Tag: Cryptocurrency

Major Victory for the Crypto Arena as Senate Passes Stablecoin Bill

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On Tuesday 17th June 2025, the United States Senate passed a bill (AKA The Genius Act) to create a regulatory framework for “Stablecoins”* in a defining moment for digital currencies in the crypto industry. The bill passed the Senate by a majority of 68 – 30 with a number of democrats joining most Republicans ensuring the bill was passed by a significant majority. The bill will now sit before a Republican controlled House of Representatives which will vote on its version of the bill before finally landing on the desk of President Donald Trump.

*Stablecoins – are a type of cryptocurrency designed to minimize price volatility by pegging their value to a stable asset such as a fiat currency which in this case is the US Dollar. Unlike other cryptocurrencies which historically and today can fluctuate wildly in price, stablecoins doctrine is to maintain a relatively stable value making them suitable for everyday transactions and a storage of wealth. 

Stablecoins that are pegged to the dollar will have to hold dollar-for-dollar reserves in either cash, short-term US government debt (treasuries) or similar products that are easily convertible to cash, which shall be overseen by federal or state regulators, The crypto industry as a whole has waited years for yesterday’s vote, have literally spent hundreds of millions of dollars to elect a Congress that is crypto friendly, and the industry is posed to do more of the same in the 2026 mid-term elections.

Those in the stablecoin arena are hopeful that the recent legislation will ensure stablecoins sooner or later become a mainstream form of payment. Indeed, retailers have backed this bill because it is felt that stablecoins will provide a faster and cheaper way to process transactions as opposed to traditional banking products such as credit cards. However, in the banking world, the smaller banks have issued warnings that deposits may be drained plus a reduction in access to credit. Meanwhile larger banks are mulling over whether they should issue their own stablecoins will generate profits from reserves. 

Senator Elizabeth Warren (Democrat and ranking member on Senate Banking) and a number of her colleagues argue that the bill does not go far enough to protect consumers in the event that issuers of stablecoin fail. They contend that in the event of a failure customers could well lose their money which could fuel demands for a bailout by the taxpayer, and Senator Warren went on to say the bill would “supercharge the value of Donald Trump’s corruption. 

Elsewhere in the crypto world declines in cryptocurrencies were led by Solana and Ether falling by 7% and 8% respectively, while Cardano had fallen by 8.5% (all coins had rebounded slightly by C.O.B. on Monday) all reflecting growing concern over the escalating conflict in the Middle East. The sell-off in crypto appeared to be a warning to Bitcoin holders that the cryptocurrency is a haven from turmoil as it sank along with other coins when Israel launched airstrikes against Iran at the end of last week.

Rush to File Exotic ETFs Linked to Crypto

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Currently there is a rush of filings by fund firms for exotic ETFs (Exchange Traded Funds) that will be linked to will track digital artwork, cryptocurrencies, meme coins in the hope that bored retail investors will be attracted to a more speculative investment in the crypto world. Among the many recent filings by fund managers are ETFs tracking Litecoin and Cardano (these are smaller cryptocurrencies), meme coins* which also include $TRUMP**, dogecoin***, non-fungible tokens****, Pudgy Penguins*****, and companies investing in “reversed engineered” alien technology******.

*Memecoins – these are crypto currencies created to follow trends (often internet trends of cultural phenomena) employ humour and try and build a sense of community to attract users.

**$TRUMP – this is an example of a meme coin associated with the President of the United States, Donald Trump and is hosted on the Solana blockchain.

***Dogecoin – Is considered to be one of the first meme coins based on the Japanese word Kabosu (dog) which was a Shiba Inu dog.  Dogecoin morphed into an open-source, peer-to-peer digital currency and it was initially created as a light-hearted joke in the cryptocurrency space but has evolved into a significant cryptocurrency with a dedicated community. Some experts feel that dogecoin is an ALT coin (alternative coin e.g., not Bitcoin) and as such should not be considered as a meme)

****Non-Fungible Tokens – also known as NFTs are unique digital assets stored on a blockchain acting as a digital certificate and ownership for various items such as digital art, music, videos, domain names, to mention but a few.

*****Pudgy Penguins – are an example of a NFT and are a collection of 8,888 unique digital penguins launched on the Ethereum blockchain in August 2021. Each penguin is a unique digital collectible, generated from a collection of hand-drawn traits.

******Reversed Engineered Alien Technology – this technology refers to the hypothetical process of understanding and replicating extra-terrestrial technology recovered by governments and other organisations. There is apparently no verifiable evidence to support the existence of this technology but some proponents suggest reverse engineering in aerospace and the energy sector. However, Tuttle Capital (Offices in Delaware and Connecticut and has circa USD 681 Million under management) have filed for an Alien Tech” ETF, and therefore there is perhaps more to this technology than meets the eye.

Experts in the crypto arena suggest that since the elevation of Donald Trump to the White House who has also nominated Paul Atkins as Chair of the US Securities and Exchange Commission, such appointments have had a positive effect on money managers and hence the ETF filings on the aforementioned crypto’s. Whilst Donal Trump has indicated his support for the crypto market, analysts suggest that Paul Atkins is much more crypto-friendly than his predecessor Gary Gensler.

Some analysts are ruminating that some fund/asset/money managers are desperate to offer new products to a retail investor base that is becoming bored with the current offerings on display today and want something more exciting and exotic to trade. However, there are many experts who suggest a number of these new filings will have a short life as product development is often well ahead of the investor base interest.

