The Bank for International Settlements (BIS), known as the central bank for central banks, has unveiled Project Agorá, an initiative aimed at delving deeper into blockchain technology to enhance the monetary system.
Hyun Song Shin, BIS Economic Adviser and Head of Research highlighted the potential of tokenization, stating, “Tokenization combines the record-keeping function of a traditional database with the rules and logic that govern transfers.” Project Agorá aims to leverage tokenization to improve existing capabilities and introduce new functionalities to the monetary system while upholding its core principles.
The project boasts collaboration from leading central banks including the Bank of France, Bank of Japan, Bank of Korea, Bank of Mexico, Swiss National Bank, Bank of England, and the Federal Reserve Bank of New York. Together with a consortium of private financial firms convened by the Institute of International Finance (IIF), they will explore the seamless integration of tokenized commercial bank deposits with tokenized wholesale central bank money within a “public-private programmable core financial platform.”
The envisioned infrastructure holds promise for enhancing the monetary system and unlocking new possibilities through smart contracts and programmability. By overcoming structural inefficiencies, especially in cross-border payments, the initiative seeks to streamline operations and improve efficiency.
Cecilia Skingsley, Head of the BIS Innovation Hub, emphasized the project’s goal of creating a common payment infrastructure that brings together various elements of the financial system for improved efficiency.
The collaborative effort will involve testing the technology within the operational, regulatory, and legal frameworks of participating currencies, along with financial companies operating in those jurisdictions. Additionally, the project aims to address challenges related to financial integrity controls, such as anti-money laundering measures and customer verification.
Project Agorá represents the BIS Innovation Hub’s experimental approach to exploring and delivering public goods to the global central banking community. Moving forward, the BIS plans to invite regulated financial institutions to join the project, aiming to include several institutions representing each of the seven participating currencies. Specific instructions and requirements for interested parties will be provided in due course.
Amid the ongoing crypto bull market, the top crypto exchange insurance funds have seen a remarkable surge in value, exceeding $1 billion.
As of April 3, Binance’s Secure Asset Fund for Users (SAFU), comprising Bitcoin, BNB, Tether, and TrueUSD (TUSD) balances, has surpassed $2.03 billion, soaring from its initial balance of $1 billion in January 2022. Similarly, Bitget’s protection fund, initially set at $300 million when launched in November 2022, has now grown to $612 million due to the appreciation of its Bitcoin holdings. Over the past year, Bitcoin has witnessed a 136% surge, while BNB has seen a 79.36% increase, contributing to the growth of these insurance funds amidst the crypto bull run.
While most exchanges offer some form of insurance protection for users, only Binance and Bitget have disclosed their on-chain addresses. Huobi (now HTX) previously announced a reserve of 20,000 BTC ($1.32 billion) in an independent address in 2019, aimed at addressing extreme security incidents. However, it remains unclear if the exchange still holds this balance, especially after suffering several exploits last year resulting in significant losses.
Crypto exchange OKX operates a $700 million “Risk Shield” program for user protection, although the composition of this amount in terms of tokens, stablecoins, or fiat funds is unclear. Conversely, exchanges like Coinbase provide insurance based on customers’ geographical location and the nature of their funds, whether in fiat or crypto.
Some exchanges may choose not to disclose on-chain addresses for various reasons, including concerns about cybersecurity attacks or potential deception, as seen in the case of the defunct exchange FTX. Former FTX chief technology officer Gary Wang revealed that FTX’s claimed $100 million insurance fund in 2021 was fabricated and did not contain any FTX Token (FTT). This underscores the importance of transparency and accountability in the crypto exchange ecosystem.
While on-chain addresses provide insight into the assets held by exchanges, they do not account for off-chain liabilities. In response to such concerns, jurisdictions like Hong Kong have mandated crypto exchanges to offer insurance covering up to 50% of users’ fiat and crypto assets, ensuring greater protection for investors.
Cathie Wood, CEO of ARK Invest, suggests that Bitcoin’s meteoric rise in price this year is not solely attributed to the introduction of Bitcoin ETFs. Instead, Wood argues that Bitcoin is gaining traction as a “flight to safety” amidst concerns about depreciating fiat currencies.
In an interview with CNBC shared on April 3, Wood emphasized that Bitcoin serves as both a risk-on and risk-off investment. She highlighted the significance of fiat currency devaluation as a driving force behind Bitcoin’s price surge.
