The stable makeup of stablecoin

stablecoin, man with laptop staring at different fiat symbols

In 2008, Satoshi Nakamoto released the Bitcoin white paper, introducing the concept of a decentralized currency to the public. From that time on, many have turned to cryptocurrency for an alternative to traditional fiat currencies that offers decentralization, transparency of exchange, and ease of use—especially when it comes to international exchanges.

However, along with the plaudits have come disadvantages, notably the volatility of digital assets relative to the US Dollar. The perceived value of a specific cryptocurrency by investors can lead to wide fluctuations in the value of Bitcoin, Ether, and other types of crypto. This, in turn, can make cryptocurrency more difficult to use as a medium of exchange or store of value.

Enter stablecoins, an inherently less volatile option being considered the best of many worlds. They provide a desirable link between the stability of fiat currency and the decentralization and efficiency of cryptocurrency.

What are stablecoins and where did they come from?

Stablecoin is a catch-all phrase for cryptocurrency that is pegged to specific reserves or other asset types. More specifically, stablecoin is divided into four groups:

  • Fiat-collateralized stablecoins: Cryptocurrency assets secured against real-world currencies, such as USD Coin (USDC) and Gemini Dollar (GUSD).
  • Commodity-collateralized stablecoins: Cryptocurrency assets fixed against commodities, such as oil, gold, and silver. One example is Pax Gold (PAXG), which is one of the collateral types available on SALT’s platform.
  • Crypto-collateralized stablecoins: Algorithmic stablecoins that mint dollar equivalents based on the value of the crypto provided to backstop each unit.
  • Non-collateralized stablecoins: Stablecoins that automatically adjust its aggregate supply to maintain a certain price or pegged asset. 

The first stablecoins, BitUSD, and NuBits, came online in 2014 and were collateralized through various other cryptocurrencies. Also released in 2014 was RealCoin (now Tether), the first crypto to be backed by so-called “real” assets. Active dollar-based stablecoins today include Paxos Standard, TrueUSD, USD Coin, Tether USD, and Gemini Dollar.

How to use stablecoin for a crypto-backed loan

Though it might not be a strong addition to an investment portfolio, stablecoins are useful in many ways. For example, at SALT Lending, as a provider of crypto-backed loans, we accept stablecoins for:

  • Making direct payments on crypto-backed loans. Reimbursement via stablecoin is nearly instant, with minimal time lag between payment and acceptance.
  • Maintaining a more stable loan to value ratio on a loan, by boosting stablecoin holdings as part of overall collateral.
  • Depositing stablecoin at any time to protect the cryptocurrency collateral value during a market downturn. Stablecoin payments can be made outside of normal banking hours or holidays, unlike cash or fiat payments, meaning borrowers can manage loans without the need for a bank.

SALT also offers loan payouts via stablecoin or fiat currency. The advantage of a stablecoin payout is that only a stablecoin address is required, no bank account is needed.

The potential of stablecoins

Cryptocurrency enthusiasts see value in stablecoins given their decentralized properties, ability to facilitate better payment rails for global commerce, accessibility in unbanked jurisdictions, and programmability to streamline business operations.

Meanwhile, more traditional institutions are researching stablecoins for their potential in cross-border lending and overseas transactions without conversion into fiat, or sovereign currency. The Bank of Canada mentioned the use of stablecoin in its 2020 vision, focusing on it as a part of emerging payment technologies. Meanwhile, The U.S. Office of the Comptroller of the Currency released guidance indicating that national banks are free to hold reserve currencies for stablecoin.

While much of the world continues to rely on fiat currency for financial operations, digital currencies have been quickly disrupting this archaic financial infrastructure. Of those currencies, stablecoins could bridge the divide between cryptocurrency volatility, decentralized ownership, and providing banking solutions in otherwise untouched jurisdictions.

For more information about cryptocurrency loans and stablecoins, contact SALT Lending.

SALT announces the SALT Card

Waitlist now open for the first crypto-backed credit card designed to help you HODL.

Today we announced our concept for the SALT Card, the first crypto credit card that lets you use your crypto to buy anything — from large purchases like vacations to everyday purchases like coffee and groceries– without selling or spending any of your crypto. Unlike other cards on the market that encourage you to spend your crypto, the SALT Card is designed to help you HODL and stack sats by earning bitcoin rewards on every purchase. No credit check required.

