Zurich Based Sygnum Becomes First Bank to Tokenize its Shares on Ethereum

Sygnum, a Zurich-based digital currency bank, has tokenized its shares according to a recent announcement on the company’s blog post. The bank touts itself as the first of its kind to tokenize shares on a distributed ledger, hence forging a path for the future of public offerings. These shares have been tokenized on the Ethereum blockchain via Sygnum’s tokenization platform dubbed ‘Desygnate.’

This means that Sygnum’s shares can now be accounted for via a blockchain ecosystem, including the associated legal rights and obligations. The blog reads,

“Put simply; this means that digital representations of Sygnum shares, together with associated legal rights and obligations, have been created and are immutably accounted for on a distributed ledger.”

With tokenization in the picture, Sygnum’s share registry will be updated automatically any time there is a capital injection transfer. According to Sygnum, this approach minimizes the counter-party risk attributed to settlements, given the bank will be using distributed ledger tech to manage both primary and secondary market transactions.

This initiative will also eliminate the administrative burden of written share transfer requests embedded in the current market structures. Sygnum Bank co-founder, Mathias Imbach, commented on the underlying value proposition in share tokenization,

“This is an important milestone towards fulfilling our mission of creating more direct and efficient access to ownership and value. This includes new engagement models with our clients and partners, and ultimately providing liquidity for our trusted shareholders.”

In the future, Sygnum plans to list its shares in Switzerland and Singapore via SIX Digital exchange and SBI digital Asset Holdings for the latter market. As reported by BEG, SIX recently completed a CBDC pilot test in collaboration with the Bank of International Settlements (BIS) and the Swiss National Bank (SNB).

It comes as no surprise that Sygnum is already eyeing a public offering in this marketplace. SIX Digital Exchange Head, Tim Grant, said that they are looking forward to the partnership,

“We are excited to partner with Sygnum on this journey and hope to facilitate a successful dual listing across Switzerland and Singapore in the future.”

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Author: Edwin Munyui

Former PBoC Governor: China Doesn’t Have ‘An Ambition to Replace Existing Currencies’

China’s former head of the central bank said digital yuan could be useful for cross-border trade and support its efforts to promote yuan as an international currency.

Zhou Xiaochuan, who stepped down as governor of the PBOC in 2018, spoke at the Shanghai Financial Forum on Friday. According to him, digital currency allows payments and currency conversions in real-time and “brings new possibilities for interconnection.”

“If you are willing to use it, the yuan can be used for trade and investment,” said Zhou, who has been a leading advocate for China’s sovereign digital currency. He also noted that the digital yuan isn’t intended to replace globally accepted fiat currencies like the US dollar.

“We are not like Libra and we don’t have an ambition to replace existing currencies.”

China has learned a lesson from Diem and took a more cautious approach. The idea is to persuade consumers and merchants to accept digital yuan payments as it quickly resolves “the problem of cross-border remittances.” He said.

“Some countries are worried about the internationalisation of yuan.”

“We can’t push them on sensitive issues and we can’t impose our will. We must avoid the perception of great power chauvinism.”

China is preparing for cross-border testing of digital yuan in partnership with Hong Kong. Additionally, over $3 million in digital yuan was airdropped to 10k residents of Suzhou on Friday. Trials are being run in other cities, including Chengdu, the Xiong’an New Area, and Hong Kong, in collaboration with companies like Didi Chuxing, Meituan, and Bilibili.

Central Banks Divided on Private Sector’s Role

According to a survey by the Official Monetary and Financial Institutions Forum (OMFIF), more than half of the central banks surveyed expect countries to collaborate with the private sector to build and run payments systems.

The central banking and economic policy forum found that central banks are split over whether to work with private sectors in payments as three-quarters of the banks said it was the state’s job to govern such systems.

The survey by the think tank involved 20 central banks and regulators in advanced and developing economies. Bhavin Patel, OMFIF’s head of fintech, said,

“It’s up to the central banks to balance how they approach collaboration – whether it’s setting joint projects together … or if it’s more just making sure that what comes to the market is properly regulated.”

