Institutional Investors Seek Tokenization Solutions

Institutional investors managing trillions of dollars worldwide are seeking solutions for tokenization, which can allow fractional ownership of an asset that previously had to be sold as a whole. This method can improve liquidity for global assets, which is expected to reach $145.4 trillion by 2025, according to Big Four firm PwC. Polygon, a blockchain scaling and infrastructure development platform, has been working with many global players in this space, including Hamilton Lane and JPMorgan.

In January, Hamilton Lane announced the first of three tokenized funds backed by Polygon, bringing part of its $824 billion in assets under management on-chain. By tokenizing its flagship Equity Opportunities Fund, Hamilton Lane was able to lower the minimum required investment from an average of $5 million to $20,000. This move enables greater accessibility for smaller investors and creates a more liquid market for the asset.

JPMorgan also explored the potential of decentralized finance (DeFi) for wholesale funding markets by executing its first cross-border DeFi transaction on the Polygon network in November. This initiative is part of a pilot program that aims to leverage the benefits of blockchain technology to improve traditional financial markets.

Polygon offers a blockchain scaling solution that enables developers to build and connect decentralized applications. The platform has been working on providing institutional-grade infrastructure for tokenization, which is crucial for institutional investors who require reliable and secure systems. Colin Butler, the global head of institutional capital at Polygon, acknowledges the need for institutional-grade systems and solutions that are easy to implement, flexible, and upgradeable, which are essential for institutional investors to integrate tokenization into their existing systems.

Overall, tokenization presents a significant opportunity for institutional investors to improve liquidity and accessibility to a wider range of investors, and platforms like Polygon are working to provide the necessary infrastructure to support the growth of this market.


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Binance Adds 11 Tokens to PoR Report

The proof-of-reserves (PoR) report of Binance, which is one of the most important and biggest cryptocurrency exchanges in the world, has been updated to include 11 new assets. MASK, ENJ, WRX, GRT, CHR, CRV, 1INCH, CVP, HFT, SSV, and DOGE are the tokens that are accounted for in the Proof of Reserves report. With this most recent upgrade, the total number of assets in Binance’s PoR system has increased to 24, with a combined worth of more than 63 billion dollars.

The Proof of Reserves (PoR) mechanism that Binance has developed is intended to give its customers with both transparency and certainty about the safekeeping of their funds. Binance claims that its Proof of Reserves (PoR) makes use of Merkle trees to add up the data that is stored on the chain. This helps to guarantee that customers’ assets are retained for them on a one-to-one basis.

The adoption of the Proof-of-Reputation (PoR) approach by other cryptocurrency exchanges comes at the same time as Binance’s Proof-of-Reputation (PoR) system is being expanded to include other coins. This comes as a direct result of the failure of FTX, which brought to light the need of more openness within the cryptocurrency sector.

Nevertheless, a number of specialists have cautioned that the PoR technique has a number of drawbacks. For instance, it does not give any information on the use of leverage, collateralization, or the proof-of-liabilities that correlate to these concepts. This information may only be disclosed if the PoR is accompanied with financial documents that detail the company’s financial position.

Binance released a significant improvement to their PoR system in February 2023, which included the incorporation of zk-SNARKs. This is an example of a zero-knowledge proof, which is a kind of proof that enables the verification of data without disclosing the data itself. According to Binance, this will result in an improvement in the level of privacy and security afforded to user data during the verification process.

 In conclusion, the incorporation of 11 more tokens into Binance’s Proof-of-Residence (PoR) system is a step in the direction of improved user confidence and visibility. Nevertheless, it is essential to keep in mind that the PoR approach is not without its flaws, and users should always proceed with extreme care whenever they engage in the usage of cryptocurrency exchanges.


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Voyager Digital Sells Assets via Coinbase Amid Bankruptcy

Voyager Digital, the New York-based centralized finance (CeFi) platform, filed for Chapter 11 bankruptcy in July 2022 after it failed to secure a new line of credit. The company, which provides cryptocurrency trading services for retail and institutional investors, had been struggling with mounting debt and declining user growth.

