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Coin Geek
20 hours ago
- Business
- Coin Geek
BIS finds tokenization is the future of financial system
Getting your Trinity Audio player ready... In a report published on June 24, the Bank for International Settlements (BIS), an institution made up of central banks from around the world, claimed that fiat-pegged stablecoins 'fall short of requirements to be the mainstay of the monetary system' as they fail the three key tests of singleness, elasticity, and integrity. However, it argued that tokenization does meet this test. In a 'special chapter' of the BIS's Annual Economic Report 2025, titled 'The next-generation monetary and financial system,' the BIS concluded that, building on the proposal for a unified ledger, the 'trilogy' of tokenized central bank reserves, commercial bank money and government bonds is 'the next logical step to deliver profound change for the financial system.' The report argued that tokenization can enhance efficiency and open new possibilities in cross-border payments, securities markets, and beyond while maintaining the key principles of sound money. 'Tokenisation represents a transformative innovation to both improve the old and enable the new. It paves the way for new arrangements in cross-border payments, securities markets and beyond,' wrote the BIS. 'Tokenised platforms with central bank reserves, commercial bank money and government bonds at the centre can lay the groundwork for the next-generation monetary and financial system.' However, while the report was effusive in its praise for the possibilities of tokenization, it was less enthusiastic about stablecoins, suggesting that they fall short of requirements to be the mainstay of the monetary system when set against the three key tests of singleness, elasticity, and integrity. This test is how the BIS judges the suitability of a payment system. The ' singleness of money ' refers to whether money can be issued by different banks and accepted by all without hesitation, otherwise known as 'acceptance for payment at par'; elasticity refers to whether money provides the flexibility to meet the need for large-value payments in the economy, 'so that obligations are discharged in a timely way without gridlock taking over'; and integrity refers to a system's ability to safeguard against financial crime and other illicit activity. According to the BIS, stablecoins do not meet any of these three criteria and are, therefore, not suitable to become the cornerstone of the next financial revolution. How stablecoins fall short According to BIS, stablecoins failed the first test, the singleness on money, partly because their value can depend on the relative 'creditworthiness' of their issuers and partly because stablecoins traded in secondary markets at an 'exchange rate' can deviate from par—meaning a situation can occur where different stablecoin that are supposed to be equivalent do not trade at equal value and can no longer be accepted at face value. 'Stablecoin holdings are tagged with the name of the issuer, much like private banknotes circulating in the 19th century Free Banking era in the United States. As such, stablecoins often trade at varying exchange rates, undermining singleness,' wrote the BIS. When it comes to elasticity, stablecoins failed the test because assets, such as Tether's USDT—the world's largest stablecoin by market cap—can be backed by a 'nominally equivalent amount of assets,' which means any 'additional issuance requires full upfront payment by holders' imposing a 'cash-in-advance constraint.' In other words, the stablecoin issuer's balance sheet cannot be expanded at will; any additional supply of stablecoins requires full upfront payment by its holders, which differs from banks, which can 'elastically expand and contract their balance sheets within regulatory limits.' Finally, stablecoins have been well publicized and have 'significant shortcomings when it comes to promoting the integrity of the monetary system' and are prone to Know Your Customer (KYC) and anti-money laundering (AML) compliance weaknesses. The BIS particularly highlighted the ability of digital asset mixers to obfuscate the origin of money and hamper traceability, as well as blockchain's propensity for anonymity, or pseudoanonymity, which hampers KYC efforts. Despite these critiques, the report wasn't wholly dismissive of the potential of stablecoins, noting that they offer certain advantages, such as programmability, pseudonymity, and 'easy access for new users.' In addition, their 'technological attributes mean they can potentially offer lower costs and faster transaction speed,' particularly for cross-border payments. 'It remains to be seen what role innovations like stablecoins will play in the future monetary system,' wrote the BIS. 'But stablecoins do not stack up well against the three desirable characteristics of sound monetary arrangements and thus cannot be the mainstay of the future monetary system.' There was, however, another asset type and financial system that did stack up well. Tokenization for the win As pessimistic as the report was in its appraisal of stablecoins as the next big thing in international payment systems, it was equally optimistic in its take on tokenization—the digital representation of assets on programmable platforms. 