The latest set of nascent projects on the runway to begin testing in Spain’s fintech sandbox has been published, including a euro-pegged ‘stable-token’ developed by a Spanish payments technology company.
The sandbox (‘Sandbox financiero’) – a test space to allow fintech-based initiatives to conduct ‘live’ experiments under regulatory supervision – welcomed its first fintech projects in 2021. Projects are being assessed for sandbox entry in two cohorts (groups) per year and are overseen in the sandbox by at least one of three regulators: Banco de España (central bank); Comisión Nacional del Mercado de Valores (CNMV – the National Securities Market Commission, the government agency responsible for financial regulation of securities markets); and the Dirección General de Seguros y Fondos de Pensiones (DGSFP – the Directorate-General for Insurance and Pension Funds).
The stable-token project – which is from Monei, a Málaga-registered company – is one of five initiatives to sit within the fourth cohort of projects to have received what is termed ‘favourable prior evaluation’ (‘proyectos con evaluación previa favorable’) for sandbox entry. Banco de España is to oversee its testing.
The four further projects in the cohort are: ‘Sistema Multilateral de Negociación Basado en Technología de Registro Descentralizado’ (to be jointly overseen by the CNMV and central bank); ‘Proyecto Akura’ (to be overseen by the DGSFP); ‘Open Brick’ (to be overseen by the CNMV); and ‘Token City Exchange’ (also to be overseen by the CNMV).
Thirty projects have received ‘favourable prior evaluation’ over the four cohorts to date, with the first cohort – which contained 18 projects (from 67 applications) – being the largest. Twelve of the 18 projects proceeded through the process to actually begin tests. The second and third cohorts comprised just four and three projects, respectively. The application window for the sandbox’s fifth cohort opens on 1 March 2023 and closes on 12 April.
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Monei’s global ambition
Monei is looking to test its stable-token called EURM as part of an ambition to ‘facilitate the sending of euros on a global scale thanks to a token linked to the euro — 1:1 parity’, the company said in a blog post on its website.
It is designed to send online payments and stable-tokens (at parity with the euro), using Ethereum and Polygon blockchain technology, according to the blog post. Each token will represent one physical euro, the total of which will be held in two ‘safekeeping’ accounts at Spanish financial institutions (private-sector banks) ‘such as’ BBVA and Caixabank, Monei explains, making clear that for the time being, its use is restricted to people in Spain.
In the test phase, an individual user would enter his or her phone number, verify their identity through video identification and load their digital wallet with real euros via Bizum, a well-known Spanish instant payment services provider. Automatically, the same amount of EURM is created, which the user can then send to the other registered users. There is a limit of €10 (about £8.79/$10.86) per participant during the trial. According to Monei, the potential number of EURM users in Spain is ‘almost 57 million’ (the total number of mobile phone lines in the country). Spain has a population of about 47 million people.
The company explains that EURM should enable users to be able to ‘send hundreds of euros to fractions of cents at various time intervals, even milliseconds, for example, to pay for employees’ transport or food allowances’. Further potential uses, the company states, include helping a business to digitise and schedule daily payments to its suppliers ‘according to consumption that day’; prorate a monthly payment into daily payments to meet a cost that cannot be paid at that time; and allow employees to choose whether they want to receive a daily, weekly, fortnightly or monthly payroll, without increasing the company’s workload.
‘All these practical uses can be programmed without the need for human intervention and are valid for both domestic and international transactions, with no higher cost per transaction. Similarly, the stable token offers greater transparency, allowing the authorities and the tax office to consult these movements in real time,’ Monei states.
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MiCA rules on way
Pre-existing euro-pegged stablecoins include EURt from crypto giant Tether (which also offers tokens pegged to other fiat currencies).
The regulatory environment in which such stablecoins operate is currently in a state of development across the European Union (EU) and beyond. The EU itself – of which Spain is one of the largest of 27 member states – is currently preparing for the introduction of the Markets in Crypto-Assets (MiCA) rules.
This high-profile legislation cover issuers of unbacked crypto-assets and ‘stablecoins’, as well as the trading platforms and the wallets in which crypto-assets are held.
The European Commission introduced the MiCA proposal in September 2020 as part of a larger European digital finance package.
*** In a separate development, a blockchain-based ‘messaging network’ has been launched to support ‘seamless’ digital payments across multiple central bank digital currencies (CBDCs) and regulated stablecoins. The Universal Digital Payments Network is a private-sector initiative described in an announcement as a DLT-underpinned (distributed-ledger technology) messaging ‘backbone’ focused on providing interoperability between regulated stablecoins and CBDCs, as well as ‘seamless connectivity between any business IT system and regulated digital currencies’.
‘Spain’s sandbox welcomes first fintech projects’ – our news story (25 May 2021) on the projects comprising the sandbox’s inaugural cohort
‘Spain readies ground for fintech regulatory sandbox’ – our news story (5 March 2020) on Spain’s Council of Ministers signing off the draft of a long-proposed ‘Digital Transformation of the Financial Sector’ law