Already sold on the concept? Join our waitlist to stay in the know or keep reading to learn more.

Credit card - whether its for video
SALT Credit Card fanning out gif

How will the SALT Card work? 

With the SALT Card, your crypto is your credit. This means we won’t ask for your credit score or do a credit check because your digital assets (not your credit score) will secure your line of credit and determine your credit limit. 

We designed it this way because we know you want to get the most out of your crypto assets without having to sell them. 

How is it different from a crypto-backed loan?

While the SALT Card is secured by your crypto assets, it’s different from a crypto-backed loan in that you can choose to borrow only what you need, and you only pay interest on an existing balance. Like a traditional credit card, if you pay the balance off each month, you won’t owe any interest. Plus, by having a physical SALT Card, you will be able to use it in the same places and for the same purposes as the other credit cards in your wallet.  

What makes the SALT Card stand out? 

Here are just a few of the existing benefits. We’re still in the early stages of developing the card and are currently in search of a card partner.

Benefits of the SALT Credit Card

Once we have a partner on board, we will be able to finalize the card rewards and any additional benefits. In the meantime, we’d love to hear your input on what you value most in a crypto credit card. 

We’re excited to be launching a new product and hope you’ll join our waitlist to receive the latest updates in the development of the SALT Card.

If you are connected to a major credit card partner and are interested in working together, please contact [email protected] We’d love to hear from you and explore opportunities.

Disclaimer: By joining the waitlist you agree to receive marketing communications from SALT. The waitlist does not guarantee that you will receive a SALT Card. SALT Card will be subject to eligibility requirements, including geographic and suitability limitations. Fees and terms are not final and are subject to change at any time in SALT’s sole discretion.

How to Grow Your Business Capital Through Cryptocurrency

By Annabelle Pollack

Disclaimer: Buying cryptocurrency is risky. This article is for informational and educational purposes only and does not constitute investment or financial advice.

Cryptocurrency is reshaping the finance and business worlds. Not only has it challenged conventional thinking, but it has provided new avenues for entrepreneurs and business owners to start and grow their businesses in these uncertain times. Many of them have turned to crypto as a way to raise initial capital or to fund ongoing operational costs. If you’re seeking creative ways to grow your business capital through cryptocurrency, there are a few ways to go about it — the most important thing when it comes to getting involved with crypto is doing your research to identify the best avenue for achieving your business goals.

Choose the right cryptocurrency for your business

When it comes to determining which cryptocurrency is the ideal fit for your business, you have several options from which to choose. At the moment, there are already more than 1,000 unique cryptocurrencies in which you can transact. But just as there are blue-chip stocks, a guide to cryptocurrencies by FXCM details how some digital currencies are considered the “gold standard” of the industry. At the top is Bitcoin, which is regarded as the first incarnation of cryptocurrency and is projected to have a market capitalization of $1 trillion in the near future. Next is Ethereum, whose $83 billion market capitalization is poised to expand in the coming years due to its growth potential in the online sphere. Then, there is Litecoin, and its surging market cap of over $18 billion. Bitcoin, Ethereum, and Litecoin are seen as the strongest investments, with Yahoo! Finance noting how a high market cap is indicative of high investor activity. All three are extremely liquid, too, which means they can be easily sold at the market price. Each cryptocurrency is different and may boast specific features that others do not. Some factors to consider as you’re choosing a cryptoasset for your business are security, privacy, transaction speed, block times, market cap, liquidity, and the blockchain upon which the cryptocurrency is built. Once you identify which factors are most important to you, you can narrow down your options and choose the crypto(s) best suited for your business.

Buy and Trade Crypto

Once you’ve done your research, identified your cryptocurrency of choice, and learned the ins and outs of the industry, you can evaluate whether you’re confident enough in your knowledge to move forward with buying and trading digital currencies. That being said, it’s essential to prioritize safety and security regardless of whether you’re trading frequently or buying for the long term. A good way to do that is to find a reputable online cryptocurrency trading platform that can help you buy and trade crypto, as well as help protect your investments. Some trading platforms even offer crypto CFDs (not available in the United States) that don’t require a special wallet or exchange account, but will ask you to speculate on the direction of their price movements instead. You can also invest in several coins at the same time, as doing so may help you mitigate the risk that comes with putting all your eggs in one basket. This way, you’re more likely to see your business capital increase.

