Precious Metals and Bitcoin Rise on the Back of Debasement Trades

A financial strategy in which investors allocate funds to assets such as Bitcoin and gold as a hedge against the devaluation of fiat currencies is known as a debasement trade. Key drivers include rising sovereign or government debt, geopolitical instability, and inflation. Experts note that investors have been selling major currencies and moving towards alternative assets such as gold (both physical and ETF), silver, Bitcoin, and even certain collectables such as Pokémon cards, which recently reached an all-time high.

Data released indicates that investors have added momentum to debasement trades due to growing concerns over fiscal challenges affecting many of the world’s largest economies, several of which are struggling under an expanding burden of debt. Analysts also highlight that political instability within these economies has further encouraged investors to pursue debasement hedges by purchasing gold, Bitcoin, and other crypto assets, particularly as the US dollar, Japanese yen, and euro face mounting fiscal and political pressures.

Experts suggest that one of the main reasons investors are rebalancing their portfolios is the rising debt levels in countries such as the United States, Japan, and across the Eurozone. These nations are finding it increasingly difficult to manage their debt piles, which in turn has enhanced the appeal of debasement trades. Gold opened today, surpassing USD 4,000 per ounce, a new record, as it continues to demonstrate its role as a safe haven amid economic and geopolitical uncertainty. Recent data also revealed that Q3 saw the largest global gold ETF monthly inflow on record at USD 17 billion, resulting in the strongest quarter ever, totalling USD 26 billion.

On the Bitcoin front, the cryptocurrency has risen steadily over the past year, driven largely by President Trump’s introduction of crypto-friendly legislation. However, the United States is grappling with a massive debt load, standing at USD 37.88 trillion as of the close of business on 30th September 2025 and still climbing. The ongoing US government shutdown has also acted as a strong buy signal for Bitcoin, much of it linked to debasement-related transactions.

Indeed, on Sunday 5th October Bitcoin reached USD 125,689, surpassing its previous record set on 14th August this year, driven primarily through Bitcoin ETFs. Data shows the coin is up 30% for the first three quarters of the year. Yesterday, 6th October, Bitcoin hit another record of USD 126,279 with the US dollar having weakened approximately 30% against the cryptocurrency this year. Several Wall Street analysts now predict Bitcoin will reach between USD 160,000 and USD 180,000 by the close of business on 31st December 2025.

Analysts advise that investors engaging in or considering debasement trades need only to look at France for an example of why hedging has become increasingly common. Newly appointed Prime Minister Sebastian Lecornu lasted only 26 days in office, surpassing the brevity of former UK Prime Minister Liz Truss’s record by 23 days. The French leader did not even manage to deliver an inaugural address to parliament, let alone present a budget that could achieve cross-party support.

Commentators suggest that debasement trading will continue an upper trajectory, as Europe contends with instability in France and beyond. Japan has also unsettled markets with a newly elected pro-stimulus Prime Minister and concerns over further debt expansion. In the United Kingdom, the Chancellor is preparing a budget that many expect to be highly contentious. Meanwhile, in the United States, already burdened by an out-of-control debt pile, a prolonged government shutdown, and a President seeking to assert influence over the Federal Reserve, the pressure continues to mount.

Swiss Government Offering Gold Concessions to U.S. for Improved Tariffs

To reduce the tariffs currently standing at 39%, imposed by President Trump, the Swiss government has offered to invest in the United States’ gold refining industry in the hope that the White House will reconsider its position. The tariff has already harmed exports* to the United States, and in a statement, the Swiss Government said: “Diplomatic and political exchanges will continue with a view to achieving a quick reduction in additional tariffs.”

*Exports to the United States have been severely affected since the 39% tariff came into effect. In August, exports fell by 22% (excluding gold and adjusted for seasonal fluctuations) compared with the previous month. Swiss watch exports to America dropped sharply in August, further compounded by weak demand from China. In a statement on Thursday, 18 September, the Federation of the Swiss Watch Industry announced that all major markets were down, with the U.S. market (the industry’s largest) falling by 24%, and overall exports down 17% year-on-year.

*Gold bullion exports to the United States in August fell to 0.3 tonnes, taking a dramatic decline. However, clarification from the White House confirmed that tariffs on gold would not be implemented, a decision only formalised in September, allowing the resumption of the bullion trade. America’s trade deficit with Switzerland fell by one-third in August compared with the previous month, from CHF 2.93 billion to CHF 2.06 billion (USD 2.6 billion), marking the lowest level since 2020, according to data from the Swiss Customs Office. Overall, Swiss exports declined by just 1%, as increased shipments to Europe, Canada, and Mexico helped offset the U.S. tariffs.