Are Tariffs Negatively Impacting America’s AI and Semi-Conductor Ambitions?

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President Donald Trump has made his desire public for U.S. global dominance in the AI and Semi-Conductor (chips) markets; however experts suggest that his tariffs will hinder domestic chip production and put a stop to his ambitions of dominating the worldwide AI market. They are portraying the escalation in tariffs which will perhaps end in an all-out trade war will dramatically increase costs in American data centres and the building of semi-conductor fabrication plants, with some analysts predicting that tariffs will become the single largest barrier to supremacy in the A1 arena.

Tech experts and industry leaders suggest tariffs will inevitably hit global supply chains, thus negatively impacting and disrupting medium to very large AI computing projects. This will be a blow to major tech companies such as Meta, Google, and Amazon who between them have pledged just for 2025, USD 300 Billion on computing infrastructure which will underpin AI projects. Furthermore, TSMC (Taiwan Semiconductor Manufacturing Company Ltd) has already committed USD 100 Billion to increase the capacity of chip production in the U.S. which will underpin the above-mentioned AI ambitions.

Potential supply chain issues are at the top of the agenda for many big tech executives, with one executive currently attached to a USD 500 Billion data centre enunciating that the delay of one single component could affect the whole project as the supplier is making business decisions brought on by tariffs. One only has to look at other industries like the European Wine Sector where shipments may be halted because impending tariffs are stopping suppliers putting a price on future orders. Elsewhere in the steel pipe manufacturing arena, tariffs on Chinese built ships/bulk carriers effect on supply chains can be located in Germany where port workers should be loading a first round 16,000 MT of steel piping bound for a huge Louisiana energy project, however due to the proposed levies, the cargo is now sitting gathering dust in a German warehouse.

In the GPU (Graphics Processing Unit)* market, Nvidia’s most advanced model is utilised Microsoft and Amazon in their cloud service providers platform, however these GPUs arrive in the United States as racks of servers or just a single rack which have been assembled in a number of different countries according to data released by Z2Data (supply chain data analysis platform). This is where the economics get blurred because although GPUs have been exempt from tariffs, the many components which make the GPU have not been exempt. Experts suggest that importers in the U.S. will be hit with huge costs as component and product categories are massive and it is suggested that even the smallest component can bring the supply chain to a halt.

*Graphics Processing Unit – is a specialised electronic circuit designed to accelerate computer graphics and image processing. The GPU is essential for AI, particularly for tasks like training deep learning models and handling complex computations. Their parallel processing capabilities and high memory bandwidth allow AI to significantly accelerate their workloads.

Experts are saying that even if chips were produced in the United States, they would be more expensive to produce despite the 32% proposed tariff on chips produced by Taiwan’s TSMC, as tariffs would push up prices on all key tools and materials. They went on to say the biggest loser would be American producers of chips, as despite tariffs it will still be cheaper to factories and manufacturing capacity outside the United States, dashing Trump’s dream of domestic chip manufacturing. This is a catch 22 situation for President Trump, for once he cannot have it both ways having his cake and eating it, and analysts wait to see how he will solve this particular conundrum.

New Lenders in the Crypto World for those Crypto Companies Seeking Debt

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The crypto lending arena was nearly wiped out during the last major bear market, but is staging a huge comeback, and Cantor Fitzgerald (Cantors)* is trying to satisfy the crypto industry’s hunger for debt. Such lenders range from crypto native firms* to traditional banks and have been putting in place, or are putting in place, the means of providing capital to a whole smorgasbord of crypto market activities.

*Cantor Fitzgerald – is an American financial services firm that was founded in 1945. It specialises in institutional equity, fixed-income sales, trading, and serving the middle market with investment banking services, prime brokerage, and commercial real-estate financing. On March 11th 2025, Cantors announced that Anchorage Digital and Copper.co (“Copper”) will serve as collateral managers and custodians for the firm’s Global Bitcoin Financing.

**Crypto Native Firms – founded with the sole purpose of investing in digital assets and providing investment products in a market previously underserved by traditional asset managers. Native crypto managers have, of course, experience with digital assets and operational nuances.

After the debacle of 2002 and 2003, quite a number of crypto lending companies went bankrupt due to some very dodgy loans, and whilst crypto lending had its heyday in 2021, volume today is still well-short of that mark. Through Q1, Q2, and Q3 of 2024 Bitcoin lending went up by circa 300%, and with speculation in Bitcoin that propelled it above USD 100,000, fervour is spilling over and continuing to fortify the crypto lending sector, and leading the way are the decentralised finance applications.

In March 2025, Cantors started its global Bitcoin financing with an initial capital of US Dollars 2 Million. Elsewhere crypto wealth manager Xapo Bank began offering loans of up to USD 1 Million backed by Bitcoin, and securing a multi-billion US Dollar investment in its crypto lending funds is Blockstream Corp. the Bitcoin software firm. Loans against Bitcoin have been increasing by the month, with investors in the coin looking to utilise this asset as collateral for other investments.

The crypto market has always been heavily reliant on lenders who have provided critical liquidity to trading and other areas over the years, especially in times of volatility. However, the more traditional banks have avoided this market and, due to the uncertainties that surround the regulatory arena, have not lent to market participants. This decision led to the explosion of crypto lenders during the bull market in 2021. Analysts and some industry participants say, since the election of Donald Trump, crypto lending is poised to grow exponentially due to support of regulations that are favourable to the sector.

