Finance

As millions of Americans received unemployment payments to get through the crisis, scammers developed a new way to steal cash directly from recipients’ accounts, according to an investigation by CNBC.When one single mother’s account was emptied, she had to crack open her child’s piggy bank to survive. Another victim choked up when telling CNBC how she left a grocery store empty-handed. A musician said he had to live in his car for a few weeks after his funds were stolen. At the heart of the issue is the technology that underpins most of the debit cards used to distribute unemployment insurance in certain states, experts say. Unlike standard consumer debit cards, government-prepaid cards often lack a chip — instead they use outdated magnetic stripe technology — making them easier for hackers to penetrate. Vanessa Rivera (left), Azuri Moon (center), Candace Koole (right) all say their unemployment insurance was stolen from their accounts.Source: CNBC”A card without a chip, that’s really easy to copy,” said Charles Henderson, global managing partner and head of X-Force at IBM Security. “If a criminal gets access to the data on that ‘magstripe’ and they can either reset the cardholder PIN or get access to the PIN number as well; they can manufacture a card, and go to an ATM.” A CNBC analysis found that states like California and Nevada saw an outsized share of so-called transaction fraud during the pandemic because, with few exceptions, their unemployment insurance was distributed through chip-less debit cards. Other states, such as Hawaii, reported negligible instances of stolen funds because most benefits were directly deposited into recipients’ bank accounts.Still, 45 states and Washington, D.C. issue debit cards as one option for unemployment insurance. Unauthorized transactionsAzuri MoonSource: CNBCDuring the pandemic, a wave of unemployment made the world of benefits a prime target for fraud. Improper payments amounted to nearly $40 billion nationwide as of January, according to estimates by the Labor Department. The bulk of this fraud involved identity theft — whereby criminals would receive unemployment by using false information. But the transaction fraud that wiped clean thousands of unemployment-insurance accounts is different. This involves unauthorized transactions, in some cases copying the cards and cashing in the accounts through ATMs. Bank of America, which is responsible for distributing government-benefits cards in California, told CNBC that less than 2% of its cardholders had their benefits stolen during the pandemic. Azuri Moon, 30, experienced this firsthand. A part-time performer and music teacher, Moon found himself unemployed for the first time in his life during the pandemic. A California resident, he took out unemployment insurance beginning in March. Around October, when he was trying to buy lunch at a taco truck, his card was declined. He said he went to an ATM to take out cash to no avail. “My entire account was cleared out,” Moon said in an interview with CNBC, referring to the account that housed his unemployment payments. “And that was actually the first time that I really needed to rely on it for rent that month.” While we had a global health pandemic, we had a national pandemic in terms of identity fraud and theft.Matt ThompsonIDEMIAMoon said he called Bank of America and learned there were two unauthorized ATM withdrawals in the days before he discovered the fraud. In total, he said, about $1,800 was stolen. Moon said it took him 11 hours to file a claim with the bank. He said he was told it would take at least 30 days to get his money back. Having no money to pay rent, Moon said he temporarily became homeless, living in his car.About a month after he filed his claim, Moon said a bank representative told him he was liable for the stolen money and that the firm would not be providing a credit. Moon said the bank encouraged him to file a police report, which he did.After months of communication, Moon said Bank of America did credit his account for the stolen funds, but only after he joined a class-action suit against the bank.  A class-action suit, injunctive reliefThe suit Moon joined alleges that the firm “failed to take reasonable steps to protect plaintiffs’ and class members’ benefits from fraud.” Filed initially in the U.S. District Court for the Northern District of California, the complaint said that Bank of America failed to implement “fraud preventing” chip technology in the plaintiffs’ cards, making them “readily susceptible to cloning.”   Brian Danitz, partner at Cotchett, Pitre & McCarthy and lead plaintiffs’ attorney for the class-action suit, said that after he filed the case, he received more than 800 calls “from people who wanted to join.”  