Get a crypto-backed loan

In an instance where you need cash but are unwilling to part with your crypto entirely, consider taking out a crypto-backed business loan. As the name suggests, this type of loan is secured by cryptocurrency, offering a way for you to get cash or stablecoin without having to sell your cryptoassets. The amount of cryptoassets you’ll be required to put up as collateral is contingent on a few factors including your loan amount, loan duration, and Loan-to-Value ratio (LTV). If this option appeals to you, a SALT loan might be just what you’re looking for. SALT accepts a dozen coins as collateral including Bitcoin, Ether, and Litecoin, and you can choose one or more of the offered collateral types to secure your loan. SALT also offers flexible loan terms, allowing you to choose your desired loan-to-value ratio from 30%-70% (amount borrowed divided by the value of your crypto), the duration of your loan (3–12 months), and whether you’d like to receive your loan proceeds in fiat or stablecoin. Interest rates are competitive, too. By taking out a crypto-backed loan, you can secure the funds to start a new business or operate and improve an existing one without selling your crypto.

Accept cryptocurrency payments

Another way that a business can generate further capital is to accept payments via cryptocurrency. For instance, Business2Community claims that businesses can lower the transaction fees involved during payment transactions due to the high number of peer-to-peer processing networks accepting popular coins. Compared to traditional methods like wire transfers and check payments, cryptocurrency can be a lot faster and more efficient. In addition, cryptocurrency transactions can be conducted directly between the business and the customer on the blockchain, which avoids the potential for third-party scams and external payment disputes. By accepting cryptocurrency payments, businesses can simultaneously grow their capital and streamline payment processes.

While there are significant risks that accompany cryptocurrency investments, doing your research and being diligent can help you significantly grow your business capital and fund new developments. Exploring different payment options and looking into specific coins can help you become more knowledgeable when it comes to determining the best way for you to start or operate your business.

 

SALT announces first-ever distributed custody model for securely storing collateral assets, onboards Fireblocks as first partner

This new model will allow SALT to distribute risk, enhance security, reduce interest rates, fund loans more swiftly, and focus on expanding its suite of wealth preservation products

We’re excited to announce Fireblocks, a platform that secures digital assets in transit, as our first partner for securely storing and transferring customers’ collateral assets. The partnership with Fireblocks marks a shift in SALT’s business model from self-custody to a more distributed custody approach that will allow us to onboard additional partners in the future and add greater flexibility for capital providers. This new approach also enables us to distribute risk, fund loans and conduct transactions more quickly, and provide customers with enhanced security for their cryptoassets, as well as lower interest rates on crypto-backed loans.

“When SALT was founded in 2016, custody wasn’t where it is now, so we built a proprietary custody solution to keep our customers’ collateral assets safe,” said Justin English, CEO of SALT. “Now that the industry has matured and companies like Fireblocks have come to the forefront, we’re excited to work with them to streamline our operations and expose their networks to our suite of wealth preservation products. They have a proven ability to safely and securely store and transfer collateral assets and to do so swiftly, which will inevitably allow us to provide faster service to our customers and focus more on product development.”

The move toward third-party custody solutions will also enable SALT to provide greater security and flexibility to capital providers that may prefer to work with a specific custodian, provided the custodian meets our rigorous security standards.

“MPC has quickly become the industry standard among the largest and most trusted institutions in the digital asset space,” said Michael Shaulov, CEO and co-founder of Fireblocks. “We’re proud to partner with the SALT team to help them strengthen security, reduce costs and expand operations as they move into the next stage of their growth.”

Fireblocks meets these security standards by combining multi-party computation (MPC) with Intel SGX technology to create a proprietary, defense in-depth approach to digital asset security — this allows organizations to accelerate operations without relying on physical hardware or slow, manual processes.

“Security is our top priority as we make this shift to be commensurate with our growth and distribute risk among trusted custodians,” said Dirk Anderson, chief technology officer at SALT. “The primary reason we’ve chosen Fireblocks as our first partner is because of their approach to MPC technology. Not only does it meet our security standards, but it will grant us more flexibility and increase the speed at which we can conduct transactions. This means we can fund stablecoin loans much faster and reduce the turnaround time for returning customers’ collateral assets once their loan has matured.”

