Region by region, what is important to know right now in the moving world of digital assets, crypto, web3, blockchain...
1. Crypto platforms merge to create new regulated Canadian player
A new crypto heavyweight is born. And this time, it is Canadian. With the announcement of their merger, WonderFi Technologies Inc, Coinsquare Ltd and CoinSmart Financial Inc have created Canada's largest regulated crypto asset exchange platform. Together, they gather over 1.65 million registered users and $600 million in assets on deposit.
“What we will deliver with the combination of both Coinsquare and CoinSmart is a unique platform where users will trade, earn and pay with crypto, invest in equities, and soon, place wagers all in one compliant ecosystem,” WonderFi president and interim CEO Dean Skurka shared.
What can we expect from this new merged company? A diverse range of products and services, such as retail and institutional crypto-currency trading, staking products, business-to-business crypto-currency payment processing, sports betting, gaming... But the offering is expected to expand to attract more customers.
Upon completion of the deal, WonderFi shareholders will own approximately 38% of the combined company, Coinsquare shareholders will own around 43% and CoinSmart shareholders more or less 19%. The deal should be closed by the end of the second quarter and the new company is not expected to change its name to a single banner anytime soon.
This move marks a new consolidation of the Canadian crypto market. The merger will bring under the same hood four of Canada’s eleven registered crypto trading platforms — Coinsquare, CoinSmart, and WonderFi-owned Bitbuy and Coinberry. Interestingly, it comes just after an aborted deal between Coinsquare and CoinSmart, following which WonderFi saw the opportunity to act as a bridge.
“Canada has been pretty forward with their regulatory approach,” added Skurka in an interview with BetaKit. “On the back of that, significant costs and obligations arrive and really, without scale, it can be hard for some of the smaller platforms to really sustain their business models, [and] certainly not in environments like we’ve seen [recently].”
2. Tokenized securities market could reach $4 trillion by 2030
Asset tokenization is the process of converting ownership of a tangible or intangible asset, such as real estate, bonds, or debt, into a digital form. We talked lengthily in one of our last thought leadership. Most tangible and intangible assets could be tokenized such as stocks, bonds, art, painting, classic cars, collectibles, real estate, etc. and this process allows assets to be split into multiple tokens or parts. Tokenization makes investing more accessible for investors and also helps provide more liquidity to some low liquidity markets such as real estate and art.
Though current estimates put tokenized assets at a marginal market share of less than 0.1% in annual issuance, according to Citi, the market for tokenized assets could grow more than 80-fold to a value of $4 trillion by 2030. The key drivers for growth would be increased adoption of DLT technologies worldwide along with increase in the number of use cases.
DLT technologies enable transparency, enhance trust and increase security and thus could be used in a number of scenarios such as real estate escrow, insurance, supply chains, etc and Citi predicts these use cases along with other factors such as central bank adoption of CBDC’s which could increase DLT users to 2-4 billion by 2030 and gamers who are expected to use Web3 technologies and tokens, will result in mass adoption and growth in the value of assets tokenized.
In keeping with this trend, HGC Technologies Inc, a freight SaaS provider in China has partnered with INX Digital Company Inc to launch the first of its kind Trucpal token which will facilitate the first security token dividend distribution using blockchain technology. Blockchain’s allow for transparency, immutability and thus help provide more value for investors by reducing operating costs.
As per the article, “The Trucpal Token was offered pursuant to Reg D and Reg S exemptions in accordance with U.S. securities regulations and is based on actual freight transactions backed by HGC.”
3. CBDC Transactions to Exceed $213 Billion by 2030
A recent study published by Juniper research found that the value of payments via CBDCs (Central Bank Digital Currencies) will reach $213 billion annually by 2030; up from just $100 million in 2023 (a 260,000% growth in this period).
The key factors for this growth are attributed to the growing number of central banks and sovereigns who are researching CBDC’s (114 countries, representing over 95 percent of global GDP, are exploring a CBDC) and the high level of smartphone penetration worldwide (According to Statista, in 2023, the current number of smartphone users in the world today is 6.92 billion, meaning 86.29% of the world’s population owns a smartphone).