In that case, a San Francisco judge issued a preliminary injunction last month that prevents Bank of America from denying fraud claims and freezing accounts based on its automated filter. In response to the injunctive relief, Bank of America said it goes “well beyond what is required by law.” The firm said in court documents that from October 2020 through March 2021, about 255,000 fraud claims were filed, of which the firm approved repayments to about half. The bank said that part of the risk is that criminals will falsely claim fraud and then obtain provisional credits, something that has cost the firm $200 million in 2020 in California alone, according to court documents. A provisional credit is one that is temporarily added to an account as a fraud claim is evaluated. Based on the outcome of a review, it can be made permanent or removed. “No more food in the house”Vanessa Rivera and her son.Source: Vanessa RiveraLegitimate recipients say they’ve been caught in the crosshairs. Single moms Candace Koole, 29, and Vanessa Rivera, 30, said they had a similar experience to Moon’s. Koole, a doula, and Rivera, a lien negotiator, said they became unemployed last spring and were granted California benefits. Koole discovered her funds were missing when she was trying to buy food at the grocery. She said she was unable to quickly recoup the $9,000 that had been stolen.”I never knew if I was gonna be homeless. I never knew if…you know, if I was going to be able to get birthday presents for my kid,” Koole said in an interview with CNBC. “I never knew what was going on. It was around Christmastime, that was also really hard.” When Rivera noticed $800 of benefits were stolen, she said she had to drain her family’s savings. “At one point, I had to actually break my son’s piggy bank ’cause I didn’t have gas and he didn’t have — we didn’t have — like, no more food in the house,” Rivera told CNBC. The two are also plaintiffs in the same class-action lawsuit as Moon. Bank of America did not comment on Moon, Koole and Rivera’s situations. The bank said in a statement to CNBC that its “No. 1 goal always has been to ensure legitimate recipients could access their benefits.” Bill Halldin, a spokesman for the firm, said that last year it increased its team serving these programs “from several hundred to more than 6,000 people, dramatically reducing wait times as we answered calls and reviewed claims.” Halldin said the bank committed to “additional measures to help unemployment recipients who have been victimized by fraud receive their benefits as quickly as possible.”The higher cost of chipsCandace Koole and her son.Source: Candace KooleMoon, Koole and Rivera said that their debit cards did not include chips. Card experts told CNBC that prepaid government cards typically lack chips because they can be about 50% more expensive to produce. Additionally, unlike typical debit and credit cards for bank customers, these benefits cards are temporary — lasting just several months, until the recipient finds full time employment. CNBC obtained an agreement between Bank of America and California to distribute government benefits from 2016. In it, the state only requested a magnetic stripe, never a chip, therefore, the bank did not need to include chips in the cards it issued for Californians. California recently extended its contract with Bank of America, although the bank told CNBC that it “would like to exit this business as soon as possible.” Bank of America recently ceased this type of work in Iowa, Kansas, Maryland and Nevada. U.S. Bank, Comerica and KeyBank are the other three largest distributors of unemployment benefits. U.S. Bank and Comerica did not respond to CNBC’s requests for comment. KeyBank declined to provide any further commentary on fraud incidents due to ongoing investigations. In the meantime, California and other states are looking to ameliorate the onslaught of transaction fraud that proliferated in their systems during the pandemic. “I have to imagine that if there was anti-fraud chip technology in these cards, there’d be an awful lot less fraud,” said assembly member David Chiu, a Democrat, who is spearheading reform to California’s Employment Development Department, which manages the benefits on behalf of the state. Unemployment cards from California do not contain security chips.Source: CNBCAs part of a package of bills, California lawmakers are looking to allow unemployment-insurance recipients to bypass cards altogether to deposit funds directly into their regular bank accounts.California’s Employment Development Department, as well as Bank of America, told CNBC that they’re in the process of transitioning to cards with chips in them to improve security for recipients. Maryland recently transitioned away from debit cards to direct deposits or paper checks for unemployment insurance. Nevada is the only other state that doesn’t allow for direct deposit, but recently switched vendors with