Indeed, the sector is now seeing increased interest from traditional lenders as they are becoming more comfortable with the current Trump administration and their favourable leanings toward crypto regulation and legislation. Experts suggest that this will lead to loans backed by Bitcoin that will be supported by more sophisticated risk-management and larger balance sheets at the more traditional lending institutions. However, analysts suggest that

crypto lending has returned with a more conservative approach with LTV ratios (Loan To Value) being lower, which translates into lenders reducing their risks requesting borrowers to make larger down payments. Experts advise that crypto natives can reinvent a couple of centuries of lending risks, and if crypto lending is to properly take off, the arena will need experts from outside the crypto industry.

Collateral Transfer – Moving Towards Digital Blockchain Assets

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Introduction

Collateral Transfer facilities have traditionally relied on well-established bank instruments, such as Bank Guarantees, as well as other forms of blue-chip securities, to underpin the underlying asset or investment. In these traditional setups, banks played a pivotal role by issuing guarantees that offered a layer of trust and assurance in financial transactions. The inherent value and stability of blue-chip securities further cemented their use as reliable collateral, ensuring that parties involved in a transaction had a solid foundation of security. These methods have been the backbone of financial collateral systems, offering robust protection and facilitating smooth operations in various financial markets.

However, the landscape is evolving rapidly. With the increasing complexity of global financial regulations, many banks are experiencing heightened regulatory scrutiny and over-regulation. This phenomenon is compounded by instances where banks refuse to transact with foreign entity banks, due to perceived risks or compliance challenges. As a result, traditional collateral instruments are facing limitations in cross-border transactions and international financing arrangements.

In response to these challenges, the financial industry is witnessing a paradigm shift towards digital blockchain assets. These digital assets present a transformative opportunity by enabling greater transparency, efficiency, and security in collateral management. Blockchain technology allows for the tokenization of assets, providing a verifiable and immutable record of ownership that can be easily transferred across borders without the friction of traditional banking systems. This evolution is not merely a technological upgrade but a fundamental change in how collateral is structured and managed, paving the way for a more interconnected and agile financial environment.

The transition to digital blockchain assets represents a strategic adaptation to the current regulatory and operational challenges faced by traditional banking. As this new model gains traction, it is likely to redefine collateral transfer facilities, making them more resilient to regulatory pressures while opening up new avenues for cross-border financial transactions.

The Future of Collateral Transfer and Digital Assets

The financial landscape has evolved dramatically with the advent of blockchain technology and cryptocurrencies. One innovative concept that has emerged is a collateral transfer facility (CTF) that employs a specialized cryptocurrency for securing loans. In this context, the cryptocurrency is not merely a speculative asset but a functional, highly liquid, and frequently traded instrument that serves as a reliable guarantee for lending activities. This paper details the mechanisms, benefits, and challenges of integrating such a specialized digital asset within a collateral transfer facility designed to underpin secured lending arrangements.

Conceptual Framework

At its core, a collateral transfer facility is a financial mechanism that enables parties to transfer collateral to secure obligations, typically loans. Traditionally, collateral has comprised physical assets or traditional financial instruments such as bonds or equities. However, the introduction of a specialized cryptocurrency as collateral represents a paradigm shift. This digital asset is engineered to maintain high liquidity and trade frequency, ensuring that it can be quickly and efficiently converted or transferred in response to market demands or changes in loan conditions.

The rationale behind using a specialized cryptocurrency in this setting is multifaceted:

  • Liquidity: The asset must be readily convertible into cash or other liquid assets, ensuring that lenders can quickly realize value if a borrower defaults.
  • Trade Frequency: A high trading volume ensures that price discovery is robust and that the asset’s market value is a reliable indicator of its collateral value.
  • Transparency and Trust: The underlying blockchain technology offers an immutable ledger and transparent transaction history, increasing confidence in the asset’s value and provenance.
  • Programmability: Smart contracts can automate the collateral management process, reducing administrative overhead and the potential for human error.

Design and Operation of the Collateral Transfer Facility

1. Structure and Key Components

The facility is structured around several key components:

  • Specialized Cryptocurrency: This digital asset is designed with features that promote stability, liquidity, and high trade frequency. It may incorporate mechanisms such as algorithmic supply adjustments, liquidity pools, or pegging to a basket of assets to maintain value stability.
  • Smart Contracts: The backbone of the facility is a set of smart contracts that govern the transfer, management, and liquidation of collateral. These contracts ensure that the collateral is automatically locked, released, or liquidated according to predefined conditions.
  • Collateral Management System: A dedicated platform manages collateral positions, monitors market conditions, and initiates actions (e.g., margin calls or liquidations) if the value of the collateral falls below required thresholds.
  • Market Integration: Integration with multiple exchanges and liquidity providers is crucial to guarantee that the specialized cryptocurrency remains highly liquid and that its market price reflects current conditions accurately.

