OCC (Office of Comptroller of Currency) which supervises national banks and agencies of foreign banks in US released their semi-annual risk report last week. The report presents key issues facing banks that “pose threats to the the safety and soundness of banks and their compliance with applicable laws and regulations”. The report presents an optimistic message – while the risk of downside growth is increasing due to tightening financial conditions and geopolitical uncertainty the banks continue to be financially strong having navigated the pandemic and are well capitalized to face the economic headwinds.
Background: This year prior to starting the war on inflation, the Fed published a paper asking for comments on a Fed coin or a CDBC
The $49 billion meltdown of the algorithmic stablecoin Terra USD (UST) coin and it’s lined token, Luna this month has shown the shaky grounds on which the lofty valuations of stablecoins have been built. Terra which has fallen in value from being pegged to USD to less than 5 cents and Luna which was one of the top 10 stablecoins in Jan is now worth less than 1 cent. The death of Terra and Luna has also led to a $300 billion decline in the crypto industry.
Earlier this month, the Presidents Working Group on Financial Markets (PWG) released a report on Stablecoins. This represents first attempt in designing prudential safeguards for stablecoin issuers.
What is the DNA effect? The DNA effect is the ability of large technology companies to build a competitive advantage by leveraging user generated data in their networks. DNA in this context stands for ‘data-network-activities’ and refers to how the business model of large technology companies (like Google, Apple, Facebook, Alibaba, Tencent aka Big Tech) depends on direct interactions of users which generates lost of data and the ability of these companies to use this data to scale up operations and enter into new areas like financial services.
Reality of a central bank digital currency (CDBC) is coming closer. However the development of a CDBC is said to pose the biggest threat to banks in developed economies like US?