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State Street Panning Tokenized Deposits and Stablecoin – Report
Today Bloomberg reported that State Street is exploring participating in various digital currency initiatives. The bank is already an investor in Fnality, the interbank DLT payment solution backed by 20 institutions. Bloomberg cited a source saying it was exploring participating in other DLT payment consortia, as well as tokenized deposits and a stablecoin.
While the mention of tokenized deposits is no surprise, it’s the stablecoin plans that stand out. It’s highly unlikely that U.S. banking regulators would sanction the bank issuing a stablecoin. However, State Street has a significant asset management subsidiary, so that could be a different story.
State Street Global Advisors (SSGA) recently partnered with Galaxy Asset Management to launch crypto-related ETFs. Notably, Galaxy is collaborating on the AllUnity Euro stablecoin with another bank-affiliated asset manager, Deutsche Bank’s DWS.
The need for asset manager stablecoins
The settlement of tokenized assets triggers the need for a stablecoin. It’s likely SSGA may want to tokenize funds. Many of the incumbents that have launched tokenized funds on public blockchain support settlement using stablecoins, including Franklin Templeton.
ETF issuer WisdomTree, which is also a Fnality stockholder, is planning to issue its own stablecoin and recently received a trust license to do so.
If asset managers are willing to offer redemptions using stablecoins, then they ideally have to have a significant stablecoin balance. However, stablecoins don’t pay interest. On the other hand, if the asset manager has its own stablecoin, it will earn the interest on the Treasuries that back the stablecoin.
While BlackRock doesn’t have its own stablecoin, stablecoin issuer Circle has offered to buy back any BlackRock BUIDL tokens – BUIDL is the asset manager’s tokenized money market fund. BlackRock is both an investor in Circle and manages most of its reserves.
Tokenized deposit initiatives
Turning to tokenized deposits, JP Morgan has its JPM Coin and Citi has its Citi Token Services. That’s useful for multinational companies that deal with the same bank in different countries. But the interesting work is happening for payments involving more than one bank.
There are numerous initiatives, but State Street isn’t involved in the high profile ones. For example, in the U.S. there Regulated Settlement Network is starting another round of trials co-ordinated by SIFMA. Participants include JP Morgan, Citi, Wells Fargo, Visa and Mastercard. State Street’s biggest competitor, BNY Mellon, is a project contributor.
Time will tell which projects State Street plans to join.
@ Newshounds News™
Read more: Ledger Insights
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IS THE RUSSIAN RUBLE PEGGED TO GOLD?
Vladimir Putin’s gold strategy explains why sanctions against Russia have failed.
“In early 2022, Russia pegged its currency, the ruble, to gold, and 5,000 rubles will now buy an ounce of pure gold. The plan was to shift the currency away from a pegged value and into the gold standard itself so the ruble would become a credible gold substitute at a fixed rate.”
“Since 2013, Russia has been preparing for western sanctions and managed to isolate its economy from transactions requiring American dollars. There are more than 16,000 sanctions imposed against Russia. “
“The U.K., the United States and Canada will not touch Russian gold. But others will. The United Arab Emirates (U.A.E.) imported 96.4 tonnes (US$6.2 billion) of Russian gold in 2022 following the British sanctions. That’s up 15 times from the 2021 imports of only 1.3 tonnes (US$84.5 million).”
“The other big client of Russian gold is Switzerland.
In 2022, Switzerland imported 75 tonnes of Russian gold (US$4.87 billion). In 2023, it imported about US$8.22 billion in gold from the U.A.E., which doesn’t produce its own but buys enormous sums from Russia, and US$3.92 billion from Uzbekistan, Russia’s next-door neighbor. Billions upon billions of dollars of Russian gold is being freely traded at top dollar while avoiding every one of those 16,000 sanctions.”
“That’s why global sanctions against Russia haven’t derailed a thing. In order for Putin’s plan for economic resilience through gold to work, however, gold needs to increase in value. His long-term goal is that gold, not the U.S. dollar, will be the global trading currency.”
