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How COVID-19 and tokenization can transform the financial sector

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Talking about COVID-19 and the “new normal” has become a cliché and, in some cases, has assumed an air of defeatism. While the world assesses the overwhelmingly economic impact of COVID-19, it is important to note that the pandemic has also acted as a catalyst for positive change, such as the shift towards digitization, cashless payments or ecommerce, which in the long run may benefit an integral part of the economy: Small and Medium-sized Enterprises (SMEs).

In the short run, however, SMEs face significant challenges; with many of these related to access to liquidity and cash flow. In this economic climate, it’s proving challenging for SMEs to access lending facilities. For this reason, we have seen multiple central banks in the Middle East take bold steps to inject liquidity into the sector and a range of government measures focused on supporting SMEs.

However, as we consider a post-COVID world and the particular challenges we are facing today, it is clear that it represents a significant opportunity to do things better: to reimagine and rewire capital markets to address some of the systemic challenges. How should we seek to create alternative mechanisms for SMEs to get access to capital and look at how advances in technology can make more effective and trustworthy financial systems?

“Tokenization” will play an important role. Taking advantage of distributed ledger technologies, such as blockchains, an asset can be tokenized; with ownership of each unit of that asset represented digitally on a single shared ledger that all participants in a market or financial system can view as a single source of truth. These tokens could be fungible or non-fungible; and, in the case of fungibles, could be a digital representation of a share in an physical asset, such as real estate, art work, or a share in a company; or could be a digital instrument created for general payment, such as Central Bank Digital Currencies.

Tokenization can provide a mechanism for people, firms, or even governments to get access to additional sources of liquidity as an alternative to traditional forms of bank lending. This could be through tokenization of shares in an enterprise or it could be by tokenization of accounts receivable and accounts payable obligations. Imagine, for example, a firm that provides services to a number of clients and has negotiated 60 or 90 day payment terms. Rather than wait for payment to arrive according to these terms, a firm could tokenize the receivables, have multiple financial institutions bid on providing working capital finance against it where they make immediate payment to the firm secured against the receivable. There are already some interesting startups exploring these concepts.

As regional governments will almost certainly accelerate their exploration of Public-Private Partnerships (PPPs) and alternative forms of fundraising, such as municipal bonds, there are a number of possible roles for tokenization to play in creating more efficient and effective fully digital securities and markets. For example, with social distancing having resulted in hotels and restaurants being closed, many municipalities are missing out on important sources of revenue from the various service charges and taxes. Tokenized general obligation bonds can be issued to raise funds that are then repaid by future tax revenues; tokenized revenue bonds can fund projects that generate revenues, such as roads in which tolls are collected for distribution.

In addition to opening up liquidity in traditionally illiquid asset classes, tokenization enables fractional ownership models; by making the units of ownership smaller, the cost of acquisition can be lowered. This has obvious benefits from a liquidity perspective but also in terms of accelerating national objectives around financial inclusion; with more people being able to afford to invest in asset classes that might previously have been outside of their reach for structural or economic reasons.

By digitizing these assets in this way, it becomes possible to improve the efficiency of the market and end to end processes – from issuance through to clearing and settlement. Looking at the structure of capital markets today, one will find there are a number of intermediaries that exist to create trust, remove friction, and address counter-party risks. By leveraging blockchain and other technologies, a tokenized securities market can avoid many of the risks that drive these inefficiencies and create markets that are more efficient and cost-effective.

Tokens also bring increased transparency to a market and a country’s financial system. All participants across the industry will have – via the immutable record stored on the distributed ledger – a view of the ownership of the assets, the history of these assets, and other attributes and aspects as relevant to ensuring a transparent marketplace.

In practice, a country or market that wanted to introduce a token-based approach to SME financing, municipal bonds, or the tokenization of any other asset class, could start relatively simply and quickly. The technology already exists and is being trialed by leading institutions and IBM is already working with its clients globally in this area.

SMEs, firms, or government agencies that want to raise capital by issuing tokens would work with a bank to create a digital representation of asset(s), such as the capital table for a firm; with the bank performing the role of ensuring that the asset that is to be represented by the token actually exists and all regulatory requirements are met.