Experts have advised that, according to sources close to the talks, proposals made by the Swiss government to both U.S. Treasury Secretary Scott Bessent and Trade Representative Jamieson Greer involve Swiss refiners relocating their lowest-margin business to the United States. The offer, insiders report, also includes melting down gold bars traded in London and recasting the metal into the smaller sizes preferred in New York.

Records show that the bullion trade with the United States is, on average evenly balanced. However, this changed in the first quarter of the year as fears arose that President Trump might impose tariffs on gold. This not only created a substantial surplus but also opened up highly profitable arbitrage opportunities for traders. The first quarter distortion of Switzerland’s trade surplus figures with the United States (bullion accounted for than two-thirds of the surplus), ignited criticism of the gold industry. Attention quickly turned to the canton of Ticino, home to the world’s largest gold refining hub, through which almost all of the world’s gold passes.

Analysts suggest that the Switzerland’s gold refining industry is an easy target for U.S. politicians. However, to portray it as the villain behind Switzerland’s distorted trade surplus with the United States is considered by many to be far-fetched. The surplus, which appears to be the justification for President Trump’s 39% tariff, is, according to some experts, merely an excuse to raise levies. They note that the United States itself had a gold surplus of approximately USD 3.6 billion in 2024. The surge in gold bullion shipments from Switzerland to New York altered that balance, as many Swiss refineries operated at full capacity to melt down the 400-troy-ounce bars traded in London into the smaller one-kilogram bars preferred in New York.

Overall, the Swiss economy has remained relatively resilient. However, due to the tariffs, the government has warned that slower growth is expected for the remainder of the year. The Swiss government is currently working to diversify its trading partnerships and, together with other members of the European Free Trade Association (EFTA), signed a new free trade agreement with the South American Mercosur bloc in the third week of September. EFTA comprises Norway, Switzerland, Liechtenstein, and Iceland, while the Mercosur countries include Argentina, Bolivia, Brazil, Paraguay, Uruguay, and Venezuela.

U.S. Politicians Ensure First Government Shutdown for Six Years

The deadline for the United States Congress to approve federal funding was midnight, and once again, politicians have put America in jeopardy by refusing to agree on a budget. The Republicans and Democrats are locked in a conflict over healthcare subsidies, and while the Republican Party controls Congress, they need the Democrats to pass the funding bill. Today’s standoff could lead to the loss of thousands of federal jobs, as President Trump may well use the shutdown to trim many thousands of jobs from federal agencies. In fact, he has warned Democrats that the shutdown could well clear the path for more redundancies, which will coincide with his push to cut 300,000 federal employees by December of this year.

The current shutdown, the fifteenth since 1981, will suspend scientific research, slow air travel, delay the payment of salaries to United States troops, and lead to enforced holidays for 750,000 federal workers, costing USD 400 million per day. Regarding air travel, Vice President Vance has gone on record saying that essential staff who work through shutdowns, such as air traffic controllers, would be concerned about the non-receipt of paycheques. He warned air travellers that they may not arrive on time, as TSA (Transportation Security Administration) and air traffic controllers would not receive their wages today.

A stopgap measure was proposed to keep the government funded until 21st November 2025. However, this was denied by Democrats, who, according to some commentators, would rather have government employees go unpaid than use the time to come to an agreement over federal funding. Both Republicans and Democrats are throwing accusations, casting blame for the shutdown at each other in the hope of gaining an early advantage in the 2026 midterm elections, where all 435 seats in the House of Representatives and 100 seats in the Senate will be up for re-election.

The problem with the funding bill is that the Democrats wish to add USD 1.5 trillion to the bill, primarily to boost healthcare and other funding. They have made it clear that not even a stopgap funding bill will be passed unless their USD 1.5 trillion healthcare funding is included, which, of course, the Republicans have flatly refused. Senior Democratic figures have accused President Trump and the Republicans of not wanting to protect the healthcare of the American people. If Congress does not approve a funding bill and the impasse continues, Obamacare premium tax credits will expire on 31st December 2025, leaving around 20 million people facing sharp premium hikes.

According to many experts, this has descended into a political impasse, with Team Trump saying they have the upper hand over the Democrats because they have rallied the rank and file behind the stopgap bill. The majority leader of the U.S Senate has said that the Democrats will be blamed, just as the GOP (Grand Old Party – Republican) was in 2013 when they engineered a shutdown over repealing Obamacare. However, this time the Democrats are asking for something to be added to the bill. The bottom line is that the Republicans need 60 votes to pass this bill (voted down by 55-45), and unless there is some political give, it appears that America is in for a lengthy shutdown.

