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USDC ranked as strongest stablecoin by S&P Global – Industry roundup: 14 December

S&P Global ranks USDC as strongest stablecoin….

Credit ratings agency S&P Global Ratings has announced a series of stability assessments for various stablecoins, rating each asset’s stability strength on a five-point scale and reports that USDC emerges as a leading stablecoin owing to low-risk asset backing.

“We see stablecoins becoming further embedded into the fabric of financial markets, acting as an important bridge between digital and real-world assets,” said Lapo Guadagnuolo, senior analyst at S&P Global Ratings. “Our evaluations consider a variety of elements that can cause [stablecoins] to depeg below or above their targeted value.”

S&P Global identified Circle's USD Coin (USDC) as one of the strongest stablecoins on the market. In a dedicated report, the firm said that USDC is fully backed by low-risk assets and granted a score of 1 — the best possible rating. However, it ultimately adjusted the score downward to a rating of 2, writing that there is “insufficient precedent” on whether assets would be protected if Circle were to enter bankruptcy.

The company also listed the Gemini Dollar (GUSD) and Paxos’ Pax Dollar (USDP) among the strongest stablecoins, granting each an overall rating of 2.

Guadagnuolo noted that stablecoins are “not immune” to factors including asset quality, governance, and liquidity. Elsewhere in the announcement, S&P Global said that its ratings take into account quality risks, how over-collateralization and liquidation mechanisms limit risks, plus factors in five other areas.

The scale specifically aims to assess each stablecoin’s ability to maintain a stable value against a fiat currency, according to S&P Global. All stablecoins assessed so far by the company are pegged to the US dollar.

In another report, S&P Global described Tether’s (USDT) ability to maintain its fiat peg as ‘constrained’ and granted a rating of 4 — the second worst possible rating. The firm noted a lack of information about the parties involved in USDT’s reserves. It also said that Tether lacks transparency on reserve management and risk appetite, as well as any regulatory framework, and does not segregate assets to protect against the issuer’s insolvency. It also described redemption limitations.

S&P similarly assigned overall ratings of 4 or “constrained” to First Digital USD (FDUSD) and Dai (DAI). Finally, the company assigned ratings of 5 to TrueUSD (TUSD) and Frax(FRAX) , identifying those stablecoins as the weakest.


…. as Germany’s DWS forms joint venture to issue euro stablecoin

Deutsche Bank’s asset management arm, DWS, is forming a new venture with Galaxy Digital, the digital investment firm headed by Michael Novogratz, and market maker Flow Traders to jointly issue a euro-denominated stablecoin.

DWS Group officially announced plans to form a new joint venture, AllUnity as part of a new partnership with its two partners to launch a “fully collateralised” euro stablecoin on all major public permissionless L1s and L2s, as well as DeFi use cases.

AllUnity’s operations will be regulated by the German Federal Financial Supervisory Authority, aka BaFin, the announcement notes. AllUnity’s longer-term focus will be to accelerate mass adoption of digital assets and tokenization.

“Through the future creation of AllUnity, we will bridge the gap between the traditional and digital finance ecosystems to build a core infrastructure provider that facilitates secure on-chain settlement for institutional, corporate, and private use,” said DWS CEO Stefan Hoops.

He noted that corporations with internet-of-things businesses could use AllUnity’s stablecoin to make payments “securely and in fractions 24/7."

Galaxy founder and CEO Novogratz also stated: “Digital currencies are the natural evolution of the world’s payment system, and Europe — a region at the forefront of the exploration of safe, secure digital money — is paving the way for this inevitable shift.”

The planned euro stablecoin will combine DWS’ portfolio management and product-structuring expertise with Flow Traders’ liquidity services and connectivity in traditional and digital assets worldwide.

Galaxy will provide the technical infrastructure and a track record of delivering digital asset solutions. At the same time, its fully owned subsidiary GK8 will license its tokenisation and custodial services to support AllUnity.

AllUnity expects to incorporate its business in early 2024, while the stablecoin launch is expected to occur in 12 to 18 months after BaFin approval, a spokesperson for Flow Traders confirmed “After it has been incorporated in Q1 2024, AllUnity will initiate the process for the E-money license.”

The issuers anticipate a period of improving regulatory clarity in the European digital asset industry, specifically expecting more clarity from the newly adopted Markets in Crypto Assets (MiCA) regulations, which provide a legal framework for stablecoins and other digital assets.

