Silver Soars Above $50 as Squeeze Hits London Silver Market

On Thursday, 9th October, silver breached the $50 per ounce mark for the first time since the 1980s, evoking memories of the Hunt brothers*, before continuing its climb to reach a high of $51.23 per ounce. The surge in silver prices, already up by around 70% since the start of the year, has been driven by investors rushing to safe-haven assets such as silver, gold, and other precious metals, as well as by a surge in demand from India. Another key factor is silver’s critical role in industrial markets, with wind farms and solar panels now accounting for nearly half of global demand.

*Hunt Brothers – Nelson Bunker Hunt and his brother were Texas oilmen whose worldview was shaped by a sense that the odds were stacked against them. With inflation at 15%, scrutiny from the IRS (Internal Revenue Service), and tensions with Muammar Gaddafi, they felt under siege. After refusing Gaddafi’s demand for half the profits from their Libyan oil fields, the Hunts saw their assets seized. Determined to protect their wealth, Nelson Hunt decided to hedge against inflation by hoarding silver, leading the brothers to begin one of the most infamous market plays in modern history.

Experts note that Nelson Hunt was not a typical “buy and sell” trader. Out of paranoia and conviction, he and his brother began stockpiling silver in 1973, when it was priced at just $2 per ounce. By 1980, the price had reached $45 per ounce and was still rising. The Hunts had amassed around 200 million ounces of silver, and the craze spread. People sold family heirlooms, thieves targeted silverware, and anything containing silver was melted down, all of which pushed prices even higher.

The fallout prompted regulators to act. On 7th January 1980, both **COMEX and the Chicago Board of Trade introduced emergency measures, including higher margin requirements. Experts at the time said the new rules effectively outlawed further silver buying, allowing only liquidation contracts. Prices soon collapsed from a high of $49.45 per ounce to $16.60 by 18th March that year. After years of legal battles and financial manoeuvring, the Hunt brothers eventually lost everything.

** COMEX – The Commodity Exchange, a division of the CME Group, is a global derivatives marketplace that allows clients to trade futures and options across major asset classes. It also provides clearing and data services and serves as the main exchange for trading metals such as gold, silver, copper, and aluminium.

Fast-forward to the 21st century, and the London Silver Market is experiencing what many describe as a historic squeeze. As prices continue to rise, the mismatch between supply and demand has become so severe that a global hunt for bullion is underway.

Some traders are even booking space on commercial flights from New York to London (a costly method) to transport silver bars and take advantage of the $1.20 per ounce arbitrage opportunity seen on Monday this week. The shortage of silver bars has been fuelled by several factors, starting with Donald Trump’s threat to impose tariffs on the metal. This prompted a mass exodus of bars across the Atlantic as traders rushed to beat potential levies.

Other contributing factors include a spike in demand from India, increased debasement trading (where investors sell currencies and buy safe-haven metals as global debt climbs), and production shortfalls among miners who are failing to keep pace with demand. Additionally, large volumes of silver are held in vaults underpinning ETF trading, meaning they cannot easily be sold or leased. The leasing market has become so tight that traders holding short spot positions are paying sky-high rates to borrow silver to roll over their contracts.

Market analysts in London believe that natural momentum will eventually see silver bars flow back to the city from reserves elsewhere, helping to ease the shortage. However, traders in New York remain hesitant to export silver to London, as the US government lockdown could cause customs delays, potentially costing millions in missed opportunities. There is also widespread caution over President Trump’s potential tariffs on silver, which is under investigation as a critical mineral under Section 232. Should the US decide not to impose tariffs, part of the squeeze in London could ease. The coming four to six weeks will be crucial in determining how this tightness in the London silver market unfolds.