Since then, Voyager has been seeking ways to raise capital and pay off its creditors. According to recent reports, the company has turned to Coinbase, one of the largest cryptocurrency exchanges in the world, to sell off some of its assets and raise cash.

On-chain data from Lookonchain, an independent analytics firm, suggest that Voyager has sent at least $100 million in USDC to Coinbase in the last three days. The transfers, which started on February 24, included a mix of cryptocurrency tokens, such as Ether, Shiba Inu, and Chainlink.

Despite the sell-off, Voyager still holds a substantial amount of crypto assets, with a total value of nearly $530 million. The majority of its holdings are in Ether, which is currently worth around $1,500 per coin, and Shiba Inu, a meme-inspired token that has gained a cult following among retail investors.

However, the fate of Voyager’s remaining assets is uncertain. The United States Securities and Exchange Commission (SEC) has raised concerns about the company’s financial stability and recently objected to Binance.US’ proposed acquisition of over $1 billion in assets belonging to Voyager.

The SEC argued that Binance.US, which is a subsidiary of the world’s largest cryptocurrency exchange, had failed to demonstrate that it could adequately safeguard the assets and protect the interests of Voyager’s creditors.

The move by Voyager to sell its assets through Coinbase has sparked speculation among industry analysts about the future of centralized finance and the role of crypto exchanges in providing liquidity for struggling platforms.

While the crypto market has seen a resurgence in investor interest and rising valuations for major tokens, such as Bitcoin and Ethereum, the fate of smaller players like Voyager remains uncertain. The company’s bankruptcy filing and subsequent asset sales highlight the risks and challenges of operating in the rapidly evolving and volatile world of cryptocurrency trading.


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Singapore Regulator MAS is Exploring Use of Cases in Digital Assets

The Monetary Authority of Singapore (MAS) has launched Project Guardian. This sandbox initiative is set to explore a number of defined use cases with respect to asset tokenisation on the blockchain


Project Guardian was floated in partnership with DBS Bank, JPMorgan Chase and Marketnote. Per the announcement, the MAS and its partners will “test the feasibility of applications in asset tokenisation and DeFi while managing risks to financial stability and integrity.” The project will explore use cases in 4 categories, including Open, interoperable networks, Trust anchors, Asset tokenisation, and Institutional grade DeFi protocols.

Within the context of its announcement, the MAS defined tokenisation as “the process of digitally representing assets or items of value through a smart contract on a blockchain. This allows high value financial and real economy assets to be fractionalised and exchanged over the internet on a peer-to-peer basis.”

Per its goals, the Singapore banking regulator seeks avenues whereby the emerging DeFi and smart contract governed finance services world will be brought under appropriate regulatory oversight in a bid to provide encompassing benefits to all industry participants.

“MAS is closely monitoring innovations and growth in the digital asset ecosystem and working through the potential opportunities and risks that come with new technologies – to consumers, investors and the financial system at large. Through practical experimentation with the financial industry and the broader ecosystem, we seek to sharpen our understanding of this rapidly transforming digital assets ecosystem. The learnings from Project Guardian will serve to inform policy markets on the regulatory guardrails that are needed to harness the benefits of DeFi while mitigating its risks,” said Sopnendu Mohanty, Chief FinTech Officer MAS.

While it defined the 4 primary areas it wishes to focus its exploration on, the MAS said additional innovations can be shared by industry participants provided they align with the overall goal it aims to achieve, a move that is contrary to earlier attempts to tighten anything crypto business activities.

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Australia’s Financial Regulator Issues First Regulatory Roadmap for Crypto Assets

The Australian Prudential Regulation Authority (APRA), a major regulator of the Australian financial services industry, announced on Thursday that it has issued a policy roadmap for implementing regulation for financial firms that engage in business activities associated with cryptocurrencies.