The report was produced with fintech firms that include PayPal, Citigroup, Mastercard, and Novi, the digital wallet division of Facebook. Patel said,

“Regulators need to keep pace with these innovations. New, non-traditional payment entities will emerge as systemically important components of the financial system. Proactive central banks and regulators, keen to harness the benefits of payments innovation without undue policy risks, engage more with industry.”

Demand for more efficient payments is growing, a trend that has accelerated during the coronavirus lockdowns but regulators fear that the wide use of private currencies could lower their control over monetary policy. Just last week, German Finance Minister Olaf Scholz said,

“We must do everything possible to make sure the currency monopoly remains in the hands of states.”

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Author: AnTy

Swedish Government Launches Exploration Into Digital Krona

The Swedish government was one of the first in Europe to explore a possible Central Bank Digital Currency (CBDC). It has now moved into an exploratory phase, with a panel studying the potential benefits and consequences of digitizing its currency.

Ready to Roll

On Friday, Blomberg reported that the Swedish government had launched a formal review of a possible e-krona. The review will explore the feasibility of moving its currency into the digital standard, utilizing its current digital payments infrastructure.

The Nordic country has one of the world’s most advanced cashless payment systems, and many believe that transitioning into a full-fledged CBDC won’t take as much effort as others. The initiative will be led by Anna Kinberg Batra, a former chairwoman of the Riksbank’s finance committee.

Per Bolund, Sweden’s financial markets minister revealed that the government expects to complete the review by the end of November 2022.

Bolund emphasized the need to ensure that the country’s digital payments infrastructure functions safely and inclusively. He added that depending on the technology’s design and utilization, it could have substantial consequences for its financial system.

The Question of Time

When it comes to CBDCs, most countries are in the exploratory phase. The European Union has confirmed that plans will explore a possible digital Euro soon, with the region looking to bolster digital payments and improve its overall economy.

However, even that effort still seems to be a long shot. The European Central Bank (ECB) believes its exploratory efforts would yield results in 2021, and it will begin drafting the module for the digital Euro then.

Experts from several European banks believe proof of concept for the digital Euro could arrive in the next half-decade. The panel, titled “Upgrading Money to the Digital Age: Introducing Digital Euro,” saw everyone agree that the most pressing task will be getting everyone on board with the specifics of the digital Euro. With that in mind, implementation could take years on its own.

Austėja Šostakaitė of the European Central Bank pointed out that the bank won’t even decide on whether to pursue the digital Euro until the middle of 2021. For her, the primary issue will be introducing the asset into the European financial ecosystem and ensuring that it collaborates effectively with bank money.

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Author: Jimmy Aki

Southeast Asia’s Biggest Bank, DBS, Launches Digital Exchange for Institutions

Southeast Asia’s biggest bank, DBS Group Holdings, is ready to launch an exchange for cryptocurrencies that will provide trading, custody, and tokenization services to institutional and accredited investors.

The Singapore exchange will have a 10% stake in the DBS’s digital exchange.

The Monetary Authority of Singapore has given in-principle approval to the new exchange to trade assets from bonds, shares, and private-equity funds, the bank said. DBS Chief Executive Piyush Gupta said,

“I believe that the time is right for this (digital assets) industry to increasingly find partnership and sponsorship from the formal banking sector.”

“There are thousands of different coins today being traded on different exchanges, and increasingly you are beginning to find that they are forming an important part of the asset allocation of wealth and private investors.”

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In Nov. 2017, David Gledhill, chief information officer at DBS, called Bitcoin “a Ponzi scheme.”

The exchange initially supports trading of Bitcoin (BTC), Ethereum (ETH), XRP, Bitcoin Cash (BCH) against four fiat currencies: SGD, USD, HKD, and JPY. These four crypto assets account for 70% to 80% of global crypto trading volume, said the bank adding, the trading activity on the exchange would start next week.