Is The Russian Economy Completely Underpinned by Its War Machine?

Experts on the Russian economy suggest that since the beginning of the invasion of Ukraine by Russia, more resources such as financial, human, and production, have been redirected to Russia’s military war machine, and today several economic commentators with expertise in this arena are saying that the war machine is now underpinning the Russian economy. The prioritisation of military spending over everything else is essentially stifling innovation and damping down any long-term growth prospects.

Indeed, since February 2022, every resource has channelled funds into the military machine for tanks, drones, bullets, and missiles; the list is endless. SIPRI (Stockholm International Peace Research Institute) has estimated that for 2025, Russia’s total military expenditure accounts for circa 7.2% of GDP, and other similar focused institutions suggest that the war machine accounts for circa 43% of the Russian government’s budget.

Analysts suggest that even if the war with Ukraine were to end tomorrow, it is feasible that Russia’s economy would always remain on a war footing, as years of massive investment in the war machine have sucked in literally hundreds of thousands of workers and transformed their factories into military production. One example of this is that before the invasion of Ukraine on February 24th, 2022, Russia had planned deliveries for 2025 of 400 armoured vehicles; today it is shipping circa 4,000 armoured vehicles. Experts argue that, on one hand, this surge in production has prevented the economy from shrinking, but on the other hand, it has also prevented it from returning to a pre-war economy—something that could be extremely perilous.

Prior to February 2024, Russia’s economy combined relatively stable private and civilian industries with the export of natural resources. The manufacturing base enjoyed the capacity for modernisation, even though it relied on imported components and technology. Even after the COVID-19 pandemic, companies were in the process of reevaluating their global markets. The economy was being managed as prudently as possible, with the auto industry producing over 1.7 million vehicles per year, military spending not exceeding 3-4% of GDP, and even a budget allocated for infrastructure.

Today, analysts and experts are painting a very bleak picture of the Russian economy and its deep ties to the war machine.  Military spending has reached unprecedented levels, colliding with an import shortage and limited production capacity, which has, in turn negatively impacted inflation. To put the brakes on price increases, inflation has remained in double-digit figures for over a year.  Meanwhile, revenue from commodity exports has dropped due to sanctions and discounts, prompting the government to raise income taxes, implement quasi-taxes such as windfall taxes, and increase export duties. As a result, many financial commentators suggest that, with government expenditure heavily skewed in favour of the military, a return to a pre-Ukraine economy is virtually impossible.

So, what’s next for the Russian economy? China continues to support the Russian economy by purchasing sanctioned LNG (Liquefied Natural Gas). In fact, it was recently reported that a fourth tanker carrying LNG from the sanctioned Arctic LNG2 project arrived and discharged its cargo at China’s Beihai LNG terminal. The Arctic LNG2 project was intended to be Russia’s largest LNG plant, producing 19.8 metric tons per year. However, sanctions have severely hindered the prospects of reaching such output.

According to a number of experts, it seems plausible that despite rhetoric to the contrary from the Kremlin and several meetings with President Trump and his officials, President Putin has no immediate intention of ending the war with Ukraine. In fact, keeping the country on a war footing would allow the military machine to prop up the economy, confirming that it has little choice but to continue producing goods central to the ongoing conflict. Experts in military affairs suggest that Putin views a military stance against the West as one of the key reasons for maintaining defence production.

Furthermore, the defence industry and the economy will benefit from arms sales to Russia’s allies, such as China. Russia is also the world’s second-largest supplier of arms behind the U.S., and has once again participated in arms fairs across the Middle East, Africa, China, and India. Notably, arms fairs in Brazil (1st – 4th April 2025) and Malaysia (20th-24th May 2025) showcased Russian arms for the first time in six years. It is therefore reasonable to assume that President Putin sees global arms sales as a boon for the economy, long after the current war with Ukraine ends.

However, sanctions on the Central Bank of Russia have been significantly reduced, curtailing its ability to borrow from international markets, and hindering the economy’s growth potential. Recently, the central bank admitted that the economy is struggling, and official data released shows GDP contracting. Analysts report that real GDP is now 12% lower than it would have been otherwise. Only the coming months and next year will reveal what is truly happening in the Russian economy, but it is without a doubt totally tied to the Russian military machine.