A CBDC is a central bank backed, digital form of the country’s fiat currency and could be used to increase financial inclusion especially in emerging economies where there is still a huge population of unbanked or underbanked as “CBDCs will improve access to digital payments, particularly in emerging economies; where mobile penetration is significantly higher than banking penetration.” according to the report by Juniper.
The research also found that most or over 90% of the payment volumes would be domestic as the central bank's primary goal would be to improve domestic payment challenges, while gradually improving and adding cross border and other capabilities. The main limiting factor currently identified was lack of commercialized platforms for central banks to easily launch CBDC’s but as there are a rising number of these software providers, deployment could be easier in the future driving growth and adoption.
4. The Universal Monetary Unit is born
The Digital Currency Monetary Authority (DCMA), the world leader in the advocacy of digital currency and monetary policy innovations for governments and central banks, announced the launch of an international central bank digital currency (CBDC) called Universal Monetary Unit (UMU): https://umu.cash/
Simply put, its innovative approach could transform foreign exchange transactions, risk-sharing, and financial contracting on a global scale.
Designed as a best-in-class CBDC (i.e., it exhibits features that makes it a multi-ledger, multi-currency settlements, and multi-gateway payments currency), the UMU aims, according to the DCMA, to strengthen the monetary sovereignty of participating central banks and adhere to the IMF's recent crypto asset policy recommendations.
The UMU would be an international CBDC that cannot become legal tender or settlement currency in domestic or international trade and can only be used as a payment currency.
As UMU’s white paper states (read it here: https://lnkd.in/eKgreyNP), each participant country can be considered a vertical market, and the DCMA as a horizontal market, providing a money commodity, the UMU.
Therefore, it works as a digital economic union. Imagine a CBDC network in which a monetary commodity, such as UMU, is traded as a single asset and not traded in financial markets as a currency pair against other currencies.
The DCMA states that its design addresses crypto assets potential risk factors previously brought forward by the IMF. Hence, the UMU should respond successfully to macroeconomic, financial stability, financial integrity, legal, consumer protection, and market integrity and contestability risks and issues present with other crypto assets.
Quite crucial is its potential impact on cross-border payments. By attaching SWIFT codes and bank accounts to a UMU digital currency wallet, banks can carry out SWIFT-like cross-border payments over digital currency rails, bypassing the correspondent banking system while enjoying the best-priced wholesale FX rates and instantaneous real-time settlement. And by supporting central banking and regulated financial institutions, UMU represents a paradigm shift in the way cross-border payments are transacted, addressing the existing slow, expensive, and risky nature of such payments.
However, there are potential challenges and drawbacks to consider. UMU's adoption and success will depend on widespread acceptance and understanding of its benefits. Furthermore, as with any new technology, UMU may face regulatory hurdles and skepticism from traditional financial institutions resistant to change.
That being said, the UMU's positive aspects are significant. By providing economic and financial stability to IMF member states, UMU could become a game-changer in cross-border payments and mitigate seasonal and systemic local currency depreciation.
5. UK government cancels plans to launch NFT
Last year, the UK government announced that it was planning to launch an NFT. The announcement was originally proposed by current Prime Minister Rishi Sunak as part of a plan to make the UK a global hub for crypto-assets. Following up on an announcement made later in the year, the UK Treasury canceled plans to launch an NFT with the Royal Mint. Although it is not launching an NFT at this time, the UK is keeping the proposal under review.
Tulip Siddiq, a member of the UK parliament, has welcomed the decision, mentioning that the “government should be focused on the cost of living crisis, not wasting time and taxpayers’ money on an NFT vanity project and promoting dodgy stablecoins.” It's worth noting that shortly after the April 2022 announcement by the UK government, there was a lot of turbulence that impacted the crypto-currency industry, including the failure of Terra's stablecoin, and the bankruptcy filings of FTX, Celsius, Voyager and Genesis. With all this turmoil, it is understandable that the Treasury may be hesitant to move forward with its plan to launch an NFT.
6. Argentinian Airline Issues Every Ticket as an NFT
Argentine airline, Flybondi, will begin offering airline tickets as NFTs, and it will do so by expanding its current partnership with the ticket company TravelX. This new integration, which is called Ticket 3.0, will allow for the creation of tickets as NFTs by leveraging the Algorand blockchain. By issuing airline tickets as NFTs, Flybondi will allow passengers to change their names, transfer and sell their tickets independently. Thus, by providing a more flexible experience for passengers, Flybondi aims to reduce customer service costs and increase its revenue from trading fees.
