Snippings

Jenny Cheng, vice president and general manager of Google Wallet, says that identity is the “greenfield opportunity for digital wallets”.

The vast majority of us still carry wallets and purses with us because access and identity credentials, not because of payments. Driver’s licenses. Tickets. Healthcare insurance cards. Building access cards. Whatever the ID, the plastic form of it must be kept somewhere. And even though payments wallets may allow some form of identity or access credentials like boarding passes or movie tickets, the physical wallet remains a necessity for most people.

Whatever you think about Bitcoin and whatever else it is, it is not money.

Yet potential property claims of prior owners could hinder the use of stablecoins as digital money.

From: Stablecoins should be treated as currency.

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Are stablecoins money? Well, I’m tending towards thinking that they are even though I am not a lawyer or economist.

Businesses covered by MiCA, or crypto-asset service providers (CASPs), include:

Custodial wallets
Exchanges for crypto to crypto transactions or crypto to fiat transactions
Crypto-trading platforms
Crypto-asset advising firms and crypto-portfolio managers
In terms of assets applicability, MiCA covers three types of assets:

Asset-referenced tokens (including stablecoins backed by commodities, or one or several currencies) 
E-money tokens (stablecoins backed by a single fiat currency)
Other tokens, including utility tokens 
MiCA will only apply to NFTs (non-fungible tokens) if the NFT has characteristics that make it similar to one of the assets that MiCA definitely applies to. For example, MiCA rules might apply to an NFT that is like a utility token or a financial instrument. When working on NFT’s token legal design, it will also be important to remember that simply assigning a unique identifier to a token is not an indicator of non-fungibility. Under MiCA, non-fungible tokens issued in large series could be considered fungible and therefore require an authorization. Most likely, this will influence projects that fractionalize NFTs.

From The EU Markets in Crypto-Assets (MiCA) Regulation Explained.

What do they mean by fungible and non-fungible here and why are they talking about them. Well, remember that 2014 IRS Ruling about Bitcoins being a commodity, so that traders would have to track the buying and selling price of each individual Bitcoin in order to assess their tax liability? No? Here’s a reminder: “the real lesson from the IRS Bitcoin ruling is that for a currency-or any payment system-to work, its units must be completely fungible”.

Now, “fungible” (from the Latin “to enjoy” via Medieval Latin phrases such as “fungi vice”, meaning “to take the place of”) is one of my favourite adjectives. It means that all the units are the same and can be substituted one for another. You owe me a quarter. It doesn’t matter _which_ quarter that you give me. Any will do. Any quarter can substitute for any other quarter because they are all the same. This isn’t true of Bitcoins. They are all different and their history can be tracked through the blockchain which is, as we are often reminded, and immutable public record of all transactions. As my good friend Marc Hochstein observe about this some time ago, blockchain’s openness could turn out to be a bug (even for law-abiding citizens).

The lack of fungibility has major implications for digital assets. In England, the High Court (in the decision of AA v Persons Unknown & Ors, Re Bitcoin [2019]) has ruled that crypto assets such as Bitcoin are considered to be ‘property’ capable of being the subject of a proprietary injunction against a cryptographic exchange, which was indeed granted. You can see what is going to happen here: the exchange will be required to identify who owns the stolen coins and the owner will then be the subject of legal action to recover them. This owner might be entirely innocent about the origin of the coins and will say that they did not know that the Bitcoins they bought are the proceeds of a ransonware attack and may ask to the keep them. But, J.P. Koning pointed out, this is just not how property law works.

However you come into possession of stolen property, a judge can still order you to return it to the rightful owner. Here is one example, randomly chosen from my archives, that will illustrate the point. Jonathan Fredricks, a 16-year-old Dallas-area teen saved up $10,000 over the course of a year working at Chick-Fil-A and bought 2016 Mazda CX-5 from James Steelman. But it wasn’t Mr. Steelman’s car to sell, as he had stopped making the payments on it. The dealer repoed the car five months later and the teenager was left without either car or his money.