2. Operational Process

The operational process of the collateral transfer facility can be broken down into several key stages:

a. Loan Origination and Collateralization

When a borrower applies for a loan secured by the specialized cryptocurrency, the following steps occur:

  • Asset Valuation: The current market value of the specialized cryptocurrency is determined through real-time data from multiple trading venues. This valuation is used to calculate the loan-to-value (LTV) ratio, ensuring that the loan is appropriately collateralized.
  • Collateral Deposit: The borrower transfers the required amount of the specialized cryptocurrency into a smart contract. This deposit acts as the collateral for the loan.
  • Verification and Lock-in: The smart contract verifies the deposit, locking the collateral and establishing the loan’s terms. This includes the interest rate, duration, and margin requirements.

b. Ongoing Management and Monitoring

Throughout the life of the loan, the facility continuously monitors the value of the collateral:

  • Real-Time Valuation Updates: Using integrated oracles and market data feeds, the system updates the collateral’s valuation in real time.
  • Margin Calls and Rebalancing: If the value of the collateral decreases, the system may trigger a margin call, requiring the borrower to deposit additional collateral or reduce the loan amount. Conversely, if the value increases, it may allow for the unlocking of excess collateral.
  • Automated Liquidation: Should the collateral’s value fall below a critical threshold, the smart contract can initiate an automatic liquidation process, selling the specialized cryptocurrency to cover the outstanding loan balance.

c. Loan Repayment and Collateral Release

Upon successful repayment of the loan:

  • Collateral Return: The smart contract releases the collateral back to the borrower.
  • Interest and Fees Settlement: Any interest or fees accrued during the loan period are deducted as per the contract terms.
  • Record-Keeping: The blockchain ensures that all transactions are recorded immutably, providing an auditable history of the loan and collateral management.

Benefits of Using a Specialized Cryptocurrency as Collateral

1. Enhanced Liquidity

Liquidity is a fundamental requirement for collateral, particularly in dynamic markets where asset prices can fluctuate rapidly. The specialized cryptocurrency is engineered to be highly liquid, meaning that it can be easily traded without causing significant price impact. High liquidity is achieved through:

  • Market Depth: The cryptocurrency is actively traded on multiple exchanges, ensuring that large transactions can occur with minimal price disruption.
  • Liquidity Pools: Dedicated liquidity pools and market-making mechanisms support continuous trading, enabling quick conversion into fiat or other assets.
  • Algorithmic Adjustments: Some specialized cryptocurrencies may incorporate algorithmic controls that adjust the token supply in response to demand, helping maintain stable liquidity levels.

2. Trade Frequency and Price Discovery

High trade frequency is essential for accurate price discovery. The specialized cryptocurrency benefits from:

  • Active Trading Ecosystem: The asset is widely held and frequently traded by a diverse range of market participants, including retail investors, institutional traders, and automated trading systems.
  • Real-Time Data Feeds: Continuous data aggregation from multiple sources ensures that the price reflects the most current market sentiment and conditions.
  • Transparency: The decentralized nature of blockchain technology provides a transparent trading history, reducing the potential for manipulation and increasing market trust.

3. Security and Trust through Blockchain Technology

The underlying blockchain technology adds significant security and trust to the collateral transfer facility:

  • Immutable Record-Keeping: Every transaction is recorded on an immutable ledger, preventing unauthorized alterations and ensuring a verifiable audit trail.
  • Decentralized Verification: The distributed nature of blockchain reduces the risk of central points of failure or manipulation.
  • Smart Contract Enforcement: Automated contracts execute collateral management rules consistently, reducing human error and potential fraud.

4. Efficiency through Automation

The integration of smart contracts streamlines many of the administrative processes associated with collateral management:

  • Automated Margin Calls: Real-time monitoring triggers automatic margin calls when collateral values drop, ensuring timely action without the need for manual intervention.
  • Self-Executing Contracts: The conditions for loan disbursement, collateral release, and liquidation are pre-programmed, reducing processing delays and operational overhead.
  • Transparency and Accountability: All actions taken by the system are visible on the blockchain, enhancing accountability and operational efficiency.

Risk Management and Mitigation

While the specialized cryptocurrency-based collateral transfer facility offers numerous benefits, it also presents several risks that must be carefully managed:

1. Price Volatility

Even though the specialized cryptocurrency is designed to be stable, it remains susceptible to market volatility:

  • Mitigation Strategies: To counteract volatility, the facility may require over-collateralization, meaning borrowers must deposit collateral exceeding the nominal loan value. Additionally, dynamic LTV ratios can be implemented to adjust collateral requirements in response to market conditions.
  • Real-Time Monitoring: Continuous monitoring of the collateral’s market value enables prompt responses to adverse price movements, including margin calls and automated liquidation processes.

2. Technological Risks

Reliance on blockchain technology and smart contracts introduces potential technological risks:

  • Smart Contract Vulnerabilities: Coding errors or vulnerabilities in smart contracts can be exploited by malicious actors. Rigorous audits, formal verification methods, and continuous testing are essential to mitigate these risks.
  • Oracle Manipulation: The system depends on external oracles for real-time price data. Ensuring these oracles are secure and decentralized is crucial to prevent manipulation or erroneous data feeds.
  • Network Congestion: High demand on the blockchain network can lead to delays or increased transaction fees, potentially impacting the efficiency of collateral management.