 USA and the World Bank Give a Boost to the Argentine Economy

Scott Bessent, the United States Treasury Secretary, has announced that Argentina is a “systematically important ally in Latin America” and went on to say that “all options are on the table” and “the U.S. is ready to do what is needed” to aid Argentina in stabilising its escalating financial woes. Recent heavy regional election losses suffered by President Javier Milei and a corruption scandal unnerved financial markets, placing in doubt the future of President Milei’s free-market and cost-cutting agenda. Such was the alarm felt by investors that it sparked off a run on the peso last week, which was threatening a devaluation of the currency.

Currently, President Milei heads the only Latin American economy that is allied to the United States, and Secretary Bessent was adamant that speculators would be defeated by confirming talks were taking place to provide a swap line of USD 20 billion to Argentina, and confirmed they were prepared to buy all the country’s dollar debt. Secretary Bessent went on to say that the “White House would be resolute in support for allies of the US” seeking to calm a market crisis engulfing the Argentine economy. Indeed, the peso on Monday of this week rose by 10% before rebounding to its level before the regional election loss, and dollar bonds issued by Argentina have edged higher following the latest intervention by Secretary Bessent.

However, the current calm pervading the Argentine markets is not guaranteed as Argentines will vote in mid-term elections next month on Sunday, 26th October, and there is further alarm for investors as President Milei may lose his re-election bid in 2027. The opposition is likely to be the governor of Buenos Aires province, Axel Kicillof, who has ambitions of his own to be President and is emboldened by his recent wins in the provincial elections, but his economic views are unorthodox to say the least, and his record as described by political commentators is alarming.

Further help from Secretary Bessent when his backing turned out to be key in Argentina securing a USD 20 billion loan back in April. However, the central bank has in recent weeks stepped in to defend a weakening peso, with investors removing money from the country with worries about the government’s ability to keep the peso steady. When President Milei won the election in 2023, he pledged to bring runaway inflation under control, along with drastic spending cuts, and a stable peso was and is critical to that pledge. As a result, the Argentine central bank has in recent weeks stepped in to prop up the peso to the tune of USD 1.1 billion, which has severely depleted its holdings and put the country in an unenviable position when it comes to repaying its debt.

The intervention by President Trump via Secretary Bessent has proved to be timely. Analysts say data show that Argentina is a serial defaulter when it comes to debt repayment, but for now, markets are calm, and thoughts of default on repayments of debt have subsided. However, President Milei has very few seats in Congress, and any gains will be a boon, and the backing of the United States in such a forceful manner may well boost his flagging polling. However, if the mid-term elections go against President Milei and he has lost control of Congress, making it long odds on his re-election in 2027, experts in this arena suggest that even the might of the U.S. President and his dollars will not save him, and the markets may once again become unsettled regarding the economy of Argentina.

Swiss National Bank Keeps Benchmark Interest Rate on Hold

Today, the SNB (Swiss National Bank) kept its key benchmark interest rate unchanged at 0%, as it continues to assess the impact on the economy of the tariffs imposed by United States President Donald Trump. The zero percent interest rate is the lowest among all major central banks and reflects the monetary policy of the SNB and the unique position of Switzerland’s economy. Money markets were not surprised by the interest rate hold (the first in seven meetings), but experts advise that, apart from tariffs dimming the outlook for the economy in 2026, there has been a small uptick in inflation in recent months.

Following the first monetary policy decision since Switzerland was hit with 39% tariffs in August this year, officials from the SNB noted that they expect growth in 2026 to be just under 1%, with unemployment likely to continue rising. Experts also suggest that the interest rate hold was also down to the stability of the Swiss Franc and also reflects the return of inflation that is still within the SNB’s target range of 0% – 2%, but is expected to move closer to the 1% mark in the next few years, having returned from negativity in May of this year.

The Chairman of the SNB, Martin Schlegel said, “Inflationary pressure is virtually unchanged compared to the previous quarter and we will continue to monitor the situation and adjust our monetary policy, if necessary, to ensure price stability”. The Chairman, with regard to interest rates, has said repeatedly that there are problems with reintroducing negative interest rates, which were in play between December 2014 to September 2022, which initiated concerns from both pension funds and savers.

Officials from the SNB also advised that Swiss companies doing business in the watchmaking and machinery sectors have been especially affected by tariffs, but the impact elsewhere, particularly in services has been limited. They also went on to say “The economic outlook for Switzerland has deteriorated due to significantly higher U.S. tariffs, which are likely to dampen exports and investment, especially“.