'Tokenisation stands to be the next logical step in the evolution of money and payments,' said the BIS, adding that it 'integrates messaging, reconciliation and settlement into a single seamless operation, and can transform cross-border payments and securities markets, ushering in a new era for the financial system.' Specifically, the report pointed to recent proposals for a unified ledger that provides a blueprint for the tokenized financial system. Key elements of the blueprint are tokenized central bank reserves, tokenized commercial bank money, and other tokenized claims on financial and real assets—all 'brought together in a new type of financial market infrastructure.' The report argued that the unified ledger can transform intermediary interactions, particularly when it comes to cross-border payments and, by combining programmability and transaction bundling, it can integrate and automate sequences of financial transactions. 'This eliminates delays and reduces manual interventions and reconciliations arising from the traditional separation of messaging, clearing and settlement,' noted the report. According to the BIS, tokenization also enables the joint execution of three previously separate steps: the debiting of the payer's account, the crediting of the receiver's account, and settlement on the central bank balance sheet. This allows for the 'synchronous exchange' of assets so that each transfer occurs only upon the transfer of the others. In terms of singleness—one of the areas stablecoins fell down—the report suggested that singleness on private tokenized money and cash would be supported in the same way it is now for commercial bank deposits, as long as all private tokenized money issuers complied with the same regulatory standards and had access to the same safeguards. It added that singleness between the private tokenized money issued by non-banks and cash could also be maintained under the proper arrangements. Tokenization can also utilize smart contracts—computer programs that run on a blockchain and automatically trigger when certain pre-agreed conditions are met, without the need for human intervention—which enables central banks to instantly create and adjust their tools, such as deploy new facilities and adjust interest rates or collateral requirements. In this way, 'tokenisation could offer flexibility and speed in monetary policy operations' as well as 'improve operational efficiency and promote automation in back office tasks.' Finally, as tokenized platforms could—in principle—operate continuously, smart contracts could support extended or even 24/7 market operations. 'Tokenisation of deposits and central bank money means that both the primary means of payment as well as the settlement function of central bank money can be integrated seamlessly on the same programmable platform,' said Hyun Song Shin, Economic Adviser and Head of the Monetary and Economic Department at the BIS, in a June 24 press release. 'It has the potential to transform securities markets and its application to correspondent banking is especially promising.' This sentiment was echoed by Agustín Carstens, General Manager of BIS, who commented: 'The next-generation monetary and financial system combines the time-tested principles of trust in money underpinned by central banks with the functionality unlocked by tokenisation. This system is poised to deliver substantial improvements to current practices and to enable entirely new economic arrangements.' Amongst all the praise, the BIS did acknowledge that the transition to a fully tokenized financial system would not be without its challenges. Interoperability between existing account-based systems and emerging tokenized infrastructures must be ensured; changes to existing systems will be needed, including adjustments to booking and reconciliation processes or messaging standards; fragmentation across both legacy and new networks could pose a challenge; and the emergence of tokenized repo transactions adds to demands on sound collateral management. However, overall, the BIS concluded that tokenization represents a 'transformative innovation to both improve the old and enable the new' and one that could well be the basis for the next-generation monetary and financial system. Watch | Rediscovering Blockchain: Here's how you build trust at scale title="YouTube video player" frameborder="0" allow="accelerometer; autoplay; clipboard-write; encrypted-media; gyroscope; picture-in-picture; web-share" referrerpolicy="strict-origin-when-cross-origin" allowfullscreen="">
Coin Geek
a day ago
- Coin Geek
Power, Protocol, Protection: Mitch Burcham on Weekly Livestream
Getting your Trinity Audio player ready... On this week's episode of the CoinGeek Weekly Livestream, BINARY founder Mitch Burcham told Kurt Wuckert Jr. about the state of the U.S. grid, how solar power will revolutionize energy, and how a more robust, decentralized grid can be built on the Bitcoin protocol. title="YouTube video player" frameborder="0" allow="accelerometer; autoplay; clipboard-write; encrypted-media; gyroscope; picture-in-picture; web-share" referrerpolicy="strict-origin-when-cross-origin" allowfullscreen=""> Who is Mitch Burcham? And a bit about the US grid Burcham is an entrepreneur and Founder of BINARY. He's also the National Blockchain Director at the Homeland Security Taskforce, giving him unique insight into both the government and business worlds. Burcham describes the last few years of his life as a 'deep dive' into the American grid. He describes it as highly complex and originally built by central planning. At its inception, Alternating Current (AC) won out, and they got economies of scale via coal-fired plants and hydro dams. While it still works great, the way it was designed created monopolies. Everything relies on the wires that the companies that built the grid own, and to this day, it depends on the monolithic structures they control. Burcham describes this as 'infrastructure jenga,' warning that it will inevitably