Digital Asset

The Clearing House stands up for bank rights, opposes CBDC in comments for US Treasury

The payments operator responded to a Treasury inquiry related to the presidential executive order with an appeal to keep bank interests in sight when designing digital assets.

United States payment systems operator The Clearing House has released its response to a Treasury Department request for comment on “digital-asset-related illicit finance and national security risks as well as the publicly released action plan to mitigate the risks.” The Clearing House found significant security serious risks associated with digital assets but was concerned that banks should have the same opportunities to participate in the market as nonbanks. 

The Treasury Department issued its request for comments on Sept. 20 as part of its ongoing response to President Joe Biden’s Executive Order 14067 from March 9, 2022, “Ensuring Responsible Development of Digital Assets.” In its 22-page response letter, The Clearing House addresses some of the questions posed by the Treasury, and it highlights five main points that it sees as ways to mitigate national security and illicit finance risks posed by privately issued non-bank digital assets (many cryptocurrencies and stablecoins) and U.S. government tokens (central bank digital currencies, or CBDCs). The letter, dated Nov. 3, was made public on Nov. 10.

The Clearing House called for a federal prudential framework with standards for digital assets service providers that are equivalent to those for depository financial institutions engaged in functionally similar activities. Furthermore, banks “should be no less able to engage in digital-asset-related activities than nonbanks.”

The company minces no words on CBDC, stating:

“The risks associated with the possible issuance of a CBDC in the U.S. outweigh its potential benefits and, therefore, it should be determined that a CBDC is not in the national interest.”

In the event the United States decides to adopt a CBDC, “the foundational requirements in place to prevent criminal and illicit use of commercial bank money must be applied to a U.S. CBDC in such a way that criminal actors are not incentivized to use CBDC,” the company writes.

Related: US Treasury report encourages instant payment, recommends more CBDC research

The Clearing House sees limited appeal for a U.S. CBDC, in any case:

“Intermediaries must have a clear business case for assuming the customer identification/identity verification, AML/CFT screening, and sanctions compliance obligations, particularly as the risks associated with such assumption may, without fees, be unsupported by the low margins typically associated with the provision of custodial services.”

The Clearing House is owned by 23 banks and payment companies. It was founded in 1853.

UBS AG launches digital bond settled on blockchain and traditional exchanges

With atomic settlement technology, the company said its digital bond settles through the SIX Digital Exchange (SDX), not requiring a central clearing counterparty.

Swiss investment bank UBS AG introduced its hybrid digital bond on Nov. 3, claiming to be the world’s first publicly traded bond that’s settled on both blockchain-based and traditional exchanges.

According to the bank, the digital bond has the same instrument structure, legal status and rating as a traditional UBS AG senior unsecured note. In its statement, the bank said:

“Through this bond, UBS enables investors, regardless of whether they have the blockchain infrastructure, to invest in a digital bond. This removes a hurdle on the way to adopt new disruptive technology that can make issuing bonds faster, more efficient and simpler.”

The senior unsecured digital bond is a 375 million Swiss franc-denominated ($272 million) three-year bond with a 2.33% coupon, according to UBS. The bank will list the digital bond at SDX Trading and SIX Swiss Exchange. It will be eligible for the Swiss Bond Index, along with other UBS AG senior unsecured notes.

With atomic settlement technology, the digital bond settles through the SIX Digital Exchange (SDX) distributed ledger-based central securities depository (CSD), which is instant and automatic, not requiring a central clearing counterparty. “Investors will have the ability to automatically settle and clear the UBS digital bond on either SDX CSD directly or on SIX SIS,” noted the bank.

Beatriz Martin, UBS’ group treasurer, said that the initiative shows the investment bank’s commitment to supporting the development of new financial market infrastructure using technology, “not just as an enabler, but to make it a true differentiator for UBS.”

UBS moves into the crypto space following comments from the company’s CEO last year classifying crypto as an “untested asset category” and urging caution from investors during the bull market.

