Stablecoin

Crypto Biz: Worldcoin expands, Saudi Aramco considers digital assets, and more

Traditional financial firms are increasingly connecting services, portfolios and operations with digital assets.

Traditional financial firms are increasingly connecting services, portfolios and operations with digital assets, taking advantage of the crypto winter to build and find a market fit for crypto-related solutions.

Recent examples include Deutsche Bank’s asset management arm, DWS, which announced a new venture with Galaxy Digital and Flow Traders to jointly issue a euro-denominated stablecoin. In another development, oil company Saudi Aramco signed an agreement with financial services firm SBI Holdings about a possible collaboration on digital assets and co-investment in SBI’s digital asset portfolios.

Meanwhile, in the United Kingdom, pension fund M&G has invested $20 million in the country’s first regulated Bitcoin (BTC) derivatives exchange, Global Futures & Options Holdings.

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Basel Committee suggests introducing maturity limits for stablecoin reserve assets

Should longer-term assets be allowed as reserve assets, the committee thinks these must overcollateralize the claims of stablecoin holders.

In a consultative document published on Dec. 14, the Basel Committee on Banking Supervision of the Bank for International Settlements (BIS) proposed several measures on targeted adjustment to its standard on banks’ exposure to crypto assets. 

The document is the result of the review work conducted during 2023, which helped the committee formulate amendments to its original prudential standards for banks’ exposure to stablecoins published in December 2022.

Proposed changes relate primarily to the composition of the reserve assets of stablecoins, specifically for crypto assets classified under Group 1b in the prudential standards, “subject to capital requirements based on the risk weights of underlying exposures.”

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German asset manager DWS joins Galaxy to issue euro stablecoin

AllUnity, a new joint venture by DWS, Galaxy, and Flow Traders, plans to issue the euro stablecoin on all major public permissionless L1s and L2s, as well as DeFi use cases.

Deutsche Bank’s asset management arm, DWS, is forming a new venture with Michael Novogratz’s Galaxy Digital and Flow Traders to jointly issue a euro-denominated stablecoin.

DWS Group officially announced on Dec. 13 the plan to form AllUnity as part of a new partnership between DWS, Flow Traders, and Galaxy to launch a “fully collateralized” euro stablecoin.

AllUnity’s operations will be regulated by the German Federal Financial Supervisory Authority, or BaFin, the announcement notes. AllUnity’s longer-term focus will be to accelerate mass adoption of digital assets and tokenization.

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S&P Global launches stablecoin ratings, ranks GUSD, USDP, USDC highest

The producer of the S&P 500 assessed eight stablecoins. Tether received the second-lowest rating.

S&P Global has launched a stablecoin stability assessment. In its initial ratings of the eight stablecoins, none were given the top mark, but two received the lowest, based on their ability to maintain their fiat pegs.

According to a statement, to establish its ratings, S&P Global first examines asset quality risks, then factors mitigating the risks, and then considers governance, legal and regulatory framework, redeemability and liquidity, technology and third-party dependencies, and track record.

S&P Global, formerly known as Standard & Poor’s, is best known for the S&P 500 Index of large companies listed on United States stock exchanges. It has turned its attention to stablecoin before, but not with the depth of the new ratings. S&P Global Ratings senior analyst Lapo Guadagnuolo said:

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Palau’s Ripple-supported stablecoin pilot achieves positive results

The U.S. dollar-pegged Palau Stablecoin was used by 168 volunteers for $100 of retail purchases in three months.

The first phase of the Palau Stablecoin (PSC) Program has been declared a success by the country’s Ministry of Finance. More work on the United States dollar-pegged national stablecoin is planned, with the goal of introducing the PSC on a national scale, according to a report released on Dec. 7.

The three-month PSC project was carried out with the participation of Ripple and used the XRP Ledger central bank digital currency (CBDC) platform. The Finance Ministry recruited 168 volunteers from among government employees, who were able to spend 100 PSC at participating local retailers. Both the volunteers and retailers responded positively to their experience using the PSC.

Purchases were made using a phone and a QR code or by manually inputting a wallet address. Only the retailers were able to redeem the PSC for U.S. dollars, which is Palau’s legal currency. The PSC was fully collateralized by $20,000 in “a Tier 1 Federal Deposit Insurance Corporation (FDIC) United States bank.”

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France’s 3rd-largest bank, Société Générale, launches euro-pegged stablecoin

The euro-pegged stablecoin will be the first of its kind in the region and will be available to the bank’s customer base for trading use.

Société Générale, France’s third-largest bank, has debuted its native euro-pegged stablecoin, making it one of the first European banking giants to venture into the stablecoin market.

The EUR CoinVertible (EURCV) stablecoin will debut on the Luxembourg-based Bitstamp crypto exchange, the Financial Times reported. EURCV will be fully backed by the euro, allowing bank customers to participate in the digital asset market. The asset will be available to a broad customer base and can be used for trading.

Jean-Marc Stenger, the CEO of Société Générale Forge, stated that the new stablecoin highlights the bank’s role in the evolving crypto domain and stressed the necessity for a stablecoin denominated in euro.

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Crypto payments: PayPal’s stablecoin ripple effect on markets

Earlier this year, PayPal released its own stablecoin. What effect has it had on crypto adoption?

PayPal’s introduction of its native stablecoin, PayPal USD (PYUSD), has sparked heated debates within the crypto industry regarding its possible sway on payments and wider crypto adoption.

While this step seems to be a big jump toward accepting cryptocurrencies in regular finance, some industry observers advise caution.

What is PYUSD?

