Banking giant JPMorgan has recently noted that the trend of de-dollarization is gaining momentum as central banks worldwide reduce their holdings of the United States Dollar (USD).

According to JPMorgan strategists Meera Chandan and Octavia Popescu, the portion of USD when it comes to the central banks and their foreign exchange reserves has reached a record low of 58%. They also highlight the increasing prominence of de-dollarization when considering the significant accumulation of gold by central banks in the past five years.

UBS, another prominent bank, also recently stated that central banks intend to acquire 700 metric tons of gold, equivalent to $48.74 billion, in 2023. This shift is driven by concerns over geopolitical issues and persistent inflation, leading countries to move away from relying on the USD.

JPMorgan analysts acknowledge the emergence of signs indicating de-dollarization. They anticipate that this trend will persist despite the USD having a substantial presence in global trade settlements.

Over the past few decades, both the USD and the Euro have maintained stable shares of 40% to 50% in trade invoicing. Additionally, the proportion of USD when it comes to foreign exchange trading volumes remains close to its all-time high of 88%.

Furthermore, JPMorgan analysts revealed that the USD continues to dominate SWIFT payments, accounting for 43% of transactions. In comparison, the Euro constitutes 32% of transactions, while the Chinese Yuan comprises 2.3%.

The US Securities and Exchange Commission (SEC) has accused Binance, the biggest cryptocurrency exchange in the world, of mishandling customer funds and providing false information to American regulators and investors.

This lawsuit has the potential to significantly impact the power dynamics of the crypto industry. The SEC alleges that Binance mixed billions of dollars in customer funds and secretly sent them to a company controlled by its founder. They also claim that Binance misled investors about its ability to detect manipulative trading and restrict users living in the United States.

Binance has expressed disappointment and plans to vigorously fight the lawsuit. CEO Changpeng Zhao believes the charges are part of broader regulatory efforts to rein in the crypto trading world. Binance has faced other legal actions and scrutiny in the past, resulting in the company taking steps to improve compliance such as the formation of Binance US.

Nevertheless, the SEC is seeking restitution and aims to bar the founder from holding certain positions in US entities that issue securities. US investors, on the other hand, are also disappointed as they largely believe the SEC to be acting in their own self interest rather than looking after the general public.

Currently, Apple shares and gold are considered more stable investment options than Bitcoin. However, the infamous price volatility of the flagship crypto has decreased significantly compared to its historical average, with an annualized rate of 32% compared to the previous average of 71%.

While Bitcoin has been known for its highly unpredictable price swings, it is currently exhibiting less volatility than tech giants Amazon and Meta. The cryptocurrency is experiencing this unusual stability during a period referred to as the summer lull, characterized by reduced trading volume. In fact, this summer is on track to be the calmest since 2020.

Bitcoin faced significant instability last summer, marked by a sharp drop in value followed by a recovery by the end of the year. During that time, both its price and stability were negatively affected by the general downturn in the crypto market and the Terra-Luna fallout.

Although its volatility has not reached the levels seen in solid assets like gold and Apple stock, Bitcoin currently exhibits more stability than both Meta and Amazon, which have volatility rates of 44% and 34% respectively. For comparison, the volatility rate of the Dow Jones Industrial Average is currently at 13%.

However, LedgerPrime Vice President Laura Vidiella believes that this recent period of low volatility does not indicate a major shift in the market. She anticipates that significant price swings and volatility will return in the fall.
If this prediction aligns with general expectations, we might see a price surge in the late third and early fourth quarter of this year.

Aligned with the prevailing sentiment in the broader cryptomarket, the price of Ethereum (ETH) has experienced a temporary halt, but the decrease in network fees suggests a reason for optimism. The lower fees create a more convenient and practical environment, making it easier for users to engage with the Ethereum network.

Recent data from Santiment revealed that average Ethereum fees have returned to their usual levels after reaching a peak of $14 per ETH transaction in early May.