DWS has shown a growing interest in exploring blockchain technology and digital assets and is reported to have considered investing in two German crypto firms early thi year. In June, the DWS CEO announced plans to launch “digital twin” funds accessible to clients with digital wallets and talked about “striving to issue” a euro stablecoin.

According to Flow Traders, AllUnity plans to issue the euro stablecoin on all major public permissionless Layer 1 and Layer 2  blockchains (L1s and L2s), including decentralised finance, or DeFi, use cases.

In September, USDC issuer Circle launched launched a Stellar-based version of its euro-backed stablecoin, EURC and already supported versions on the Ethereum and Avalanche networks.


US households have ‘unprecedented’ US$18 trillion in liquid assets

American households hold just under US$18 trillion in liquid assets, which includes cash deposits, according to new data highlighted by Bank of America. The figure represents an increase of nearly 80% from the level a decade ago, which reached US$10 trillion level in 2013. Consumers added US$5 trillion in liquid assets in 2020 alone.

Bank of America called the near-record high level of deposits held by consumers as “unprecedented” in a note accompanying the data.

“Still saving for a rainy day. Covid-era stimulus remains in the economy three years later,” commented Bank of America. “Our economists estimate that consumers still have US$950 billion in excess savings. Household savings are growing at 8.5% per year, a clip not [seen] in nearly 30 years.”

Consumers’ strong cash position means that they “won't have to break their piggy banks” in the event that the US economy goes through a mild recession, Bank of America said. “Increased savings and household wealth adds further reinforcement to consumer resilience.”

The trend in rising cash balances held by American consumers is also reflected by assets held in money market funds, which has grown to nearly US$6 trillion held by both institutions and retail investors.

Another encouraging development is that savers are once more receiving a solid interest rate on their cash since the Federal Reserve began aggressively hiking interest rates in March 2022. Near 5% interest rates on cash could translate into nearly US$1 trillion in risk-free returns for consumers.


UK payments regulator wants cap on Mastercard, Visa cross-border fees

The UK’s payments regulator has provisionally proposed a cap on cross-border interchange fees on retailers and other businesses charged by Mastercard and Visa on transactions made between the UK and European single market.

The Payment Systems Regulator (PSR) said a cap would protect businesses from overpaying, after it published interim findings of a market review on interchange fees charged since Brexit in 2016, when the bloc's longstanding cap ceased to apply in Britain.

UK lawmakers had piled pressure on the PSR to consider re-introducing a cap in Britain, and the watchdog said last year it would conduct two market reviews, but that an outcome could take years.

The PSR said the review focused on charges set by Mastercard and Visa, as they account for 99% of debit and credit card payments in the UK.

The watchdog said both companies had likely raised fees to an “unduly high level”, costing UK businesses an extra £150-200 million (US$190-250 million) last year due to fee increases, with the charges potentially passed on to consumers.

"In short, at this stage, we do not think this market is working well," PSR managing director Chris Hemsley said in a statement.

Under the proposals, the PSR would impose an initial time-limited cap of 0.2% on UK-European Economic Area debit transactions and 0.3% on credit transactions. A lasting cap would then be imposed once further analysis is carried out.

A spokesperson for Visa said the company strongly disputed the findings of the PSR's interim report and said the proposed remedies were not justified. “Accepting reliable, secure, and innovative digital payments represents enormous value to UK businesses, especially when selling overseas,” they added.

“These interchange rates apply to less than 2% of UK card payments - European (EEA) cardholders buying online from a UK seller - and reflect the fact that these transactions are more complex and carry far greater risk of fraud.”

Mastercard said interchange fees reflect value in an extremely competitive market. “We do not agree with the PSR's findings and will continue to educate them on the critical importance of electronic payments to the UK economy,” a spokesperson said.

The PSR is inviting feedback on the proposals until the end of January, with a final report due in Q1 2024.

Last month, a government commissioned report found that the UK needs a “digital alternative” to relying on Visa and Mastercard regardless of what the PSR does, echoing longstanding ambitions in the EU for a “home grown” alternative to the two US companies that has yet to emerge.


Argentina devalues the peso by more than 50%

Argentina’s Economy Minister Luis Caputo announced a devaluation of the peso (ARS) of more than 50% to 800 against the US dolla against 365 previously.

The move came days after incoming President Javier Milei took office. Milei campaigned on a pledge to get rid of the peso and replace it with the dollar to revive Argentina’s economy. The peso has been artificially supported for years by strict capital controls, and its value has fallen by about 52% this year against the US dollar.