This initiative aims to bridge the fiat and digital currency realms for consumers, merchants and developers. PayPal CEO Dan Schulman highlighted the need for a stable digital-fiat conduit.

“The shift toward digital currencies requires a stable instrument that is both digitally native and easily connected to fiat currency like the U.S. Our commitment to responsible innovation and compliance, and our track record delivering new experiences to our customers, provides the foundation necessary to contribute to the growth of digital payments through PayPal USD.” 

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Tether moving into infrastructure, energy production, CEO Ardoino says

Tether will build renewable energy facilities in Uruguay and El Salvador, the new CEO told Cointelegraph.

Paolo Ardoino became CEO of Tether on Dec. His appointment was planned well in advance and comes as the company is prioritizing diversification and expansion. 

It’s a good time for the company.

“As we are going to show in the next quarter, Tether is much more than USDT (USDT),” Ardoino said.

“There is some talk about real-world assets, but what I think is more important is a real-world ecosystem.” 

Innovations coming from the crypto world “should almost be masked” from the public, which cares about what technology does, not how it works, Ardoino said.

Holepunch is decentralized, but isn’t a blockchain.

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Lack of regulatory clarity on payment solutions could undermine US sanctions, says expert

Anja Manuel said U.S. sanctions generally work with “responsible” blockchain firms but not when there are fintech solutions available to individuals looking to circumvent them.

According to former Department of State official Anja Manuel, if the United States isn’t able to maintain its dominance in financial innovation and payments, it could affect its national security policy, specifically on sanctions.

Speaking to Coinbase CEO Brian Armstrong and listeners in an April 21 Twitter Spaces discussion, Manuel said that because the U.S. was one of the biggest global leaders in payments, it allowed the government to enforce sanctions on “bad actors” like Iran or North Korea. According to Manuel, letting the country lead in innovation under clear rules reinforced U.S. national security controls, but China seemed to be catching up on dominance in mobile payments “both in sophistication and scale.”

“While we’re hemming and hawing here and not having a thoughtful regulatory framework in the U.S., China is marching forward, lots of other people are marching forward,” said Manuel. “If Chinese payments solutions, for example, gained a dominant foothold in the developing world, [sanctions are] going to become much, much harder.”

The U.S. enforces sanctions through the Office of Foreign Assets Control of the Treasury Department, which has announced several actions against Russian nationals and groups related to their involvement in the war on Ukraine — including sanctions on crypto wallets. The former Department of State official said sanctions generally worked “in a world of traditional banks” and “responsible” blockchain firms, but not when there existed financial technology firms available to individuals looking to circumvent restrictions.

Manuel added:

“Other thoughtful countries are getting their act together, from Singapore to the U.K. to the EU. This is not impossible — it just hasn’t happened in the U.S. In the U.S., regulation has been almost entirely by enforcement actions from the SEC.”

The Twitter Spaces discussion was part of Coinbase’s “Crypto435” campaign, aimed at promoting pro-crypto policies and candidates in the United States. Armstrong has reiterated calls for action among pro-crypto U.S. voters following the exchange receiving a Wells notice in March — suggesting a potential enforcement action from the Securities and Exchange Commission.

Related: What new EU sanctions mean for crypto exchanges and their Russian clients

“Countries aren’t going to wait for the United States to get this right,” Tomicah Tillemann, a former senior adviser to two U.S. Secretaries of State, said in regard to regulation. “At the moment, there are 114 different governments that are in pretty advanced stages of investigating their own central bank digital currencies. More than half of those are very far along in the process.”

Armstrong has been one of the more vocal critics among major U.S. digital asset exchange leaders in saying the SEC needs to provide “clear rules to regulate the crypto industry.” Amid the looming Wells notice, the Coinbase CEO said he met with SEC officials and U.S. lawmakers this week to push for regulatory clarity.

Magazine: The FBI’s takedown of Virgil Griffith for breaking sanctions, firsthand

Bank of England preparing for greater role of tokenization in finance, official says

BoE deputy governor Sir Jon Cunliffe looked at stablecoins, CBDC and other forms of tokenization taking hold in the modern economy in a speech on financial innovation.

Bank of England deputy governor Sir Jon Cunliffe spoke at the Innovative Finance Global Summit in London on April 17 about the development of tokenization. The UK’s central bank is currently exploring tokenization in bank money, non-bank money and central bank money and the ways tokenized assets will interact.

Stablecoins, Cunliffe said, “offer the possibility of greater efficiency and functionality in payments,” but “it is extremely unlikely that any of the current offerings would meet the standards for robustness and uniformity we currently apply both to commercial bank money and to the existing payment systems.” The central bank is planning to collaborate with the Financial Conduct Authority on regulation after the passage of the Financial Services and Markets Bill.

Related: Bank of England has no tech skills to issue CBDC yet: Deputy governor

Tokenized bank deposits are “a much simpler proposition than non-bank stablecoins,” and may allow banks deposits “to compete better with non-bank payment coins.” Regulatory issues, such as deposit insurance and Anti-Money Laundering measures remain, however, as deposit tokens would settle without the involvement of central bank money, unlike current commercial bank settlements.

A UK central bank digital currency “is likely to be needed if current trends in payments and money […] continue.” A digital pound would play an anchoring role in the economy the way cash does now and would provide a wide range of innovators access to a platform. Machinery could be created to ensure that wholesale tokenized transactions could settle in central bank money thanks to a digital pound, again adding to financial stability, Cunliffe said.

Synchronizing tokenized transactions with the British central bank’s real time payment system will also be potentially possible with upgrades that are now underway, Cunliffe said. The United States Federal Reserve has recently announced the creation of FedNow, a new instant payment system.

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