This issue of whether a digital asset is fungible or not is crucial. In a parallel but useful set of discussions, the ISDA considered the issue of fungibility in the context of voluntary carbon credits which could be tokenised. To aid liquidity, two or more VCCs should be interchangeable for the purposes of satisfying VCC transfer obligations between traders, even if the VCCs themselves were uniquely generated in relation to specific projects. Fungibility is therefore not a feature of the asset itself but a matter of context. As ISDA points out by way of example, banknotes are fungible to satisfy payment obligations, but are not fungible for tracing purposes since every banknote has a unique serial number. Therefore, a unique “serial number” does not preclude a digital asset token from being fungible and the issue is whether and in what circumstances different tokens will be treated as interchangeable.

 

Taking all of these perspectives on board, 

A stocktake

on the digital euro

Summary report on the investigation phase and

outlook on the next phase

18 October 2023

Holdings of individuals would be subject to a limit to prevent excessive outflows from

commercial bank deposits into digital euro. This limit would be set closer to the

possible launch date to reflect the economic conditions prevailing at that time.

Business users would have a zero holding limit, meaning they would not be able to

accumulate holdings of digital euro, but they would be able to make specific types of

payment. Initially this would refer to the processing of payments and refunds.

12 See Section 3.1.1.1 for more on the role of PSPs in the onboarding of end users.

A stocktake on the digital euro – How a digital euro would work from the perspective of end

users 13

Like merchants, government or public authorities would be able to transact in digital

euro with a holding limit of zero.

Thus, both business users and public authorities would have any payments received

transferred immediately to their commercial bank account,

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Once he places an order, Jeff pops a small marker on the lawn which contains a QR code. As the drone approaches, it finds the spot and the package is released. But in the UK Amazon plans to use markerless delivery and enable the drones to pinpoint drop points using GPS.

From Amazon plans drone deliveries for UK parcels next year – BBC News.

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With the European Central Bank on Wednesday confirming that it is moving onto the preperation phase of the digital euro, the European Data Protection Board and the European Data Protection Supervisor say that the regulation underpinning a future CBDC should “further clarify” the data protection responsibilities of the ECB and of payment services providers.

In addition, they “strongly recommend” a “privacy threshold” for online transactions so that neither offline nor online low-value transactions are traced for AML purposes.

From EU data protection watchdog calls for more privacy for digital euro.

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The OIX recommends that the role of governments should be to create strong trust frameworks that enable the approval and trust of private sector provided wallets. This includes the tech-giants, such as Google an Apple, that may want to hold and present government credentials in their wallets. Government credentials can then be issued only into these approved private sector wallets.

From Governments not the ideal providers of digital ID wallets, says OIX – Identity Week.

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Chinese foreign exchange regulator official said “programmable features” of a central bank digital currency (CBDC) could help enhance the effectiveness of monetary policy tools, state media reported on Friday.

Programmable features in a CBDC are settings that can be changed. For example, money can be programmed to have an expiration date or be restricted for certain uses.

From China FX regulator says CBDC features could improve monetary policy | Reuters.

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Apple and Google will soon be required to comply with rules already imposed on credit cards and EFTPOS transactions in an attempt by the federal government to better protect consumers.

From Apple and Google digital wallets to be brought under payment rules for credit cards, EFTPOS – ABC News.

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The multinational technology company also argued that digital wallets were different to credit cards and therefore should not have to follow the same rules.

 

“Apple Pay can only operate with an existing debit, credit or prepaid card issued by a third party … Apple does not have access to a cardholder’s account to determine whether funds are available … in offering Apple Pay, Apple does not collect any transaction information.”

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Nexi remains the largest European merchant acquirer with $541 billion TPV (-20% y/y).
Worldline came in 2nd ($489 billion/+10%), which was equally balanced between in-store and online channels. Worldline is the largest in-store acquirer.
Adyen grew 60% y/y to $428 billion surpassing Barclays to become 5th largest acquirer in Europe driven by nearly threefold increase in in-store, which ranks now 9th, while Adyen‘s European e-commerce acquiring at $284 billion (1st in Europe) is now 35% larger than #2 Worldpay.

From European merchant acquiring market 2022.

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In Switzerland, the characteristics that have made the country such a haven for the rich to safely store their money — its secrecy, its deep conservatism and its stolid, inflexible institutions — can also sometimes turn into nightmarish liabilities when things go wrong.

From How a couple lost a fortune in an alleged Swiss banking fraud | Financial Times.

The same is true for Bitcoin, of course.