The cryptocurrency market continues to trade in a narrow range, with Bitcoin (BTC) hovering around $20,000. While preparing this report, Bitcoin was trading at $19,905, down 3.20% in the last 24 hours. Ether (ETH) had lost 5.40% to trade at $1,092. XRP was trading at $0.3162, reflecting a loss of 3.20% in the past 24 hours.
Major altcoins, which have gained ground in the past 24 hours, include Internet Computer (ICP, $.6.35, 0.20%) and Polygon (MATIC- $0.5763, 4.30%).
The major altcoins, which have lost ground in the past 24 hours, include Uniswap (UNI – $5.57, -9.10%), Shiba Inu (SHIB – $0.00001041, -5.70%), Tezos (XTZ- $1.60, -1%), VeChain (VET, $0.022089, -4.1%), IOTA (IOTA – $0.2658, -8%), Stellar (XLM – $0.102469, -3.20%), Polkadot (DOT, $6.57, -2.60), Cardano (ADA, $0.4375, -4.60%), Binance Coin (BNB- $224.61, -3.70%), Avalanche (Avax- $17.53, -6.70%), EOS (EOS – $0.9461, -4.70%), ChainLink (LINK – $6.13, -0.60%), Solana (SOL, $33.82, -5%), Cosmos (ATOM, $8.34, -2.9%), and Dogecoin (DOGE- $0.0620, -6.10%).
Government level initiatives
China Central Bank looking at retail and wholesale CBDC
In the latest speech, Central Bank of the Republic of China’s (Taiwan) Governor Yang stated that the institution is looking at both retail and wholesale central bank digital currency (CBDC). The central bank completed its recent retail CBDC trial three months before schedule.
The bank finished its initial research – a technical viability study utilizing decentralized technology for wholesale CBDC – in June 2020. The central bank was dissatisfied with the operational efficiency of blockchain technology at that phase. The second stage was a “Universal CBDC Pilot Program” to trial the retail payment environment with the assistance of five banks, namely Huanan, China Trust, Cathay United World Bank, Shanghai, and Taishin.
With respect to subsequent steps, the bank is looking at both retail and wholesale CBDC. After completion of stage two, the bank intends to carry out surveys to receive feedback on the subject and interact with the public about CBDCs.
Amended capital needs for crypto risk exposures document published
The Basel Committee on Banking Supervision has published an amended document on the capital needs for cryptocurrency risk exposures. Interestingly, the rules have become stricter, contrary to the hope of crypto advocates. Notably, the chief of the committee has cautioned earlier about the likely tightening of rules. All popular stablecoins may not receive approval and will be categorized as high-risk assets similar to the rest of the cryptos.
While allowing hedging, as earlier, the Basel Committee has brought cryptocurrencies under three broad categories, namely stablecoins, DLT, and crypts.
The major changes include:
- Exposure to cryptos is limited to 1% on capital
- Legal endorsement for crypto hedging process.
- Stringent rules for stablecoins.
Concerning conventional assets that are tokenized utilizing DLT, there is a framework risk of 2.50%.
The one domain, which has seen considerable relaxation, is hedging. There is a capital fee of 100% for hedging exposures to cryptos, however, the values are netted. Better than before, when hedging was totally disregarded.
For exposure to other cryptos, the risk weightage is the greatest at 1250%. This makes holding cryptos on the balance sheet an unattractive option for banks.
Private sector initiatives
Societe Generale starts using DLR from Broadbridge
Broadridge stated that Societe Generale (SocGen) has started using its distributed ledger technology-based repo platform, referred to as DLR. Notably, five years ago, SocGen was involved in the initial trial of the platform, alongside Natixis. A year back, the DLR solution went live on a commercial basis, with UBS adopting it in August 2021. In that phase, the platform was already executing over $35 billion worth of transactions on a daily basis.
Broadridge runs one of the top traditional fixed income systems, which is used by 20 out of 24 primary dealers and transacts for over $8 trillion per day.
A repo trade is carried out when a financial institution borrows funds by offering securities, usually treasuries, and accepts to purchase it back at a slightly higher price in the near term. The aforesaid DLR platform aids in preparing contracts, execution and settlement of repo transactions on a single platform, even though payment is carried out through traditional channels. The assets backing the deal are frozen and tokenized, allowing the transfer of ownership through smart contracts.
CoreVest completes securitization deal
CoreVest, a subsidiary of Redwood Trust, revealed the completion of a $313 million securitization deal backed by single-family rental (SFR) loans. One of the prominent aspects is that loan payments are monitored utilizing blockchain technology from Liquid Mortgage. This implies that investors can look at loan payment dealings on a daily basis. In April, Redwood Trust backed the seed funding round (undisclosed amount) of Liquid Mortgage.
Investors usually receive payment data only after six weeks without the availability of a blockchain system. Liquid installed its platform with one mortgage servicing firm to receive the payment details. Liquid’s platform uses the Stellar public blockchain, but avoids retaining any personal info on the blockchain.
Other than sharing payment details, Liquid Mortgage’s platform aids with tokenization and due diligence. Each individual loan that serves as the basis for securitization is represented by a digital asset that is stored in a wallet. The wallet balance will decrease in proportion to the loan balance when the user makes principal repayments. Due diligence is performed whenever a mortgage is re-sold.
Disclaimer: Any financial trading analysis offered here is our opinion and is not intended as advice or direction for investors. We cannot guarantee the success of any trades made as a consequence of this article, and we encourage traders to incorporate a strong money management strategy to limit losses when they enter the markets. Please use this article as part of your own research before formulating strategies prior to trading.