Last month, another major traditional financial institution in Europe, Société Générale, was granted approval as a digital asset provider (DASP), allowing the French bank to provide digital assets custody and trading through a subsidiary. The bank joined other international DASP operators such as Bitpanda, Binance and eToro.

Goldman Sachs creates digital asset taxonomy system for subscribing investors

The financial services giant, along with Coin Metrics and MSCI, will help investors track market movements and screen hundreds of coins and tokens by their uses.

Goldman Sachs, MSCI and Coin Metrics announced on Nov. 3 that they have devised a digital assets classification system to increase the transparency of market movements and help market participants analyze the digital assets ecosystem. The new system is called “Datonomy” and is available by subscription from the three companies. 

The new taxonomy divides the digital assets world into classes, sectors and subsectors according to their use to make it possible to view those assets in a more granular way, a Goldman Sachs spokesperson told CNBC. The system is intended to provide a consistent view of the market, screen assets using different filters and help market participants “understand aggregated properties of these assets at the portfolio level,” according to a statement.

Coin Metrics CEO Tim Rice said in the statement, “This collaboration represents a significant leap forward for the industry as a whole, establishing a coherent and future-proof structure to monitor and analyze the digital assets ecosystem.” Coin Metrics provides crypto reporting and analytical software.

MSCI, a provider of critical decision support tools for investors, is the owner and sole administrator of the system. MSCI announced in a separate statement that it has launched a series of new indexes using Datonomy in collaboration with Menai Financial Group and Compass Financial Technologies.

Swiss-based Compass is the publisher of the “Compass Crypto Basket Fundamental DeFi Index” and other crypto indexes. It created single-digital-asset indexes based on MSCI’s new indexes.

Related: Altcoin Roundup: Crypto indexes offer broad access, but are they profitable in the long run?

The new MSCI indexes will chart top 20 and top 30 digital assets by market cap, assets that do not rely on proof-of-work consensus and assets “associated with technology platforms supporting ‘Smart Contracts’ features.” The indexes are the first of their kind for MSCI.

Prometheum partners with Anchorage Digital on SEC-registered alternative trading system

The New York-based exchange will start with five digital assets on offer in its SEC-compliant trading system, which will “seamlessly integrate with legacy securities trading systems.”

Prometheum Ember ATS announced the launch of its alternative trading system (ATS) on Oct. 26. The new ATS is registered by the United States Securities and Exchange Commission (SEC) and is a member of the Financial Industry Regulatory Authority.

Prometheum Ember ATS will offer digital asset securities trading, clearing, settlement and custody. The new ATS has partnered with Anchorage Digital Bank to help it provide its service, which is meant to “seamlessly integrate with legacy securities trading systems.”

Prometheum stated that its ATS “enables institutions to trade digital asset securities under Federal Securities Laws.” It will initially support digital assets Flow, Filecoin, The Graph, Compound and Celo. Prometheum founder and co-CEO Aaron Kaplan said in a statement:

“Prometheum sets itself apart by maintaining the ability to be sustainably compliant under current securities laws, ensuring the multi-layer protections and standards required on Wall Street.”

Prometheum Ember ATS said in its statement that it will make the system’s full functionality available to all users “regardless of trading activity, volume, experience, or account size.”

It has been a long journey to SEC approval for Prometheum Ember ATS, which announced its intention to receive registration in March 2021. The New York-based Prometheum, which was founded in 2017, was already operating as a crypto exchange at that time.

Related: SBF: FTX to filter assets it thinks are securities from US listings until registration in place

Prometheum Ember ATS is one of several partnerships Anchorage Digital Bank has established to advance its business. In June, Anchorage Digital announced it was working with Binance.US, CoinList, Blockchain.com, Strix Leviathan and Wintermute to segregate institutional client funds from exchanges into regulated asset vaults. Anchorage Digital President Diogo Mónica recently shared with Cointelegraph that the bank is preparing to enter the Asian market. Mónica has also called for greater regulatory clarity in the United States.

Wealthy crypto believer and incoming UK PM Rishi Sunak once commissioned a royal NFT

The new leader of the world’s sixth-largest economy is the former chancellor of the exchequer and is said to be richer than King Charles. He is also a firm crypto supporter.