Many of the regulatory rules associated with an asset could be programmed into the token itself. For example, preventing ownership to pass to people who don’t meet certain criteria will allow the financial sector to move to a compliant-by-design regulatory model.

Investors can view the issued tokens and purchase them. The broker or bank would fulfil the regulatory requirements around Know Your Customer (KYC) and as the network grows, more regional and international banks and brokers could join.

Once purchased, the title would move digitally to the buyer with no delayed settlement. Delivery of the token will be simultaneous to payment. This would represent a significant improvement over contemporary approaches both in terms of time and transaction cost.

As we think through what a post-COVID world looks like and how we can transform the challenges that we face into opportunities, governments and financial services organizations in the region should look at how the adoption of tokenization can support this recovery and enable a stronger, more innovative, and competitive system to emerge.

Source: https://www.fintechnews.org/how-covid-19-and-tokenization-can-transform-the-financial-sector/

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Uncomfortable Truths of Trading And What to Watch Out For

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There are some uncomfortable truths about trading crypto, which many people refuse to acknowledge. For instance, everybody — no matter how they play the market — is part of an emotional scheme. That means you, too. Thierry Gilgen, CEO of MachinaTrader, takes a deeper look into how social media channels dominate information about cryptocurrencies.

The market is not purely mathematics. Raw human emotions play a big role, and that includes you potentially getting played. It is easy to be carried away while trading and make an emotional-based decision that results in you being wrecked. 

That’s not the only unpleasant truth about trading. Your exchange might be using you. Some platforms today built their architecture in such a way as to monopolize the data they get by providing their services. In the crypto space, for instance, there are delays between the moment a provider receives data, and the moment its customers receive that same data. 

Such platforms take customer data for free, use it, and sell it. They don’t give back the knowledge their customers created in concert. They keep it for themselves and use it to influence those very same users. They devalue, use, and sell their customers, not letting them get back what they put into those platforms. 

Customers need platforms that don’t exploit them

Customers need platforms that don’t exploit them. And platforms can be incentivized to pursue such an egalitarianism, because they need the group’s knowledge. They’re nothing without their users they need in order to predict markets. 

I believe that over the course of the next two years or so, the exchange market will undergo a massive transformation. Although there are dozens of crypto exchanges today, there will be fewer than ten, in the not so distant future.

If you look at trader behavior, you’ll see that they have no emotional binding to a product. If tomorrow they see something that suggests more profit — and it provides a clear fact-based reason why it can propagate such a thing — they will at least give it a try. If it works, they will move on from their previous product of choice.

Keeping up to date with such a swiftly evolving market is paramount for trading. The day of a successful trader starts as soon as they open their eyes and ends when they close them to go to sleep. Beyond controlling your emotions and anticipating which exchange platforms will persist, there are also the fundamentals of trading to understand.

I am often asked which indicators traders should observe, and I always answer the same: don’t only look at one or two indicators, but rather at as many as possible in aggregate. Consider all types of data across different time horizons.

With that said, keeping an eye on social media can oftentimes give you a good sense of where the market is headed. For instance, you might keep an eye on how many times and in what context a particular asset — for example, bitcoin (BTC) — has been mentioned on social media. 

Listen to social media

Admittedly, it is not easy to track everything that happens on social media. But if you get the real grasp of what’s really happening there by aggregating indicators of multiple projects, you will see that social media has a massive effect on crypto prices — even more than a lot of other indicators.

It’s a highly reliable indicator. However, this won’t last forever. The larger the market, the less the impact social media has on prices. Currently, social media is one of the most interesting indicators.

People ask me what kind of bot they should create. I think, the simplest, most profitable bots would be the best option, listen to social media. If you aggregate this information, you can see how many times a specific cryptocurrency is mentioned within a certain timeframe such as one hour, 24 hours, etc. 

If you look into how markets behave based on social media indicators, you’ll apparently improve the accuracy of your bets. If you stick to the top five cryptocurrencies mentioned within the past hour, you can uncover profitable niches.

