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Daily briefing - 11 July 2019

Judging by the number of remittance businesses continuing to scale up, there must be plenty of fat still to be trimmed from the Western Unions of this world. The latest is eight-year-old Seattle-based Remitly which raised $155 million to give it a near one billion dollar valuation, despite fears that Facebook's new Libra project will cut across its bows. Remitly's early backers include Jeff Bezos. "There's not a huge amount of detail on how Facebook's product will really work in the real world," said Remitly chief executive Matt Oppenheimer, adding that it could end up focusing on payments for goods and services, rather than remittances. He said Remitly would track the Libra project closely and would not rule out joining its 28 backers, a group that already includes Uber, Spotify and Visa. Meanwhile, financial analysts are trying to come to grips with Calibra, the wallet that Facebook will offer users and which will hold digital tokens for sending on the Facebook network. Any white-label wallet worth its salt will hold more than one value, so it's likely that Calibra users will also be able to trade everything from bitcoin to bonus points. Don't get hung up on Libra itself, and the regulatory battle around Libra, because that system can operate without Libra once the wallet is up and running. It's the wallet everyone should be keeping their eyes on. We've commented recently that banks don't want to have anything to do with money anymore, and now Nigeria's central bankers have ordered that banks will no longer receive interest payments on deposits in excess of 2 billion naira ($5.5 million). "That compares with a previous limit set in 2014 of 7.5 billion naira through the central bank's standing deposit facility. The move comes less than a week after the Abuja-based central bank ordered lenders to use at least 60% of their deposits for loans by the end of September, or have their cash-reserve requirements increased, meaning they'll be forced to leave more of their cash with the central bank. 'The rule is geared at making banks lend,' Kunle Ezun, an analyst at Ecobank Transnational Inc in Lagos, said by phone," reports Bloomberg. Lafferty's Digital Lending report suggests that previous incentives to accelerate lending have not worked, but that people have shown a large appetite for digital credit, which may be another major option for Nigeria. We've long flagged digital identity and self-sovereign identities as areas that banks and citizens alike are going to be grappling with for the next decade. As PSD2 looms in the UK, big banks such as Lloyds are penning deals to bring its customers smoothly through the strong authentication rules which require a two-stage log in for most customers. Lloyds is working with UK start up Callsign, which can identify users from their smartphone behaviour. "Callsign already has deals with banks and other institutions to identify staff online without the need for time-consuming two-factor authentication," writes the FT. "But having Lloyds use it for customers is a big breakthrough. [Chief executive Zia] Hayat, 37, is a former Lloyds employee who also designed encrypted information systems for BAE Systems, the defence company. London-based Callsign was valued at more than $100m in a 2017 fundraising led by Accel, the US private equity firm. It now has 112 staff and is seeking fresh investment."

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Daily briefing - 26 June 2019

