’s merchants, producers, and consumers. The currency says a lot about the economic value of the king’s jurisdiction and to maintain the prevailing narrative the currency represents, the king must control or heavily influence its value and circulation. The decentralized financial mechanism that cryptocurrency survives on does not fit into the command and control scheme of the king.

So far the US Federal Reserve has been ambivalent about its view of cryptocurrency. The US Treasury has been a bit clearer about its view of cryptocurrency as a currency based on Janet Yellen’s concerns about cryptocurrency being used for nefarious activities such as money laundering and drug trafficking. Neither the Federal Reserve or the US Treasury has expressed their concerns based on the philosophical underpinnings of currency, but I believe that when it is time for the central bank and the Treasury Department to pull the public policy trigger, control of the currency will be the ultimate public policy rationale.

Countries such as The Bahamas and Cambodia (see the links above) are not waiting. In the interbank, foreign currency exchange world, The Bahamas and Cambodia are near non-existent, but in the digital space they are the leaders in issuing central bank digital currency, taking digital payments to the next level. Over 60 countries are experimenting with or planning deployment of central bank digital currencies where their fiat currencies are tethered to block chain digital technology. Critics argue the point that outside of the digital tethering, a central bank issued digital currency does not increase the value of the fiat currency much. Maybe.

Other than requiring more use out of your cellphone or apps on your desktop, a central bank bank-issued digital coin may seem like mere aesthetics, but what is being ignored is the increased control that the government and central banks can exercise over the currency. Taking it to the extreme, I can see a government requiring that all transactions conducted within its jurisdiction be done via its central bank-issued digital currency with the primary reason being ensuring the collection of taxes on these transactions while better monitoring nefarious activities. I can see such a move beginning in countries that place less emphasis on free markets or individual privacy. The US will hem and haw over such a move especially when it sees China doing it, but if digitisation puts China out further ahead then I can see the United States capitulating to the new digital reality.

As for bitcoin, ethereum, and other cryptocurrencies, they may end up staying in the digital asset space. Their calling card is built on decentralized finance and opaqueness. They won’t become universally used currency for the masses.

Interbank market news scan: Cryptocurrency advocates moving to bolster their advocacy prowess in DC …

Digital currency. Atlas Organization founder Dr. Jonathan Ward, an expert on Chinese global strategy, discussed how the Biden administration can create competitive policies against China and argued that creating its own digital currency that is controlled by its central bank will “offset” U.S. sanctions, during an interview on FOX Business’ “Mornings with Maria.” China creating own digital currency will ‘offset’ US sanctions: Jonathan Ward | Fox Business

Foreign exchange, digital yuan. The United States’ reliance on economic sanctions to coerce other countries is gradually losing its effectiveness and slowly degrading one of Washington’s most influential tools in international affairs, the power of the U.S. dollar, experts told Newsweek. Sanctions Are Destroying U.S. Dollar’s Status as World’s Top Currency (newsweek.com)

Cryptocurrency. Even as cryptocurrencies steadily gain support on Wall Street, they’re still regarded by regulators as a tool for criminals to conceal shady transactions — posing a challenge to the nascent industry as it seeks to win wider respect. Bitcoin (BTC USD) Cryptocurrency Price News: Industry Forms Lobby to Shed Image – Bloomberg

Digital currency. A cyber yuan gives Beijing power to track spending in real time. Importantly, it’s money that isn’t linked to the dollar-dominated global financial system. Anxiety in the US as China Creates the First Major Digital Currency (thestreet.com)

Foreign exchange, India. Currency exchange rates can turn out to be a real dealbreaker and can cause a dent in an individual’s pocket who is traveling overseas. Even a difference of a few paise while doing currency conversion can make a huge difference in the budget for the trip. It becomes crucial to be aware of the various options while doing currency exchange. Currency Exchange and the related details (msn.com)

Cryptocurrency, Ethereum. Blockchain technology Ethereum has seen its price reach a new all-time high of $2,150 following Visa’s decision to allow cryptocurrency for transactions on its platform. World’s second-biggest cryptocurrency Ethereum hits new high of $2,150 after Visa agrees to allow crypto-payments on its network (msn.com)