After the announcement, the Swiss Franc was broadly unchanged against the Euro and the US Dollar. Since January of this year, the Swiss Franc has rallied against the US Dollar and the Euro and has approached its highest level in almost a decade as investors have treated the currency as a safe haven in times of uncertainty. Furthermore, analysts advise that data released shows that since the beginning of the year, the Swiss Franc has rallied over 12% against the dollar and circa 1% against the Euro, making it one of the best-performing G-10* currencies of 2025.

*G-10 – A forum of eleven economically advanced nations that consult on economic and financial matters, such as international financial stability. 

Purpose

To foster cooperation and address emerging financial risks, especially concerning the International Monetary Fund (IMF).

History

The group formed from an agreement to provide the IMF with additional funds through the General Arrangements to Borrow (GAB). 

Membership

Includes Belgium, Canada, France, Germany, Italy, Japan, the Netherlands, Sweden, Switzerland, the United Kingdom, and the United States. 

Switzerland’s New Capital Push for UBS: Balancing Resilience and Competitiveness

In an update to our UBS (Union Bank of Switzerland) note in June of this year, the collapse of Credit Suisse in 2023 and its emergency takeover by UBS remains one of the most consequential events in recent financial history. Two years on, the Swiss government is moving decisively to prevent such a systemic crisis from recurring. At the heart of this effort lies a controversial proposal: requiring UBS to hold significantly more equity capital, potentially in the range of USD 20–30 billion, with particular focus on its sprawling foreign subsidiaries.

This initiative, if implemented, could reshape not only UBS’s balance sheet but also Switzerland’s position in the global financial landscape. It raises critical questions about systemic stability, competitiveness, and whether regulation is moving too far, too fast.

Why Switzerland Is Tightening the Screws

Switzerland’s reputation as a global banking hub rests on stability, prudence, and investor confidence. The sudden implosion of Credit Suisse challenged that reputation, exposing weaknesses in oversight, risk management, and contingency planning.

UBS’s government-brokered takeover prevented a financial panic, but it also created a new challenge: Switzerland now hosts one of the world’s largest “too big to fail” banks, whose balance sheet exceeds the country’s GDP by several multiples.

Regulators argue that requiring UBS to raise additional equity serves three goals:

1. Enhancing resilience – More equity capital provides a thicker buffer against losses, reducing the likelihood of taxpayer-funded rescues.

2. Protecting Swiss financial stability – With UBS dominating the domestic landscape, its failure would have systemic consequences for households, corporates, and the national economy.

3. Aligning with international reforms – post-2008, regulators worldwide have tightened capital rules. Switzerland, often stricter than its peers, wants to ensure it is not the weak link.

The Scale of the Proposal

Reports suggest that UBS could be required to raise between USD 20–30 billion in additional equity. To put this in context:

  • UBS’s current Common Equity Tier 1 (CET1) ratio is already above international minimums.
  • However, the Swiss government and FINMA want to impose additional requirements on the group’s international subsidiaries.
  • The reasoning is that risks at overseas branches could, in a crisis, flow back to the Swiss parent, creating liabilities for the Swiss state.

By tightening the screws on foreign operations, Swiss authorities are signalling they want a greater safety margin across the entire UBS ecosystem, not just in its home market.

UBS’s Pushback

UBS executives have responded cautiously but firmly. The bank acknowledges the need for strong safeguards but warns that excessive capital burdens could undermine its competitiveness.

Key arguments from UBS include:

  • Shareholder dilution – Raising tens of billions in equity could depress returns and shareholder value.
  • Global competitiveness – If UBS is forced to hold more capital than peers such as JPMorgan or HSBC, it may be disadvantaged in international markets.
  • Strategic risk – UBS has hinted it may consider relocating its headquarters outside Switzerland if regulation becomes too heavy-handed. While such a move is unlikely in the short term, even raising the possibility reflects the tension between the regulator and bank.

This tug-of-war highlights the delicate balance Switzerland must strike in protecting its financial system without driving away its crown jewel institution.

Lessons from Credit Suisse

The debate cannot be separated from the shadow of Credit Suisse. For years, Swiss authorities were criticised for not acting sooner on governance failures, risk scandals, and capital erosion at the bank. By the time the rescue was engineered, confidence was shattered.

Critics argue that if Credit Suisse had been required to hold more capital earlier, the collapse might have been mitigated or avoided. Proponents of the UBS reforms frame them as a direct lesson learned: act before the cracks widen, not after.

However, opponents counter that Credit Suisse’s downfall was primarily about governance and trust, not raw capital levels. Simply piling more equity onto UBS, they say, risks addressing the wrong problem.