From a customer standpoint, the biggest and most exciting changes to note are increased security, faster services, and the offering of lower interest rates. Aside from these changes, the customer experience will largely remain the same. Just as they do now, borrowers will still be able to make deposits and withdrawals, and will be able to continue tracking the health of their loan via our Loan-to-Value monitoring and real-time notification systems.

“We believe working with Fireblocks and other custody partners in the future is in the best interest of both the business and our customers,” said English. “Not only will we be able to offer more competitive interest rates, but we will have the time and resources to focus on expanding our offerings to include products that are designed to help our customers build and preserve their wealth.”

To apply for a loan or learn more about our suite of wealth preservation products, visit https://saltlending.com/getaloan/ or contact [email protected]. For questions contact [email protected].

About SALT

SALT, the pioneer of crypto-backed lending, offers a way for individuals and businesses to use their cryptoassets as collateral to secure a fiat or stablecoin loan without having to worry about credit checks. SALT offers flexible loan terms and accepts multiple cryptoassets as collateral including cryptocurrencies, stablecoins, and tokenized gold. SALT also offers competitive interest rates and does not charge origination or prepayment fees. As cryptocurrency becomes more widely adopted and additional real-world assets become tokenized, SALT’s mission is to offer solutions that make it possible for people to securely hold, manage, and borrow against their cryptoassets. Founded in 2016, SALT is headquartered in Denver, Colorado. For more information, visit www.saltlending.com or follow us on Twitter, Facebook and Medium.

All SALT loans are subject to KYC, AML, and other Terms, Conditions, and Restrictions. Please see saltlending.com/terms and FAQ for additional information. Loan options and terms may not be available in your jurisdiction, for your loan amount, and/or collateral type. SALT Loans are subject to jurisdictional limitations and other restrictions. SALT may not be able to offer a loan to all borrowers. SALT loans are originated by Salt Lending LLC. NMLS #1711910. NMLS Consumer Access (https://www.nmlsconsumeraccess.org/).

About Fireblocks

Fireblocks is an enterprise-grade platform delivering a secure infrastructure for moving, storing, and issuing digital assets. Fireblocks enables exchanges, custodians, banks, trading desks, and hedge funds to securely scale digital asset operations through the Fireblocks Network and MPC-based Wallet Infrastructure. They have secured the transfer of over $70 billion in digital assets and have a unique insurance policy that covers assets in storage & transit. For more information, please visit www.fireblocks.com.

Media Contacts

SALT

Kendra Staggs, [email protected]

Fireblocks

Yelena Osin, [email protected]

The Evolution of the Crypto Market and its Role in Asset-Based Lending

Originally published in ABF Journal

Cryptocurrency is a disruptor. Not only has it changed the way we conduct business, but it has changed the way we think. The most obvious manifestation of how cryptocurrency has disrupted our thought patterns is in the way we think about money — about who issues it, how to transact with it, how to put it to work and how to keep it safe. It also has changed the way we think about our government, our right to privacy and our financial freedom. What’s less obvious is how cryptocurrencies are disrupting the way we think about and participate in asset-based lending. The advent of Bitcoin catalyzed the creation of a myriad of cryptocurrencies, many of which became viewed as assets, yet at the time, there was no way for crypto investors to unlock the value of these assets without selling them. This is the problem SALT’s founders set out to solve in 2016 and in doing so successfully, made asset-based lending as we once knew it a thing of the past.

Creating a New Asset Class

As Bitcoin began to experience wider adoption following its release in 2009, it became clear that some investors were purchasing crypto to trade on a daily basis while others were choosing to invest long-term, viewing Bitcoin more as an asset than as a spendable currency. As more investors adopted this long position and began to think of cryptocurrencies as an asset class in their own right, the term “HODL” emerged in 2013 on a bitcoin-talk forum and has since become one of the most commonly used words in the crypto vernacular. This HODL culture has grown significantly over the years and has evolved to where investors are buying, selling and trading these assets not only for themselves but on behalf of others. This activity has taken the form of crypto portfolios and crypto funds, which offer access to this new asset class for individuals and allow them to diversify their portfolios while eliminating some of the overhead of learning how to purchase and safely hold cryptoassets. By providing a way to collateralize cryptoassets to secure a cash or stablecoin loan, SALT provides opportunities for individuals, businesses and capital providers to build and preserve wealth.