The financial regulator published a letter addressed to financial institutions it regulates, including banks and pension funds. In the letter, the APRA highlighted the need to provide such institutions with “more clarity” relating to crypto and financial regulation. The regulator, therefore, sets its expectations on how financial institutions should handle digital assets in the country.

The APRA acknowledged that “in recent years, there has been rapid growth in crypto-assets and the use of distributed ledger technology.” The regulator further admitted that although crypto activities are still relatively limited in Australia, such activities’ potential scale and risks could become significant over time.

APRA has therefore stated that it expects entities to conduct “appropriate” due diligence and comprehensive risk assessments before engaging in activities associated with crypto coins. The agency further expects entities to ensure that they understand and have plans to mitigate any risks.

The regulator also mentioned that it is creating a longer-term prudential framework for cryptocurrencies in Australia through consultation with other international regulators.

The APRA has set a tentative goal for 2025 to make sure its framework is effective. The agency plans to conduct consultations on requirements for the financial treatment of crypto coins in 2023. The regulator said it would release a draft standard within the next few months.

The Rising Use of Crypto in Business

The latest policy framework for crypto regulation is a progressive development being made by the Australian government.

Last month, the government announced plans to introduce legislation that seeks licensing and custody measures for the nation’s growing digital asset industry. The government also announced potential changes to the way the nascent asset class could be taxed.

In November last year, Commonwealth Bank of Australia (CBA), the Australian banking giant, became the first major Australian bank to allow customers to buy, sell and hold crypto assets. The APRA is now concerned that the move by CBA could entice other regulated institutions to offer such products.

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Cambridge University Partners with 16 Financial Institutions to Develop Crypto Asset Ecosystem

The University of Cambridge, through the Cambridge Centre of Alternative Finance (CCAF), has rolled out a multi-year research initiative with 16 key financial institutions like WorldBank, IMF, and MasterCard to shed more light on the rapidly evolving crypto-asset ecosystem.  

The research initiative dubbed the Cambridge Digital Assets Programme (CDAP) seeks to paint a picture of the opportunities and risks presented by the crypto space through an evidence-based public dialogue.  

Per the announcement:

“It is designed to address the broader ecosystem trends and issues through impactful research outputs that can help guide public opinion, inform regulation and policy discussion, as well as support evidence-based decision making by individuals and institutions globally.”

Moreover, the new programme intends to offer greater clarity about the digital asset ecosystem and value transfer systems by providing data-driven insights. Other players in the collaborative research include Visa, Goldman Sachs, Fidelity, Bank for International Settlements (BIS) Innovation Hub, Invesco, and Dubai International Financial Centre (DIFC).

Bryan Zhang, CCAF’s executive director, welcomed the initiative and noted:

“The growing adoption of digital assets increasingly blurs the lines between roles, responsibilities and applicable rules, stretching the boundaries of long-term institutional arrangements.”

CDAP’s research agenda will be categorized into three workstreams: emergent money systems comprising crypto-assets, enterprise and consumer tokens, central bank digital currencies (CBDCs), and stablecoins. 

Michel Rauchs, CCAF’s digital assets lead, stated:

“We believe that this programme will provide decision-makers with the objective analysis and empirical evidence that they need to navigate the digital assets maze.”

A recent study from Visa showed that building wealth and the financial way of the future were the primary drivers of owning cryptocurrencies. 

Furthermore, insights gained entailed cryptocurrencies being part of the popular consciousness and were poised for additional growth, especially in emerging markets.

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Crypto Price Shows Stronger Interconnectedness with Stock Market amid COVID-19: IMF

As a change of tune, the International Monetary Fund (IMF) alludes to how crypto-assets like Bitcoin (BTC) have transformed from an obscure asset class to an integral part of the digital asset revolution. 

In a statement, the IMF noted that cryptocurrencies are a notable part of the financial system because they are no longer on the fringe, given that their market value skyrocketed to $3 trillion in November 2021 from $620 billion in 2017. 

“There’s a growing interconnectedness between virtual assets and financial markets,” per the report.