The DBS Digital Exchange will also be using blockchain technology to provide a fundraising platform through tokenization, said the bank in a statement. Tokenization involves converting the rights to an underlying asset such as shares of an unlisted company and private equity funds into digital form, which is then eligible for trading. Gupta said,

“We are on the cusp of a massive tokenization and therefore you’ll find tokenization of all kinds of assets around the world and I think more and more exchanges will start dealing with tokenized assets.”

Earlier this week, Standard Chartered also said it would start a crypto custodian for institutional investors in partnership with Northern Trust Corp. The bank has a substantial presence in Singapore.

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Author: AnTy

Veteran German Bank to Launch Crypto Fund Featuring BTC, ETH & XLM in 2021

Veteran German Bank Hauck & Aufhäuser is set to launch a crypto fund in 2021 as the demand for crypto assets increases. This bank, which dates back to 1796, will feature Bitcoin (BTC), Ethereum (ETH), and Stellar (XLM) in its upcoming crypto fund. The products will be facilitated by the bank’s recently licensed digital asset fund dubbed Hauck & Aufhäuser Innovative Capital (HAIC).

This initiative mostly targets institutional investors and high net worth individuals who can fork a minimum of €200,000 ($242,500) towards investing in the fund. As for the charges, the bank will impose a 2.05% investment fee, the industry average. Notably, investors will be flexible to invest and divest their funds from the Hauck & Aufhäuser at any time.

To roll out this crypto service, the bank has partnered with a Berlin domiciled Fintech firm by Kapilendo. This entity will be tasked with the storage of HAIC’s crypto fund and is expected to provide a secure ecosystem where user funds will be SAFU.

Increasing Demand for Crypto Products

The move by Hauck & Aufhäuser comes as no surprise given the spike in crypto interest, especially by institutional investors. In September, the bank’s board chairman, Michael Bentlage, noted an increased interest in crypto as they sorted a BaFin license for HAIC. His sentiments have since been reiterated by another board member Holger Sepp who expressed optimism in the crypto fund milestone,

“We see that digital assets and cryptocurrencies are becoming increasingly attractive to institutional investors.”

Hauck & Aufhäuser crypto allocation model will be based on metrics such as the current market capitalization, liquidity, and qualitative stats. Sepp went on to highlight that the fund will open up more opportunities for the bank’s clients to access crypto investments,

“With the launch of our first crypto-fund, we have created an innovative investment vehicle together with Kapilendo, which provides our customers with a cost-effective and secure access to the novel crypto asset class.”

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Author: Edwin Munyui

BIS Wholesale CBDC Proof-of-Concept in Collaboration with SNB and SIX was A Success

The Bank of International Settlements (BIS), Swiss National Bank (SNB), and SIX Digital Exchange has completed a wholesale CBDC proof-of-concept (PoC), which tested the integration of a CBDC with tokenized assets and the feasibility of linking existing payment networks with Digital Ledgers (DLTs).

As earlier reported by BEG, the SNB and BIS were planning to launch a PoC CBDC by the end of 2020; it seems the duo is on track given the latest updates. Dubbed project ‘Helvetia,’ this initiative tested the technical and legal feasibility of integrating digital assets via a CBDC or linking current networks with DLT ecosystems. The press release reads,

“Project Helvetia shows the feasibility of two proofs of concept (PoCs), using “near-live’ systems to settle digital assets on a distributed ledger with central bank money … The collaboration sets the stage for further joint experimentation to assess the impact of digital innovation on the future of the financial system.”

Switzerland, which has long been an international financial hub, is looking to capitalize on the benefits of DLTs to further increase its attractiveness as a haven. SNB’s governing board member, Andréa M Maechler, noted that the SNB is prepared to embrace DLT if this means a better financial ecosystem,

“Irrespective of which technologies the financial markets adopt next, the safety and reliability of Swiss financial infrastructure must be preserved. If DLT can deliver significant improvements in securities trading and settlement, then the SNB will be prepared.”

Pros and Cons for both PoCs

Following the PoC tests, this initiative revealed that both a wholesale CBDC or linking existing payments with DLTs come with pros and cons. The former provides a seamless avenue for settling digital assets but is likely to raise significant governance and policy challenges. As for the integration approach, policy implications are minimal, although stakeholders would have to forego the perks of fully integrating with DLT networks.