collapse. This inevitable collapse is a feature of the top-down model, Burcham tells us. Thankfully, we now have solar panels—a distributed technology that can power almost anything locally. What is Burcham's idea for a more robust grid? Burcham begins his answer by stating an obvious fact: the sun is the biggest energy producer we'll ever find. It emits limitless energy wirelessly, giving him nuclear fusion on his rooftop. The Earth always has been and always will be solar-powered, so this energy source is part of the solution for him. However, the power source is only one element of a more robust, decentralized grid. They produce direct current (DC) electricity, which has to be inverted, and inverters introduce vulnerabilities like cybersecurity threats. In his vision, power would be transmitted between AC islands, and energy from rooftop panels would stabilize the grid. Currently, Burcham and his team are trying to build a state machine to allow all stakeholders to see the state of the grid and any actions taken. The ultimate aim is seamless coordination and competition between nodes. Wuckert mentions the cost of solar setups and how they become less efficient over time as potential barriers to a system like this. Burcham counters that the cost of solar panels has dropped 90% in 20 years, but the batteries are still relatively expensive. Regardless, he sees a future in which every house has one. The key to solving most cost problems is the open market, he says. We need price signals to determine when to recharge, etc. Aggregators can also help automate much of this. Unpacking what Burhcam's ideal grid would look like Wuckert asks for more detail on what this would look like at scale. He notes there are four time zones in the USA, and he wonders if arbitrage is possible over the huge distances in the country. Burcham envisions something much more local, emphasizing that this can't be centrally planned. It requires local power generation, and peer-to-peer transactions are a necessary part of it. How is blockchain utilized? The Bitcoin protocol acts as the global communication standard, facilitates peer-to-peer transactions, and offers timestamped records and verifiable proofs. Furthermore, backing this with an asset like Bitcoin (or tokens on it) will only add resiliency. The main benefit of building the grid on Bitcoin is that to attack it, a malicious actor would have to attack the Bitcoin network itself. However, if they also ran on it, they'd ultimately be attacking themselves, rendering the attack pointless due to mutually assured destruction. 'Bitcoin doesn't exist if the grid goes down, but the grid doesn't go down if it's built on Bitcoin,' Burcham says, highlighting the genius of Satoshi Nakamoto's invention. How receptive are stakeholders to this idea? Wuckert wonders what the grey-haired government officials and stakeholders think about Burcham's ideas. How has his pitch gone over with them? 'They wonder if I'm selling it,' Burcham says, emphasizing that he doesn't know. Others have told him it's impossible. Nobody wants to do it because of the costs involved, but he reminds them of how it's a national security superpower, and the first mover will have the advantage. To hear more about how a decentralized grid can be built on Bitcoin, why tradable assets like tokens can make it even more secure, and the direction Burcham's company is taking now, check out the episode here . Watch: Here's how Triple Entry Accounting guarantees trust in accounting title="YouTube video player" frameborder="0" allow="accelerometer; autoplay; clipboard-write; encrypted-media; gyroscope; picture-in-picture; web-share" referrerpolicy="strict-origin-when-cross-origin" allowfullscreen="">
Coin Geek
a day ago
- Business
- Coin Geek
Yellow Card teams up with Visa for stablecoin payments
Getting your Trinity Audio player ready... One of Africa's premier exchanges, Yellow Card, has partnered with Visa (NASDAQ: V) to expand stablecoin payments across the region. The partnership will center around cross-border transfers, which continue to be slow, inefficient, and expensive. According to the World Bank, Africans pay 8.5% in costs, with the global average at 6.6%. 'When you look at stablecoins, there's a lot of excitement in the market and all the major payment companies are exploring ways to get into the space,' Yellow Card CEO Chris Maurice told Bloomberg. Yellow Card has been shifting its business model to focus on stablecoins for years. In January 2024, the exchange told CoinGeek that its African users were now turning to stablecoins to make payments abroad and receive remittances. Under the new partnership, the exchange plans to launch its new stablecoin service in at least one African country this year, Maurice said. It intends to expand its services to more than 20 countries in which it operates next year. While the company didn't reveal which country it would launch in first, Kenya is the most likely. According to the exchange's senior legal counsel, Edline Murungi, the East African nation's recent regulatory efforts have made it among the most appealing on the continent. The proposed Virtual Asset Service Providers Bill draws a distinction between speculative 'crypto' tokens and stable assets, laying out separate policies for each category. If it passes, the bill will be the most progressive in Africa, Murungi told Bloomberg in a separate interview. 