International Financial Settlement: Cryptocurrrencies vs Crypto-Assets
International financial settlements require a stable global asset and liquid asset markets. To date, cryptocurrencies have not yet been adopted as a tool for cross-border financial arrangements. Banks and financial service companies have offered up many reasons for this veto. The banker’s avoidance stems from three main reasons.
- A lack of supervised large-scale liquidity between cryptocurrency global trading parties.
- The volatility of cryptocurrency price as quoted in various global currencies.
- The lack of unified trading practices and settlement regulations.
Cryptocurrencies’s liquidity and volatility issues.
As of 2015, bitcoin’s global trading market is very scarce, unsupervised and in many cases unregulated across multiple jurisdictions. Bitcoin’s spotty and sometimes illegal trading cause’s its price to move in a very volatile price range as quoted from many foreign trading sources. Further variances in transaction price have been created through multiple large block private exchanges (off-market transactions) and uneven participation by trading throughout various jurisdictions.
Gold bullion’s stable global trading marketplace
Conversely, gold bullion and other precious metals trade 24/7 in every financial center on the planet. Multiple forms of gold’s value can be contracted, exchanged or stored to hedge gold trading activity and financial settlement. Just as it trades now in 2015, gold has been a stable and liquid asset for the thousands of years.
Gold is one of the civilized world’s oldest forms of money. It is recognized, accepted and traded throughout every country and region on earth. As an asset, gold is liquid, fungible, can hold value well and presents a stable price, as quoted in any global currency.
Unfortunately, across Bitcoin’s current unregulated, unsupervised and unaudited international backdrop of trading firms, the cryptocurrency lacks both stability and liquidity that global financial markets require for international settlement.
Benefits of Digix
The digital Proof of Asset (PoA™) Digital Ownership Certificate brings together the modern blockchain technology paired with the stability and liquidity of gold bullion. A Digix unit is a legal representation of gold. The audited units have a precise value based on the stable price of gold created by global markets. Those who possess the digital units that represent Digix tokens or Proof of Asset (PoA™) Digital Ownership Certificates are the legal owner of a specified amount of gold held securely offline through vaults in Singapore. Also, at any time that owner may exchange that digital representation of gold for actual gold bullion. The Digix asset is not a future promise to pay, or a debt note. Digix gold represents the legal ownership of gold bullion held offline, making this new technology a very useful tool for global financial settlements.
Similar to bitcoin, the online trading of Digix assets is a decentralized activity. Gold’s value, as secured by digital units, is traded through online person to person transactions without any central point of failure or requirement for an antiquated third party clearing agent. Decentralized Digix global asset transactions, backed by gold bullion, occur instantly and move securely along the Ethereum Blockchain. Because of the liquidity created by the global trading of gold, the act of valuing a Digix gold asset in any world currency occurs instantly. This feature of digital units backed by gold meets many of requirements for a large-scale multi-jurisdictional financial settlement between companies or even countries.
Every country in the world already values, stores and uses gold. This fact makes Digix’s gold assets efficient, secure and convenient financial tools.