Author: Johnny Mattimore

Coronavirus #3: We face “An international problem in a world of competing nationalisms:

[quote: Lindsay Hilson, Channel 4 News]: and it is nowhere more acute than in the EU (European Union). Here, every member country has pursued its own plan, uncoordinated with its neighbours and union members. From broader controls, to industrial economic stimulus, to healthcare planning, etc., each country has turned insular. And the banking systems is under pockets of extreme stress in the EU.

(1) Today, 6th April, 2020, we had expected a plan (albeit it circa three weeks since the first ECB liquidity plan) from the Eurogroup (finance ministers of 19 members of the EURO currency block) for the financial support of its members. It seems they can only agree to disagree.

(2) Tomorrow, the EU is supposed to bring a plan where all of its members (those int he EURO and the rest of the EU members) to act together, coordinate, help and support each other.

(3) It seems we are nowhere near a meaningful solution and that instead, we shall see a weak, fragmented and discordant response that will set back the EU, it members and the EURO many years … in short, it stands to lose its reputation in an instant, due to indecision and division on how to manage MONEY.

European Banks Prepared for a Crisis. But Not This One.

Coronavirus#2: How “CLIMATE RISK APPETITE” post COVID-19 may become a central element of enterprise and government planning

The collapse in global industrial production is likely to mark a nadir in global emissions, which, if we measure it, may provide a “Global Eyeball” of how we recover and how much of prior emissions are turned back on versus what happens if industries take a different path towards lower impact solutions.

The article below, provides some valuable thoughts on how to think of the next stage in global industrial production and how this might impact CLIMATE RISK APPETITE.

See also this recent post on CLIMATE RISK APPETITE:

CoronaVirus#1: Feedback on EU guarantee is excellent … keep helping –

ECB to print 1 trillion euro this year to stem coronavirus rout

There are three things I think are key to

(1) EU TEMPORARY GOVT DEBT GUARANTEE of Member Nations’ Govt Debt – this will stabilise a big part of the market and free up resources to help other key areas;

(2) CASH for Private Sector Companies, Employees & Self Employed – we need more focus on cash to end users;

(3) GOVT PRIVATE EQUITY FUND – we need the experts in the private sector to support governments to set up, run and make investments in critical firms – this is not about nationalisation, it is about temporary strategic private sector investments. We need to embrace the deals like Buffet does: 8% preferred equity plus warrant; or, convertibles, direct equity, mezzanine debt, etc. This will save critical firms, jobs, suppliers and make a return for the tax payer – it could spawn ongoing critical private/public investment like never before.


When a price “gaps”, i.e. no meaningful traded prices or committed quotes across a wide price range, [or what quants/mathematicians call “jump discontinuities“], then you know that we are in the eye-of-the-storm. See the oil chart below for today.

So, the question arises“when do we know we are close to the bottom?” 

The simple answer is that we will not know immediately – it will take several attempts to keep taking the market lower. Only when sustained selling fails to have any further impact will we have a bottom – when people are exhausted and algorithms fail to impact prices. It may sound obvious, but when everyone is driven by fear, stating the obvious is a helpful way to restore sanity.

HIGHLIGHTS: Top Companies Using Top DLT/Blockchain Platforms – from Forbes

Forbes Blockchain 50 is published for the Top Companies Using the Top DLT/Blockchain Platforms.

Findings of the report as summarised by the website “Blockdata” are below.


“The list aims to capture the billion dollar companies most active in blockchain. To be included in the Blockchain 50 [list], a company must have a valuation above $1 billion.”


Hyperledger Fabric is the most popular outright with 24 companies using the permissioned ledger.”

Ethereum is a close second with 22 firms.”

Corda from R3 is used by 11 companies, including GE, Nasdaq, UBS, Aon, and BMW.”

Quorum, JPMorgan’s enterprise version of Ethereum, is used by 7 companies.”


  • “Asset tokenization & bond issuance: Santander, Overstock’s tZERO, and Daimler”
  • “Provenance: traceability platforms like IBM Food Trust (Dole, Nestlé, and Walmart) and Tracr (De Beers and others)”
  • “Custody solutions: Bakkt (owned by Intercontinental Exchange), HSBC’s Digital Vault, and Coinbase Custody”
  • “Enterprise infrastructure developments: blockchain development platforms such as JPMorgan’s Quorum, Bitfury’s Exonum, and IBM Blockchain and the various Hyperledger projects”
  • “Trade Finance: Foxconn, Tencent, and Shell; komgo and Contour trade finance platforms (which ING and Citi are both members of)”


See Blockdata Article:

See Forbes Article:

3/3 FAIT ACCOMPLI: Central banks must create digital risk free assets (dRFA)

SUMMARY There is substantial debate on if and when any central banks will issue digital currencies. However, before one addresses that debate, I believe that one should consider the role of a central bank in creating digital risk free assets (RFA) for digital Financial Market Infrastructure (dFMI).