How to Lend Cryptoassets

As the first-ever crypto-backed lender, SALT has developed the technology and processes required to successfully lend against cryptoassets, giving borrowers a way to unlock the value of these assets without selling them. Take Bitcoin for example. It’s one of many cryptoassets we accept as collateral on our platform, yet it makes up more than 80% of the collateral securing our loan book.

What makes Bitcoin a strong form of collateral? The answer lies in Bitcoin’s combined characteristics. Like gold, Bitcoin is scarce, fungible, divisible, transferable and durable. It is also extremely liquid given it is traded on global exchanges every day. Additionally, as a decentralized asset, Bitcoin is highly secure. All of these properties make Bitcoin both a viable asset and a highly efficient form of collateral that has piqued the interest of some of the largest financial institutions in the world.

One thing to note is Bitcoin’s volatile nature, which can pose challenges specifically for the ABL market. However, SALT’s risk management technology effectively manages this volatility. Our technology includes real-time loan-to-value (LTV) monitoring, margin call and liquidation triggers, real-time notifications and the safekeeping of assets through institutional grade custody solutions. For example, our loan-to-value (LTV) monitoring system tracks the prices of assets 24 hours a day, 365 days a year, providing borrowers with the ability to monitor the health of their loan in real-time. If, during periods of heightened volatility, a borrower’s collateral declines in value and their LTV breaches our margin call threshold, we protect the borrower by issuing a margin call that prompts them to take action to restore the health of their loan. Actions borrowers may take include paying down principal or depositing additional collateral to recalibrate their LTV to an appropriate level (70%). If no action is taken and asset prices continue to decline, SALT has the ability and the right to liquidate collateral assets to preserve lender capital. The overcollateralized nature of our loans combined with our risk management technology and ability to liquidate assets enables us to protect the lender, and as a result, we’ve experienced zero losses of principal to date.

Choosing a Crypto-Backed Lender

SALT’s business model is attractive to crypto investors (e.g. traders and asset managers) and businesses (e.g. mining operations and exchanges) for a few reasons. First, we provide access to liquidity, offering loans ranging from $5,000 to the millions. Typical use cases include businesses seeking working capital to fund operational costs and large capital expenditures, or investors seeking leverage, diversification or risk management. Second, since our model is asset-based and requires overcollateralization, we do not rely on a borrower’s credit profile and can fund loans within 24 to 48 hours, assuming the borrower meets our strict AML/KYC requirements. Third, customers know their assets are safely and securely held with institutional-grade custody providers for the duration of their loan. Fourth, our loan process is straightforward and customizable. We allow borrowers to lend against a single cryptoasset or a portfolio of cryptoassets and offer flexible loan terms, including durations ranging from three to 12 months, LTVs up to 60% for individual loans or up to 70% for business loans, and competitive interest rates ranging from 5% to 12% depending on the borrower’s jurisdiction, loan amount and LTV. While we are no longer the only crypto-backed lender in the world, we are one of the few that incorporate a human element into our business model. Unlike completely automated lenders, SALT offers both phone and online support, and assigns each customer a loan support specialist at the time of loan origination. These human touches positively impact a borrower’s experience with the platform; they know that by choosing SALT, they will always have the option to speak with someone about their financial needs.

The Evolution of the Crypto Market and Tokenization

Since SALT’s founding in 2016, the crypto lending market has grown exponentially. According to a report from Credmark, the crypto lending market reached $8 billion in total lifetime loan originations as of Q4/19 and has since surpassed $10 billion following Q1/20. These numbers not only indicate the growing demand for liquidity among crypto holders but also the growing interest among capital providers to get involved in the crypto market. For example, we’ve witnessed an influx of both crypto native (BitGo Prime and Genesis Capital) and traditional financial institutions (Silvergate) that provide leverage and liquidity vehicles at the institutional level.

Another thing to consider regarding the evolution of the crypto market is that as the world becomes tokenized, the very definition of the term “crypto market” is changing. With the emergence of companies like Paxos and Harbor, we’re beginning to see increased tokenization of real-world assets like gold and real estate. At SALT we already accept Pax Gold (a gold-backed cryptoasset) as collateral on our platform and our vision for the future goes well beyond our current collateral scope.