new cards that include chips, the state told CNBC. Other states, like Oklahoma, are using technological solutions for their recent fraud problems. IDEMIA provides identity verification solutions for 34 state agencies, using facial recognition and biometric identification technology.Oklahoma’s Employment Security Commission is one of those agencies, having implemented the security solution in December 2020. Shelley Zumwalt, executive director of the commission, said the state was able to prevent about 40% of fraud within the first 30 days of implementing the IDEMIA solution.”While we had a global health pandemic, we had a national pandemic in terms of identity fraud and theft,” said Matt Thompson, senior vice president of civil identity for North America at IDEMIA.For those who say their benefits were already stolen, the main way to replenish those funds is through the banks that oversee the accounts and debit cards. Ultimately, Moon, Koole and Rivera were given a credit from Bank of America for their missing funds. But they say that their lives had already been upended. “This is people’s lives that you’re messing with,” Rivera said. “I feel very, like, punched in the gut.”Please email tips to [email protected]. More

An executive chef interviews a job seeker about hospitality employment during a job fair on June 23, 2021 in Torrance, California.PATRICK T. FALLON | AFP | Getty ImagesThe rapidly spreading delta variant of Covid-19 may be reason for Congress to extend federal unemployment benefits past their expiration in early September, according to some labor economists.Rising Covid caseloads, largely the result of the more transmissible virus strain, threaten to undermine the U.S. economic recovery at around the same time that federal benefits are supposed to end, they said.  Local outbreaks may lead consumers — both vaccinated and unvaccinated — to curtail in-person activities like dining at restaurants, and lead parents to stay home if some schools adopt remote learning in the fall, for example, economists said.More from Personal Finance:Student loan borrowers may get more time without paymentsIntuit will no longer be a part of an IRS free-tax-filing programDemocrats’ budget bars higher taxes for those making under $400,000″It’s certainly possible we could have another round of economic contraction in certain areas if there’s an outbreak,” said Eliza Forsythe, an assistant professor and economist at the University of Illinois. “And the unemployment system won’t be there for people the way it’s been over the past year.”This is, of course, a hypothetical scenario. And there’s been little indication of political will to continue benefits past their expiration Sept. 6.Around half of states, largely Republican, have already withdrawn from the federal unemployment programs months early, claiming benefits were keeping recipients from returning to work.But the dynamic is one Congress should be considering given recent Covid statistics, some economists believe.”We should be thinking more about these what-ifs than we are right now,” according to Arindrajit Dube, an economics professor at the University of Massachusetts Amherst.Delta variantThe seven-day average of newly confirmed Covid cases jumped to more than 26,000 as of July 14, double the sum two weeks earlier, according to the Centers for Disease Control and Prevention.The CDC estimates 58% of recent U.S. cases were due to the delta variant, which is more contagious than other strains. In some regions, like Iowa, Kansas, Missouri and Nebraska, the variant accounts for almost 90% of new cases, according to the CDC.White House chief medical advisor Dr. Anthony Fauci said in June that the delta variant is “currently the greatest threat in the U.S. to our attempt to eliminate Covid-19.””I think most of our economic policy has been predicated on a status quo of the pandemic,” Dube said. “Pandemic economics is not necessarily over.”Unemployment benefitsSoaring caseloads were the reason Congress initially created the pandemic-era benefit programs in March 2020, via the CARES Act.The unemployment system expanded significantly, giving assistance to those who’d exhausted state benefits and to those who don’t ordinarily qualify for state aid, such as the self-employed, gig workers and parents who had to care for kids at home.However, economists are quick to point out that the current situation is different. Last year, Covid vaccines weren’t available; now, almost 60% of American adults are fully vaccinated. So far, the delta variant seems to be spreading largely among unvaccinated individuals.People across the country did seem to reduce in-person interactions when the virus was spreading a lot. I think there’s no reason not think that won’t happen again.Eliza Forsytheassistant professor and economist at the University of Illinois”If that’s the case, then