Caputo reiterated Milei’s campaign theme that “there is no money” as he outlined other measures, including a cut to new public works projects, plans not to renew labour contracts that have been in effect for less than one year and reducing energy and transportation subsidies. “For a few months we’ll be worse off, particularly with inflation,” he said.

Addressing public works, Caputo said that “there’s no money to pay for works that often end up in the pockets of politicians and business people.”

The International Monetary Fund (IMF) responded to Caputo’s remarks by voicing support for the new initiatives.

“IMF staff welcome the measures announced earlier today by Argentina’s new Economy Minister, Luis Caputo,” said Julie Kozack, IMF director of communications, s in a press release. ”These bold initial actions aim to significantly improve public finances in a manner that protects the most vulnerable in society and strengthen the foreign exchange regime,”

The new president of the Central Bank of the Argentine Republic, Santiago Bausili, met with local banking representatives on Wednesday to explain the scope of the measures announced by Caputo.

The “shock” plan implies a strong fiscal adjustment with the goal of achieving a balanced budget in 2024. It includes several cuts in public spending and the reduction of state subsidies for public services and transportation as of January.

Government spokesman Manuel Adorni said at a press conference on Wednesday that the measures were unavoidable in order to achieve a zero deficit and avoid the “catastrophe” of hyperinflation.


Japan urged to accelerate preparations for a digital yen

Japan should make preparations to issue a digital yen “without delay” and treat it as legal tender that would coexist with cash, according to a government panel of experts.

The nine-member panel under the Finance Ministry said any central bank digital currency (CBDC), or a digital yen, should be usable " “by anyone, anytime and anywhere” and compatible with other private companies’ digital payment services.

Currently, Japan does not have specific plans to introduce a digital yen. However, the Bank of Japan (BOJ) has launched a pilot programme to study the feasibility of implementing such a currency.

China has already experimented with a digital yuan. In contrast, major economies have taken a more cautious stance about issuing digital versions of their currencies.

"The basic stance should be that CBDC will complement, rather than replace, cash," the latest report by the panel on CBDC said, calling for closer coordination between the government and the BOJ.

While the COVID-19 pandemic boosted the appeal of digital payments, Japan is still known as a cash-loving nation. Of the some ¥2,100 trillion (US$14 trillion) held by households, more than half was in cash and deposits at the end of September.

The government and the BOJ have taken the view that they will make cash available as long as there is demand for it.

The panel of university professors and researchers at think tanks also said public safety and privacy concerns about a digital yen should also be addressed, adding that the amount of user information handled by the BOJ should be kept to a minimum.

As part of such efforts, the panel suggested that utilising intermediaries — private-sector entities that facilitate transactions between CBDC users and the BOJ — would be preferable to direct engagement between the two parties.

  • Japanese card issuer JCB is moving to Phase 2 of a pilot to trial offline peer-to-peer (P2P) payments for a CBDC. The Phase 1 trials, conducted in partnership with Idemia and Soft Space, entailed the development and testing of a mechanism that enabled merchants to accept CBDC without the need to modify their point of sale (POS) terminals and payment cards. For Phase 2, customers will be able to transfer CBDC funds from one person to another person using their cards and mobile phones even without Internet connectivity. These offline P2P fund transfers can either be done from one card to another with a mobile NFC device as an intermediary, or from one mobile NFC device to another mobile NFC device directly.


Switzerland’s Metafuels raises US$8 million for its sustainable aviation fuel

Swiss climate tech start-up Metafuels has raised US$8 million in a seed funding round. The company specialises in developing sustainable aviation fuels that can work with existing aircraft.

The seed round was led by Energy Impact Partners and Contrarian Ventures.

Decarbonising air travel and the fuel used by planes has proven to be a major challenge. Air travel accounts for around 2% of emissions, driving a race from industry to develop sustainable, cleaner fuels for aviation.

There are various kinds of sustainable aviation fuel (SAF) that the industry is trying to commercialise at scale in a bid to decarbonise aviation.

Late last month a Boeing 787 from Richard Branson’s Virgin Atlantic fleet completed a transatlantic flight with the plane powered by biofuel, made from a blend of 88% waste fats and 12% synthetic kerosene from plant sugars. Metafuel’s own SAF is dubbed “aerobrew” and is generated from converting green methanol into an electro-sustainable aviation fuel (eSAF).