The Role of Alternative Investments

As crypto becomes more widely accepted, a growing number of people are assessing their own risk profiles and determining the best way for them to participate in the crypto market. For those with lower risk profiles, the market has evolved in recent years to offer individuals or businesses indirect exposure to this new asset class. As previously mentioned, crypto portfolios and crypto funds are part of this evolution along with alternative investment companies like Cadence (portfolio company of Coinbase Ventures). Cadence is a securitization platform for private credit that grants access to exclusive high yield, short term investments traditionally reserved for institutions. In February 2020, we partnered with Cadence to offer prospective investors the opportunity to gain exposure to cash flows associated with a portfolio of underlying loans collateralized by cryptoassets. The first note of $500,000 was oversubscribed in five days and we have since worked with Cadence to issue $2.9 million in notes to investors to date. As more companies like Cadence provide structure, liquidity and indirect exposure to alternative asset classes like crypto, we expect to see even greater demand from investors seeking attractive risk adjusted returns.

Opportunities for Institutional Investors

There’s no doubt cryptocurrency has changed the way we think about asset-based lending. It has formed a new asset class and also has catalyzed the trend of broader tokenization — a trend that will inevitably expand the universe of collateral options and have a meaningful impact on the ABL industry. If you’re a decision maker at an institution and are interested in learning more, email [email protected] to discuss opportunities to build and preserve wealth in this rapidly evolving industry.

A CBDC Crash Course: Can sovereign-focused digital currencies become a monetary reality?

By Rob Odell

Article originally published on ValueWalk

China’s central banking system officially launched large-scale testing of what could be the world’s first digital sovereign currency. The People’s Bank of China, the nation’s central bank, is working with main banks in major cities, with a focus on digitizing the renminbi. During this trial, users register their mobile phone numbers for access to digital wallets. Through that access, they can use digital currency, issued by the central bank, to withdraw and transfer money, and to pay bills.

If this test is successful, it means that China could be one of the first countries to develop and maintain central banking digital currency, or CBDC. But China’s move toward CBDC doesn’t necessarily mean that other countries’ central banking systems will, or can, automatically follow. Moving an economy from bills and coins — whether physical or virtual — to 100% digitization isn’t something a country just does. Furthermore, there is the question of whether central banks can — or should — work directly with consumers and businesses, in direct competition with commercial and investment banks.

As such, the CBDC reality is a few years away.

Defining Digital Currency And Central Banks

Mention the words “digital currency” and the first thought that might come to mind is Bitcoin.

Certainly, Bitcoin, Ether, Litecoin, and other cryptocurrencies are digitized value exchanges, which can be used to buy goods and services. But cryptocurrencies and central banking digital currencies are two very different sides of the digital coin. While cryptocurrencies are privately developed and distributed, CBDCs are government-backed sovereign currency systems, complete with appropriate denominations. In other words, think digitized fiat currency, overseen by the central banks.

Much like cryptocurrencies, however, CBDCs are recorded on digital ledgers, which keep track of ownership and transactions by users with ledger accounts. But unlike cryptocurrencies, these ledgers would be overseen by central banks, which would also issue the currencies and process transactions.

Speaking of central banks, these institutions have big-picture monetary goals for the nations in which they operate. The above-mentioned People’s Bank of China, as well as the U.S. Federal Reserve, Bank of England, Deutsche Bundesbank, and others are responsible for national monetary policies. They also deal with the nation’s commercial and investment banks, as lenders of last resort. They aren’t in business to work with consumers or businesses.

Just because central banking systems don’t work on the commercial level, it doesn’t mean they haven’t. In writing for the National Bureau of Economic Research (NBER), economists Michael Bordo and Andrew Levin pointed out that central banks’ histories are filled with examples of interactions with consumers and businesses, and “often, these activities were considered more important for the central banks than the conduct of monetary policy, both in terms of daily operations and the priorities of top management.”

For example, the Bank of England conducted general business and consumer banking activities during the 17th and 18th centuries. And, in the United States, a highly successful post office savings bank system operated from 1911 through 1967, using the post office network to offer government-backed deposit accounts and other financial services. In many cases, postal banking performed central banking functions — such as funding two world wars — before the Federal Reserve stepped in to determine national monetary policy.