'Those use cases are going to really change the industry. And if other countries follow suit, then Kenya is going to be a hub for a lot of digital-asset activities,' she stated. In addition to the upcoming friendly laws, stablecoin adoption in Kenya is also among the highest in Africa. A report by the International Monetary Fund (IMF) in January revealed that a large number of Kenyan firms now pay their foreign suppliers in stablecoins owing to a dollar shortage and high costs on mainstream channels. While most African countries still lack comprehensive 'crypto' regulations, CEO Maurice believes the region is still the best place to launch digital asset products due to its fintech-friendly frameworks. 'There's no better place to be [launching] a company in stablecoins than the African continent where you have more regulators that have licensing available, there's more engagement with regulators…[Africa's] had more friendly trends over the past two and a half years than you did in any other single continent in the world,' Maurice stated while speaking at a recent event in New York. For Visa, the Yellow Card partnership is the latest in its quest to position itself as a stablecoin mainstay. It first settled a stablecoin transaction on its rails in 2023, and since then, it claims to have settled $225 million in similar transactions, a small fraction of the $28 trillion that flowed through stablecoins last year. Visa's stablecoin ventures are as much about innovation as they are about protecting its position. Industry experts have expressed concerns that stablecoins could eat into the market share that the company and Mastercard (NASDAQ: MA) have enjoyed for decades. Africa's digital wallets to record 13% CAGR, hit $59B by 2029 Away from stablecoins, a new report has revealed that Africa's prepaid card and digital wallet market will continue growing aggressively over the next four years to hit $59 billion by 2029. The report revealed that over the past four years, the sector has recorded an 18.8% compound annual growth rate (CAGR), and is expected to end this year at $36.1 billion. Source: Research and Markets Digital wallets and prepaid cards have benefited from a rise in the adoption of digital solutions and concerted efforts to promote financial inclusion. This has rapidly lowered the number of unbanked and underbanked people, with some countries like Kenya and Egypt achieving a financial inclusion rate exceeding 75%. African countries continue to lead in mobile money banking. To capitalize on it, digital wallet providers have integrated their solutions into mobile money platforms, further fueling adoption. 'As the market evolves, companies that adapt to regulatory requirements, invest in security enhancements, and offer innovative solutions will be best positioned for long-term success,' the report noted. Watch: Boosting financial inclusion in Africa with BSV blockchain title="YouTube video player" frameborder="0" allow="accelerometer; autoplay; clipboard-write; encrypted-media; gyroscope; picture-in-picture; web-share" referrerpolicy="strict-origin-when-cross-origin" allowfullscreen="">
Coin Geek
a day ago
- Business
- Coin Geek
Japan wants reforms to broaden appeal of digital asset investments
Getting your Trinity Audio player ready... Japan continues to explore reforms that would make the country more competitive in the global digital asset industry. This week, its national financial regulator, the Financial Services Agency (FSA), created a working group to explore proposals related to taxation and classification of digital assets to mirror those of other investments. A reclassification, which the ruling Liberal Democratic Party (LDP) is also exploring, would see digital assets have the same flat 20% tax rate as shares. Other issues of concern are additional sales taxes on digital assets that hit non-JPY trades between assets on exchanges and limits on how Japanese customers can acquire digital assets. In Japan, digital assets are classified as 'payment methods' rather than 'investments,' which results in additional taxes and tends to lump blockchain in with game tokens and retail points. Changing this would reflect a gradual shift in perception of blockchain assets/tokens over the years, from currencies intended for daily purchases to assets their users hold in the hope of future profits. While this was never the (stated) intention for inventions like Bitcoin when it first emerged, volatile market values and the resulting media attention have de facto created a new investment class instead. The latest moves result from years of lobbying from Japanese digital asset industry groups, like the Japan Crypto-Asset Business Association (JCBA) and the Japan Crypto-Asset Exchange Association (JVCEA). Specifically, they have called for reduced taxes for digital asset investments and reforms that would make Japan a more attractive location for Web3 and other technology startups. Digital assets becoming a major investment sector in Japan and internationally The FSA noted that the number of digital asset trading accounts in Japan has grown fivefold since 2020. Currently, 12.14 million accounts are registered, with a total user deposit balance of roughly JPY5 trillion (US$34.4 billion). Those numbers reflect trend shifts internationally as a new generation of younger and more technologically-competent investors seeks opportunities outside the 'traditional' areas of stocks and bonds. The FSA's document also revealed financial survey findings showing that 7.3% of experienced investors hold 'cryptocurrencies.' That number is still lower than those investing in other existing financial products, including stocks, but higher than those participating in yen-denominated corporate bonds, savings insurance, and foreign exchange. In another survey from Nomura Holdings and Laser Digital Holdings AG, 62% of investment managers said they view digital assets as an opportunity, while 54% said