@ Newshounds News™
Read more: The Conversation
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Fact Check: Is The Russian Ruble Already Backed By Gold?
“Russia’s central bank has resumed buying gold at a set fixed price of 5,000 rubles ($52) per gram and analysts say this could be the starting point for a shift to a new gold standard across the world.”
“Meanwhile, Russia’s Ministry of Finance also referred to gold as an “ideal alternative” to the U.S. dollar.
“This is potentially a very big deal. This is basically pegging the ruble to gold,” said Joseph Brown of Heresy Financial in a YouTube video. If Russia is at the point of having enough gold to back up the ruble, “then they can price oil in gold and then accept gold or the ruble for payment,” Brown said. “They can literally take this, in just a few steps, and force the whole world into a new gold standard. Like a new Brenton Woods.”
“Russia’s fixed price for gold is reminiscent of what the U.S. did during the “gold standard” years — 1879 to 1914 — when one ounce of gold would represent $21. In the 1930s, the U.S. banned gold ownership and raised the value of the dollar in gold from $20.67 to $35 per ounce.”
“In 1971, Richard Nixon put a halt on the U.S. dollar’s convertibility into gold, making it difficult for other countries to redeem dollars for gold. This marked the end of the gold standard.”
“By pegging its currency to gold, Russia has effectively ratcheted up the ruble’s value against the dollar. Pegging one gram of gold to 5,000 rubles means one troy ounce of gold (32 grams) would now cost 158,183.78 rubles in Russia. At the current exchange rate, 32 grams of gold would cost roughly $1,600 in Russia instead of the $1,928 it cost outside Russia.”
““Russia’s intention would be for the value of the ruble to be linked directly to the value of gold,” Gainesville Coins precious metals expert Everett Millman told Kitco News. “Setting a fixed price for rubles per gram of gold seems to be the intention. That’s pretty important when it comes to how Russia could seek funding and manage its central bank financing outside of the US dollar system.”
@ Newshounds News™
Read more: Moguldom
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EU, UK regulators launch consultations on digital asset data reporting and wallets
Tech consultation season has kicked off in Europe, with regulators from the United Kingdom and the European Union seeking feedback on digital asset-related issues.
On July 15, the European Banking Authority (EBA), an independent EU Authority in charge of prudential regulation and supervision across the European banking sector, launched a consultation on draft guidelines for digital asset issuer reporting requirements.
The same day, the U.K. Payments Systems Regulator (PSR) and Financial Conduct Authority (FCA) announced they were jointly seeking views on the benefits and risks digital wallets bring to people and businesses.
EBA guidelines on reporting requirements
The EU banking regulator is seeking feedback on draft guidelines aimed at ensuring that “competent authorities” have enough information to supervise the compliance of digital asset issuers with the Markets in Crypto Asset Regulation (MiCAR)—parts of which came into force this June, with the full provisions scheduled to kick in by the end of the year.
The landmark MiCAR provides rules for offering and admission to trading asset-referenced tokens (ARTs), e-money tokens (EMTs), and other types of digital assets, as well as rules for those providing digital asset services in the EU. It sets out a range of regulatory requirements, including authorizations, conduct, and prudential requirements for issuers and mandates for issuers of certain tokens to report “data points” to the authorities.
When MiCAR’s stablecoin rules came into force on June 30, issuers of ARTs—stablecoins that purport to maintain a stable value by referencing another value or right—and EMTs—stablecoins pegged to a fiat currency—had several new obligations, including a requirement to be authorized by the Central Bank, prudential requirements, and conduct and governance requirements around marketing, dealing with conflicts of interest, and disclosure of information.
Regarding this latter obligation, the EBA has decided that the reporting requirements placed on issuers of ARTs and EMTs were “not enough to allow competent authorities and the EBA to discharge their supervisory tasks and the significance assessment tasks under MiCAR.”
Having identified these so-called “data gaps,” the banking regulator is consulting on draft guidelines specifying common templates and instructions for issuers to provide the necessary information to fill the gaps.