Most recently, there was a significant 69% decline in just 25 days. This was initially triggered by the popularity of meme coins, particularly the successful launch of the Pepe (PEPE) token, which led to increased activity on both the Ethereum and Bitcoin networks.

Furthermore, the percentage of Ethereum supply available on crypto exchanges reached an all-time low of 9.9%. This decline is attributed to the growing trend of self-custody, where users prefer to hold their assets securely instead of relying on trading platforms. Factors contributing to this shift include concerns surrounding platform security and a lack of regulatory clarity regarding the classification of ETH as a security or commodity.

In addition to the low supply on exchanges, another noteworthy milestone for Ethereum is the deposit of over 4.4 million ETH since April 12th, resulting in a deposit contract balance exceeding $40 billion. This milestone coincides with the implementation of the Shanghai upgrade, a highly anticipated update which ETH holders had been awaiting for some time.

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The conference is set to be the largest event of its kind and will serve as a platform for exploring the future possibilities and advancements in blockchain technology. It brings together experts in the fields of Web3, crypto, DeFi, GameFi, NFTs, DAOs, the metaverse, and more.

Put simply, the annual event offers an immersive crypto experience with features such as crypto-powered marketplaces, NFT galleries, crypto ATMs, and the integration of blockchain technology in the context of real world use cases.

With a consistent attendance of over 6,000 participants each year, the event provides an excellent opportunity to network with prominent founders, investors, and projects. Attendees can connect with industry leaders at the VIP Cabanas, participate in exciting networking events, and explore exhibitor booths located on multiple levels.

The event also aims to educate participants about the future trends and advancements in the field, encouraging them to become active contributors to the Web3 movement. Notable speakers at the event include Charles Hoskinson, Michele Romanow, Anthony Di Iorio, Ethan Buchman, Jaime Leverton, Tamara Haasen, Miko Matsumura, Silvina Moschini, Adam Cai, Sascha Darius Mojtahedi, Pamela Draper, Ben Armstrong, Trevor Koverko, and many more esteemed individuals.

Additional details will follow in the weeks building up to the event.

The XRP network has recently experienced two significant surges in address activity, marking a positive trend for the digital currency. These record setting spikes were identified by blockchain analytics platform Santiment.

This occurrence suggests a potential upswing for XRP, similar to the price appreciation it observed following a surge in address activity on March 18th. Presently, XRP is valued at just over $0.50, reflecting a 4.2% increase for the day and a substantial 7.8% growth over the week.

The divergence of XRP and its behavior from other cryptocurrencies, such as Bitcoin and Ethereum further supports the notion of a possible breakout for XRP. It is worth noting that these notable address activity spikes coincide with increased attention on Ripple due to an ongoing lawsuit with the SEC concerning the classification of XRP as a security.

However, Ripple CEO Brad Garlinghouse recently hinted at the potential resolution of the case within the next few weeks, offering an optimistic outlook that could have spurred the heightened network activity.

If the SEC lawsuit is successfully resolved, it could provide a significant boost to XRP by addressing regulatory uncertainties and potentially driving increased adoption. However, nothing has been confirmed as of this moment.

Many crypto-natives think of DeFi and big names like Uniswap and Aave come to mind. However, for the everyday person that knows nothing about crypto, those names mean nothing. Why is that? Mostly because DeFis main use cases in 2023 are still targeted at solving needs for the crypto-native. Use Uniswap to swap ETH for your favourite meme coin. Use Aave to take out a loan against your staked ETH to buy your favourite meme coin. Of course I am mostly kidding, but there is some truth here. DeFi is still quite far away from mass adoption. Or at least it feels that way. Being born and raised in North America, we can be quite ignorant to the financial problems that people in developing nations faced. In some places around the world people face:

• Governments and banks stealing their funds
• Inflationary pressure
• High FX conversion rates for illiquid currencies
• Expensive fees on cross-border payments

And for the above reasons, citizens and businesses in African countries are looking to DeFi and crypto more broadly to circumvent the challenges of their existing financial system.

