First's Monthly Insights: The Current State of CBDCs, Diem & Digital Currencies

It’s often remarked that a month in the digital asset sector equals a year anywhere else; this month is no exception. From the US’ reinforcing its regulatory stance on stablecoins to the latest on Diem, Novi wallet, and First’s various partnerships and developments — here’s September in a nutshell.

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First's Monthly Insights: The Current State of CBDCs, Diem & Digital Currencies

It’s often remarked that a month in the digital asset sector equals a year anywhere else; this month is no exception. From the US’ reinforcing its regulatory stance on stablecoins to the latest on Diem, Novi wallet, and First’s various partnerships and developments — here’s September in a nutshell.

The Latest on Diem and Novi

David Marcus, Facebook’s Chief of Financial Services, recently revealed that the company’s highly anticipated Novi wallet was ready for mainstream deployment. However, the firm might be holding back on its release so that its launch can coincide with that of the Diem dollar later this year. In the meantime, Marcus told Yahoo Finance that his team is actively looking to incorporate other novel features — most notably support for NFTs — into its aforementioned wallet system.

“We’re definitely looking at the number of ways to get involved in the space because we think we’re in a really good position to do so,” Marcus said, speaking to Yahoo Finance.

As a quick reminder, the NFT (non-fungible token) market has exploded in a big way this year. Over the course of August alone, prominent NFT marketplace OpenSea recorded an average trade volume of more than $1 Billion.

Lastly, Marcus also recently conceded that if Diem’s launch is delayed any further, he and his team may consider launching Novi as a standalone offering — with or without the stablecoin — by the close of 2021.

Diem’s payment ecosystem addresses key systemic issues affecting traditional finance

As part of the conversation with Yahoo Finance’s Andy Serwer, Diem’s David Marcus highlighted that the financial ecosystem he and his team are working to create will help bolster consumer protection by laying in accordance with all of the local regulatory norms where the currency might be used. “We believe that in terms of consumer protections, both on the purpose-built payments blockchain that Diem is and on the stablecoin itself, it’s in a class of its own,” he highlighted.

Additionally, Marcus also noted that while it may have been easier to simply build Novi atop one of the many crypto payment rails in existence today, such a setup, in his view, would not help solve any of the systemic issues that currently plague the global payments infrastructure. As a result, Novi and Diem have been designed from scratch, with the latter being backed by a combination of cash or cash equivalents and short-term government securities.

First DAG CTO becomes an official maintainer for the Diem blockchain

First DAG’s chief technical officer (CTO) Daniel Prinz was recently appointed as an official maintainer for the Diem blockchain by the Diem Association’s Technical Steering Committee (TSC). Prinz has been working for First Digital Asset Group since 2019, building blockchain tools and APIs for developers using Diem as well as other digital solutions related to PSPs.

As part of his latest job profile, Prinz will be required to help facilitate the development of a robust technical governance framework for the Diem Association’s open-source blockchain project. In its most basic sense, the open-source blockchain project seeks to provide a wide array of quality financial services to billions of unbanked individuals across the globe. On the subject, Prinz noted:

“For Diem to successfully serve as a fast, simple, secure, and low-fee medium of exchange for a massive market, it’s critical that the infrastructure powering Diem is designed, built, and maintained with security, sustainability, and transparency in mind. This is a very exciting opportunity to shape the future of Diem.”

Circle announces major partnership as USDC market cap hits $30bln

As Diem readies to address issues with broader financial infrastructure, another stablecoin, USDC — issued by the peer-to-peer payments technology company, Circle — looks to address its own. The firm recently entered into a partnership with financial data aggregator Plaid to make it easier for USDC owners to move their funds in/out of their preferred banks.

Akin to its previous partnerships with Visa, by joining hands with Plaid, Circle is looking to explore various ways through which it is possible to move between fiat assets and dollar-backed crypto tokens. “By integrating with Plaid, Circle is demonstrating – yet again – how we’re able to work with technology and finance leaders in the payment industry and leverage the power of USDC to generate frictionless economic activity,” Circle Chief Strategy Officer Dante Disparte was quoted as saying.

Plaid consists of a wide network of banks and financial entities that allow fintech firms to facilitate their daily financial needs without the need for a centralized financial intermediary. Not only that, but Plaid has also entered into long term arrangements with several prominent companies operating within the global crypto ecosystem today, such as Coinbase, one of the largest crypto trading platforms in the world, as well as other smaller firms such as DeFi-startup Dharma.

Stablecoin regulations are on the rise

After having largely left the stablecoin market to its own devices, federal regulators are now starting to address many of the potential risks posed by this unique asset class for consumers and financial markets. Most of the concerns surrounding stablecoins stem from the fact that a growing list of companies have continued to rush to them to maximize their profits through the use of interest-bearing accounts and lending protocols.

“It is important for the agencies to act quickly to ensure there is an appropriate U.S. regulatory framework in place,” Nellie Liang, an undersecretary of the Treasury Dept. highlighted.

A similar sentiment was shared by Michael Hsu, Office of the Comptroller of the Currency (OCC), who believes that much like the gold rush leading to the 2008 financial crisis, the ongoing growth of the stablecoin market could also pose a challenge of a similar nature. As a result, regulatory bodies are now working to create a framework that will ensure that stablecoin issuers are in possession of enough liquidity so as to back up each and every one of their tokens.

In all, increased regulation looks to be a great step forward for the crypto industry as well as for Diem, especially since it seeks to create an environment that is welcoming of newer participants. With the Diem Association working closely to win over regulators in Washington, it will be interesting to see how the coming few months play out for this fast-evolving space.

 

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