3. Regulatory and Legal Risks

The regulatory landscape for cryptocurrencies and blockchain-based financial instruments is still evolving:

  • Compliance: The facility must adhere to relevant financial regulations, including anti-money laundering (AML) and know-your-customer (KYC) requirements. This might involve integrating identity verification protocols and ensuring transparency in transaction reporting.
  • Legal Uncertainty: Given the nascent regulatory environment, legal frameworks surrounding the use of cryptocurrencies as collateral may change. Ongoing engagement with regulators and legal experts is necessary to navigate these uncertainties and adapt the facility’s operations accordingly.
  • Jurisdictional Challenges: Operating across multiple jurisdictions may require compliance with diverse regulatory requirements, which can complicate the design and implementation of the collateral transfer facility.

4. Market Risks and Liquidity Crises

Despite efforts to maintain high liquidity and trade frequency, there is always the risk of market disruptions:

  • Systemic Shocks: Sudden market shocks, such as global financial crises or regulatory clampdowns, could affect liquidity and trigger rapid devaluation of the collateral. Diversification strategies and contingency planning are essential to mitigate these risks.
  • Counterparty Risk: In a collateral transfer facility, the risk that a borrower may not meet margin calls or that counterparties may fail is ever-present. Robust risk assessment frameworks, including stress testing and scenario analysis, help in anticipating and managing such risks.

Innovative Features of a Specialized Cryptocurrency

The success of a collateral transfer facility largely depends on the inherent features of the specialized cryptocurrency used as collateral. Key innovative features include:

1. Stability Mechanisms

To minimize volatility and ensure consistent collateral value:

  • Algorithmic Stability: The cryptocurrency might use algorithmic adjustments to control its supply. When demand increases, new tokens may be minted in a controlled manner, and vice versa, to maintain price stability.
  • Pegging and Basket Systems: Some designs peg the cryptocurrency’s value to a basket of assets (fiat currencies, commodities, or other digital assets) to cushion against dramatic fluctuations.
  • Reserve Buffers: The protocol may hold a reserve of traditional assets to back the cryptocurrency, providing an additional layer of stability and credibility.

2. Enhanced Liquidity Protocols

Liquidity is enhanced through several mechanisms:

  • Decentralized Exchanges (DEXs): Integration with DEXs ensures that the specialized cryptocurrency is available for trading in a decentralized, trustless environment.
  • Liquidity Incentives: Yield farming and staking rewards can be offered to liquidity providers, encouraging market participation and deepening liquidity pools.
  • Cross-Chain Interoperability: Facilitating interoperability with other blockchains and financial systems broadens the market for the cryptocurrency, increasing its liquidity and usability as collateral.

3. Advanced Security Measures

Security is paramount in any system dealing with financial collateral:

  • Multi-Signature Wallets: Collateral can be stored in multi-signature wallets that require multiple approvals for any transaction, reducing the risk of unauthorized access.
  • Hardware Security Modules (HSMs): Utilizing HSMs for key management further secures the digital assets against cyber threats.
  • Continuous Audits and Bug Bounties: Regular third-party audits and incentivized bug bounty programs ensure that the smart contracts and underlying systems are continually monitored for vulnerabilities.

4. Transparency and Decentralization

Transparency is a critical advantage of blockchain technology:

  • Public Ledger: Every transaction, from collateral deposit to liquidation, is recorded on a public ledger, providing an auditable trail.
  • Decentralized Governance: Some specialized cryptocurrencies incorporate decentralized governance mechanisms, allowing token holders to participate in decision-making processes. This can enhance the facility’s adaptability and ensure that it aligns with the interests of its users.

Market Impact and Use Cases

The implementation of a collateral transfer facility that uses a specialized cryptocurrency as collateral has broad implications for both traditional finance and the emerging decentralized finance (DeFi) sector.

1. Bridging Traditional and Digital Finance

By offering a reliable and highly liquid digital asset as collateral, the facility creates a bridge between conventional banking and the crypto world:

  • Access to Capital: Individuals and institutions holding the specialized cryptocurrency can access loans without the need to liquidate their digital assets, preserving their long-term investment positions.
  • Risk Diversification: For banks and lenders, accepting a stable, liquid cryptocurrency as collateral can diversify their collateral base, reducing dependency on traditional assets.
  • Innovation in Lending Products: The facility paves the way for innovative lending products, including fractionalized loans, collateral swaps, and cross-collateralization strategies that can enhance financial inclusion and market efficiency.

2. Empowering Decentralized Finance (DeFi)

In the realm of DeFi, the collateral transfer facility can drive further innovation:

  • Automated Lending Platforms: DeFi lending platforms can integrate the facility’s technology to automate the collateralization process, making loans more efficient and accessible.
  • Interoperability with Other DeFi Protocols: The specialized cryptocurrency can be used across various DeFi protocols—such as decentralized exchanges, derivatives markets, and yield farming platforms—enhancing its utility and reinforcing its liquidity.
  • Enhanced Transparency: The immutable record-keeping and decentralized governance inherent in blockchain systems can foster trust among participants in the DeFi ecosystem, encouraging further innovation and adoption.

3. Global Financial Inclusion

A collateral transfer facility that leverages a specialized cryptocurrency has the potential to democratize access to credit:

  • Reduced Barriers to Entry: In regions where traditional banking services are limited or inaccessible, a blockchain-based facility offers a low-barrier entry point for individuals and small businesses to secure loans.
  • Cost Efficiency: Automation and the elimination of intermediaries reduce transaction costs, making borrowing more affordable and accessible.
  • Cross-Border Functionality: The digital nature of the specialized cryptocurrency and the global reach of blockchain networks enable seamless cross-border transactions, facilitating international trade and investment.