extending the [unemployment] program wouldn’t be worthwhile,” Michael Farren, an economist at George Mason University’s Mercatus Center, said. “You don’t need to extend the program, you just need more vaccinations.”Extending federal benefits could be damaging to the economy, if the policy leads some workers to delay returning to the labor force, for example, Farren said. The risk of businesses automating certain jobs also grows the harder it is for them to fill a role, he said.But there are some groups, like children under age 12, who can’t get a vaccine even if they want one, Dube said.Outbreaks are likely to be more localized among areas with relatively low vaccination rates, Dube said. But in Los Angeles County, for example, officials said Thursday that masks are required indoors regardless of vaccination status due to the delta variant.Such mitigation measures may lead some residents, even vaccinated ones, to be more cautious about visiting indoor restaurants, bars, cafes and movie theaters, for example, which could lead to more layoffs, Dube said.”People across the country did seem to reduce in-person interactions when the virus was spreading a lot,” Forsythe said. “I think there’s no reason not think that won’t happen again.” More

A view of the Norwegian Encore cruise ship during its inaugural sailing from PortMiami, which took place from Nov. 21-24, 2019.Orlando Sentinel | Tribune News Service | Getty ImagesCheck out the companies making headlines in midday trading.State Street — The financial firm’s shares rose 2.9% after beating on the top and bottom line of its quarterly results. State Street reported earnings of $1.97 per share on revenue of $3.03 billion, while analysts expected earnings of $1.79 per share on revenue of $2.94 billion, according to Refinitiv.Moderna – Shares of Moderna soared more than 10% on news that the pharmaceutical company would join the S&P 500 on Wednesday, July 21. Moderna will replace Alexion Pharmaceuticals, which is being acquired by AstraZeneca.Charles Schwab — Shares of the online broker ticked about 2% lower after reporting its quarterly results. Schwab earned 70 cents per share, missing estimates by 1 cent, according to Refinitiv. The company made $4.53 billion in revenue, topping estimates of $4.46 billion. Schwab also showed a slowdown in new clients, which totaled 1.7 million in the second quarter after a record 3.2 million in the first quarter.The Honest Company — The maker of environmentally sustainable lifestyle products saw its stock jump 2.3% after Loop upgraded it to a buy from a hold after a recent pullback in shares. Retail demand is strong, Loop said, and any second quarter destocking-related weakness should be made up in the second half.iHeartMedia — The media company’s stock climbed 1.7% higher after Goldman Sachs initiated coverage as a buy. Goldman also said iHeartMedia is well positioned to make the transition from legacy radio broadcasting to digital-first audio media.Dow — The chemical stock dipped 3% after Bank of America downgraded Dow to underperform from neutral. The firm said in a note to clients that there was downside risk to the price of polyethylene in the U.S., which could take a bite out of the company’s stock price.Carnival Corp, Norwegian Cruise Lines — Cruise lines dropped on Friday, with Carnival declining about 4.6% and Norwegian dropping more than 5%. The companies’ shares fell despite positive news that Canada will allow cruise ships to resume operations in its waters starting Nov. 1, sooner than planned. Previously, the Canadian government extended its cruise ban until the end of February 2022. Norwegian and Carnival shares are both down double digits this month.Tencent Music Entertainment — Shares of the Chinese music streaming service dropped more than 5% after Morgan Stanley downgraded the stock to equal-weight from overweight. The Wall Street firm said rising regulatory issues in China will keep Tencent Music Entertainment from bouncing back after its rough first half of the year. The stock has fallen nearly 40% this year.Uber — The ride sharing company saw its stock rise 1% before pulling back slightly, after MKM named it a top pick, saying Uber finally has a “line-of-sight” for profitability and that it expects an upward re-rating on the stock. — CNBC’s Maggie Fitzgerald, Hannah Miao, Yun Li, Jesse Powell and Michael Bloom contributed reportingBecome a smarter investor with CNBC Pro. Get stock picks, analyst calls, exclusive interviews and access to CNBC TV. Sign up to start a free trial today More