While the launch of exchange-traded funds has garnered attention, Wood believes that the broader global economic landscape is playing a pivotal role. She pointed to instances of currency devaluations, such as those observed with the Nigerian naira and Egyptian pound, which have lost considerable value against the U.S. dollar due to deliberate government interventions rather than market forces.
Wood characterizes Bitcoin as a hedge against devaluation and loss of purchasing power, positioning it as an insurance policy against unfavorable fiscal and monetary policies adopted by governments. She draws parallels with previous financial crises, such as the U.S. regional banking crisis in 2023 and the Greek financial crisis in 2013, to underscore Bitcoin’s role as a safeguard against adverse economic conditions.
While ARK’s ETF product competes with major asset managers, recent data showed uncharacteristic net outflows of nearly $90 million. Wood attributes this to quarterly rebalancing flows and remains optimistic about Bitcoin’s long-term prospects, predicting a $1 million price target by 2030 fueled by institutional adoption.
Despite the fluctuations in fund flows, Wood maintains her bullish stance on Bitcoin, emphasizing its value proposition as a hedge against government fiscal policies and currency devaluation.
The Bank of England (BoE) and the Financial Conduct Authority (FCA) are eyeing autumn 2024 for the debut cohort of participants in the UK Digital Securities Sandbox (DSS), designed to facilitate the adoption of digital assets within financial markets.
Presently, the central bank and regulatory body are seeking feedback on their proposed operational framework for the DSS, with plans to open applications during the summer.
In a joint consultation and draft guidance released on Wednesday, the BoE and the FCA outlined their aspirations for the inaugural group of entrants into the Digital Securities Sandbox, a venture aimed at fostering innovation in digital assets. This initiative involves adapting regulations to permit eligible UK firms to utilize emerging technologies, such as blockchain and distributed ledger networks, in the trading and settlement of digital securities, excluding derivative contracts and “unbacked crypto assets” like bitcoin and ether.
FCA Executive Director Sheldon Mills emphasized the transformative potential of the DSS, stating, “The new Digital Securities Sandbox reshapes how we regulate by allowing firms to test regulatory changes using real-world situations before these changes are made permanent.” Mills added, “The new sandbox also helps strengthen the U.K.’s leading position as a global and vibrant financial center, by driving adoption of new technologies for trading and settling traditional assets.”
It’s crucial to note that the DSS differs from the Digital Sandbox, launched by the FCA in August 2023, which supports firms in the nascent stages of digital product development.
Timeline and Implementation
The UK Treasury initially proposed the DSS in July 2023, followed by the government’s response to the consultation and plans to enact legislation to implement the initiative in November. Subsequently, the government introduced new regulations in December, providing supervisory guidelines for the sandbox under the Financial Services and Markets Act 2023, which took effect on January 8.
Following the release of the joint consultation paper, interested parties have until May 29 to provide feedback. Subsequently, the BoE and FCA will issue a response and begin accepting applications for the DSS, scheduled for the summer of 2024. The regulators anticipate that the first cohort of DSS participants will join the initiative as early as autumn.
BoE Executive Director for Financial Market Infrastructure, Sasha Mills, emphasized the importance of the Digital Securities Sandbox, highlighting its role as a crucial tool for regulators to understand how to adapt safely to technological advancements and changes in critical financial market processes such as securities settlement. Mills also expressed a warm welcome to input from potential participants and expressed anticipation for collaboration with the FCA, government, and industry throughout the DSS.
Successful applicants will have the opportunity to offer securities depository and settlement services and operate a trading venue under a single legal entity. The DSS aims to encompass a diverse range of firms to maximize learning opportunities and foster innovation within the UK financial system. This endeavor could pave the way for expedited and cost-effective trading, settlement, and utilization of securities among financial market participants. The initiative is slated to run for five years, contingent upon entry limits, and could culminate in permanent regulations governing the trading and settlement of digital assets.
The stablecoin supply within the layer-1 blockchain network Solana has experienced a steady rise since the start of the year, surpassing the $3 billion milestone in recent days.
Data sourced from the blockchain analytics platform Artemis reveals a 55.72% increase in stablecoin supply over the last three months, now totaling $3.12 billion on the network.
While this figure is notably lower than the balance recorded in 2022, when over $6 billion worth of assets were present on the blockchain, it marks a significant recovery from the low point of $1.4 billion during the bear market. The recent upward trend signals a resurgence in activity.