Challenges and Future Directions

Despite its promising features, the collateral transfer facility faces several challenges that require ongoing research and development:

1. Regulatory Evolution

The legal status of cryptocurrencies and blockchain-based collateral systems remains in flux:

  • Standardization: There is a pressing need for standardized regulatory frameworks that address the unique characteristics of digital collateral.
  • International Coordination: Given the borderless nature of cryptocurrencies, international regulatory coordination is essential to avoid regulatory arbitrage and ensure a level playing field.
  • Consumer Protection: Regulatory bodies must balance innovation with consumer protection, ensuring that borrowers and lenders are adequately safeguarded against systemic risks and fraud.

2. Technological Advancements

Continuous technological evolution is crucial for the success of the collateral transfer facility:

  • Scalability: As demand increases, the underlying blockchain infrastructure must scale efficiently to handle higher transaction volumes without compromising speed or security.
  • Interoperability: Future developments in cross-chain technology will enable more seamless interactions between different blockchain networks, enhancing the facility’s versatility.
  • Resilience to Cyber Threats: With the growing sophistication of cyberattacks, continuous improvements in security protocols, smart contract auditing, and real-time monitoring will be essential.

3. Market Adoption and Education

Widespread adoption hinges on building trust and educating potential users:

  • Stakeholder Engagement: Engaging with both traditional financial institutions and the DeFi community is critical to fostering adoption and ensuring that the facility meets the needs of diverse market participants.
  • User-Friendly Interfaces: Simplifying the user experience, from collateral deposit to loan management, will be key in driving mass adoption.
  • Transparency in Operations: Clear communication regarding risk management practices, fee structures, and operational protocols will help build confidence among users.

Conclusion

A collateral transfer facility that leverages a specialized cryptocurrency as collateral represents a significant innovation in the intersection of traditional finance and decentralized technologies. With its focus on high liquidity, frequent trading, and robust automation through smart contracts, the facility offers a compelling solution for secure, efficient, and transparent lending. By integrating state-of-the-art blockchain technology, the facility not only ensures real-time valuation and risk management but also opens the door to new financial products and global market integration.

The benefits are substantial—enhanced liquidity, improved market efficiency, reduced transaction costs, and increased financial inclusion. However, realizing this vision requires careful navigation of technological, regulatory, and market challenges. Overcoming these hurdles will involve continuous innovation, robust risk management frameworks, and proactive engagement with regulatory bodies and market stakeholders.

Looking ahead, as the financial industry continues to embrace digital transformation, the collateral transfer facility is poised to play a pivotal role in reshaping how collateral is managed and loans are secured. With ongoing advancements in blockchain technology and growing acceptance of digital assets, the specialized cryptocurrency used in this facility could well become a cornerstone of modern financial infrastructure, enabling more secure, efficient, and accessible credit systems globally.

In summary, the integration of a specialized, highly liquid, and frequently traded cryptocurrency into a collateral transfer facility not only enhances the security and efficiency of loan collateralization but also bridges the gap between traditional finance and the emerging decentralized financial landscape. The continued evolution of this facility promises to unlock new opportunities for financial innovation, driving a more inclusive, resilient, and interconnected global economy.

Tokenisation of Assets is Becoming More Popular

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The global outlook on the tokenisation of assets has become more popular, and on Wall Street, this phenomenon will, experts predict, become very fashionable. Indeed, in March 2024, BlackRock Inc introduced their first tokenised mutual fund the USD Institutional Digital Liquidity Fund, currently valued in excess of USD500 Million. Looking back, the whole crypto revolution began during the Global Financial Crisis 2007 – 2009, as an alternative to banks who were of course struggling under the weight of mind blowing losses. The titans of Wall Street, who looked down their noses at the whole crypto movement, have now integrated themselves into the crypto currency business, but also have adopted the underlying *blockchain technology.

*Blockchain Technology – This is an advanced data mechanism that stores transactional records which allows transparent information sharing. It is also referred to as a decentralised public digital ledger and at its core is a chain of blocks where each block contains a set of data.

For those financial institutions who originally underestimated whole crypto world, there’s a reason that they have adopted tokenisation: money. They saw the blockchain as a way of digitising or tokenising traditional assets such as bonds, stocks, and Treasury Bills, thus making them faster and cheaper to trade. Today, not just in New York, but across the world, the tokenisation of assets such as those mentioned above, now include such assets as art, carbon credits and shares in property. Even golf courses and exclusive memberships are included, since it can include any asset that has a perceived commercial value. Interestingly, the HKMA (Hong Kong Monetary Authority) on 7th February 2024 issued their USD750 Million digital bond, and in the commodity market, gold tokens are already being traded with a market capitalisation of over USD1.2 Billion.

It is simple to understand that anyone who owns a token owns the underlying asset, where ownership can be easily transferred from one *crypto wallet to another in exchange for payment. Experts suggest that by 2030, the value of the tokenised market could reach USD2 Trillion (circa the size of the entire crypto market as valued today, excluding **stable coins). However, there is a downside for brokers, as such tokenisation schemes could in fact make them redundant, putting many employees out of work. Analysts suggest that in the short-term, bonds and private equity will be leading the charge in tokenisation of assets, with the potential of having their market structure reshaped, and having their supply and demand dynamics altered.