Treasury Secretary Janet Yellen speaks during the daily press briefing on May 7, 2021, in the Brady Briefing Room of the White House in Washington, DC.Saul Loeb | AFP | Getty ImagesU.S. Treasury Secretary Janet Yellen will meet with the President’s Working Group on Financial Markets next week to discuss the role stablecoins could play in the financial system.The meeting will take place Monday and will include representatives from the Office of the Comptroller of the Currency and the Federal Deposit Insurance Corporation, the Treasury announced Friday.Stablecoins are digital currencies designed to be less volatile than other cryptocurrencies by pegging their market value to an outside asset like the U.S. dollar.”Bringing together regulators will enable us to assess the potential benefits of stablecoins while mitigating risks they could pose to users, markets, or the financial system,” Yellen said in a statement Friday. “In light of the rapid growth in digital assets, it is important for the agencies to collaborate on the regulation of this sector and the development of any recommendations for new authorities.”Regulators have become increasingly concerned about transparency in the trading of stablecoins, the reserves backing them and how much market participants rely on them to enable trading in decentralized finance, also known as DeFi. They’re growing in popularity and interest. Earlier this year, Visa said it would begin supporting payments on its network in the dollar-backed stablecoin USD Coin.As more companies with cryptocurrency businesses go public or prepare to do so, like Coinbase and Circle, the industry needs further regulatory clarity on stablecoins. On Thursday, Federal Reserve Chairman Jerome Powell acknowledged before the Senate Banking Committee that stablecoins would need “an appropriate framework.” More

Serhii Shleihel | iStock | Getty ImagesSigns are mounting that student loan borrowers could get more time before they need to resume their payments.For more than 16 months now, most borrowers’ bills have been on pause, thanks to a break offered by the U.S. Department of Education because of the financial struggles wrought by the Covid-19 pandemic. Currently, those payments are scheduled to begin again in October.However, an extension is under consideration, experts say.”There’s a great deal of discussion about what’s the right thing to do here,” said Scott Buchanan, executive director of the Student Loan Servicing Alliance, a trade group for loan servicing companies and their affiliates.More from Personal Finance:Consider these tax moves before paying for collegeHow to identify and control a spending problemThe next big steps to take after quitting your jobA recent change in student loan servicing could work in borrowers’ favor.The Pennsylvania Higher Education Assistance Agency — which oversees loans of 8.5 million student borrowers — announced this month that it would not renew its contract with the federal government when it ends in December. All those borrowers, as a result, will need to be matched with a new lender.”It would be confusing for PHEAA borrowers to restart repayment on Sept. 30, only to change servicers on Dec. 14,” said higher education expert Mark Kantrowitz.”It would be better to combine both changes so that they occur at the same time.”There were already signs that the White House was considering an extension.In an interview with the Education Writers Association in May, Education Secretary Miguel Cardona said the government was deciding whether it should grant borrowers more time beyond September.Meanwhile, Democrats and advocates are pushing for an extension.Sen. Elizabeth Warren, D-Mass., and Senate Majority Leader Chuck Schumer, D-N.Y., sent a letter in June to President Joe Biden, urging him to keep the payment pause in effect until March 2022. That would mean most borrowers wouldn’t have made a payment on their student loans in two years.More than 120 organizations, including the American Civil Liberties Union, the National Consumer Law Center and the Consumer Federation of America, also recently wrote to the president, asking him to extend the payment pause until student debt has been forgiven.Maintaining the pause until a decision on forgiveness is made would reduce confusion for borrowers and servicers alike, experts say.Zoom In IconArrows pointing outwardsBiden has asked the U.S. Department of Justice and the U.S. Department of Education to review his legal authority to forgive student debt through executive action. Those reports are still pending.The decision over when to resume payments may also depend on how borrowers are faring as the country pulls out of the pandemic.Those with student debt were struggling before Covid, with more than 1 in 4 in delinquency or default. After more than a year of record-high unemployment levels, that pain has only worsened.The unemployment rate for those with an associate’s degree was more than 5% in May, compared with 2.8% before the pandemic. Close to 3% of bachelor’s degree recipients remain jobless, up from around 2.2% pre-Covid.The Congressional Budget Office recently predicted that the jobless rate for younger workers will be slower to improve than the overall rate.”Best guess is that the payment pause and interest waiver will be extended if the unemployment rates for college graduates have not yet normalized as of Sept. 30, 2021,” Kantrowitz said. More