It's hardly a surprise that US congresswoman Maxine Waters is calling for a ban on Libra, stating that nothing must be allowed to challenge the dollar. Indeed. But those days of dollar domination are numbered. Richard Nixon's Treasury Secretary John Connally unilaterally took the dollar gold standard in 1971. Later that year, Connally famously told a group of European reporters — in reference to the export of American inflation via the dollar — that "it's our currency but your problem". Yesterday the Basel-based Financial Stability Board (FSB) managed to stutter something similar at Libra, Facebook's new finance offering. The FT reports a senior FSB official saying "If we're to have something like Libra, if it were to become a widespread retail payment mechanism, we would obviously be looking at that very closely." Wow, Facebook will be quaking in its boots. Broadly, however, regulators are welcoming the chance to engage with Libra, especially in Switzerland. (Libra's HQ is a short train ride away from the FSB headquarters in Basel). Thomas Moser, an alternate member of the Swiss National Bank's governing board, told a Crypto Valley Conference that Libra had clearly indicated that they are willing to play according to the rules, and had been contacting regulators. "I think it's an interesting development and I'm pretty relaxed about it," said Moser, as other central bankers around the world entered various stages of existential anxiety, knowing that the Swiss are only "generally pretty relaxed" about things like securely parking vast amounts of global savings in Alpine vaults when they've already thought the whole thing through. As we wrote last year, Switzerland has been busy upgrading its former military bunkers into offline cryptocurrency storage units. "The Bank for International Settlements, an umbrella group for central banks, said on Sunday that greater political coordination was needed to deal with the entry into finance of major tech firms like Facebook," reports Reuters. It will not have escaped the attention of the BIS that it remains the daddy of banks, the most hated institutions in the world (maybe even more than Facebook). What a fight this is shaping up to be, and there's precedent here. When Rupert Murdoch scooped up Star TV in the 1990s, who was able to stop him from beaming satellite signals into countries across Asia? Who is going to stop Facebook's high altitude balloons from beaming the internet across much of Africa? (And by the way, Facebook operates on the internet.)Let's take a look for instance at one of Facebook's major markets: Indonesia. From our recent Credit Cards and Digital Finance reports on Indonesia, we know that ecommerce is absolutely thriving. "The recent entry of Alipay, WeChat into Indonesia has enthused the market with Grab Pay and Go-Jek responding with their own local innovations. With 250 million customers, Indonesia is the largest ASEAN market for the Chinese giants. However, even the mobile wallet and ecommerce giants have found the Indonesian regulators to be a handful." India is no longer the main arena for the US to meet the Chinese challengers. Libra has published its white paper in Bahasa, an Indonesian language. Why? Among other reasons, Indonesia has the fourth-highest number of Facebook users in the world. "Since nearly 10 percent of Indonesian respondents said they also own some cryptocurrency, double American percentage, Facebook couldn't have dreamed up a better market for Libra," suggests Coindesk. "QCP Capital co-founder Joshua Ho, a trader who works closely with Indonesian exchange Tokocrypto, told CoinDesk Facebook's Libra ecosystem could be a 'gamechanger' in Indonesia. 'People are already very aligned with mobile payments,' Ho said. 'It is geographically decentralized. Creating banking access is a huge challenge'." Safaricom courts credit unions in banking push

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Daily briefing - 25 June 2019

Facebook's Libra project is growing from an office in Geneva. And how? We've marked Switzerland's card as a world leader in digital assets including bitcoin. The Crypto Valley of Zug is just up the road. The Swiss have the knowhow to attract financial assets and have taken a proactive regulatory approach, including giving a professional fund management licence to Crypto Finance, which also operates out of Geneva — and from the same space where Libra is now setting up. (It's the site which was formerly home to Coutts, the private bank acquired by RBS. In 2015, RBS sold the business to Geneva-based private bank Union Bancaire Privee.) Indeed, it caught our eye that one of Libra's early partners is the global charity Mercy Corps. Now, would it be possible that Libra has looked at China's Red Envelopes and thought: let's launch Libra by getting money to global humanitarian causes through Mercy Corps. We all know there's plenty of humanitarian and ecological crises lining up. The United Nations building is just up the road too, and the boffins there have been exploring things such as decentralised digital identity, something that's also at the heart of the Libra project. And incidentally, David Marcus, Facebook's point man on Libra, has roots in Geneva. ""Our goal is to manage Libra, the technology and the digital currency very much like a public good, so where better than Switzerland to make this kind of global organization and project," said Libra spokesperson Dante Disparte. Read the background notes to this story on Bloomberg. HSBC will scrap several fees including the minimum balance charge in Asia in order to stay competitive as new digital only banks start to come on stream. "More banks are expected to follow," the South China Morning Post reports "The change, analysts say, is fuelled by competition arising from virtual banks, which are due to come online later this year. Eight licences have been issued by the Hong Kong Monetary Authority since March. They include tech giants like Tencent and Alibaba, the parent company of the South China Morning Post as well as insurance company Ping An and smartphone maker Xiaomi. The virtual banks operate online without a branch network and are not allowed to charge minimum balance fees."There's a lot to be said for partisan journalism, especially once it's obvious. The New York Times has plenty of reasons to write about Amazon, owner of its competitor the Washington Post and new entrant to the digital advertising business. Amazon acquisition Createspace is a brilliant scheme where authors can upload digital books which Amazon then prints on order and sells to customers. Unfortunately this opens the doors to scammers — but Amazon expects publishers to police their own marketplaces. Anyone operating in the publishing world will be familiar with these problems: songs or publications are easily ripped off or made available on channels where royalties flow to channel owners and not the artists. A nice piece of reporting by the Times. UK bank Monzo scooped up another wedge of cash to fuel its expansion in the United States.

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