The cryptocurrency market remains range-bound with a slight bearish bias as Bitcoin (BTC) finds it increasingly difficult to cross the psychological $40,000 level.
While writing this article, Bitcoin was trading at $38,665, reflecting a loss of 3.7% in 24 hours. Ether (ETH) has lost 4.6% to trade at $2,410. XRP was trading at $0.8560, representing a loss of 0.7% in the past 24 hours.
Major altcoins which have gained ground in the last 24 hours include Cosmos (ATOM, $14.28, 12.20%).
Major altcoins which have lost ground in the last 24 hours includes ChainLink (LINK-$23.63, -2.40%), Tron (TRX-$0.0702, -1.6%), EOS (EOS-$4.97, -3.10%), Polkadot (DOT-$23.45, -1.70%), Cardano (ADA-$1.52, -1.80%), Tezos (XTZ-3.17, -2.10%), Dash (DASH-$169.10, -0.20%), Bitcoin SV (BSV-$165.69, -1.30%), Binance Coin (BNB-$352.42, -2.40%), Bitcoin Cash (BCH-$607.44, -2.10%) and Stellar (XLM-$0.3245, -1.80%).
Government level initiatives
Swiss National Bank conducting a wholesale CBDC trial
The Swiss National Bank has stated that it is conducting a CBDC trial in partnership with the BIS Innovation Hub the Banque de France.
The CBDC intends to utilize the digital Franc and digital Euro to conclude cross-border trades for financial assets such as bonds or stock on a blockchain platform. The central banks do not want the trial to be construed as a resolution to roll out a CBDC.
Other partakers in the Project Jura trial for trans-border border settlements are Accenture and an association made up of Natixis, R3, Credit Suisse, UBS, and Six Digital Exchange.
These participants in the trial are also involved in Accenture’s association for wholesale digital Euro trials at the Banque de France. Notably, the French central bank has set up eight associations in one of the biggest central bank digital currency trials.
Of late, the central bank has developed a CBDC to carry out public blockchain platform-based bond issues by the European Investment Bank.
Utilizing distributed ledger technology paves the way for real-time settlement or delivery versus payment (DvP) of asset trade. Being an atomic transaction, if one party fails to execute correctly, both sides fail. Hence, there is no need for intermediates or third parties who are generally employed to assess credit risks in case of transaction failure.
Nigeria Central Bank to start CBDC trials this year
The Central Bank of Nigeria intends to begin the trial of a central bank digital currency (CBDC) sometime this year, as per Rakiya Mohammed, the IT Director of the Bank.
Regarding the trial, Mohammed said, “The plan to launch a digital currency is for Nigeria to join the league of other nations like China. It is going to help us accentuate the financial inclusion strategy that we are behind schedule at only 60 percent. It is going to simplify payments, as well as reduce the cost of international payments.”
She is optimistic that the government-backed CBDC will minimize the expenses related to cash administration. Furthermore, only a phone is required to transact in an easy manner. Interestingly, she pointed out that CBDC is totally different from cryptos, which are under a blanket ban in the country.
Private sector initiatives
State Streets sets up State Street Digital
State Street has set up a new sector named State Street Digital, which will focus on digital finance, including CBDC, tokenization, and blockchain.
Notably, State Street is the second biggest custodial firm globally with over $40 trillion worth of assets under custody, just short of a few trillion in comparison to numero uno wealth management firm BNY Mellon, which has already made a similar statement related to cryptocurrency assets in February.
Nadine Chakar, former Head of State Street Global Markets, will head the newly formed division. Chakar, who served in top positions at BNY Mellon for 18 years, said, “As digital currencies and tokenization not only gain momentum, but transform financial infrastructure and operating models, we can help our clients bridge the gap between the industry of today and the one of tomorrow.”
State Street also underlined two latest transactions: appointment as the administrator for a planned Bitcoin pegged exchange-traded note commenced by Iconic Funds BTC ETN and eventual listing on the Frankfurt Stock Exchange, and appointment as the fund manager for the VanEck Bitcoin Trust, an exchange-traded fund (ETF) that is awaiting SEC clearance.
Miscellaneous
Basel Committee releases document on crypto risk exposures
The Basel Committee on Banking Supervision has released a document on capital requirements related to cryptocurrency risk exposures.
The committee has suggested levying 1250% risk weightage for crypto exposures, effectively dissuading banks from exposing themselves to the threats.
Notably, the US Treasuries have a 0% risk weightage. Compliance requirements for tokenized traditional assets are not very high, but stablecoin risk weightage is not as low as one would anticipate.
Basel III necessitates banks to put forth extra capital based on risk level. In general, high risk usually offers high returns, and Basel intends to have control over that risk appetite.
Residential mortgages usually have a 50% risk weightage, while publicly traded equities have a 300% risk weightage. Highly leveraged funds are slapped with a 600% risk weightage. Usually, 1250% risk weightage is applied only on securities trades that are behind the payment schedule. The aforesaid details are an oversimplified format of the Basel III rules.
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.