Federal Reserve chair Jerome Powell has been testifying on Capitol Hill this week, and it’s pretty clear that he is not a fan of digital coins – especially stablecoins.During a two-day congressional hearing, the Fed chief said the main incentive for the U.S. to launch its own central bank digital currency, or CBDC, would be to eliminate the use case for crypto coins in America.”You wouldn’t need stablecoins; you wouldn’t need cryptocurrencies, if you had a digital U.S. currency,” Powell said. “I think that’s one of the stronger arguments in its favor.”Central bankers and U.S. lawmakers have for years bemoaned the rise of stablecoins, a specific subset of cryptocurrencies that have a value pegged to a real-world asset, such as a fiat currency like the U.S. dollar or a commodity like gold.These nongovernmental digital tokens are increasingly being used in domestic and international transactions, which is scary for central banks because they don’t have a say in how this space is regulated.”I understand why they fear stablecoins,” said Nic Carter, founding partner at Castle Island Ventures. “I can see why they’d be concerned with a large portion of commercial banking activity flipping over to this largely unregulated world.”But Powell isn’t necessarily all that keen on the U.S. launching its own digital token either. There are already close to 11,000 cryptocurrencies, so a digital dollar would be entering a very crowded field.In response to a question Thursday from Senator Pat Toomey, R-Pa., Powell said that he was undecided on whether the benefits of a digital dollar outweigh the costs.What is clear, however, is that the Fed is done letting stablecoins run amok.”We have a tradition in this country where the public’s money is held in what is supposed to be a very safe asset,” Powell said.”That doesn’t exist for stablecoins, and if they’re going to be a significant part of the payments universe…then we need an appropriate framework, which frankly we don’t have.”Stablecoins vs. CBDC vs. electronic USDRight now, there are several different types of digital U.S. dollars.Sitting in commercial bank accounts across the country are electronic U.S. dollars, which are partially backed by reserves, under a system known as fractional-reserve banking. As the name implies, the bank holds in its reserves a fraction of the bank’s deposit liabilities. Transferring this form of money from one bank to another or from one country to another operates on legacy financial rails.There are also a spate of USD-pegged stablecoins, including Tether and USD Coin. Although critics have questioned whether tether has enough dollar reserves to back its currency, it remains the largest stablecoin on the planet. USD Coin is backed by fully reserved assets, redeemable on a 1:1 basis for U.S. dollars, and governed by Centre, a consortium of regulated financial institutions. It is also relatively easy to use no matter where you are.Then there’s the hypothetical digital dollar that would be the Fed’s take on a CBDC. This would essentially just be a digital twin of the U.S. dollar: Fully regulated, under a central authority, and with the full faith and backing of the country’s central bank.”A dollar in CBDC form is a liability of the central bank. The Federal Reserve has to pay you back,” explained Ronit Ghose, who heads FinTech and digital assets for Citi Global Insights.There are relative benefits and drawbacks of all these forms. But Powell’s contention that CBDCs are a rival to stablecoins misses the larger point of why cryptocurrencies are popular – and it’s not simply because they’re digital.”[They’re] popular because it’s money that’s independent of politicians and bankers,” said Mati Greenspan, portfolio manager and Quantum Economics founder. “People want the separation of government and money. They clearly don’t get that.”Some argue that a CBDC in the U.S. would technically be safer than privately issued stablecoins because it would present a direct claim against a central bank, similar to the U.S. dollar.But many of the people who deal in stablecoins don’t necessarily want safe. They want an easier way of doing business, especially internationally.Getty Images”It’s just an alternative payments network, built on top of the commercial bank system,” said Carter. “It’s like open banking on steroids. It is very interoperable, it is relatively transparent, and in theory, you can get faster settlement and faster cross-border settlement, because it’s not encumbered.”Stablecoins originally emerged to cater to demand for dollar exposure offshore and overseas, according to