What happened this week around blockchain and cryptocurrencies? The most relevant local and international events as well as appealing background reports in a pointed and compact weekly review.
Selected articles of the week:
Stablecoins pegged to the US dollar have become a crucial part of the emerging cryptocurrency ecosystem. They serve as the primary currency on centralized exchanges and as an alternative to the dollar on decentralized trading platforms. Alongside Tether (USDT) and USD Coin (USDC), Binance USD (BUSD) ranks third among all stablecoins by market capitalization. The digital asset was launched in 2019 through a partnership between Paxos and Binance. The regulated Paxos Trust Co. acts as the sole issuer of the stablecoin under a branding license from the largest crypto exchange, which has been using BUSD as its primary base currency for some time. However, this controversial business relationship is disliked by local regulatory authorities, as Binance operates without headquarters and an opaque past. As a result, the New York State Department of Financial Services (NYDFS) has demanded that Paxos cease the issuance of the stablecoin.
The digitization of payment transactions has revolutionized the processing of transactions, making cross-border money transfers easier, faster, and more secure. Blockchain technology plays an important role in this by enabling decentralized, tamper-proof transactions that do not require an intermediary. Additionally, the creation of “smart contracts” allows for the automation of complex financial agreements. However, the majority of blockchain and fintech applications in use today are in the hands of private companies. This delegation of power to the private sector has led to concerns among various central banks regarding the security and stability of the financial system. A response is reflected in the acceleration of any projects related to central bank digital currencies (CBDCs) – digital currencies issued and regulated directly by the central bank. A detailed analysis of the advanced CBDC efforts of today’s world powers.
Since the creation of the legal basis for digital securities, blockchain-based bonds can be digitally issued and traded in Switzerland since February 2021. Unlike their traditional counterparts, digital bonds are programmed as blockchain software (smart contracts). This allows for more efficient issuance, seamless trading, as well as transparent and automated management of bond payments. At the beginning of the year, Lugano made pioneering efforts in this area. In collaboration with stablecoin issuer Tether and the Zürcher Kantonalbank (ZKB) as Sole Lead Manager, the Ticino city sold digital bonds worth CHF 15 million to qualified investors. Almost a month later, the Swiss National Bank (SNB) recognized blockchain securities as collateral for repurchase agreements (repos). A significant milestone for the Swiss blockchain ecosystem.
Non-fungible tokens (NFTs) are digital assets that use blockchain technology to certify ownership and authenticity. Unlike traditional cryptocurrencies, which are interchangeable and have no distinctive features, NFTs are unique items such as artworks, music pieces, or videos. This type of token can be bought, sold, and traded like physical collectibles. NFTs contain a unique identifier stored on a blockchain, providing a permanent and transparent proof of ownership that cannot be duplicated or altered. For larger brand names, NFTs offer a new and exciting way to engage with their audience, showcase their creativity, and tap into a new market of investors. The list of companies involved now extends beyond Coca Cola, Porsche, Nike, and Prada.
In addition: The interest in Swiss blockchain companies seems to remain strong in the traditional financial world, despite the crypto winter. The Geneva-based crypto startup Taurus has raised $65 million in a Series B funding round led by Credit Suisse and with the participation of Deutsche Bank. The banking giants aim to position themselves clearly in the emerging ecosystem for digital assets and expand their offering for blockchain-savvy customers.