Broader Implications for Switzerland

1. Competitiveness of the Swiss Financial Centre

Switzerland thrives on being a global wealth and asset management hub. If regulation is seen as disproportionate, wealthy clients and financial institutions might seek friendlier jurisdictions—Singapore, Luxembourg, or even London.

2. Investor Confidence

On the flip side, stronger capital buffers may enhance Switzerland’s reputation for safety, making UBS and the Swiss financial centre more attractive for conservative investors seeking stability.

3. Geopolitical Dimensions 

UBS’s global operations span the United States, Europe, and Asia. Stricter capital rules on foreign subsidiaries could strain cross-border relationships, especially if host regulators feel Switzerland is overstepping.

4. Moral Hazard vs. Market Discipline

Requiring more capital aims to prevent moral hazard—where banks take excessive risks knowing the state will bail them out. Yet markets may still assume that UBS, given its size, is “too big to fail,” regardless of how much capital it holds.

International Context

The UBS debate mirrors global conversations. After 2008, banks were forced to raise capital, shrink balance sheets, and simplify structures. But memories fade, and some regulators have since softened rules to encourage lending and growth.

Switzerland’s move goes against the grain, positioning it as one of the strictest jurisdictions. Other countries will watch closely: if UBS adapts without losing ground, it could set a precedent. If not, Switzerland risks being seen as overly punitive.

Meanwhile, discussions about central clearing, liquidity rules, and “living wills” for systemic banks continue in the U.S. and EU. The fate of UBS may influence how regulators elsewhere treat their own giants.

Strategic Options for UBS

 Faced with these proposals, UBS has several possible paths:

1. Raise Equity Proactively – Issuing new shares or retaining earnings to meet requirements.

2. Restructure Subsidiaries – Streamlining international operations to reduce capital burdens.

3. Lobby for Phased Implementation – Negotiating with regulators for a gradual timeline.

4. Relocation Threats – Keeping the option of moving headquarters on the table as a bargaining chip.

 Each option carries costs and risks. The bank’s management must weigh the benefits of compliance against the potential erosion of shareholder trust and strategic freedom.

What’s at Stake

The UBS capital debate is more than a technical matter of balance sheets. It strikes at the core of Switzerland’s identity as a financial hub. The country has long prided itself on stability, discretion, and competitiveness. Yet those values can come into conflict when global shocks demand tougher safeguards.

If Switzerland can strike the right balance, it may emerge stronger, with UBS positioned as the world’s safest global bank. If not, it risks alienating its largest institution and undermining the sector that is central to its economy.

Conclusion

The call for UBS to raise an additional USD 20–30 billion in equity capital underscores how deeply the Credit Suisse collapse has shaken Swiss regulators and policymakers. Stability and reputation are priceless in finance, and Switzerland is determined to protect both. 

Yet the challenge lies in implementation. Too much pressure could handicap UBS in global competition or even push it to reconsider its Swiss base. Too little, and Switzerland risks repeating the mistakes that led to Credit Suisse’s downfall.

The debate will continue in parliament, boardrooms, and international forums. What is clear is that the world is watching Switzerland’s next move closely. In the post-Credit Suisse era, the stakes could not be higher.

Stablecoins & New Regulatory Regimes: Tether’s USAT and the Future of Digital Money


Why Stablecoins Matter

Stablecoins have long been a bridge between the volatile world of crypto and the predictability of fiat money. By offering digital tokens that maintain a 1:1 peg to a stable asset like the U.S. dollar, they provide traders, investors, and even ordinary consumers with a tool to move in and out of crypto markets without exposure to wild price swings.

For Tether — the world’s largest stablecoin issuer, with its flagship USDT consistently ranking among the most traded digital assets — the stakes are high. Stablecoins now underpin billions of dollars of daily transactions across exchanges, DeFi protocols, and cross-border payments. They have become the plumbing of the crypto economy.

Yet that central role has also attracted scrutiny. Concerns about the quality of reserves backing stablecoins, the risks of bank runs, and the potential for systemic contagion have prompted regulators to act.


The Push for Regulation

Until recently, stablecoins lived in a regulatory gray zone. In the U.S., questions about whether they were money market funds, payment instruments, or securities left issuers juggling multiple overlapping frameworks. In Europe, the new Markets in Crypto-Assets Regulation (MiCA) has taken a firmer step, requiring stablecoin issuers to be licensed, audited, and transparent about their reserves.

Other jurisdictions, from Singapore to Japan, are following suit. The common theme is clear: stablecoins will be allowed, but only within tightly defined guardrails. Regulators want to ensure that these digital dollars are as safe and reliable as the real thing — if not safer.

