Bond Investments

Crypto Biz: BlackRock Bitcoin ETF seed capital, HashKey targets market makers, and more

The countdown is underway for the U.S. Securities and Exchange Commission to decide on the first spot Bitcoin ETF in the United States.

The countdown is underway for the United States Securities and Exchange Commission (SEC) to decide on approving the first spot Bitcoin exchange-traded fund (ETF) in the United States. After several delays, the regulator’s final deadline is approaching, with market participants anticipating a decision in early January 2024.

In another sign that a green light may be forthcoming, companies awaiting approval have regularly met with SEC officials over the past weeks, discussing their proposals and making adjustments as requested.

If approved, the biggest cryptocurrency will be traded on the spot market of Wall Street’s major exchanges, opening up Bitcoin (BTC) to a broader audience of investors, this time as a product backed by the most prominent investment firms in the world. If denied, investment managers will likely appeal the ruling, prolonging the waiting period for investors and Bitcoiners in the United States.

AI and pension funds: Is AI a safe bet for retirement investment?

Some pensions funds that experimented with emerging assets like cryptocurrency have lost millions of dollars.

Pension funds are in a perpetual crisis worldwide, with low demographic rates in many countries foreshadowing a dim future for such investments, combined with young people’s lack of faith in the continued existence of social security models.

In order to stay afloat, many pension funds have strived to remain apprised of new investment opportunities, including cryptocurrencies. According to a 2022 study published by the CFA Institute, “94% of state and government-sponsored pension funds are invested in one or more cryptocurrencies.”

But pension fund interest in volatile cryptocurrencies has not come without consequences.

In April 2023, Ontario Teachers’ Pension Plan (OTPP) backed off from investing in the cryptocurrency sector after losing $95 million on its stake in FTX.

Artificial intelligence (AI) and digital assets share a similar hype.

For better or for worse, this relationship could affect them.

European banks launch ‘sustainable’ blockchain platform for digital bonds

The platform makes the first use case of a so-called “Proof of Climate” blockchain protocol.

Two banks from Sweden and France announced the launch of a new digital bond platform built on blockchain technology. The platform will enable institutional clients to issue, trade and settle bonds digitally, providing a more efficient and secure process than traditional methods.

The platform is a joint project of Skandinaviska Enskilda Banken (SEB) and Credit Agricole Bank, called “so|bond.“ According to the announcement from April 3, the blockchain network will be using a validation protocol, “Proof of Climate awaReness,” and minimizing its environmental footprint.

The Proof of Climate awaReness protocol is said to enable an energy consumption comparable to non-blockchain systems, and incentivize participating nodes to improve the environmental footprint of their infrastructures.

Each node will be remunerated according to a formula linked to its climate impact: the lower the environmental footprint, the larger the reward. So|bond would become the first use case for the protocol developed by the French-based IT provider Finaxys.

Romaric Rolleti, head of innovation and digital transformation at Credit Agricole, said that the bond blockchain platform was part of a larger plan for the bank’s digital transformation:

“The platform’s innovative approach, both to the blockchain infrastructure and to the securities market, is coupled with the strong commitment to green and sustainable finance that is at the center of our Societal Project.”

The project joins many other efforts to explore the use of blockchain, smart contracts and the Internet of Things for a global environment cause. For example, in October 2022, the Bank for International Settlements, the Hong Kong Monetary Authority and the United Nations Climate Change Global Innovation Hub presented the results of their Genesis 2.0 initiative — two prototypes of tokenized green bonds.

Hong Kong issues 800M HKD in tokenized green bonds

The bonds were underwritten by four banks and priced at a yield of 4.05%.

The government of Hong Kong announced on Feb. 16 that it had issued 800 million Hong Kong dollars (roughly $100 million) in tokenized green bonds under its Green Bond Programme. The bonds were underwritten by four banks and priced at a yield of 4.05%.

According to the announcement, the platform used Goldman Sachs’ tokenization protocol GS DAP for the bond, which uses a private blockchain network to settle security tokens representing the beneficial interests of bonds in a T+1 payment-vs-payment manner and cash tokens representing claims on the Hong Kong dollar.