In the search of revolutionizing the airline industry, TravelX has also made its infrastructure available to other airlines companies through its TravelX API. According to the company, there are many use cases in the airlines for NFT tickets. This news shows that companies outside the art industry, where NFTs were originally introduced, are interested in the benefits of this technology, such as authenticity, verifiability, transferability and ownership, among others, in order to improve their current processes and provide a more flexible customer experience. This interest in NFT goes hand in hand with BlockZero's thought leadership “NFTs: beyond fine arts”.
How does it work? In the case of Ticket 3.0, the process is pretty straightforward. First, the customer buys a ticket on the company's website using a credit card. Then, he will receive two emails, one for confirmation and the other for the activation of the ticket, which will be done through a link dedicated to this purpose. The customer will have to create an account that will be associated with an Algorand address. It is on this platform that the customer will be able to modify or transfer his tickets. It is important to mention that from the point of view of use there is no blockchain, Algorand or metamask, everything is done on the platform of Flybondi where the user has access through the link sent by email. This was done intentionally by the company to offer an experience with the least amount of friction possible. Tickets can be transferred in a few minutes, however there may be delays depending on the regulations of other countries.
MIDDLE EAST AND AFRICA
7. Nigerian government and the Central Bank are pushing adoption of e-Naira
After a rocky launch during which e-Naira didn’t see much of a demand, the CBDC of Nigeria seems to be finally on a rising adoption trend with four million wallets created recently for disbursing social intervention payments and the value of eNaira transactions increasing by 68% since the beginning of 2023.
The Central Bank of Nigeria (CBN) said the e-Naira currently has 13 million electronic wallets with the value of e-naira transactions reaching almost N22 billion (USD 48 million). Over N10 billion (USD 22 million) of e-Naira has been minted, and then about N3.4 billion (USD 7.4 million) of it is currently in circulation.
The recent demonetization policy adopted by the Nigerian government has led to a drop in the cash in circulation. The currency in circulation in Africa’s largest economy has dropped to 1 trillion Naira from 3.2 trillion Naira in September 2022. This may also help in contributing to an increase in CBDC adoption.
Nevertheless, there is still place for improvement in the digital infrastructure. Last month, Nigerian native Adesoji Solanke, a director at Renaissance Capital, said:
“They want to put it out there to get people to use it, but people don’t have enough places to use it. The challenge is that the wallet requires you to have a smartphone and use the internet, but think of the people you’re trying to send money to, they’re relatively poor, right? So the cost of the smartphone, the cost of the internet, these are just some of the hindrances to get some of these things up and running.”
Time may definitely let us know if the schemes taken by the Central Bank and the Nigerian government will help increase adoption sustainably.
8. India is progressing on its CBDC pilot and is exploring offline payment functionality
E-rupee, India’s CBDC worth over USD 16 million (or Rs 130 crore), is in circulation on a pilot basis in the wholesale (97%) and retail (3%) segments as on December 1, 2022 with nine participating banks (State Bank of India, Bank of Baroda, Union Bank of India, HDFC Bank, ICICI Bank, Kotak Mahindra Bank, Yes Bank, IDFC First Bank and HSBC).
Moreover, the Reserve Bank of India (RBI), India’s Central Bank, is working to enable offline payments with the CBDC. RBI’s initiative will give access to digital payments even when there is no network, providing support for offline retail payments in India. This solution is expected to open up the customer base and regions for adoption of cashless digital payments.
The RBI is also gauging the CBDC’s potential for cross-border transactions and linkage with legacy systems in other countries. Moreover, speaking on behalf of the RBI, Ajay Kumar Choudhary, executive director of the RBI, said the CBDC would soon become the medium of exchange and fulfill the needs of physical currency features, including anonymity. He further mentioned that the CBDC would eventually act as a replacement for cryptocurrencies.
Even if some doubts remain about the future, adoption and privacy of this digital rupee, the fact is that two of the largest economies in the world, India and China, have been leading on a global scale in pioneering the payments space. With both of them clear with their path ahead on CBDC, will other nations also follow suit in launching CBDCs?