The U.S. is currently advancing draft legislation and regulatory guidance that would require stablecoin issuers to hold high-quality liquid assets (HQLA), submit to oversight, and ensure redemption at par. For an industry that grew up in the shadows, this represents a profound shift.


Enter Tether’s USAT

Against this backdrop, Tether’s move to create a new U.S.-based stablecoin, USAT, is strategic. Unlike USDT, which is issued by Tether Holdings and based offshore, USAT is being designed specifically to comply with forthcoming U.S. stablecoin rules.

This is significant for several reasons:

  1. Regulatory Alignment – By building a stablecoin under the U.S. framework, Tether signals its willingness to engage directly with regulators. This is not just about avoiding conflict — it’s about positioning USAT as a legitimate, regulated alternative that institutions can adopt without hesitation.
  2. Institutional Adoption – Large financial players, from banks to fintechs, have been hesitant to engage with unregulated stablecoins. A compliant U.S.-issued version could open the door to partnerships, integrations, and mainstream use cases.
  3. Market Competition – USAT is entering a field already eyed by competitors like Circle (issuer of USDC) and PayPal (with PYUSD). By leveraging Tether’s brand, liquidity, and distribution, USAT could capture significant market share, especially if it achieves rapid listings and integrations.

A Turning Point for Stablecoins

The introduction of USAT under a regulated regime is more than a branding exercise. It marks the beginning of a dual ecosystem:

  • Offshore stablecoins like USDT may continue to dominate in markets where regulation is looser, serving as global liquidity tools.
  • Onshore, regulated stablecoins like USAT will target compliance-minded institutions and consumers, particularly in the U.S. and allied jurisdictions.

This bifurcation mirrors developments in traditional finance, where offshore Eurodollar markets coexist alongside regulated domestic banking. The innovation here is digital: stablecoins move across borders at the speed of the internet, raising questions about how these two worlds will interact.


The Global Ripple Effect

Tether’s USAT is not happening in isolation. Other regions are watching closely:

  • Europe: Under MiCA, stablecoins must be backed by reserves held with EU-regulated institutions. This has already prompted issuers to adjust their business models. A U.S.-compliant Tether product could inspire a European equivalent.
  • Asia: Japan has approved legislation requiring stablecoins to be issued by licensed banks and trust companies. Singapore has leaned heavily on prudential regulation. USAT’s design may become a template for alignment across Asia-Pacific.
  • Emerging Markets: Stablecoins are increasingly used for remittances and as dollar substitutes in countries with volatile currencies. For these markets, regulatory approval in the U.S. could lend credibility and encourage adoption.

Challenges Ahead

Of course, the path forward is not without obstacles. Tether has faced criticism in the past over the transparency of reserves and regulatory compliance. Sceptics will demand proof that USAT truly embodies a new standard.

Questions remain:

  • Reserve Composition: Will USAT be backed exclusively by U.S. Treasuries and cash, as regulators may require, or will there be more flexibility?
  • Redemption Rights: How easily will holders be able to redeem USAT for dollars, and at what scale?
  • Oversight: Which U.S. regulatory body will oversee USAT, and how intrusive will the supervision be?

If Tether can answer these convincingly, USAT could reshape its reputation and position it as a partner to regulators rather than an adversary.


What This Means for Investors and Institutions

For businesses and investors, the rise of regulated stablecoins like USAT has several implications:

  1. Safer Infrastructure – Institutions can build on regulated stablecoins with more confidence, reducing counterparty risk.
  2. Mainstream Integration – Payment firms, banks, and asset managers may embrace stablecoins as part of their offerings.
  3. Competition and Innovation – With multiple regulated players, stablecoin markets could see lower fees, better transparency, and more diverse services.

At the same time, offshore stablecoins will remain vital for global liquidity and in regions where regulatory acceptance is still developing. The coexistence of both models may spur innovation in cross-border payments and financial inclusion.


The Future is Stable

Stablecoins began as a crypto-native experiment, a workaround to avoid volatility. They have now become the backbone of the digital asset economy and are poised to enter the regulated mainstream. Tether’s planned U.S.-based stablecoin, USAT, represents a watershed moment — one that could define the next chapter of digital money.

As governments move from ambiguity to clarity, stablecoins are transitioning from shadow players to recognised instruments of financial infrastructure. For consumers, investors, and institutions alike, this promises not only greater security but also greater opportunity.

The future of finance may not lie in the extremes of unregulated crypto or traditional banking — but in the stable middle ground that regulated digital dollars like USAT are now beginning to occupy.