Enter Canza Finance

The team at Canza Finance is building a suite of products that will bring DeFi to developing regions such as sub-saharan Africa and onboard millions of users into crypto.

Canza Finance solutions entail five different but interconnected areas encompassing Cryptocurrency Onramp and Offramps, Crossborder Settlements, Treasury, Decentralized Finance, Crypto Teller Machines, Agent-based banking, and IPFS Storage.

In the future, Canza will offer on-chain asset management solutions before eventually becoming a fully on-chain investment bank.

The Canza team has high ambitions and we could spend hours detailing every area of the business, but for the purpose of this article we are going to highlight Baki.

The Problem with African FX

Currently it is quite tough to operate an intra-African trade network for many reasons. Businesses in countries like Nigeria face a crucial obstacle stemming from restricted access to central bank rates. The Nigerian government has taken it as a matter of pride to artificially keep the &ldquoofficial" FX rate for the Naira low, and only offers this rate to exclusive investors and exporters. This restriction has led to the emergence of fragmented liquidity and parallel rate markets, where trading occurs at substantially higher rates than the central bank rate. Consequently, businesses seeking to engage in local currency transactions may encounter significant limitations in obtaining the necessary liquidity, potentially resulting in additional costs when settling larger transactions.

Introducing Baki

Baki V1 introduces an FX exchange that ensures unlimited liquidity for users. It does this by providing access to synthetic on-chain assets known as zTokens, which are pegged to African currencies. Baki will pioneer the implementation of on-chain African stable coins. Its primary objective is to alleviate the scarcity of US dollars in emerging markets, offering users the ability to enter dollar markets without slippage and at the most competitive rates available in the markets.

By developing a synthetic asset that can be freely traded at the central bank rate, Baki democratizes access to exclusive exchange rates. Additionally, Bakis architecture facilitates infinite liquidity, ensuring that a unit of zUSD can always be exchanged for an equivalent value in any supported currency. This directly addresses the challenges arising from the fragmented liquidity in existing models.

Finally, Baki offers another significant advantage by enabling assets to be natively quoted in local currencies on the blockchain. This opens up opportunities for exchanges to price assets directly in local currencies, eliminating the necessity for fiat-priced on-ramps or assets denominated in US dollars.

Baki in Action

While this all may sound good in theory, lets take a deeper dive into Baki's potential user base and the LP partners that will make all of this possible.

An American construction company is looking to purchase Nigerian Naira for a project. They can either approach and onboard with Jara Network or Baki. Jara Network is a Canza Finance business line which is a typical FX OTC desk (with lower fees than the competitor). This infrastructure will act as the means to onboard future users of Baki as they have a trusted anchor in the real world.

A company that is new to crypto can easily sell their fiat for a zToken (stablecoin currencies from around the world) and then become a Baki user. Furthermore, firms that have other access to crypto can simply use other stablecoins such as USDC to mint zTokens.

If they needed to buy $1m USD worth of Naira, they would deposit $1.5m of USDC to mint $1m ZUSD. They could then use Baki to trade zUSD for zNGN at 80 bps premium to central bank FX rates.

So who provides the liquidity on the other side of the trade?

Baki LPs

Canza agent partners act as LPs that can offer NGN to zNGN swaps. They hold large USDT/USDC positions and therefore have an incentive to mint zTokens.

Baki LPs enjoy access to two notable properties, which offer distinct advantages:
1) They implicitly take a short position on African currencies since these positions are essentially debt positions. This means they can benefit if African currencies devalue in comparison to the US dollar.
2) 50% of Baki transaction fees are distributed to minters as yield, paid in zUSD. Consequently, during periods of volatility in African currencies, there will be excess yield available.

Considering all factors equal, let's assume someone provides NGN to zNGN, with a spread of 75% between the official exchange rate (used as a reference price by Canza) and the parallel rate (at which all P2P liquidity is provided). In this case, the price for 1 zNGN should ideally be 1.75 NGN. However, since the minter earns yield on their position, they should offer it at 1.75 NGN minus the yield they earn to maintain a fair value. Assuming a yield of 30%, they should offer 1 zNGN for 1.45 NGN.