Moreover, stablecoin transfer volume on Solana has surged by an impressive 164%, reaching $1.4 trillion, underscoring the network’s robust activity levels.
USDC Dominance
A breakdown of stablecoins on Solana highlights the dominance of Circle’s USD Coin (USDC), which accounts for 73% of such assets on the network.
Recent data from Artemis shows USDC’s substantial share of stablecoin transfer volume, amounting to $63.69 billion on April 2, overshadowing USDT’s $812.41 million. EURC ranks third with a volume of less than $100,000.
The rise of USDC’s dominance on Solana correlates with Circle’s introduction of its Cross-Chain Transfer Protocol (CCTP) on the network on March 26.
Reasons Behind Solana’s Stablecoin Surge
Stablecoins serve as a vital bridge between traditional fiat currencies and digital assets. The increasing stablecoin supply indicates heightened liquidity and suggests a rise in capital inflow.
Market analysts attribute this surge to the influx of capital into the network, coinciding with the hype surrounding meme coins and the expanding DeFi activity within the Solana ecosystem.
Despite past controversies involving Sam Bankman-Fried, the founder of FTX, the Solana blockchain ecosystem has witnessed significant growth over the past year. This growth has attracted a wave of new users and forged substantial partnerships with major global financial entities like Visa and Shopify.
Coinbase has joined the ranks of prominent cryptocurrency trading platforms like Binance by integrating the Bitcoin Lightning Network, fulfilling promises made by CEO Brian Armstrong.
In a statement released on April 3rd, Lightspark, a lightning network-based payment infrastructure provider, announced its selection by Coinbase to facilitate the integration of the Bitcoin Lightning Network.
Through this partnership, Coinbase will utilize Lightspark’s remote-key signing implementation. This setup enables Coinbase to maintain control of the Lightning signing keys while Lightspark manages the Lightning node infrastructure. This collaborative approach ensures smooth operations without overwhelming Coinbase’s team with the management of a large-scale implementation.
Lightspark has garnered significant success in simplifying Lightning node management. Its suite of products, including SDKs, APIs, and developer tools, seamlessly integrates with the Lightning Network. Moreover, Lightspark’s AI-based smart engine, known as Lightspark Predict, dynamically optimizes liquidity needs to improve transaction success rates in real time.
Benefits of Lightning Integration
The integration provides several advantages for Coinbase, including leveraging Lightspark’s node infrastructure while allowing its team to concentrate on customer-centric initiatives.
Furthermore, the collaboration will positively impact the Bitcoin network, particularly during periods of increased transaction fees, by improving scalability and transaction efficiency. Furthermore, it sets the foundation for future applications by supplying liquidity to the Bitcoin network.
Shan Aggarwal, Coinbase’s VP of Corporate & Business Development, conveyed excitement regarding the partnership, expressing the company’s eagerness to collaborate with Lightspark to remove payment barriers and facilitate faster and more cost-effective Bitcoin transactions by supporting the Bitcoin Lightning Network.
Recently, Coinbase has faced mounting inquiries from various crypto community members regarding its delay in adopting the scaling solution, especially following the integration of the technology by major competitors like Binance.
In response, Armstrong reaffirmed Coinbase’s commitment to incorporating the Lightning Network, highlighting the company’s ongoing efforts.
This integration holds significance for Bitcoin, considering the growing demand for streamlined Bitcoin transactions amidst soaring prices.
Walter Medina, 31, found himself demoralized when he tried to buy his first home.
Medina and his wife began looking for homes in suburban Maryland in January, keen on landing something quick because their apartment lease was ending soon. Their budget was between $400,000 and $425,000, and the couple planned to put down 3% of the home’s purchase price.
High mortgage rates didn’t spook Medina, even if they meant taking on a 30-year loan at a 6.8% interest rate. The process of actually finding a house and signing the contract, he said, was the painful part.
After attending around 15 open houses, the couple put down five offers, all of which fell through. “I just remember the first one. It felt like we were getting crushed,” Medina said. The home was listed at $395,000, so the couple offered $405,000. The buyer ended up going with an all-cash offer of $400,000 that came with no contingencies.
Bid after bid, buyers with deeper pockets kept beating out Medina and his wife. “There was one where they went [$40,000] over asking,” Medina recalled. “It was extremely competitive.”
Over a third of home purchases in February were made with all cash, according to a Redfin analysis. “In many places, wealthy Americans are the only ones who can afford to buy homes,” said Chen Zhao, the brokerage’s economics research lead.
