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Monetary Authorities Focus on Digital Assets as Recession Likelihood Increases
After two years of stepping on the accelerator of fiscal stimulus, encouraging spending, consumption and borrowing, to recover from the economic paralysis produced by the Covid-19 lockdowns, today the Central Banking measures of the major economies look just as radical but reversing at high speed. Analysts at Citigroup and Deutsche Bank, for example, expected measures such as interest rate hikes to be taken, but not at a pace that would contribute to a greater likelihood of a global recession.
The evident goal of many Central Banks has been to hit demand, instead of stimulating supply given the untamed inflationary scenario. But reducing consumer spending and slowing business expansion could make things worse and consumers' and investors’ sentiment is a testament to this. Rising interest rates mean that consumers should expect the cost of their credit card debt, mortgages and auto loans, among other items, to increase. The cost of borrowing for businesses will also increase, and companies are likely to slow down their investments and hiring as they are, in general, already doing. The stock market has also been reflecting some concern about the Fed for weeks now, as rising interest rates depress valuations and, especially in this context, eventually, earnings.
In the case of digital assets, BTC price is striving to consolidate above US$ 20k, despite strong forced sales. This week saw an increase in the liquidation of positions in bitcoin futures ETFs, as well as the launch of new products to bet on the decline in BTC. And as we concluded in our Market Commentary last week, authorities and regulators worldwide are putting their finger on the pulse after the liquidity crunch in the space, pointing out the problems of the Digital Assets Ecosystem as if they were isolated phenomena with respect to the global economic landscape.
But the industry is moving forward regardless of opinions. New regulations are being passed and more traditional finance players are expanding their product base focused on the digital asset sector, while the outlook for Central Bank Digital Currency (CBDC) issuance is becoming clearer in several jurisdictions.
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Solidus Capital, in its thesis of mixed exposure to liquid portfolios and direct investments in equity in this asset class, continues to structure private deals and opportunities for the acquisition of shares in the primary and secondary market of fundamental companies within the Digital Assets Ecosystem (DAE).
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MCD Fund: VC-style Fund that intends to offer exposure to transformational technologies in this Digital Age, including Blockchain, Artificial Intelligence/Big Data and Digital Assets Primarily equity investments in Blockchain and Artificial Intelligence/Big Data technology companies will be the focus. The Fund will have a second closing on June 30th.
Closing: June 30, 2022
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Louisiana legalizes Digital Assets custody by financial institutions
The governor of Louisiana, United States, approved a bill that regulates the custody of third-party digital assets by financial institutions in the state. To offer the custody service, intermediaries must provide controls that measure and monitor potential risks and confirm that they have adequate insurance coverage for the funds.
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Citigroup and Deutsche Bank agree on growing expectations of a global recession
The economic measures adopted by the world's central banks to combat inflation increase the probability of a global recession to 50%, according to Citigroup. This position is shared by Deutsche Bank, whose CEO expected interest rates to rise, but not at the pace currently seen.
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European Central Bank President calls for regulations for the Digital Asset lending industry
Following the episodes around digital asset lender Celsius recently, the President of the European Central Bank, Christine Lagarde, expressed before the European Parliament the need for a second regulatory framework that covers more than the so-called MiCA Act due to the speed at which the ecosystem is advancing.
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ProShares lists ETF to bet on Bitcoin's decline
Proshares, the first firm to receive U.S. approval for a futures-based bitcoin ETF when the market was rising, has begun offering a new exchange-traded product for investors to open positions betting on BTC's decline.
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Balances of major bitcoin ETFs halve sharply
Canadian bitcoin ETF providers Purpose and 3iQ CoinShares have suffered the biggest drops in their BTC holdings in their history, suggesting forced sales. Purpose fell from 47,818 BTC to 23,307 BTC between June 16 and June 17, while 3iQ CoinShares fell from 23,917 BTC on June 1, to 12,668 BTC on June 17, indicating a pattern of selling among major ETF providers in Canada.