Carter. Tether, the world’s third-largest cryptocurrency and the biggest of the stablecoins, is primarily transacted outside the U.S.Alyse Killeen, founder and managing partner of bitcoin-focused venture firm Stillmark, thinks the presence of a digital currency issued by the Fed in no way reduces the value of cryptocurrency.”Many people recognize the loss of autonomy that occurs when permission to spend is implicit in the use of a currency,” says Killeen. “It’s a relatively common experience to be blocked from executing a transaction via bank wire, debit card, or credit card when the transaction is attempted after bank hours or outside of your bank-identified personal spending habits,” she said.”A digital currency issued by the Fed…would likely bear the same friction as attempting to initiate a wire on a Sunday.”Why stablecoins are scaryThere are lots of reasons for the Fed to be concerned over the rise of stablecoins.For one, there’s a concern over losing monetary control.Facebook plans to launch its own stablecoin, diem, later this year, and were it “to succeed in supplanting central bank money in the public’s wallets, it would make it more difficult for the Fed to control the money supply or more generally, to conduct monetary policy,” according to Rutgers University economist Michael Bordo.There is also the issue of waning monetary sovereignty.”Were diem, or even a Chinese CBDC, to be accepted by many other countries, the U.S. dollar would lose its dominance,” continued Bordo.Central banks like the Fed also take issue with the fact that stablecoins look as though they are pegged to fiat currency, even though they aren’t backed by the sovereign, but instead by financial assets. Ghose says it’s similar to how a money market fund works.”Stablecoins are like watching a movie that is dubbed – you are not watching the original movie,” said Ghose.This is what really gets under the skin of the Fed. Decentralized cryptocurrencies like bitcoin don’t pretend to be the same as fiat, but “stablecoins can give the impression that you are using something with a fixed value to fiat,” he said.Carter thinks the Fed’s hostility may stem from its own plans for a CBDC, which it can use to instill monetary policy more granularly and directly.Carter imagines the CBDC as a “programmable voucher that the Fed could control by twiddling buttons, having total visibility into and control over monetary velocity, making your money expire if not spent within 60 days, completely eliminating disfavorable uses of cash – it’s the holy grail for central bankers because it gives them full discretion.”Not going anywhereLike them or not, central bankers do agree that stablecoins are here to stay.Data from The Block shows nearly $110 billion in total stablecoin supply, and it remains on a swift incline.Unlike his fellow central bankers, Fed Governor Randal Quarles thinks there’s no need to fear stablecoins. He also doesn’t really get the case for the U.S. launching its own central bank-backed digital dollar.In remarks made to the Utah Bankers Association in Sun Valley, Idaho this June, Quarles argued that stablecoins could, in fact, advance the role of the U.S. dollar internationally.”A global U.S. dollar stablecoin network could encourage the use of the dollar by making cross-border payments faster and cheaper, and it potentially could be deployed much faster and with fewer downsides than a CBDC,” he said.Provided that certain regulatory questions can be addressed, Quarles argued that “rather than straining to find ways to say ‘no,'” the Fed should be saying “yes” to these products.”Indeed, the combination of imminent improvements in the existing payments system such as various instant payments initiatives combined with the cross-border efficiency of properly structured stablecoins could well make superfluous any effort to develop a CBDC,” continued Quarles.President Biden will have to decide in October whether to renew Quarles’ term as the central bank’s vice chair for supervision, which could indicate where the White House falls on the topic of digital currencies. 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In this articleSQJack Dorsey creator, co-founder, and Chairman of Twitter and co-founder & CEO of Square arrives on stage at the Bitcoin 2021 Convention, a crypto-currency conference held at the Mana Convention Center in Wynwood on June 04, 2021 in Miami, Florida.Joe Raedle | Getty ImagesPayments company Square is launching a business dedicated to “decentralized financial services” using bitcoin.Square CEO and bitcoin bull Jack Dorsey said on Twitter late Thursday that the company is “focused on building an open developer platform with the sole goal of making it easy to create non-custodial, permissionless, and decentralized financial services.”The new unit will include the Seller, Cash App and recently acquired