Rishi Sunak is set to become prime minister of the United Kingdom within days. Sunak was defeated for the top government post by Liz Truss on Sept. 5, but she resigned after 45 days in office. Indications so far are that his selection for the office is good news for the crypto industry.

Sunak was chancellor of the exchequer, or head of the treasury, from early 2020 to July 5, when he resigned during a scandal that shook Boris Johnson’s government. During that time, Sunak repeatedly voiced his support for crypto. Speaking in April about proposed regulatory reform related to stablecoins, Sunak said:

“It’s my ambition to make the U.K. a global hub for crypto-asset technology, and the measures we’ve outlined […] will help to ensure firms can invest, innovate and scale up in this country. This is part of our plan to ensure the U.K. financial services industry is always at the forefront of technology and innovation.”

Sunak has also spoken positively of central bank digital currency. In April, he commissioned the Royal Mint to issue a nonfungible token (NFT) by the end of the year “as an emblem of the forward-looking approach the UK is determined to take.”

Related: UK hits double-digit inflation for the first time in 40 years

He also oversaw the drafting of the Financial Services and Markets Bill, which is now making its way through Parliament and promises to provide a regulatory framework for stablecoins and crypto assets.

Sunak has made history for several reasons. At 42, he is the youngest prime minister in modern U.K. history. David Cameron and Tony Blair were 43 when they assumed office. Sunak and his wife have a combined fortune worth 730 million pounds ($824 million), making him the richest British prime minister to take office.

S. Korean watchdog goes after crypto whales to ensure AML compliance

The South Korean regulator noted that popular stablecoins used by the public might become a primary tool for money laundering using digital assets.

South Korea’s financial watchdog, the Financial Services Commission (FSC), will monitor crypto whales with assets of over 100 million won ($70,000) to prevent money laundering efforts using digital assets.

The FSC noted that having a larger proportion of digital assets and stablecoins equates to a higher money laundering risk. Thus, special focus should be placed on monitoring crypto whales with significant digital-asset and stablecoin holdings under the new Anti-Money Laundering guidelines, reported local media.

The report also noted that stablecoins, especially those commonly used by the public, are more likely to be used as a means of crime. The report reads:

“In the case of an independently listed virtual asset, it is possible that it did not meet the listing criteria of other virtual asset operators, and it can be evaluated that the risk of money laundering of virtual asset operators with a high proportion of the virtual asset is high.”

Apart from monitoring crypto whales and their activities, the report also advocates for keeping an eye on retail customers making high-value deposits. Those customers should be monitored for any significant change in holdings every quarter.

“Customers with large virtual asset holdings are at higher risk of money laundering.”

South Korea is known for its strict implementation of crypto-related policies, especially in the wake of the collapse of the Terra ecosystem. Its financial regulators have doubled down on their efforts to ensure investor protection and bring crypto legislation by early 2024.

Related: Koreans to have access to blockchain-powered digital IDs by 2024

In August, the chair of FSC said the regulator plans to expedite its review of 13 bills related to digital assets pending in the country’s National Assembly. The aim of the review is to make institutional supplements that will take a balanced approach to blockchain development, investor protection and market stability.

South Africa declares crypto to be a financial product subject to financial services law

The declaration marks the beginning of the long-awaited process of regulating crypto assets, which will produce benefits such as consumer protection and AML/KYC compliance.

The Financial Sector Conduct Authority (FSCA), South Africa’s financial regulator, published a notice on Oct. 19 indicating that the country’s 2002 Financial Advisory and Financial Intermediary Services Act (FAIS) has been updated to include a definition of crypto assets. A decision of this type has been expected for several months, and it brings crypto assets under regulation in South Africa for the first time.

The FSCA notice, which went into force on publication in the Green Gazette (the government gazette of record), states that a crypto asset is “a digital representation of value” that can be electronically traded, transferred and stored but is not issued by a central bank. Additionally, it “applies cryptographic techniques” and uses distributed ledger technology. The notice goes on to state that crypto assets are declared financial products.