The IMF research pointed out that the pandemic triggered the correlation between crypto-assets like Bitcoin and Ethereum with major stock indices. This relationship was made possible by the extraordinary central bank crisis responses in early 2020. 

The IMF stated:

“Returns on Bitcoin did not move in a particular direction with the S&P 500, the benchmark stock index for the United States, in 2017–19. The correlation coefficient of their daily moves was just 0.01, but that measure jumped to 0.36 for 2020–21 as the assets moved more in lockstep, rising together or falling together.”

The research also noted that the strong connection between cryptocurrencies and equities boosted crypto adoption. For instance, the correlation between Bitcoin and the MSCI emerging markets index increased 17-fold in the 2020-21 period from the preceding years. 

Nevertheless, the financial institution also highlighted that caution should not be thrown to the wind because the high correlation between cryptocurrencies with traditional holdings like stocks raised the risk of contagion across financial markets.

Last year, the IMF raised its concerns about El Salvador’s decision to make Bitcoin legal tender because it raised a number of macroeconomic, legal, and financial issues that necessitated careful analysis. 

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3 reasons why DeFiChain (DFI) price has gained 60% in December

Decentralized finance (DeFi) offers one of the most widely applicable use-cases for distributed ledger technology and today it is one of the main avenues for the wider adoption of blockchain technology.

Last week, as the wider crypto market corrected and Bitcoin (BTC) dropped by 22%, DeFiChain (DFI) bucked the trend and rallied 76% to establish a new high at $5.70 on Dec. 6 as its 24-hour trading volume surged from an average of $3.6 million to $24.3 million.

DFI/USDT 4-hour chart. Source: TradingView

Three reasons for the price breakout for DFI include the launch of decentralized assets on the DFI mainnet, a surge in transactions and users on the network and an increase in the total value locked on the protocol.

Traders pile into decentralized stocks and cryptocurrencies

The biggest source of momentum for DFI in recent weeks has been the launch of decentralized assets on the DeFiChain network and staking options for holders.

Users of the platform now have access to multiple pools that include large-cap cryptocurrencies like Bitcoin and Ether, as well as synthetic versions of popular stocks and indices, including pairs for Tesla (TSLA), Apple (APPL) and the S&P 500 (SPY). In addition to having exposure to these assets, stakers also benefit from the higher-than-average yields available on the platform.

DeFiChain DEX pool pairs. Source: DeFi Scan

Other d-asset options available to users include Gold (GLD), Silver (SLV), the ARK Innovation ETF (ARKK) and the iShares 20+ Year Treasury Bond ETF (TLT).

Transaction volumes surge

Another reason for the strong performance seen from DFI has been an increase in transactions on the network following the release of decentralized assets.

Daily DeFiChain transaction count. Source: DeFiChain Analytics

The surge in network activity is largely the result of the new use cases made possible by the launch of decentralized assets, including the creation of assets, liquidity mining and arbitrage trading.

The added features have also helped to attract new users to the DFiChain ecosystem, with the number of unique wallets holding DFI reaching a new record high of 42,555 on Dec. 8.

Unique addresses holding DFI. Source: DeFiChain Analytics

Related: Nasdaq to provide price feeds for tokenized stock trades on DeFiChain

Total value locked hits a new all-time high

DFI has also seen a steady increase in total value locked on the DeFiChain protocol, which is now at an all-time high of $1.83 billion according to data from Defi Llama.

Total value locked on DeFiChain. Source: Defi Llama

The spike in value locked coincides with the launch of decentralized assets on the network and it’s claer that users rushed to deposit funds to gain access to the high yield opportunities available to liquidity providers.

Aside from the staking features offered on the DeFiChain DEX, larger DFI holders with at least 20,000 DFI also have the option of locking their DFI tokens up in order to run a masternode on the network and earn rewards in return for helping to verify transactions and secure the blockchain.

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Every investment and trading move involves risk, you should conduct your own research when making a decision.