Tidal businesses.Decentralized finance, or DeFi, applications are those that don’t rely on centralized authorities like banks, but instead use blockchain-based smart contracts to execute transactions. Most are being built on the Ethereum blockchain.DeFi applications allow for financial transactions that are more easily accessible, efficient, and relatively low cost. They’ve also been highly attractive to yield seekers who can generate returns between about 15% and 30% by participating in the DeFi ecosystem – by “locking” capital in smart contracts.”DeFi platforms function similarly to traditional banks and financial services companies and could pose a disruption risk in the coming years,” Needham’s John Todaro said in a recent report focused on the DeFi opportunity. “In the current yield starved environment, there has been an increased demand for DeFi platforms which offer significantly higher yields than traditional financial products.”But like cryptocurrency activity broadly, DeFi comes with many different kinds of risks, including regulation, asset volatility and the technology itself. Because there aren’t banks or other third-party companies facilitating transactions, there’s no insurance on funds that could potentially get lost. Cryptocurrencies are volatile, which means assets put up as collateral could quickly decline in value if there’s a downturn, which could lead to positions being liquidated. And there could be errors in the original smart contract code.The current estimated value of funds currently locked into DeFi-related contracts is $55.21 billion, according to DeFi Pulse.Dorsey said the team is committed to building in a transparent way that includes an “open roadmap, open development, and open source.”Mike Brock, who leads strategic initiatives within Square’s consumer product Cash App, will lead the new business.”Technology has always been a story of decentralization,” he said in a follow-up tweet. “From the printing press, to the internet to bitcoin – technology has the power to distribute power to the masses and unleash human potential for good, and I’m convinced this is the next step.” More

The logo of cryptocurrency exchange Binance displayed on a smartphone with the word “cancelled” on a computer screen in the background.Budrul Chukrut | SOPA Images | LightRocket via Getty ImagesBinance will no longer offer digital versions of stocks like Tesla, Apple and Coinbase, as the cryptocurrency exchange faces growing pressure from regulators around the world.The world’s top digital currency exchange by trading volume said in a blogpost Friday that it would end support for “stock tokens,” crypto assets tied to the value of certain shares.Binance had offered the tokens through a partnership with CM-Equity AG, a licensed investment firm based in Germany. According to Binance, each token was fully backed by shares held by CM-Equity AG.Binance said stock tokens were unavailable for purchase on its website, “effective immediately.” The company will cease support for any stock tokens after Oct. 14, and users may sell or hold them over the next 90 days.European users will be able to move their holdings over to a new “portal” from CM-Equity AG roughly two to four weeks before Binance closes all positions on Oct. 15, Binance said.The company said the decision was taken to “shift our commercial focus to other product offerings.”In April, Germany’s financial watchdog warned investors that Binance had likely violated securities rules with the launch of its stock tokens, adding the company faced potential fines for not publishing investor prospectuses for the instruments.”As the crypto ecosystem evolves, and as Binance grows as a company, we are continually evaluating our products and working with our partners to meet our users’ needs,” a Binance spokesperson told CNBC.”We take our legal obligations very seriously and engage with regulators and law enforcement in a collaborative fashion. We don’t comment on specific matters or inquiries.”Binance’s stock tokens let users buy a fraction of publicly traded companies’ shares without paying commission fees. Stocks on offer included Apple, Coinbase, Microsoft, MicroStrategy and Tesla. Prices were settled in the company’s own dollar-pegged stablecoin, Binance USD.Binance has been facing a growing crackdown from regulators around the world. Last month, Britain’s markets watchdog barred the firm from carrying out regulated services in the country, while Italy’s securities regulator on Thursday said Binance was not authorized to provide investment services to Italians.Regulators in Japan, Canada and Thailand have also issued warnings about Binance.Last week, Binance CEO Changpeng Zhao — known in the crypto industry as “CZ” — said his firm “still has a lot of room to grow” and that “compliance is a journey” in the nascent digital asset market. More