Under the FAIS, a financial product is defined as a security, debenture, “any money-making instrument” or an instrument conferring rights to securities and instruments. It can be offered by financial service providers, whether they are domestic or international firms, that are licensed in South Africa. Registration can be “an onerous procedure,” according to the local press.

Related: On Freedom Day, Bitcoin gives South Africans a stake in their financial future

A South African draft declaration on crypto assets was published in November 2020. In June 2021, a national working group created a roadmap for a regulatory framework. Regulation will help the country conform to Anti-Money Laundering/Know Your Customer (AML/KYC) standards and protect investors, but the details of the AML/KYC requirements have aroused some controversy. In February 2022, South Africa’s National Treasury confirmed the intention of declaring cryptocurrency a financial product and of enhancing the monitoring and compliance of transactions with regard to crypto.

According to the Chainalysis 2022 Global Crypto Adoption Index, published in September, South Africa ranks 30th worldwide for cryptocurrency adoption. Various estimates say that about 10-13% of the South African population are crypto holders.

Crypto and digital bank MinePlex secures $100M in funding from GEM

The funding will be used in new banking technologies, including a collaboration with Mastercard and Visa for crypto transactions.

In another round of investments in the crypto space, Singapore-based crypto bank MinePlex has secured $100 million from digital asset investment firm GEM Digital Limited (GEM), aimed at closing the gap between digital assets and traditional banking. 

According to an Oct. 11 announcement, MinePlex will use the funding to develop new banking technologies, including a collaboration with Mastercard and Visa for transactions accepting Tether (USDT), Bitcoin (BTC), Ether (ETH) and TRON (TRX).

Bringing digital assets and traditional banking services together is MinePlex’s big bet.

The platform offers fiat and crypto assets services within the same application, enabling transactions such as bill payments as well as purchases in crypto assets.

Introducing CrossFi, MinePlex’s co-founder and CEO, Aleksandr Mamasidikov, explained to Cointelegraph:

“We created CrossFi, a new technology that runs on the LPoS (Liquid Proof of Stake) consensus algorithm and MinePlex’s innovative blockchain, which provides such advantages as simplicity, operating speed, and low fees.”

According to MinePlex, its native MinePlex (PLEX) token will also be listed on new exchanges as part of the fundraising efforts.

The company also intends to open new offices in South Africa, Australia, India and Brazil, adding to its already established offices in Barcelona, Dubai, Uruguay and Singapore. The company claims to have processed more than five million cards across 50 banks in Russia, Europe and Asia.

GEM is a $3.4 billion alternative investment group that has been a source of capital for other startups in the crypto space.

In September, ParallelChain Lab secured $50 million in funds from GEM following the launch of its mainnet and native token listing, XPLL, while Sports Metaverse startup LootMogul secured a $200 million investment commitment from Gem Global Yield.

In June, the private equity fund closed a $200 million investment in the cryptocurrency exchange Unizen to expand the firm’s business and its ecosystem.

The world’s cultural heritage is being preserved one NFT at a time

The Monuverse is taking some of the world’s most precious monuments and preserving them forever as NFTs in the digital universe.

The use cases of nonfungible tokens (NFTs) have evolved from pixelated Punks and Apes to real-world applications like real estate contracts and music royalties. Another use case is surfacing as the Monuverse uses NFTs to preserve cultural heritages around the world.

Through a combination of blockchain technology, 3D imaging, generative art and local collaboration, the Monuverse is using NFTs to take important global monuments into digital reality where they will be preserved infinitely.

The first NFT project of this caliber from the Monuverse highlights the Arco della Pace, or the Arc of Peace, in Milan, Italy.

The initial digital rendering of the monument will not be available for individual ownership under the precipice of intellectual property law and authorization of the Italian Ministry of Culture: Archeology, Fine Arts and Landscapes, Milan Authority.

However, a subsequent drop of 7,777 randomized NFTs gives individuals a piece of the virtual counterpart of the monument and access to related events. These NFTs also open up a new means by which owners can patronize cultural heritage.