We see a lot of data analytics projects suggesting that they can exploit this, and they can indeed predict where prices will go thanks to social media indicators. In other words, you can easily profit from using algorithms listening to mentions and cataloguing aggregate volumes across social media, including Telegram.

Tracking social media metrics 

Social media mentions are such an important metric that audience intelligence company Pulsar examined mainstream adoption of crypto. It measured neither trade volume, nor market capitalizations, but social media mentions.

The company concluded that social media is a strong indicator of what’s to come in crypto: “In nearly every case, a rise of 10 per cent or more in social cryptocurrency buzz volume from one day to the next ‘predicts’ a rise of at least 5 per cent in the price of bitcoin within three days time.” 

On social media, people seem to follow “brand names” more than they follow terms such as “cryptocurrencies” and “digital assets,” wherein the most popular would be “bitcoin,” followed by “ethereum” and “ripple.”

Social media channels dominate information about cryptocurrencies. Facebook groups, crypto Twitter, and Reddit have helped those interested in cryptocurrencies learn about the technology. 

Other than social media, Google Trends is a powerful analytics tool when it comes to the fundamentals of the market. You can see how many people are thinking about bitcoin, ethereum or ripple at any given time. 

Many traders spend time on social media, pruning their Twitter, Facebook, and LinkedIn feeds. In particular, Twitter and Reddit allow users to customize their crypto information. If you’re careful about what you follow, you can gain a lot of valuable information from these sources such as price analyses and news. By following mentions, you can determine if people are bullish or bearish and adjust your positions accordingly. 

NOTE: The views expressed here are those of the author’s and do not necessarily represent or reflect the views of BeInCrypto.

Written by Thierry Gilgen, CEO of MachinaTrader. Thierry has highly infectious motivational energy in the trading industry. With years of experience in forming startups and understanding the hurt points of enterprises, he provides insights based on his experience. Starting from a garage path lifestyle and selling websites from home during his teenage years, his goal is to provide valuable insight to the finance industry and share his thoughts on how to build successful businesses.

Thierry Gilgen on LinkedIn

MachinaTrader on Twitter

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Source: https://beincrypto.com/uncomfortable-truths-of-trading-and-what-to-watch-out-for/

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Grayscale Bought Almost $140 Million in BTC in 24 Hours

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Betting Big on Bitcoin

Grayscale, the Bitcoin Trust custodian and digital asset manager, has added another $140 million worth of Bitcoin to their Bitcoin Trust portfolio within the last 24 hours.

Grayscale made the purchase of 7,188 Bitcoins in just one day. This confirms continued institutional interest surrounding their Bitcoin offering. When you look at Grayscale Bitcoin holdings over the last week and month, a similar pattern appears. In the last week, Grayscale added over 14,000 BTC. In the last month the company added a whopping 64,832 BTC worth collectively over $1.2 billion. Miners created only 27,881 BTC in all of November, or only half the Bitcoin Grayscale purchased during the month. It is apparent just how massive and influential Grayscale is as a cryptocurrency focused entity.

Painting A Bigger Picture

As a digital asset custodian primarily focused around Bitcoin, Grayscale makes these massive BTC purchases. Their clients continue requesting additional exposure. The picture becomes clearer when you add this alongside other major announcements. Hundred million dollar BTC acquisitions from public companies are just the beginning. There are now Wall Street regulated crypto indices, and the integration of cryptocurrency usage in globally dominant financial services like PayPal. You can start to see a bigger picture of what mainstream and institutional organizations think about Bitcoin long term. It will be interesting to see how Grayscale’s Bitcoin purchases for December compare to November as Bitcoin continues approaching its all time high.

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Harrison is a reporter and lead specialist at BeInCrypto based out of Tel Aviv, Israel. Harrison has been involved in the cryptocurrency space since late 2016 and is passionate about decentralized ledger technology and its potential.

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Source: https://beincrypto.com/grayscale-bought-almost-140-million-btc-in-24-hours/

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The OCC is Focused on “Not Killing” Bitcoin and Crypto says Acting Comptroller Brian Brooks

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The newly nominated Comptroller of the United States Office of the Comptroller of the Currency (OCC), Brian Brooks has affirmed that the agency is not planning any ban or to place any stringent regulation on Bitcoin and cryptocurrencies.