But the couple’s efforts eventually paid off with their sixth bid, and they closed on their home March 5.
Medina’s experience illustrates how competitive and expensive the U.S. housing market has become for first-time home buyers, particularly millennials.
It’s also a tale of perseverance and success. Millennials, the largest generation in the U.S., are the country’s dominant home buyers today, according to the National Association of Realtors’ latest annual report on generational trends in home buyers and sellers. And their demand for homes to buy is likely to only intensify in the years to come, based on industry forecasts and analyses of demographic trends.
Millennials reclaim the home-buying title after brief boomer takeover
To be sure, older generations still have the upper hand in the housing market.
“Sellers have lived in their homes for a long period of time, and they’ve gained a lot of housing equity,” Jessica Lautz, the deputy chief economist and vice president of research at the National Association of Realtors, told MarketWatch. So when they’re buying homes, they can pull out all the stops and pay for a home with cash.
“But millennials found a way to enter into the market,” Lautz added.
After a brief period last year when millennials lost the title of the dominant home-buying generation to baby boomers, they have taken back the title, the new NAR report found. Millennials made up 38% of home buyers, the largest group by generation, followed by boomers at 31% and Gen X at 24%.
First-time buyers made up 32% of all home buyers, the NAR said. Younger millennials in particular made “huge strides in becoming a first-time home buyer,” Lautz said; about 17% of home buyers were younger millennials.
In fact, the 2023 surge by boomers was a blip, as millennials have made steady gains in homeownership and have outpaced their elders every year since 2014, aside from last year, Lautz said.
But with boomers seeing a sharp increase in home values and equity, they remain a formidable home-buying force. Over the next few years, there will be a tug-of-war between the two largest generations as to which will dominate the market, Lautz said.
Gen Z women make homeownership gains
At the other end of the spectrum, the youngest generation of home buyers — who generally have less wealth given their age — are making strong progress towards homeownership. Even though Gen Z made up the smallest share of home buyers, at 3%, women of that generation have made significant headway toward homeownership, NAR’s data showed.
Overall, 20% of recent home buyers were single women, and Gen Z made up the highest share of single women buyers, the NAR said, at 31%.
Jasmine Wells, a 24-year-old active-duty servicemember, was one of those new, single homeowners.
After learning in January 2022 that she would be stationed in South Carolina, Wells bought her first home there. She decided to buy after seeing how much cheaper it was to own rather than rent.
1st Lt. Jasmine Wells, who is in the Army, in front of her first home.
Photo courtesy of Jasmine Wells
“When I was looking at apartments, I saw that to get an apartment in a nice area, it was something like $1,800 a month,” Wells told MarketWatch in an interview. “I felt that it was like a really good idea for me to purchase a home.”
She found from her supervisor that there was a company that works with people in the Army, like her. The company then assigned her a specific real-estate agent during the house-hunting process, but that arrangement wasn’t working for her: The offers she submitted were falling through. She found her own agent and they looked at more homes, including newly constructed ones.
In May 2022, she found her target, and two months later, she closed on the newly built home for $300,000 with a mortgage backed by the Department of Veterans Affairs. She has a mortgage rate of 4.5%.
“My goal was to create generational wealth,” Wells said. “My mom talked to me a lot about how long she waited to purchase a home … and she completely regretted not purchasing it sooner to build generational wealth.”
Boomers still rule home-selling
When it comes to selling homes, there’s no doubt about it — baby boomers are the dominant generation.
Younger baby boomers in particular made up the largest share of home sellers, at 26%, NAR said. The median seller was 64 and earned a median income of $103,000.
Gen X made up the second-largest share of sellers, at 23%.
The most common reason homeowners cited for selling their house was to move closer to family and friends, according to the NAR. Other reasons included their home being too small and their family situation changing.
The typical homeowner lived in their house for 10 years before selling. That number has stayed the same over the past few years, but before the Great Recession, people used to move every six or seven years on average, Lautz said.
Tenure also varied widely by age group: Younger millennials typically stayed in their homes for four years, while sellers ages 59 and older stayed for 15 years.
One possible explanation for people staying in their homes for longer after the recession is that they “may think of their house in a different type of way,” Lautz said. People find staying in one place for a longer period of time to afford stability, and also allow them to build more equity in their home.
“But they may also have a lower interest rate, or [may] have purchased a larger home,” she added, “so this gives them some stability that they don’t have to make a housing trade.”
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