Tokenization, the process of representing assets or securities as digital tokens, is a relatively new concept in the financial world. By using blockchain technology to create digital tokens, issuers can provide more transparency, efficiency, and accessibility in the issuance and trading of securities. This move toward the digital settlement of bonds on private blockchain networks marks a significant shift from traditional settlement processes, which often rely on manual verification and paper-based documentation.

Financial Secretary Paul Chan noted that the successful issuance of tokenized green bonds marks a milestone for Hong Kong. He shared:

“Hong Kong has been actively promoting the application of innovative technologies in the financial sector, actively exploring new concepts and technologies to improve the efficiency, transparency, and security of financial transactions.”

The successful issuance of the tokenized green bond highlights the growing adoption of blockchain technology in the financial industry and marks an important step toward the development of sustainable finance globally.

The government of Hong Kong continues to indicate that it remains committed to the development of digital asset infrastructure. In December 2022, Hong Kong introduced two exchange-traded funds for cryptocurrency futures, raising over $70 million before their launch.

In October 2022, Cointelegraph reported that Hong Kong’s securities regulator wanted to allow retail investors to invest directly in virtual assets and to reconsider current crypto trading requirements. According to Elizabeth Wong, head of the fintech unit at the Securities and Futures Commission, the government of Hong Kong is considering introducing its own bill to regulate crypto in its own China-free way.

El Salvador Bitcoin bond delayed due to security concerns: Bitfinex CTO

The Bitcoin bond was announced in November last year and was initially expected to launch in the first quarter of 2022.

El Salvador, the Central American nation that adopted Bitcoin (BTC) as a legal tender in September last year, has delayed the launch of its billion-dollar Bitcoin bond again.

The Bitcoin bond, also known as the Volcanic bond, or Volcanic token, was first announced in November 2021 as a way to issue tokenized bonds and raise $1 billion in return from investors. The fundraiser will then be used to build a Bitcoin City and buy more BTC.

The bond was set to be issued in the first quarter of 2022 but was postponed to September in the wake of unfavorable market conditions and geopolitical crises. However, earlier this week, Bitfinex and Tether chief technology officer Paolo Ardoino revealed that the Bitcoin bond will be delayed again to the end of the year.

Ardoino, in an exclusive conversation with the Cointelegraph, revealed that the current delay in the launch could be attributed to the internal security issues where the nation’s security forces have had to confront the scourge of gang violence in the country. This has diverted the focus of government resources, and “the delay in the launch of the Volcano Token has to be viewed in this context.”

Bitfinex is the key infrastructure partner of the El Salvador government responsible for processing transactions from the sale of Volcanic tokens. However, Bitfinex must acquire a license of issuance from the government first, which would be granted after the passing of the digital securities bill slated for September.

Ardoino confirmed that the final draft of the bill is ready, and they are expecting the bill to be passed in the next couple of weeks, given President Nayib Bukele’s party holds a majority. He said:

“We are confident that the law will obtain approval from Congress in the coming weeks, assuming that the country has the necessary stability for such legislation to pass.”

Bitfinex Securities El Salvador, S.A. de C.V. “will apply for a license to operate under the El Salvador digital securities regulatory framework once this is passed into law,” he added.

While several reports and market pundits have blamed waning investor interest and the current downturn in the crypto market, Ardoino believes the idea behind the Bitcoin bond would garner investors’ interest irrespective of the market conditions.

He added that the Bitcoin bond has the potential to accelerate BTC adoption. He cited the example of memecoins and explained:

“When you consider that the memecoin, Dogecoin, was able to obtain a market capitalization of $48 billion, there is clearly enough investor appetite in the digital token economy to support a $1 billion Volcano.”

After making BTC a legal tender on Sept. 7, 2021, El Salvador accumulated over 2,301 BTC for roughly $103.9 million. During the bull market, the profit from the investment was even used to build schools and hospitals, however, with the current downturn in the market, the BTC holdings are worth about $45 million currently.