Brian Brooks, OCC, Bitcoin, Regulation, Crypto

The OCC Has Good Plans For Bitcoin

Asked by Melissa Lee on CNBC Squawk Box, the former Chief Legal Officer at Coinbase cryptocurrency exchange quelled rumors making the rounds about regulation or a ban on Bitcoin and cryptocurrencies. In response Brooks said;

“We’re very focused on getting this right. We are very focused on not killing this, and it is equally important that we develop the networks behind #bitcoin and other cryptos as it is we prevent money laundering and terrorism financing.”

Brooks noted that the position of the agency is to embrace a balanced approach so that both regulators and investors in the space will be carried along. The OCC boss also responded to a query seeking to know if more regulations covering the cryptospace will be rolled out by the end of the Trump administration. Brooks responded by saying that there is going to be a lot of positive news coming from the White House in the coming days and much of it will border around banking, blockchain, and digital currencies.

“So, believe me, there’s gonna be lots of positive messages coming out.”

The OCC’s Bullish Crypto Approach Taking Heat From Lawmakers

The freedom to develop that the Office of the Comptroller of the Currency is giving to cryptocurrencies, particularly Bitcoin and stablecoins, is not passing without a rebuff.

According to a Blockchain.news report back in November, some Democrat members of the United States Congress led by Congresswoman Rashida Tlaib (D-MI) criticized the Office of The Comptroller of the Currency (OCC) for having an “excessive focus” on cryptocurrencies and stablecoins, arguing crypto-related financial services move too far away from the core business of banking and finance.

Nonetheless, the OCC according to Brooks is aware of the risks associated with digital assets and is handling regulations in the space by being “honest” about that fact.

Image source: Shutterstock Source: https://Blockchain.News/news/the-occ-is-focused-on-not-killing-bitcoin-acting-comptroller-brian-brooks

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Kraken Exchange Now Allows Users to Stake ETH on Its Platform

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Kraken, the online cryptocurrency exchange, has announced that it has enabled the ability for its users to stake ETH via the new ETH 2.0 Beacon Chain directly on the exchange.

As far as major cryptocurrency exchanges go, Kraken appears to be one of the first to announce the opportunity for its users.

At press time, Kraken had recently enabled the staking ability, marking a major step in the continued growth of ETH 2.0.

A Win for the “Small” ETH Holder

Kraken will be allowing ETH users of all sizes to delegate their ETH for staking. With the launch of ETH 2.0 and the adoption of a Proof-of-Stake transaction verification methodology, only users with a minimum of 32 ETH would be able to run a node, thus allowing them to validate the network.

Currently, 32 ETH costs around $20,000, a hefty sum for the average crypto enthusiast. Kraken will enable users holding any amount of Ethereum to stake via the platform.

This will allow users to earn passive income on their holdings. Users will receive rewards ranging from 5% to 17% average percentage yield (APY) per year and will receive ETH rewards on a weekly basis.

Other Benefits

Another feature Kraken will be adding next week (although not for American or Canadian users) is the ability to trade staked ETH for unstaked ETH.

Once ETH is staked on the ETH 2.0 network, that ETH cannot be accessed or traded until the next phase of the project. However, Kraken will soon enable a special trading pair to circumvent this limitation:

“As a courtesy to clients who may wish to exchange their staked ETH for unstaked ETH, Kraken will provide a special trading pair for this purpose until the ability to unstake ETH is available on the Ethereum network.”

This will likely give users more freedom over their collateral compared with regular ETH 2.0 stakers who won’t be able to take advantage if they independently run an ETH node.

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Harrison is a reporter and lead specialist at BeInCrypto based out of Tel Aviv, Israel. Harrison has been involved in the cryptocurrency space since late 2016 and is passionate about decentralized ledger technology and its potential.

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Source: https://beincrypto.com/kraken-exchange-now-allows-users-to-stake-eth-on-its-platform/

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