16th September 2023 > > CBDCs & tokenisation.

tl;dr

Swift destroys its previously admirable reputation within the crypto community. Citibank joins the TradFi charge into adopting cryptos.

Market Snap

Market Wrap

Leveraged shorts are building once more, including the risk of a short squeeze higher, probably due to the well-known wall of selling pressure in the $26k-$28k price range. As mentioned yesterday, at these levels we will see selling pressure as recent speculative money moves from loss-making to break-even or better. This is the graph that should have accompanied that statement:

Curious Cryptos’ Commentary – Swift

Just recently we looked at how Swift is getting involved with cryptos and tokenisation, an initiative that gets plaudits from the CCC (https://www.curiouscryptos.com/post/1st-september-2023-tokenisation).

I am disappointed to have to bring some rather troubling news:

https://www.swift.com/news-events/press-releases/swift-advances-cbdc-innovation-interlinking-solution-begins-beta-testing#:~:text=Brussels%2C%2013%20September%2C%202023%20%E2%80%93,with%20the%20solution%20in%20a

According to this press release:

“Swift has entered a new phase of its breakthrough work on Central Bank Digital Currency (CBDC) interoperability, announcing that three central banks are beta testing its innovative solution for interlinking CBDCs …”

And who are these thieves of privacy, these illiberal folk who wish to control and coerce their own citizens?

One is HKMA (Hong Kong Monetary Authority), so no surprise there as China is probably the most advanced in implementing a CBDC. Another is the National Bank of Kazakhstan. Bordered by both Russia and China, the concept of personal freedoms and liberties is not so well-established in Kazakhstan as in some other nations.

The third central bank remains nameless, presumably out of shame.

I do wonder though just how successful this initiative could ever be without the involvement of CHF and USD, two of the most widely used currencies in the world, especially in the finance industry.

Putting that to one side, Swift has gone from hero to zero in just two weeks.

Curious Cryptos’ Commentary – Crypto adoption

Yesterday, Deutsche Bank. Today, Citibank.

Over the next couple of years you are going to hear a lot more about tokenisation of assets – the democratisation of investment opportunities. By tokenising assets, the minimum amount required to invest in any particular asset can be reduced to as low a number as you wish. Those assets can be liquid securities such as stocks, or illiquid ones that traditionally require high capital investment such as real estate.

HSBC wrote in a research report that:

“Investors can benefit from a wider range of asset choices due to increased affordability, facilitating portfolio diversification, while sellers would benefit from their assets having greater liquidity.”

Tokenisation cannot happen without DLT (distributed ledger technology – the blockchain) which has the added advantages of reducing transaction costs to fractions of a penny, removing all potential reconciliation issues, providing immediate verifiable proof of ownership, and almost instantaneous transactions.

The investment world stands on the brink of its most dramatic transformation.

…

BondbloX is an early mover in the world of tokenisation, focussing on the bond markets:

https://bondblox.com/

Some bonds are issued specifically for the retail market, which is strong in France, Italy, and Germany, but virtually unknown in the UK, and some bonds specifically for institutional investors. The latter have larger denominations, are more liquid, and generally provide better returns. In short, compliant retail investors have long lost out. BondbloX fixes that problem.

Citibank has announced that they are in partnership with BondbloX to provide custodial services and will offer the BondbloX platform to its client base. Matthew Bax, Global Head of Custody at Citibank explains:

“Today’s announcement demonstrates our commitment to investing in the future of digital financial market infrastructure (FMI) by building products and services to support the current and future needs of our clients… We are committed to partnering with BondbloX on their journey to transform and simplify bond trading and investing.”

Estimates for the tokenisation world are in the tens of trillions of dollars within a relatively short period of time.

Crypto adoption, right here, right now, being driven by some of the biggest, most influential TradFi firms.