*Crypto Wallet – These wallets are designed to hold crypto currencies and tokens allowing these items to be sent and received from wallet to wallet. The wallet holds the owners “private key” which is an alphanumeric code generated by the wallet and is used to authorise transactions and prove ownership of a blockchain asset. 

**Stable Coins – These coins are cryptocurrencies whose value is pegged to certain currencies such as the US Dollar, financial instruments, or commodities, and provide an alternative to the high volatility of other cryptocurrencies such as Bitcoin.

The Future of America’s Economy: Donald Trump vs. Kamala Harris

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Experts and analysts from many walks of life have been mulling over what effect the two presidential candidates (Trump/Harris) will have on the economy of the United States. Both candidates have very different visions of an economy that they will build if/when they get elected to the office of President of the United States of America. Below are some of the differing policy decisions the candidates will make as they try to shape America’s future.

1. Trade policy

Trump

During his first and only term as President of the United States Donald Trump ushered in a new era of trade policy for America by introducing tariffs. Once again, he has promised to put his “America First” policy back on track with greater fervour than before. Donald Trump has informed the voters that he will introduce a baseline tariff of 20% on all imports with a 60% tariff on any imports from China. He has further promised massive new tariffs on those countries that abandon the US Dollar and all imports of cars from Mexico. 

Trump has said that these new tariffs will fund everything from child care to tax cuts, but experts are sceptical as they suggest that the tariffs won’t come close to creating the revenue this policy requires. Indeed, such experts suggest that the best case scenario is that tariff revenue could be between circa USD 200 – USD 400 Billion per year, but these numbers would drop as trade realigns. Furthermore, Trump has promised voters that he will revoke China’s “Most Favoured Nation” status, along with banning Chinese investors from buying US real estate or companies, and he has vowed to keep United States Steel Corp in US Ownership, blocking a potential sale to the Japanese.

Harris

Kamala Harris has issued very little in the terms of trade policy but has vowed no major departure from President Biden’s current trade policies, which have retained all of the Trump’s administration’s tariffs, plus adding a couple of new ones. She has also agreed with Trump, vowing to keep US Steel Corp in US ownership, and has gone on to say she will make available tax credits to help businesses in the United States compete with China. However, she has warned voters that Donald Trump’s promised increase in tariffs for all imports would increase the costs for consumers and argues that it is nothing more than a National Sales Tax. Experts suggest that Harris is expected to expand and enhance the United States domestic technological and economic strength by promoting resilient and diversified global supply chains. Political commentators suggest that voters will be swayed by the fact that Vice President Harris’s trade stance is not that of Donald Trump. 

2. Immigration

Trump

Donald Trump has announced he will complete the wall on the Mexican US border which he started in his first term, whilst deporting millions of undocumented migrants. His party, the GOP (Grand Old Party), are running on a platform where they promise to end “a tidal wave of illegal aliens, deadly drugs, and migrant crime.” 

Harris

At the start of her term Vice President Harris was mandated to tackle immigration, however that has sadly failed as there has been a surge of migrants across the border. Indeed, under the Biden/Harris administration there has been a surge in border crossings culminating in December 2023 when in excess of 300,000 migrants crossed into the United States. However, in June 2024 these numbers finally fell after asylum restrictions came into effect. Kamala Harris has said very little on immigration policy, but has pledged to re-introduce legislation that will clamp down on border crossings. 

3. Housing

Trump

Former president Trump has proposed that if he wins the White House he will repurpose some federal land to build new homes, whilst promising to reduce the cost of homebuilding by severely reducing the amount of red tape. He also affirms that his policy on immigration will have the effect of reducing the purchase price of homes, making them much more affordable.

Harris

Like Donald Trump, Vice President Harris has also proposed repurposing some federal land to build new homes. Her platform also wants to help first time buyers with down payments on homes, proposing support of up to USD25,000. Furthermore, she has also proposed a fund with USD40 Billion to support innovations in home building whilst offering tax incentives to those builders who work on starter homes. Elsewhere, she is suggesting she will target certain landlords with new measures because they raise rents by utilising price-setting tools. 

There have been some negative comments by related market experts who advise that the United States has two problems in this area, lack of housing and affordability. They acknowledge that Harris’s proposals are to tackle both problems at the same time, however they feel her policies on housing will make purchases less affordable. Their reasons are fairly straightforward, as subsidies given to new home buyers will inevitably push up demand as building new homes will take time to deliver. As such, this will push the prices up and make it an increased pay-day for sellers. 

4. Inflation

Trump

One of Donald Trump’s major promises is to keep inflation low, and energy makes up a key part of this promise. Indeed, he argues that offering new land for drilling and tax relief on gas and oil producers, reducing the time it takes to obtain approvals for permits, licences, and pipelines, will boost oil and gas production and will help bring costs down. However, sceptics point out that unless the Republicans control congress it would be difficult to pass such legislation.

Harris

A lot of Vice President Harris’s rhetoric is all about middle-class families and lowering their costs. In the health care arena she is proposing a USD35 limit on insulin payments and on prescription drugs out of pocket costs will have an annual cap of USD2,000. Regarding groceries, Harris has proposed a federal ban on price gouging, whilst introducing new penalties for those companies who infringe, violate or flout pricing rules. These proposals have been greeted somewhat sceptically by certain economists and analysts. 