they intended to invest in digital assets in the next three years—80% of those also plan to hold their assets for more than one year. Investors abroad (particularly in the USA) are interested in exchange-traded funds (ETFs), including BTC and other digital assets. Even more conservative institutional investors like pension funds are joining in, and there are signs fund managers are starting to see digital assets as 'inflation-resistant' investments, similar to precious metals. The relatively new Trump Administration in the U.S. is seen as particularly friendly to digital asset investments, and this, coupled with fears of inflation in national fiat currencies, has led investors to discover alternative means to protect existing value. Investment opportunities for everyone could spur innovation Reforms to digital asset investment rules are part of the Japanese government's 'New Capitalism Strategy.' This is an ongoing initiative started by former Prime Minister Fumio Kishida in 2021 and aims to reconfigure Japan's economy around sustainable growth and innovation. The terms 'Web3,' 'Green Transformation/Clean Energy,' and 'inclusion' frequently appear alongside blockchain, stablecoins, and DAOs as key drivers. The strategy also aims to create a more equitable share of wealth in general, focusing on human capital and opening up new investment opportunities outside the traditional sphere of stock exchanges and stagnant investment funds. The government views Japan's reputation as an early adopter of new technologies, with a population always keen to build and protect wealth through investments, as an advantage. Watch: Power, Protocol, and Protection with Mitch Burcham title="YouTube video player" frameborder="0" allow="accelerometer; autoplay; clipboard-write; encrypted-media; gyroscope; picture-in-picture; web-share" referrerpolicy="strict-origin-when-cross-origin" allowfullscreen="">
Coin Geek
a day ago
- Business
- Coin Geek
US pushes for 'crypto' ambition amid environmental crisis
Getting your Trinity Audio player ready... The United States has solidified its position as the global leader in block reward mining, commanding over 40% of the world's hash rate as of May 2025. The 2021 China's crypto ban drove miners to the United States, where affordable energy, supportive policies, and robust infrastructure create an ideal environment. States like Texas, Wyoming, and Georgia offer electricity rates as low as $0.08 per kilowatt-hour and business-friendly regulations, attracting major players like Riot Platforms (NASDAQ: RIOT) and Core Scientific (NASDAQ: CORZ). The Trump administration's pro-crypto stance has accelerated the digital mining industry's growth, with relaxed environmental regulations and streamlined permitting processes spurring the development of new mining facilities. Texas, with its deregulated energy market and abundant natural gas, is a prime destination for block reward mining. It hosts some of the largest operations globally, including Argo Blockchain (LSE: ARB), which acquired 320 acres of land in West Texas in 2021. However, the proposed 36% tariffs on imported mining equipment announced on April 2 threaten profitability by increasing operational costs. For the block reward mining sector, which heavily depends on imported hardware from Southeast Asia and China, these tariffs present immediate challenges and create a transformative opportunity. Energy availability remains a critical but challenging factor. While competitive rates provide an advantage, grid strain during peak demand periods can lead to outages or price spikes, disrupting operations. Miners are mitigating these risks by securing long-term energy contracts or investing in renewable sources like solar and wind, aligning with growing environmental concerns. Bitcoin mining's estimated 150 TWh annual consumption has drawn scrutiny from climate advocates, pushing the industry toward sustainable practices. Institutional investors, including firms like BlackRock (NASDAQ: BLK), are exploring stakes in mining companies, driving consolidation as larger players acquire smaller operations to boost efficiency. However, local communities, particularly in Texas, are resisting mining's environmental and noise impacts, with lawsuits over cooling fan noise escalating. In October 2024, Citizens Concerned About Wolf Hollow filed a lawsuit at the District Court for Hood County, accusing Marathon Digital (NASDAQ: MARA) of failing to reduce excessive noise pollution caused by its mining operations. These tensions could lead to stricter local regulations, challenging the industry's expansion. 'In such a short time, Bitcoin mining has completely altered our community, for the worse. The around-the-clock mining isn't just driving up our electricity bills — it's costing us our health. We feel trapped. Day and night, we are subjected to relentless noise that is physically harming us. We aren't asking for much — just for Marathon to take responsibility and restore our peace and well-being,' one Granbury resident said. The U.S.'s dominance in Bitcoin mining will likely persist, but miners must navigate tariff risks, energy volatility, and community concerns to maintain their global edge. Strategic adaptation and investment in sustainable practices will be key to sustaining leadership in this dynamic market. Watch: Bitcoin mining in 2025: Is it still worth it? title="YouTube video player" frameborder="0" allow="accelerometer; autoplay; clipboard-write; encrypted-media; gyroscope; picture-in-picture; web-share" referrerpolicy="strict-origin-when-cross-origin" allowfullscreen=""> Block Reward Mining Donald Trump Tariff Texas Trump Administration United States