Nonetheless, this milestone set the stage for further practical CBDC research according to the head of BIS Innovation Hub (BISIH), Benoît Cœuré,

“If wholesale CBDCs are to fulfill their potential as a new means of settlement, their design and implications deserve close study and consideration. This is only possible via continued deliberations and experimentations among central banks and with other stakeholders, such as market supervisors and the private sector.”

The press release was keen to point out that this innovation is only a PoC test and should be interpreted that the SNB will issue a wholesale CBDC or facilitate exchange clearing through DLT. Meanwhile, other jurisdictions, including Canada, have recently signaled a keener interest in the CBDC developments to hedge for a virtual monetary future.

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Author: Edwin Munyui

PBOC Planning Technical Pilot Testing of Digital Renminbi (e-CNY) for Cross-Border Payments

The central bank of China and Hong Kong Monetary Authority is now discussing the technical pilot testing of digital renminbi for cross-border payments, said HKMA on Friday. The launch date for e-CNY hasn’t been set yet.

Sharing the recent development in the cross-border payment area, Eddie Yue, the chief executive of Hong Kong’s central banking institution wrote,

“The HKMA and the Digital Currency Institute of People’s Bank of China are discussing the technical pilot testing of using e-CNY, the digital renminbi issued by the PBOC, for making cross-border payments, and are making the corresponding technical preparations.”

He further notes that with renminbi already in use in Hong Kong and e-CNY being the same as cash in circulation, “it will bring even greater convenience to Hong Kong and Mainland tourists.”

This development was shared in HKMA’s article on “A New Trend for Fintech – Cross-border Payment,” where it talks about the share of e-payment in Hong Kong being one of the highest among the world’s developed economies.

While the domestic payment service has become highly digitized, development in cross-border payments is lagging behind globally.

For this, HKMA launched a joint research project with the Bank of Thailand last year to address the various cross-border payment issues by using central bank digital currencies (CBDC) and a blockchain platform. Yue noted,

“The research project has entered its second stage, including exploring specific business applications as well as the operability and scalability of the platform to allow the participation of three or more CBDCs.”

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Author: AnTy

ECB Experts Maintain a Cautious Approach to Digital Euro Development

The European Central Bank (ECB) has been talking a big game about its forthcoming digital euro, particularly considering its functionality.

However, the agency remains resolute in its stance that it shouldn’t rush an asset and instead move with caution.

Synergy is Required for Optimal CBDC Performance

Earlier this week, several experts from the ECB agreed that a cautious approach would be the best way forward considering the digital euro.

In a panel tagged “Upgrading Money to the Digital Age: Introducing Digital Euro,” participants argued that the primary goal would be to form a consensus on the digital euro and the form it should take.

In the panel, Austėja Šostakaitė, a Market Infrastructure Expert at the ECB and a former Senior Economist at the Bank of Lithuania, explained that the ECB would not be considering a digital euro until the middle of 2011. She wants the ECB to focus on solving the most critical questions on introducing the asset into the European financial ecosystem and how to collaborate it with commercial bank money.

Carl Andreas Claussen, an advisor to the Swedish Riksbank, also explained that the Riksbank is currently working on a proof-of-concept for the e-krona. However, he highlighted that a launch for the asset is “four to five years away.” Claussen highlighted,

“There are some legal questions and this is such a big issue that we cannot decide on this. We need some political backing. We suggested to the parliament that they should have an expert committee looking at this.”

Top ECB Brass in On Board

All opinions appear to be in line with the official stance of the ECB. While it first announced its digital euro in September, the agency has made it clear that it wouldn’t be rushing development for the asset. In an online panel from November 12, Christine Lagarde, the agency’s President, explained that it had chosen to focus on the proper implementation.

Lagarde pointed out that the ECB had set a consultation panel to explore the potential of a CBDC. She added that the panel would give a consultation report by January 2021. This report will help the bank make decisions on whether to launch – and what course to follow. While Lagarde highlighted that she believed a digital euro would come to light, she also understood that everyone needed to agree on the right implementation format.