It's also important to consider the implicit short position they hold on African currencies. As a result, they should offer zNGN at a price lower than 1.45 NGN per zNGN. Consequently, given the markets high sensitivity to fees, any entity capable of offering zNGN below the standard parallel market price will be able to capture a significant portion of the market share for FX swaps that provide on/off ramps into zNGN instead of directly into USDT.

In Conclusion

Not all market participants are as privileged as the western world to have the access to robust financial markets and systems. In many emerging markets there are shortcomings that make it tough for consumers and businesses to predict the financial markets they reside in, making it tougher to interact with one another.

Cryptocurrency protocols such as Baki are providing solutions to these problems. DeFi in Africa has the ability to change the financial landscape as we know it, as builders in web3 find creative ways to reduce the friction of these markets and provide them with more autonomy over their financial decisions.

The banking giant recently filed a trademark application for a new generative AI tool known as IndexGPT with the US Patent and Trademark Office, indicating their intention to utilize it in various business areas such as advertising, business consulting, and finance-focused software solutions which also includes crypto based offerings.

The decision to develop IndexGPT aligns with the perspective of CEO Jamie Dimon, who has previously expressed a keen interest in AI. Dimon previously mentioned that the company already has more than 300 AI use cases in production, covering areas like risk assessment, marketing, customer experience, and fraud prevention.

While numerous technology giants are eagerly adopting generative AI tools across different sectors, Apple has taken a different approach by imposing restrictions on the use of ChatGPT and similar tools. This decision was prompted by concerns about the potential compromise of sensitive data. An internal document highlighted specific restriction by Apple on the usage of Copilot, an AI tool owned by GitHub that automates software code writing.
 

The ERC-6551 protocol has introduced token-bound accounts, enabling individual NFTs to function as a wallet of sorts. This innovation was discussed by Benny Giang, the co-founder of Future Primitive and the renowned CryptoKitties NFT collection.

The concept behind this development originated from a collaboration between Giang and streetwear designer Jeff Staple called Sapienz. They sought to reimagine the future of storytelling, streetwear, and fashion through profile pictures (PFPs).

By assigning each NFT its own smart contract account or wallet, which became ERC-6551, a breakthrough was achieved. According to Giang, all NFTs on the Ethereum mainnet, from CryptoKitties to the latest projects, now possess their own account addresses capable of holding various tokens.

Token-bound accounts endow NFTs with two significant properties. Firstly, they can own assets, including ETH, USDC, and other NFTs. Secondly, they can participate in social governance. As Giang explains, NFTs can become signers on multisig transactions, possess their own ENS sub-domains, and engage in voting on proposals.

Giang metaphorically describes this as granting NFTs a passport, providing users access to diverse functions like bank accounts and voting. Taking it a step further, Giang suggests that incorporating AI into NFTs could infuse them with personalities, allowing them to tweet and execute on-chain actions.

Ultimately, Giang views this as a natural progression for human interaction and digital interfaces, facilitating deeper engagement and interaction among users worldwide.

Binance has finally made its entry into the NFT lending space by introducing a new feature on its NFT marketplace. Users can now borrow cryptocurrencies by using NFTs as collateral.

Initially, the feature supports borrowing ETH against blue-chip NFTs such as Bored Ape Yacht Club (BAYC), Mutant Ape Yacht Club (MAYC), Azuki, and Doodles. The current interest rate for NFT loans stands at 7.91% per annum, and the loan-to-value ratio ranges from 40% to 60%. Notably, there are no gas fees or Ethereum transaction charges associated with these loans.

Binance launched its NFT marketplace in June 2021 and plans to add support for Ordinals (Bitcoin NFTs) in addition to the existing blockchain systems of Ethereum, Polygon, and BNB Chain.