In addition, the draft guidelines include common templates and instructions that issuers should use to collect the data they need from the relevant Crypto-Asset Service Providers (CASPs).
The EBA said it would accept comments on the consultation paper up to October 11, 2024.
PSR and FCA call for information on digital wallets
Meanwhile, across the pond, the FCA—the U.K.’s top finance sector watchdog—and the PSR—its independent subsidiary focused on payment systems—are seeking views on the benefits and risks of digital wallets.
Building on the PSR’s previous work on contactless mobile payments and the FCA’s work on big tech activity in financial services, this consultation aims to better understand the impact on consumers and businesses that digital wallets’ increasing popularity creates.
“The use of digital wallets has grown rapidly over the last few years, and it’s likely that more than half of UK adults now use one. With Apple Pay, Google Pay and PayPal being three of the most widely used digital wallets in the UK today” said Monday’s announcement.
The PSR said it was particularly interested in understanding how digital wallets impact consumers’ choice of payment options at checkout.
“Digital wallets are steadily becoming a go-to payment type and while this presents exciting opportunities, there might be risks too,” said David Geale, the PSR’s Managing Director.
“ We look forward to hearing views and evidence from a wide range of stakeholders throughout this process.”
The regulators hope to hear from stakeholders across the payments and wider financial services landscape, including digital wallets, technology providers, and their service users.
The call for information is open until September 13. After that, the regulators said they would analyze all responses received and provide an update by Q1 2025.
FCA Chief Executive Nikhil Rathi stated. “We want to make sure we can maximise the opportunities and benefits for consumers and businesses while protecting against any risks this technology may present.”
@ Newshounds News™
Read more: CoinGeek
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ASSET TOKENIZATION TODAY AND TOMORROW
The estimated worth of asset tokenization today is as much as $3.5 billion. And with projections that it could reach $16 trillion by 2030, the tokenization market represents a massive opportunity. So, what’s holding the technology back from fully realizing its potential? That was the question posed during the London Tokenization Policy Summit held earlier this year hosted by Ripple and the Imperial College Business School’s Centre for Financial Technology.
Tokenization Use Cases: The “Real Deal” of Digitization
With a promise to remove payment gateway intermediaries; improve payment processor efficiencies; ensure data protection, data privacy and transparency; and enable real-time settlement, tokenization is championed as the “real deal” function of blockchain technology. It’s potential for significant impact across a broad range of sectors is massive.
Tokenized mortgages, consumer loans and microloans have all helped make private credit and debt the second fastest growing sector, while property purchases and treasury notes also stand to benefit. Additional tokenization use cases include enhanced capital flows for small- and medium-sized enterprises, improved efficiencies in carbon credit trading and better price discovery compared to traditional assets.
But despite tokenization’s potential as a new asset class, challenges to mainstream adoption persist. A lack of well-established Special Purpose Vehicles makes it difficult to tokenize real-world assets. Cross-chain protocols are needed to improve interoperability. Limited liquidity in secondary markets means an elevated risk on investment. And there is a clear need for providers that can simplify tokenization into a single offering to help break down silos between financial ecosystems.
To overcome these hurdles and scale tokenization, there are three key areas of emphasis: 1. collateralization, 2. valuation and 3. passkeys. Ensuring that tokens are backed by sufficient reserves, hold the same value internationally and are protected through secure passkeys and proper key management will help to foster trust and—ultimately—adoption.
A New Financial Framework
Central to the topic of tokenization is the importance of a robust regulatory framework to underpin the tokenized economy. Once in place, this framework would provide the necessary structure, safeguards and confidence needed for sustainable growth and development.
Looking Ahead
One thing is abundantly clear: tokenization is more than just a buzzword, it’s a rapidly growing movement that is poised to reshape the financial landscape.
Banks, traditional finance players and regulators are all key to furthering this adoption of tokenization.
@ Newshounds News™
Read more: Ripple
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