Cointelegraph spoke with Andrea Salomone, a co-founder of Monuverse, to understand how NFTs can help further preserve this cultural heritage and boost virtual tourism efforts. 

Related: Web3 technologies could be a game changer for the travel industry

NFTs are expected to be a major aid in ushering the next billion users into the crypto space. This will especially be the case if they are connected with already known and valued elements of their cultural heritage, creating a sense of familiarity.

Salomone said when NFTs of monuments are created, it will help create “a tangible bridge between realities” and contribute to a virtual ecosystem.

“Being one of the virtual owners of a real historic monument should come with both feelings: not only do you own a cool piece, but you are actively helping safeguard heritage in an innovative and fun way.”

The virtual preservation of monuments means that they will be frozen in time as they are now. If global conflicts or natural erosion takes place in the real world, virtual reality will have an untouched version for future generations to enjoy.

“Owning a Monuverse NFT is not only an honor but also a responsibility,” said Salomone.

An important aspect of this project is that part of the revenue from NFT drops provides “perpetual funding” to the local institutions to which these monuments belong. 

“[Funding] will accelerate the maintenance and restoration of monuments around the world, a lot of which are really at risk.”

Salomone said this is definitely something the project plans to “change for the better.”

Aside from cultural heritage, NFTs can create new possibilities for the world of virtual tourism in Web3. While virtual reality and augmented reality have been important in creating digital experiences, Marec believes they cannot do it alone. 

“Web3 will be critical in this field because it will take people’s experiences to a whole new level. I believe the key word here is ownership.”

According to the Monuverse co-founder, virtual tourism can take on a new level of connection to a place as visitors who own a related NFT can develop a real sense of ownership and belonging like never before.

Already, metaverse events at historical sites are proving to be innovative ways to connect the past to the future.

US senator bill seeks to cushion crypto exchanges from SEC enforcement actions

The Digital Trading Clarity Act of 2022 aims to provide regulatory clarity around classifying digital assets and related liabilities under existing securities laws.

United States Senator Bill Hagerty, a member of the Senate Banking Committee, introduced legislation seeking a safe harbor for cryptocurrency exchanges from “certain” Securities and Exchange Commission (SEC) enforcement actions.

The Digital Trading Clarity Act of 2022, introduced by Senator Hagerty, aims to provide regulatory clarity around two primary concerns plaguing crypto exchange establishments — (i) the classification of digital assets and (ii) related liabilities under existing securities laws.

A bill to provide digital asset intermediaries with a safe harbor from certain enforcement actions by the Securities and Exchange Commission, and for other purposes. Source: congress.gov

Sen. Hagerty outlined an overview of the problems amid regulatory hurdles:

“The current lack of regulatory clarity for digital assets presents entrepreneurs and businesses with a choice: navigate the significant regulatory ambiguity in the U.S., or move overseas to markets with clear digital asset regulations.”

The aforementioned regulatory uncertainty, according to Sen. Hagerty, discourages investments in the crypto spaces and hampers job creation opportunities in the United States. As a result, the blockade “jeopardizes the United States’ leadership in this transformational technology at such a crucial time.”

The senator believed that the legislation, when passed, would not only provide “much-needed certainty” to crypto businesses but also improve the growth and liquidity of U.S. cryptocurrency markets.

To establish the legislation as law, the bill needs approval from the Senate, the House and the President of the United States.

Related: US lawmakers propose amending cybersecurity bill to include crypto firms reporting potential threats

Running parallel to the regulatory reforms recommended by the US senators, the federal government amped up efforts to study the feasibility of central bank digital currencies (CBDCs) in the American market.

Under Biden’s directive, the Office of Science and Technology Policy (OSTP) analyzed 18 CBDC design choices, outlining various pros and cons of each system:

“It is possible that the technology underpinning a permissionless approach will improve significantly over time, which might make it more suitable to be used in a CBDC system.”

The technical evaluation for a U.S. CBDC system highlighted the department’s inclination toward an off-ledger, hardware-protected system.