Facebook details digital currency plans; CRA credit for disaster prep loans?

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Going mainstream
Facebook said it will create a “secure, scalable and reliable” cryptocurrency by next year, “promising a secure blockchain-based payment system backed by hard assets and designed for mainstream users,” The Wall Street Journal says. Called Libra, the currency will be supported by “big, corporate partners” such as Visa, Mastercard and PayPal. The company is also creating a regulated subsidiary, called Calibra, to ensure “the separation between social and financial data.” With 2.4 billion active users, Facebook's "move is one of the most mainstream attempts to deploy digital currencies."

“Calibra will roll out a crypto wallet — a digital wallet that can be used to pay for items online and send money — using Libra,” the paper reports.

Cryptocurrency backers say Facebook's action will help other digital currencies.

This “meeting of Big Tech and fintech represents a challenge to traditional banks,” the Financial Times comments. “Facebook hopes to exploit their flaws, most notably slow and expensive transactions. There are good reasons to remain wary of Facebook, but a digital shake-up of banking is long overdue.” Wall Street Journal, Financial Times here, here and here, New York Times here and here, Washington Post here and here

Wall Street Journal

Ripple effect
Ripple, the startup behind the XRP cryptocurrency, will invest up to $50 million in MoneyGram International “in a deal that stands to rank among the first crypto-based company investments in a major U.S. publicly listed firm.” As part of the deal, “the two companies signed a two-year agreement for MoneyGram to use XRP and a platform for XRP transfers called xRapid as a back-office channel for managing its settlement operations.”

The agreement is “another sign that for all the volatility of the cryptocurrency sector, digital currencies like bitcoin have left their backers with considerable war chests and the ability to spend aggressively,” the paper notes.

Fighting climate change
The Federal Reserve Bank of San Francisco says banks should get extra credit under the Community Reinvestment Act for making loans that help communities prepare for climate change and natural disasters. “As we’re seeing this increase in the severity of disasters, people at all levels are thinking about how can we reduce the cost in the future and how can we reduce the financial strain on communities in general?” said Elizabeth Mattiuzzi, a senior researcher at the San Francisco Fed, who co-wrote a paper on the subject. “The report represents the latest in a series of small steps by Federal Reserve banks to recognize climate change as a threat to the U.S. financial system.”

Meanwhile, 11 large banks, including Citibank and Société Générale, said they will take climate into account when making shipping loans. “The banks, which have a combined shipping portfolio of around $100 billion, or about a fourth of the global ship finance market, have signed onto an industrial framework known as The Poseidon Principles, which seeks to direct new money for shipping toward environmentally friendly oceangoing vessels. The goal is for the ship financing sector to support an industry target to cut greenhouse gas emissions by half in 2050.”

Jumping ship
Edward Sankey, Deutsche Bank’s co-head of European equity capital markets and global head of equity syndicate, is leaving the German bank after almost 15 years, “as planned cuts to its beleaguered equities business and the broader investment bank increasingly take a toll.” He will be succeeded in both roles by Josef Ritter. “Staff and clients of the bank are poised for deep cuts to trading and related businesses, especially in equities,” which lost about €750 million last year.

Financial Times

Streamlining
“In the first restructuring under new investment bank chief Paco Ybarra,” Citigroup is merging its rates and currencies businesses. “We believe this more streamlined operating model will drive better client service, risk management and profitability,” the bank said.

Scandal probe deepens
Swedbank has fired the CEO and CFO of its Estonian branch “as part of its internal investigation into extensive money laundering allegations. The ousting of its two most senior managers in Estonia further increases the problems for the largest bank in the Baltic region over an ever-increasing money laundering scandal. Swedbank is already facing multiple enquiries from U.S. regulators over the scandal in which €135 billion of high-risk, non-resident money flowed through its Estonian branch over a decade.”

Elsewhere

Rating security
JPMorgan Chase CEO Jamie Dimon’s claim that cyber security is the biggest threat to the American financial system is debated. The bank spends $600 million a year on cyber security.

Quotable

“This deal is a major milestone for the entire industry.” — Ripple CEO Brad Garlinghouse about the firm’s agreement to invest up to $50 million in MoneyGram

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