Gold Rally Helping China Towards Less Reliance on the Dollar and U.S. Financial Dominance

China and its partner countries in BRICS* have long aspired to develop an alternative currency to the US dollar, as well as their own payment systems and other financial instruments that would reduce global dependence on the de facto reserve currency and the financial dominance of the United States. In this context, the three-year bull run in gold, confounding many sceptics and recently breaching the USD 4,000 per ounce mark (yet another record), is aiding China in its quest to diminish US influence across global financial markets.

*BRICS is an intergovernmental organisation formed as an acronym for Brazil, Russia, India, China and South Africa, established in 2009 (with South Africa joining in 2010). Membership has since expanded to include Egypt, Ethiopia, Indonesia, Iran, and the United Arab Emirates. Saudi Arabia has been offered full membership, though its government is still considering the proposal. Partner nations with potential for future membership include Belarus, Bolivia, Cuba, Kazakhstan, Malaysia, Nigeria, Thailand, Uganda, Uzbekistan, and Vietnam.

Experts suggest that Russia views BRICS as a means of countering Western sanctions, while China, through BRICS, is expanding its influence across Africa with ambitions of becoming the leading voice of the “Global South”. Analysts predict that over time, BRICS will evolve into both a geopolitical and economic powerhouse, posing a direct challenge to the G7 group of nations. Current data indicate that BRICS countries account for 44% of global crude oil production, with a combined economic output exceeding USD 28.5 trillion, equivalent to approximately 28% of the global economy.

The global spotlight remains firmly on gold, and China has been steadily accumulating reserves of the yellow metal for over a decade. Experts estimate that the nation’s gold stockpile is now the sixth largest in the world. The metal’s ascent to record highs is helping China pursue its geopolitical and economic objectives. Amid escalating global tensions, protectionist tariffs, and a widening rift between the United States and its traditional allies, Chinese policymakers are capitalising on the moment.

For the first time, the Chinese government has established an offshore vault for the Shanghai Gold Exchange in Hong Kong, enhancing its status as an international trading hub. China has also approached several countries with offers to store gold in its bonded warehouses. Experts suggest that such initiatives will encourage sovereign wealth funds and central banks to trade the stored gold, diverting business away from established centres such as the London Metal Exchange (LME).

Data shows that China is the world’s largest gold producer and is expanding its influence within segments of the financial system where it faces the least resistance. The yellow metal is playing a pivotal role in helping the government achieve several of its economic ambitions. Financial commentators note that controlling a larger share of the global bullion market could elevate China’s international standing, with gold reinforcing the wider use of the yuan. This could ultimately allow China to offer the world an alternative to US financial dominance, bringing it closer to realising its long-standing vision. China has even eased capital controls to enhance its weight in financial markets, while its resurgent technology sector continues to attract international investors.

However, despite its substantial gold holdings, China has yet to make significant progress in promoting the yuan as a dominant currency within the commodities markets. Although some cross-border contracts are denominated in the yuan, analysts note that for key commodities such as oil and copper, yuan contracts possess only a fraction of the liquidity seen in dollar-denominated benchmarks and remain far from displacing the US dollar in global trade, particularly among developing countries.

Nevertheless, China is renowned for its long-term strategic approach, and its efforts to cultivate stronger relationships with central banks play a key role in its plan to provide an alternative currency framework. In light of Western sanctions on Russia and other countries, China’s economic system may appeal as a network insulated from Western political interference. As part of its persuasion strategy, China is expected to highlight examples such as Venezuela’s gold, valued at around USD 1 billion, which has been frozen for years in the Bank of England.

Western nations and other developed economies would be unwise to underestimate China’s ambitions. Should Saudi Arabia decide to join BRICS, those ambitions would gain even greater momentum. Some analysts argue that President Trump’s policies are inadvertently facilitating China’s rise, with America’s massive debt burden and escalating tariff disputes straining relationships with traditional allies. Moreover, as global debt continues to climb and geopolitical tensions intensify, fuelled further by the now popular “debasement trade” (selling currencies and buying gold), China’s ambitions may well be realised sooner rather than later.

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.