This move follows the recent introduction of Blend, an NFT lending protocol by the NFT marketplace giant, Blur. Blend allows lenders to determine their own interest rates and loan-to-value ratios, showcasing its rapid growth and potential to revolutionize the lending landscape.

In other news, Binance also recently gained its first Southeast Asian license from Thailand as the team gets ready to launch a new Thai crypto exchange in late 2023.

Starting June 1st, the Hong Kong Securities and Futures Commission (SFC) will begin accepting applications for licenses from cryptocurrency exchanges. The SFC has issued guidelines that prohibit the offering of crypto gifts aimed at incentivizing retail investments, including airdrops. It has also stated that stablecoins should not be allowed for retail trading until they are regulated.

According to the latest consultation on policy recommendations, licensed virtual asset providers will be allowed to serve retail investors as long as they assess the overall understanding of the investors and associated risks. The SFC sought public feedback on its initial policy recommendations in February before finalizing them.

The guidelines place the responsibility on platform operators to conduct thorough due diligence, emphasizing that meeting the minimum requirement of being included in two acceptable indices is not sufficient for listing a cryptocurrency for trading.

Under the new rules, crypto exchanges must also maintain a minimum capital of $640,000 (USD) at all times. They are also required to submit reports on available and required liquid capital, a summary of bank loans and credit facilities, and profit and loss analyses to the SFC on a monthly basis. In addition, approved tokens on regulated exchanges must have a 12-month track record.

The SFC mentioned that it will separately consult on the inclusion of derivatives, which are crucial for institutional investors. Regarding the implementation of the travel rule by the FATF, which involves sharing information on crypto transactions between financial institutions, the SFC will accept delayed submission of required information until January 1st, 2024, if immediate submission is not feasible during the virtual asset transfer.

Ledger, the renowned cryptocurrency hardware wallet manufacturer, recently introduced a new Bitcoin (BTC) key recovery feature, aiming to provide users with an additional layer of convenience and security as it will reportedly enable them to back up their private keys so that they may be recovered if lost.

However, the introduction of this feature has not been without controversy, as experts and critics raise doubts about its safety and effectiveness. More importantly, it is indicative of how Ledger may have violated the trust of its user base with potentially catastrophic consequences.

Safety or violation of trust?

When it comes to user satisfaction and building trust, being technically correct is not enough. It is impossible to overestimate the importance of addressing user concerns and striking a balance between security and convenience, as while the new feature may be useful in the long run as far as Ledger is concerned, the crypto community remains unconvinced and feels betrayed.

Since then, Ledger has responded to the criticism and concerns expressed about their new wallet recovery service. The company talks about the specifics and how it intends to help users recover lost or inaccessible Bitcoin keys. Despite the controversy, Ledger defends the implemented security measures and emphasizes their commitment to protecting user assets.

Still, experts have expressed concerns about the security of the new Bitcoin key recovery feature. They evaluate the technical aspects while also examining potential vulnerabilities and risks associated with the recovery process. Twitter user foobar told his 132,000 followers to stop using Ledger hardware wallets as soon as possible, claiming that the company has shown nothing but gross incompetence and wild misunderstanding of their own purposes. Similarly, Polygon Labs CISO Mudit Gupta informed his 61,000 followers that the new recovery feature is a horrendous idea and that no one in their right minds would support it.

What comes next?

While it is optional, the new feature will split the private keys of the users into three encrypted fragments which would be stored by three different companies, including Ledger. Users who once trusted that it was next to impossible for their private keys to ever leave their Ledger devices are understandably livid with this new feature, as they believe it defeats the purpose of having a hardware wallet in the first place.

As to why Ledger would do this, the official statement was that the feature will make it easy for anyone to own crypto by eliminating the confusing and complicated terminologies and processes associated with private keys and crypto wallets. Nevertheless, many believe that this is indeed a violation of trust and numerous Ledger users are now shifting to alternative options like Argent and Trezor.