As with existing “real” RFA of cash bank notes (& coins) and government debt securities, the future of digital risky assets (dRA), such as credit bonds, equities, etc., is a hollow ambition without the parallel creation of digital risk free assets (dRFA). (Note: risk-free is just a market term, governments can also default on their bank notes and debt!)

Without an equivalent dRFA, there will be a bifurcation of risk management between real assets (off-chain) and digital assets (on-chain) for all of those institutions (financial & non-financial) that wish to participate in digital assets.

This will also impact individuals who will need to access a digital version of cash in order to participate in dFMI. At present the alternative is a digital stablecoin provided by their deposit/payment bank of choice.

Moreover, in the event that dRFA do not exist, then central banks will face an outcome where private enterprises will fill the gap. This would lead to weakening of system-wide creditworthiness (e.g. no ability for investors to hold dRFA in order to negate taking private enterprise counterparty risk; and, no ability to have a digital lender of last resort to negate systemic risk).

Related to the full set of dRFA (the dRFA yield curve) is the foundation of that yield curve, namely: the CBDC (Central Bank Digital Currency, which has a maturity of zero and pays zero interest). This is critical to the creation of a complete dRFA yield curve and the creation of an associated payment mechanism using central bank equivalent currency in dFMI.

HISTORICAL IMPORTANCE OF RISK FREE ASSETS The entire fabric of the global financial system is based upon each country having a set of risk free assets (RFA), denominated in their national, fiat currency.

(Note, some countries have adopted foreign currencies, such as Panama and Ecuador, but these are the exception. In the case of the Eurozone, the Euro is, de jure, the national currency of each of the member countries, thus, a single currency is used in more than one country, but that single currency is used for different RFA per country.)

In the current world, for most users RFA take the form of either bank notes or government debt securities. By volume, the former is typically used by individuals and small businesses, while the latter is the domain of the professional/wholesale corporate, investment and banking markets.

The RFA form the basis from which all other risky assets (RA) are priced, typically at a positive spread over the corresponding RFA rate. With the exception of systemic crises, when anomalous circumstances may arise for short periods of time, this pricing rule holds true.

FUTURE IMPORTANCE OF digital RISK FREE ASSETS In the same manner as RFA, the emergence of digital assets on a dFMI will require dRFA for the simple reason that without it there will be no sustainability of the dFMI to withstand a crisis. This, I believe, is the test for whether a new dFMI will have longevity. Without dRFA, the dFMI will likely fail at the first major crisis and all on-chain, digital assets will have to revert to off-chain real world assets for crisis resolution.

CREATING A DIGITAL GOVERNMENT BOND MARKET IS CRITICAL TO dFMI If the emerging dFMI is to be durable and withstand a crisis, then it is critical that the first step in the development of digitised securities is for government debt securities.

While other securities, such as credit bonds, equity securities, etc., could gain some traction in dFMI, they are unlikely to gain material traction in the absence of the creation of dRFA.

The first stage of evolution of dRFA is likely to be in smaller markets by value, perhaps smaller countries and emerging market countries. This is because these countries may be able to be early adopters due to their lower impact on global markets. However, it is the evolution of dRFA for the larger countries that is critical to the success of dFMI.

The dRFA Yield Curve and CBDC We are all familiar with yield curves. They are the returns for lending to governments for different lengths of time. It is reasonable to believe, given the established practices in this asset class, that creating a digital equivalent is achievable for participants in the dFMI.

However, in the creation of the digital yield curve (dYC), there is one point on that curve that is special, unique one might say, namely: the zero maturity, zero yield RFA, known to most as “cash”.

At present, private sector banks that hold reserves at central banks do indeed hold them as “digital” assets. However, individuals and the majority of private companies do not have access to such digital assets at a central bank. When we think of giving every individual and every private company access to a central bank digital currency, CBDC, to hold as an asset and to make and receive payments, then the question arises: how is this achieved in the dFMI?

The creation of a CBDC is a more complex issue than the rest of the dYC, and, therefore, I address it in a subsequent article. However, it is possible to start with the digitisation of government bonds and later examine the introduction of a CBDC.

So, my view is that the market should proceed with digitising government bond markets to aid the development and maturity of the dFMI and then add additional features, such as CBDC. This incremental approach will be much more likely to succeed than trying to implement everything at once. After all, the current financial market infrastructure took a long time to create and it is still far from perfect.

[SOURCE: this is an extract taken from “The Emergence of a New Digital Financial Market Infrastructure”, a series of thought leadership articles by Johnny D. Mattimore. For the full series see his LinkedIn Posts at: and select “Articles”.]

2/3 SECURITIES Digitisation/Tokenisation: Accelerate economic growth with dFMI

SUMMARY I have recently been involved in a broad range of strategic product initiatives to tokenise securities in the financial services sector, generally referred to as “Securities Digitisation“. What is clear to me during this work is that there is a huge opportunity for the marketplace to bypass the use and/or the new build of traditional Financial Market Infrastructure (FMI) and leap to the next generation of digital FMI (dFMI). The benefits of doing so are wide-ranging. However, for many countries (sovereign nations) and market sectors (asset classes sub-asset classes), the potential to derive economic benefits by accelerating growth through the faster development of institutional standard securities markets using dFMI is significant.