The London IPO Market – Still in the Doldrums

In Q1 and Q2 of this year, data released showed the London IPO market was down to just £182.8 million from nine raisings, as opposed to the same period in 2024, where eight IPOs raised £526.7 million, raising concerns that London is fading as a centre for global capital. Further data also showed that Q3 and Q4 of 2024 had only nine IPOs raising £258 million. Indeed, in April of this year, the market saw the most significant IPO for MHA, a professional services company that raised £98 million on AIM (Alternative Investment Market).

The City (City of London – the financial centre) is struggling to maintain its reputation as a centre and destination for high-growth listings as evidenced by reports suggesting that the CEO of AstraZeneca (pharmaceuticals) might well relocate their primary listing to the United States along with Wise (money transfer service), who with a valuation of £11 billion might also consider moving their listing to the United States as well. A further disappointment is Shein (Online fast fashion company), who were denied a London listing by the Chinese regulators, so they have opted for a listing in Hong Kong.

The above companies are just a part of a growing number of companies that have shelved listings in the city due to pushbacks from investors and challenges related to Brexit, which have negatively impacted valuations. As such, these companies have opted for listings not only in the United States but also in other markets where there are perceived higher valuations plus stronger investor appetite.

However, not all is doom and gloom as analysts report that the Labour government are making headway in reforming listing requirements, which it is hoped will help revive the market that headed south once the United Kingdom had left the European Union. However, 2026 should provide the biggest impetus in the London IPO market as there is a planned IPO by the software giant Visma valued at Euros 19 billion, and HG Capital is leaning towards the City for a listing, attracted by listing reforms, especially allowing euro-denominated stocks into flagship FTSE indexes.

Experts argue that out of all the European exchanges, London has been the hardest hit. However, in Q1 and Q2, bourses in Zurich, Milan, and Paris saw lower volumes than London, and overall Europe suffered its worst opening six months in IPO volumes. However, a large part of the problem has been President Trump’s tariffs, which unleashed a round of volatility which resulted in the market being shut for a while, delaying plans by issuers to go public. Analysts are hopeful of a rebound in 2026 with the new regulations attracting companies to the IPO market in London.

Bank of England Leaves Benchmark Interest Rates on Hold

Today the BOE’s (Bank of England) nine-member MPC (Monetary Policy Committee) voted 7-2 to keep interest rates on hold at 4.00%, with the two dissenting votes of Swati Dhingra and Alan Taylor both voting for a 25-basis point cut. Experts were not surprised at the MPC holding interest rates as data released shows that prices are increasing at twice the rate predicted by the BOE. However, officials said that they still expected inflation to return to the Central Bank’s target of 2%, but remained somewhat on the fence as regards further cuts this year.

However, the Governor of the Bank of England, Andrew Bailey, was slightly more forthcoming, saying that they are not done with the cycle of cutting interest rates referring to the possibility of upcoming risks with regards to cooling in the jobs market. Whilst highlighting rising inflation and an easing labour market Governor Bailey said, “there are risks on both sides” and added “I continue to think that there will be further reductions, but I think the time and scale of those is more uncertain now than before August”.

Analysts advise that financial markets see less than a 30% chance of another rate cut this year despite any implied optimism by Governor Bailey. The MPC meets two more times this year to discuss interest rates and experts advise that a rate cut at the November meeting of the MPC is all but ruled out as they expect inflation to hit 4%, double the BOE’s target figure which is backed up by Governor Bailey also saying “The pricing at the moment which basically says ‘look, there’s going to be a period where we’re watching very carefully to see how the economy unfolds before whatever we do next in terms of movement’ is, I think is the right thing”.

The BOE has also warned that the economy is being negatively impacted due to further tax raids by the current labour government with analysts saying that the Chancellor of the Exchequer, Rachel Reeves, will probably have to find somewhere between £20 Billion to £50 Billion in either spending cuts or tax increases to maintain her fiscal plans, but according to some financial commentators, either way her credibility is diminishing at a rapid rate.

Indeed, Governor Bailey noted that higher inflation was partly to blame on government policy, and in an open letter confirming that thought, he advised inflation was almost double (3.8%) of the bank’s target and said this was due to “the increase in employer NICS (National Insurance Contributions) and pay growth in sectors with a large share of employees at or close to the NLW (National Living Wage). Officials noted that they had previously warned that the introduction of net zero packaging taxes are also pushing up prices with inflation on supermarket shelves expected to continue up to close of business 31st December 2025. All in all, analysts advise that the general feeling in the financial markets is that the benchmark interest rate will remain the same at 4.00% come the end of the year.