“Our technology selectively converts methanol to sustainable aviation fuel. Methanol is one of the largest traded chemical commodities worldwide,” Saurabh Kapoor, chief executive and co-founder of Metafuels, told Forbes magazine. “What’s happening is there are lots of methanol plants being developed all over the world, so we take output from these plants and convert with our technology to SAF.”

The fuel can be used with existing aircraft and will not require re-engineering or retrofitting of planes. Planes typically have a lifespan of 30 years so completely changing or retrofitting existing fleets is not practical.

“Aviation is one of the most difficult, toughest [industries] to decarbonise,” said Kapoor. “It’s tightly regulated, constraints are high. You don’t have a lot of leeway to do whatever you want to do like with terrestrial transportation.”

One particular challenge involves the types of flights that can use SAF. While various methods so far are promising, including electrification and hydrogen fuels, neither are yet ready for prime time and according to Metafuels, many alternatives will only ever be suitable for short-haul flights. Metafuels’ SAF will be suitable for short- and long-haul flights alike, Kapoor said.

With its new funding in, Metafuels will invest in developing a pilot facility at the Paul Scherrer Institut (PSI) in Switzerland for developing and testing the new fuel to prepare for scaling.

“At the moment we’re working on deploying a pilot facility here in Switzerland,” said Kapoor. “This facility is a technology validation facility where we actually deploy the whole technology.” He expects work on the facility to commence in 2024.

The new funding will finance this facility and investments in R&D. “A large part of the money we raised goes towards the pilot plant, both in terms of capex as well as operation and the growth of Metafuels as an organisation, so we have been recruiting people,” he added.


Philippines lists maiden sukuk issuance on Nasdaq Dubai

Nasdaq Dubai welcomed the first Sukuk listing by the Republic of the Philippines, "ROP Sukuk Trust", underscoring the exchange’s reputation as the preferred choice for sovereign issuances. The Republic of the Philippines chose Nasdaq Dubai to list its maiden sukuk worth US$1 billion of Trust Certificates due in 2029.

“The debut listing solidifies the exchange's standing as a premier global platform for financial listings and features the Philippines, one of Asia's most active sovereign debt issuers, reflecting the confidence in Nasdaq Dubai's advanced platform that focuses on offering a world-class listing venue to leading regional and global issuers,” stated a release.

“The total value of sukuk issuances listed on Nasdaq Dubai now stands at US$85.11 billion, marking yet another achievement in Nasdaq Dubai's journey towards expanding its role as a global centre for sukuk issuances.

“Dubai is recognised as one of the world's largest centres for sukuk issuances, with a total of US$87.61 billion, in alignment with the government's vision to become the international hub of the Islamic economy.”


Santander to buy BNP Paribas' Mexico asset management business

Grupo Santander’s asset management arm has reached an agreement to buy BNP Paribas’ asset management operation in Mexico, the Spanish bank has confirmed.

Santander, which did not disclose the financial details of the purchase, said it would allow the bank to strengthen its institutional investor business, adding that it was one of its key long-term strategies.

“Wealth management and insurance is one of the fastest-growing global businesses for the group, and Mexico is one of our main markets,” said Victor Matarranz, Santander’s global head of wealth management and insurance.

BNP Paribas’ website lists life cycle, debt and white-label funds for its Mexico asset management business. It does not disclose the assets under management for the country. Both Santander and BNP Paribas are among the world’s largest asset managers.


Liberis raises US$112 million for expansion in Europe and North America

Liberis, the UK-based global embedded business platform, has secure US$112 million in debt financing from HSBC Innovation Banking and BCI Capital, marking a major step forward in the company’s expansion strategy.

The company said that the funding will primarily be channelled towards expanding its reach in North America and Europe, with new market entries planned for Canada, Poland, and Germany. “This move is not just a growth strategy for Liberis but also a means to address the critical global funding gap faced by small businesses. In a world where small enterprises often struggle to secure financial support, Liberis’s efforts represent a vital lifeline,” the company stated.

Commenting on the impact of the new funding, Liberis CEO Rob Straathof said: “The joint debt facility from HSBC Innovation Banking and BCI Capital allows Liberis to serve thousands more business owners with fair and frictionless funding through our partners using our embedded finance platform.

“It enables us to extend our reach into new markets like Canada, Poland, and Germany. We are thrilled to be supported by our capital partners as we continue to serve businesses with innovative and flexible funding solutions.”

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