Stablecoins Bonanza  - Speculation Down 90%! 😱

Introduction

Happy Friday, and welcome to your weekly tokenization deep dive, brought to you by RWA World! 

We have a lot to cover this week, from stablecoin speculation dropping like a rock to the US and UK putting some aspects of tokenization in their crosshairs.

Let’s dive right into the action! 👇

🎯🔥 Rapid Fire Takeaways:

🏛️ HSBC confirms plans for digital asset custody

🦅 Fed Governor Barr: stablecoins borrow the trust of Federal Reserve

⛔ UK Stablecoin Consultation: Don’t Issue One

📉 Circle (USDC) Report: Stablecoins Real World Utility Rises as Speculative Trading Drops 90%

👝 Mastercard trialed eHKD CBDC for luxury purchases using web3

🤝 CBOE invests in Japan’s Osaka Digital Exchange. Security tokens to launch this year

Institutions Getting Antsy 🕺

Keeping with last week’s theme of Hong Kong embracing tokenization in full force, HSBC has confirmed its plans to custody digital assets starting in 2024. HSBC already offers tokenized bond and gold products, and the bank sees demand for tokenized asset services only growing from here. 

Banks aren’t the only ones putting their weight behind asset tokenization, with CBOE investing in Japan’s Osaka Digital Exchange (ODX). The two announced a collaboration last year, and ODX is on track to start trading digital securities by the end of 2023.

Payment giant Mastercard is using its pedigree to court big contracts, having trialed the eHKD CBDC for luxury purchases with an NFT, or non-fungible token, and payment released upon item delivery. The pilot program indicated that over two-thirds of digital asset owners would prefer the eHKD over stablecoins, highlighting a preference for familiar, insured payment options. The Atlantic Council has a really cool CBDC tracker detailing the ongoing CBDC projects and where they are in their lifecycles.

Old Friends, Big Tokenizations 🇬🇧🤝🇺🇸

There’s a lot to cover here, so we’re going to break it down into chunks:

U.S. 🦅🇺🇸💵

• Representatives Zach Nunn (Republican) and Abigail Spanberger (Democrat) put forth a bill that proposes to blacklist four entities. Most notable is iFinex, the parent company of the prominent stablecoin Tether. The bill emphasizes the urgency to address potential national security and data privacy issues while also seeking an assessment of the impacts on the U.S. dollar as the world's reserve currency.

• Vice Chair of the Federal Reserve Michael Barr says that dollar stablecoins borrow the trust of the Fed, stating, “Private money that’s linked to the dollar basically borrows the trust of the Federal Reserve in its issuance,” With a stablecoin bill working its way through Congress, and global volumes surpassing that of VISA, tokenization may finally be finding its footing in the U.S. 

• U.S. “banking watchdog” Hsu would agree – he says tokenization looks promising, but that crypto "tends to be driven by the hope for speculative gain." and that “It still remains replete with frauds, scams, and hacks,” As acting head of the U.S. Office of the Comptroller of the Currency, Hsu is actively exploring asset tokenization, while clearly eschewing crypto.

U.K. 🦁🇬🇧💷

• The Bank of England recently notified banks to avoid stablecoin issuance and instead favor tokenized deposits. It seems regulators are doing all they can to dissuade stablecoin issuance within the country in general–some require the oversight of multiple regulators, and they can’t earn interest on deposits without holding them at the central bank. 

• Meanwhile, the Financial Conduct Authority (FCA) is set to clarify tokenization regulations by the end of 2023. They’ve been working with trade firms and other organizations to get it right – "We’ve been working with the Technology Working Group, which sits under the Treasury’s Asset Management Taskforce, on a blueprint for fund tokenization," said FCA Chair Ashley Alder in a Thursday speech.

Stablecoin Utility Up, Speculation Down 🧰

The big news of the day is Circle’s report on stablecoins, showing that speculative trading has dropped by an incredible 90% since 2019. Other key findings include:

• Payment stablecoin’s trading turnover is 10% that of trading stablecoins and 60% that of fiat M2 dollar.

• The use of stablecoins for speculative trading has declined 90 percent over the past five years.

• 100% of RWA World subscribers have a great Friday 🔥🚀 (this one’s a joke, but you know that 😉)

You can read the full report here.

Your World, Your Way 🗺️

Tokenization is a force that can’t be stopped, but where this story ends up is still anyone’s guess. 

We’re all active participants, so make sure to stay up to date with the latest and greatest via the RWA World Database and Reports, and follow us on Twitter and LinkedIn for frequent updates.

Our latest report on RWA-Backed Stablecoins is filled with insights on what stablecoins are, who is issuing them, why, and where this subsector of tokenization is heading.