The President has been an ardent supporter of Central Bank Digital Currencies (CBDCs) for a while. Earlier this week, she explained in an article that the digital euro would help bring the Eurozone into the digital financial age.

Lagarde added that the digital euro could complement cash and ensure seamless access to central bank money. It would surely ensure the maintenance of monetary sovereignty – especially in a future where the use of physical cash declines.

Reuters also reported last week that Olaf Scholz, the German Finance Minister, had called on the ECB to expedite the asset’s development. Scholz, an ardent critic of private cryptocurrencies, explained that there is already significant demand for digital payments across the European Union. As he believes, it is time for the ECB to move swiftly towards developing its CBDC.

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Author: Jimmy Aki

World’s 4th Largest Bank Drops the $3B Bond Tradeable Against USD & BTC Amid Fintech Backlash

China’s Construction Bank (CCB) has withdrawn the listing of its $3 billion bond on the Malaysian cryptocurrency exchange. The bonds were to be issued by Longbond Ltd, which was to be created specifically to issue digital bonds.

The bond, which was to be tradable on the FUSANG exchange, a crypto trading platform, had CCB Lauban as its listing sponsor.

The day the bond was to be traded, the Labuan-based exchange received a letter from CCB informing them that the world’s second-largest lender “decided not to proceed” with the issuance. The reason for the suspension wasn’t given, said Henry Chong, chief executive of FUSANG. Fusang said in the statement on Monday,

“The exchange has accepted this decision, and is announcing the suspension of the listing with immediate effect.”

This month, Ant Group met with troubles with its record-breaking IPO, just 48 hours before it was to be listed.

According to South China Morning Post, with China’s central bank rolling out its own digital yuan, “CCB’s digital bonds, which can be bought and traded using US dollars or bitcoin, appear to undermine efforts to safeguard its currency sovereignty.”

SCMP is owned by the Chinese Alibaba Group, founded by Jack Ma, who is also the controlling shareholder of Ant Group. Jacky Zuo, an analyst at Hong Kong-based China Renaissance, said,

“If a retail investor could use bitcoin or other cryptocurrencies to trade such digital bonds backed by a Chinese bank, there may not be a welcoming stance from the policymakers’ perspective.”

“This could be seen as challenging the digital yuan.”

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Author: AnTy

US Regulator OCC Proposes ‘Fair Access’ to Banking Services For All Including Crypto Companies

The Office of the Comptroller of the Currency (OCC), the US’s national bank regulator, has proposed a rule that would forbid banks from providing their services to legal industries, including cryptocurrency companies.

As per the proposed rule, led by former Coinbase counsel Brian Brooks, fair access is promoted under which financial services could be denied by banks to customers only on the basis of “quantitative, risk-based standards established in advance.”

They can’t do so due to political pressures, to prevent the customer from entering or competing in a market or to benefit another person or business activity.

Published on Friday, the proposal does not explicitly mention cryptocurrency but is surely welcoming news for the industry, which has been time and again denied the services by the banks.

The proposal does mention Operation Choke Point, an initiative taken by the Justice Department under the Barack Obama presidency that reportedly aimed to shut down the fraudulent businesses and lenders.

It further reads that it has been revealed that the government agencies have pressured banks to sever their financial services access to “disfavored (but not unlawful) sectors of the economy.”

But neither OCC nor banks are well-equipped to balance these risks that are unrelated to the financial exposure, it said.

Marco Santori on US OCC
Source: @MSantoriESQ

“Fair access to financial services, credit, and capital are essential to our economy,” said Acting Comptroller of the Currency Brian P. Brooks.

“This proposed rule would ensure that banks meet their responsibility to provide their services fairly since they enjoy special privilege and powers because if the system fails to provide fairness to all, it cannot be a source of strength for any.”

The proposal is open for public comments until January 4, 2021.

This week, President Donald Trump nominated the acting Comptroller Brooks as the permanent head of the OCC, a five-year stint.

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Author: AnTy