Digital currency, Bank of Japan. Japan’s central bank has started trials of a new digital currency in an effort to experiment with how it might be used, the Bank of Japan announced on Monday. The announcement comes after the Chinese government revealed it was doing something very similar with a digital yuan in early March. Japan’s Central Bank Launches One-Year Test of Digital Currency (gizmodo.com)

Currency PairsRates as of 2:30 pm 6 April 2021
EUR/USD1.1853
AUD/USD0.7661
GBP/USD1.3809
USD/JPY109.8700
NZD/USD0.7044
USD/CHF0.9322
USD/NOK8.5005
USD/SEK8.6312
USD/CAD1.2553
  
Selected Rates 
Fed Funds.07
Bank prime rate3.25
Discount window.25
2-yr Treasury.16
10-yr Treasury1.65
30-yr2.31
Source: Bloomberg, Reuters

Interbank market news scan: Jamaica closer to testing central bank digital currencies; Bitcoin is the world’s 3rd largest currency in total value …

The Strategic Takeaway: Governments of varying size from the United States to Jamaica are ready to compete with the threat alternative digital currencies like bitcoin poses to nation-state payment systems. Traders and investors should keep their eyes on the long term viability of cryptocurrencies in the current political environment. Even as larger financial institutions consider bitcoin as a hedge against declines in other assets including the dollar and consumers see more opportunities to use cryptocurrencies to purchase goods and services, nation-states will only tolerate the threat to their payment systems for so long.

Cryptocurrency issuers and the exchanges that support them will have to make the political and legal arguments that support their incorporation into a nation-state’s payment system. Central bank digital currencies have the potential of offering a faster payments system for the average consumer. Claims of decentralization, anonymity, and democratization of finance may fall on deaf ears if central bank digital currencies offer the average consumer a significant improvement over what the consumer is comfortable with.

In the meantime, cryptocurrency stakeholders should be prepared for closer regulatory scrutiny including threats of stringent regulation especially if there are either mass losses in cryptocurrency valuations or if investors are subjected to massive and/or frequent amounts of fraud.

Cryptocurrencies. Cryptocurrencies have emerged as a financial instrument over the last year, but have reached new heights over the last quarter, becoming financial equality tools and placing power back in the hands of investors. How cryptomarkets revolutionised financial freedom (raconteur.net)

Stablecoins. Thailand’s central bank said it will issue regulations on asset-backed stablecoins this year after warning against the illegal use of a new baht-denominated stablecoin that was created outside the country. Thai Central Bank to Regulate Stablecoins This Year | Nasdaq

Cryptocurrencies. Now the third-largest cryptocurrency by market cap, Cardano (CCC:ADA-USD) is alive with buzz in the crypto community. Indeed, Cardano is one of those alt coins that gets less attention these days, mainly due to the sheer size of rivals Bitcoin (CCC:BTC-USD) and Ethereum (CCC:ETH-USD) 3 Reasons Why Cardano Has Outperformed So Impressively (yahoo.com)

Central Bank Digital Currency. Most of global payments are already digital, yet a central bank digital currency would provide risk-free, central-bank backed money denominated in a national unit of account — like cash, though updated to the demands of a digital financial system. Here’s How a Central Bank Digital Currency Could Work (msn.com)

Central Bank Digital Currency. After quietly exploring the viability of a central bank digital currency (CBDC) for some time, Bank of Jamaica (BOJ) took the decision in May 2020, as a part of our ongoing retail payments reform, to venture into this digital innovation that is fast becoming a feature of global central banks. A primer on BOJ’s central bank digital currency (jamaicaobserver.com)

Cryptocurrency. Deutsche Bank has published a report stating that bitcoin is too important to ignore, noting that it is now the third-largest currency in terms of the total value in circulation. Deutsche Bank: Bitcoin Now 3rd Largest Currency, Too Important to Ignore – Markets and Prices Bitcoin News

Currency pair20 January 202122 March 2021Percentage change
ADA/USD *.381.18210.5
BTC/USD36,841.7058,335.0058.3
ETH/USD1,358.491,813.6833.5
LTC/USD159.13200.6526.1
Source: OANDA *Yahoo Finance