HISTORICAL PRECEDENTS There are already examples in other industries where economies have achieved faster economic growth by leaping over intermediate stages of infrastructure development. In particular, emerging market countries and remoter communities in developed economies have always faced the challenge of restricted access to the high levels and high costs of capital required for infrastructure investment before deriving the long-term economic benefits. Three such examples come to mind:

1) ELECTRICITY DISTRIBUTION – building transmission networks is slow, costly and often completely non-viable, especially in poorer countries with large distances between urban centres and with dispersed population densities. Many countries overcame this using portable generators to bridge the demographic gap of pre-urbanised or transitioning agricultural-to-urban economies.

2) TELECOMMUNICATIONS – likewise, the move for many countries leaping from low use of telecommunications (landlines mostly in densely populated areas with limited functionality) to mass use was only achievable with the adoption directly of mobile (and the consequential benefit of smart phones – see the next point on computers).

3) COMPUTERS – the access to computers, whether desktop, laptop, tablet or smart phone, has transformed the need for the infrastructure related to the access of entire populations to education, health, business, travel, banking services, etc, all of which drive faster economic growth. (It did of course need internet access infrastructure as a minimum investment.)

SECURITIES DIGITISATION It seems that we are now on the cusp of another major industrial transformation opportunity for all countries, rich to poor, to leap to the next version of FMI, namely dFMI. I believe that it will bring benefits to the entire spectrum of countries and market sectors. It will bring efficiencies in many forms including the following:

1) INFRASTRUCTURE CAPITAL: Capital savings related to the creation of current infrastructure

2) INFRASTRUCTURE INTEREST: Interest savings on the borrowing costs of that capital;

3) INFRASTRUCTURE BARRIERS TO ENTRY: the consequential reduction in barriers to entry for countries and for new market sectors (across the spectrum of rich to poor countries);

4) INVESTMENT SECURITIES TRADING CYCLES: changes in the speed of the securities trade cycle to get money in and out of exposures quicker, by reducing barriers for cross border capital flows (linked to government FX policies on hot money in the securities markets and the slower moving Foreign Direct Investment);

5) INVESTMENT SECURITIES SETTLEMENT CYCLES: changes in the speed of settlement and the consequential immediate return of invested capital cross border.

[SOURCE: this is an extract taken from “The Emergence of a Digital Financial Market Infrastructure”, a series of thought leadership articles by Johnny D. Mattimore. For the full series see his LinkedIn Posts at: and select “Articles”.]

FURTHER READING I recommend the following for those interested in this subject:

1) OECD (2020), The Tokenisation of Assets and Potential Implications for Financial Markets, OECD Blockchain Policy Series,

2) R3 (2019) , The Tokenization of Financial Market Securities – What’s next?

3) University of Oxford Research (2020) Tokenisation: the future of real estate investment?

1/3 DEFINITION: Central bank digital currency

Definition: “A CBDC (Central Bank Digital Currency) is a DC (Digital Currency) with the full faith and credit guarantee of the CB (Central Bank) to provide continuous fungibility on a 1-to-1 basis between the CBDC and the underlying CB national fiat currency.” Johnny Mattimore, LDN-10:00-24-Jan-2020. See #cbdc 

I have seen many people trying to lock down the definition of a central bank digital currency. Therefore, this is my contribution to the effort. Please feel free to use it. I’d appreciate it if users cited me as the source (thank you).

I think that how the mechanism works to create the CBDC and to achieve the “fungibility” should be separate to the fundamental definition of the guarantee to assure the 1-to-1 permanent stability between the CBDC and the CB national fiat currency. This is critical for the proper functioning of payment systems (see footnote).

For those familiar with history, this can be seen as just a modern digital version of the currency board 1-to-1 system. I hope this is helpful. Johnny

[SOURCE: this is an extract taken from “The Emergence of a Digital Financial Market Infrastructure”, a series of thought leadership articles by Johnny D. Mattimore. For the full series see his LinkedIn Posts at: and select “Articles”.]

Footnote: “The proper functioning of the payment system, however, implies one-to-one convertibility of CBDC with respect to reserves and banknotes (Fung and Halaburda (2016)). Not facilitating one-to-one convertibility would lead to an exchange rate between different types of central bank money, breaking the unity of the currency. However, some have proposed allowing this unity to break under certain circumstances. For example, Agarwal and Kimball (2015) propose abandoning one-to-one convertibility as a way of allowing a floating exchange rate between cash and commercial bank deposits and thus eliminating the effective lower bound. Abandoning convertibility between CBDC and reserves would similarly lead to a floating exchange rate between CBDC and commercial bank deposits.”


See page 6, footnote 12