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BIS: "structural flaws make the crypto universe unsuitable as a basis for the monetary system"
The Bank for International Settlements (BIS) published a report called "The Future Monetary System" in which they dismiss the role that cryptocurrencies can play and praise the role of Central Bank Digital Currencies (CBDCs). They state that recent events demonstrate that "contrary to the decentralization narrative, crypto often relies on unregulated intermediaries that pose financial risks."
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President of Spain's Securities Market Commission insists on describing Digital Assets as a bubble
During the Annual Report statement, the president of Spain's National Securities Market Commission (CNMV) ratified his skeptical position regarding digital assets, arguing that it is a financial bubble. However, he defended the value of blockchains as a way to innovate in the digitization of financial assets.
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Citibank to integrate Digital Asset custody service from Metaco
Banking firm with US$ 27T of assets under management (AUM), Citibank, has teamed up with Swiss firm Metaco to implement its custody service for digital assets. For the time being, the service will focus on tokenized securities and bonds.
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U.S. Congressman introduces digital dollar proposal
Connecticut Democratic Representative Jim Himes released his proposal for the U.S. Central Bank Digital Currency on June 22. Under the name Winning the Future of Money, the digital dollar proposal seeks to lay the groundwork for early legislative approval for the issuance of CBDC by the Federal Reserve.
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Brazilian banks would use Real Digital as backing to issue stablecoins
Roberto Campos Neto, president of the Central Bank of Brazil, said that the work for the development of the Brazilian Real Digital, CBDC, should have a pilot for the second half of the year. The official mentioned that the digital version of the Brazilian real (BRL) will have an issuance limit but may be used as collateral for the country's banks to issue stablecoins.
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Morgan Creek defends its place as BlockFi shareholder against FTX
Investment firm Morgan Creek is raising US$250M to counter FTX's rescue bid for BlockFi. If the rescue went through, FTX would displace all BlockFi investors, including Morgan Creek.
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Goldman Sachs to buy Celsius assets, according to Coindesk
Sources at specialist media outlet Coindesk told that the financial giant would be looking to raise US$ 2B to buy the assets of lender Celsius at a discount should it go bankrupt.
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Half of Latin Americans surveyed by Mastercard have paid with Digital Assets
In a survey conducted by Mastercard of more than six thousand Latin Americans in ten markets in the region, they found that more than half of the respondents have ever paid with digital assets. In addition, they learned that the barrier for that number to increase is education since 71% of respondents said they would pay with digital assets if they knew how to do it.
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Tether launches stablecoin anchored to the British Pound
Tether, the issuer of the largest market cap stablecoin, USDT, has announced the launch of a new digital asset anchored to the price of the British pound. The asset will be issued in early July, making it the fifth stablecoin issued by Tether, joining the U.S. dollar, Chinese yuan, Mexican peso and euro.
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Spanish tax authorities would require reporting of Digital Assets held abroad starting in 2023
Spain's Tax Agency is taking comments for its new provision to tax digital assets held offshore. The draft still awaiting discussion would also require companies that intermediate transactions with digital assets to declare them annually to the tax authority.
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Deutsche Börse expands its Digital Asset data services
Deutsche Börse, which is in charge of operations at the Frankfurt Stock Exchange, entered into a partnership with analytics company Kaiko to offer more refined data on digital assets for its clients, which include asset managers, banks, market makers and others.
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Solidus Capital is the leading firm in Digital Assets, which provides exclusive, agnostic, and institutional services such as Liquidity, Custody Solutions, Wealth (Private Accounts and Portfolio Management), Multi-Strategy Funds, Private Placements, and other sophisticated products in conjunction with bespoke accompaniment to High Net Worth Individuals, Family Offices, Companies, Wealth Managers and Banks.
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By relying on Solidus' services, investors avoid the classic fatal mistakes:
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- Lacking information in the context and moments of the market
- Executing operations inefficiently
- Using unreliable service providers and infrastructure
- Closing of accounts and freezing of funds
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Disclaimer
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