Experts note that since March 2020 food prices have risen by 25% making it more difficult for households to live. Data released show that over the past few years profit margins at grocery stores were fairly flat, meaning that these shops were raising prices in face of supply chain disruptions and rising costs, not gouging customers. 

To conclude

A number of experts and analysts suggest that, although Vice President Harris and former President Donald Trump come from vastly different places, both sides agree to deploying tariffs, stopping takeovers of US firms by foreign predators and above all running the largest deficits in the history of the United States, even when the economy is flourishing. As far as the election goes, once again America is deeply divided, it will be the swing states that call this election, and with only a short time to go, it is anybody’s guess. 

Will the US Dollar Continue to Decline?

Written by IntaCapital Swiss on . Posted in News & Reports. Leave a Comment

According to data supplied by Bloomberg’s Dollar Spot Index, the US Dollar has fallen just under 1% in September 2024, and is currently in the longest monthly losing streak since January 2023. Experts suggest that currency traders feel the US Dollar is in for more losses after the Federal Reserve cut interest rates by 50 basis points on 18th September, with analysts suggesting that sentiment is still bearish, with traders having already taken into account the impact of lower cost of borrowing. 

Since late June 2024, financial markets were getting more confident that the Federal Reserve would soon begin to cut interest rates and as a result the US Dollar Index has fallen by circa 3.6%. A downward trend that has continued since and since 18th September. With the United States election becoming imminent and the debate surrounding the rate cut intensifying, there are some strategists who are advising their clients to completely avoid the US Dollar. 

Data shows that markets and investors are engaging in more cross-currency exposure and giving the greenback a miss, so profits from trades such as buying GBP against the New Zealand Dollar or shorting the Swiss Franc against the Japanese Yen will be regardless of the outcome of the US election, or any fiscal policy announced by the Federal Reserve impacting the US Dollar.  Interestingly, data released by the BIS (Bank for International Settlements) reveals that on average the US Dollar accounts for one side of 88% of trades in a market valued at USD7.5 Trillion per day, so for the greenback to be avoided shows the uncertainty surrounding the currency.

Experts suggest that the US Dollar could well remain weak as the financial markets hunt for clues in economic data which might suggest the pace at which the Federal Reserve will cut interest rates. A number of analysts agree on a 25 (1/4 of 1%) basis points cut in November, however in the swaps markets experts are suggesting that there is a better than 50% chance of a bigger cut in rates. Therefore, the swaps markets feels that future interest rate movements are downwards, so fixed rate notes are betting on a bigger rate cut than 25 basis points.


However, as of 30th September, the Federal Reserve Chairman Jerome Powell adopted a more hawkish tone on the economy leaving financial markets, indicating that interest rates will only be cut by 25 basis points in November’s meeting. The dollar index rose .42% on the news, but as always the Federal Reserve’s decisions will be data driven, so it is still open season on whether the US Dollar continues its slide or not. Furthermore, analysts suggest that a Harris presidency will promote a stronger dollar whilst a Trump presidency will promote a weaker dollar.

Bitcoin Beats September Blues

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Bitcoin ,the original and most famous cryptocurrency, is currently enjoying a market capitalisation in excess of USD1.1 Trillion. The coin is having its best September ever due mainly to a swathe of interest rate cuts that were headlined by the Federal Reserve, who slightly surprised some parts of the financial markets with a full 50 basis point cut. This has helped Bitcoin show a gain of 10% in September 2024, which is in total contrast to previous Septembers stretching as far back 2014, where the average decline has been circa 5.9%. 

The correlation between the Federal Reserve’s monetary policy and Bitcoin is at its highest in comparison with other central banks monetary policies. A number of central banks, including the Federal Reserve, cut interest rates in September allowing investors to look elsewhere for returns bidding up many opportunities, including stocks, gold, and cryptocurrencies, while at the same time expecting further rate cuts in the near future.

Bitcoin is a decentralised asset and was originally a technology for payments, however today it is regarded as an investment, and a hedge against inflation. Over the years Bitcoin has, despite being subject to extreme volatility, experienced tremendous growth, and has recently outpaced gains in major stock indices, making it an attractive alternative to traditional portfolio investments. 

Furthermore, September gains have also benefited from US Spot Bitcoin ETFs (Exchange Traded Funds), which is gaining in attraction to both institutional and retail investors. Indeed, September 26th, 2024, the Bitcoin ETFs recorded a net daily inflow of USD365.57 Million, the largest inflow since the end of July this year. Data shows that since Bitcoin ETFs were launched, net inflows have reached an impressive level of USD18.31 Billion. Another factor that might have added to Bitcoin’s impressive September are the effects of April 24th halving* beginning to filter through.

Interestingly, a number of experts have advised that Bitcoin follows global liquidity trends 83% of the time over any twelve-month period, (more than any other asset class). They have highlighted that if on-chain Bitcoin metrics** are combined with global liquidity, it gives a deeper understanding of Bitcoin’s price cycles therefore opening up potential investment opportunities. 

*Bitcoin Halving – Halving or “The Halvening” occurs roughly every four years with the latest halving occurring on 20th April 2024. This event reduces the rate at which Bitcoins are created by 50%, which can potentially lead to price appreciation if demand remains constant or increases.

**On-Chain metrics – refer to data from a blockchain ledger that can be analysed to get a greater understanding of market sentiment and offers insights into various aspects of Bitcoins network health, economic activity and investment trends.

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