Digital Sovereign Currency Structure: The Theory…

Researchers and scholars have been pondering the idea of centralized digital currencies for a few years. The most recent study along these lines was released in June 2020 by the Federal Reserve of Philadelphia, and entitled “Central Banking Digital Currency: Central Banking for All?” Led by University of Pennsylvania economist, Jesús Fernández-Villaverde, the authors explored whether a central bank, such as the U.S. Federal Reserve, could successfully implement a 100% digital sovereign currency structure, which could realistically compete with commercial financial institutions without too much disruption.

The authors determined that, in theory, and absent any kind of financial panic, a digital conduit between central banks and consumers might be effective in optimizing fund allocations. Furthermore, a direct-to-consumer sovereign digital currency could help streamline and potentially eliminate current time-consuming and costly payment systems.

Bardon and Levin also suggest that central banking systems could offer digital currencies to the general public through specially designated accounts, opened in partnership with commercial banks. The banks could keep corresponding amounts of commercial funds in segregated reserve accounts at the central banks. Furthermore, setting up a CBDC infrastructure would be a straightforward process. Thanks to the internet, brick-and-mortar branches wouldn’t be necessary.

So, in theory, a CBDC is workable.

Now, The Reality…

China is pushing ahead to set up the first bona fide, workable CBDC. Meanwhile, other central banking systems, including the Bank of England, Bank of Japan and the Swiss National Bank, are working with the Bank for International Settlements (BIS) on additional CBDC research.

But the BIS cautions that jumping on the CBDC bandwagon right now will mean bumps in the road, mostly in the forms of security, convenience and accessibility. The current coins-and-bills banking system has sophisticated infrastructures in place to handle peak demands for money, and can support potential bank runs. Then, there are the questions about privacy and potential data breaches. Take for example, a situation in which the Federal Reserve issues $1 million to an individual’s stablecoin address. That individual then spends $100 from the same address at an online retailer.

Right now, with the way most blockchain technology functions, that retailer can look at that stablecoin address and see without question that there is nearly $1 million in the account. Cryptocurrency proves that while blockchain technology is great for anonymity, it is far from private. We must find a way to bring the same level of privacy to CBDCs as we currently experience with traditional banking, so that it is both private and public in all of the right ways. Until then, CBDC will likely remain more of a futuristic vision than become a reality.

And, from a larger-picture perspective, Fernández-Villaverde and his colleagues caution that the move to CBDCs could give central banking systems monopoly power, siphoning business away from commercial banks. Commercial and investment banks are set up to support maturity transformation — in other words, using consumer and business deposits for longer-term loans, such as mortgages. Central banks don’t have the capacity to do this; such a lack could be dangerous to economic policies.

Keeping It Cash … For Now

Though the Chinese central bank is experimenting with sovereign-backed digital currency and centralized ledgers, the CBDC concept isn’t close to implementation. Even China is phasing in CBDC very slowly. Coins and bills will be with us for a while longer, at least until security, accessibility and privacy issues — not to mention potential monopolization scenarios — can be worked out.

Still, the increasing use of cryptocurrency continues to prove that digital mediums of exchange are workable. As the People’s Bank of China continues working with sovereign-backed digital exchanges, other central banks will likely examine their own regulatory, legal and technical risks to determine the feasibility of CBDCs.

July Update from SALT

In case you’re not a subscriber to our newsletter, we want to share some of our favorite highlights from July right here on our blog to help keep you up to date on all things SALT.

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How Financial Firms Navigate the Markets to Grow in Any Climate

SALT was featured on Adroll’s blog alongside Catch Benefits and Hippo Insurance. Learn how we’re navigating the markets and changing the way people interact with money in the full blog post here.

Read Adroll’s full blog post here


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ICYMI: SALT Announces Justin English as Chief Executive Officer

In case you missed it, we recently announced that Justin English has been named chief executive officer at Salt Blockchain Inc., parent company to SALT Lending. Co-presidents Rob Odell and Dustin Hull, who have been working together for the past six months to fill the CEO role and onboard English, will remain co-presidents and will continue to support SALT in their respective roles as chief product officer and chief financial officer.

Read the full announcement here.


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Creative Wealth Preservation with Blockchain Center

Our CPO Rob Odell joined Blockchain Center’s VR Crypto Mondays to talk with their CEO about crypto lending and creative ways to preserve your wealth.

Watch their full discussion here.


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Black Lives Matter

As operations at SALT carry on, it is not lost on us, as a company nor as individuals, that Black Americans continue to fight for racial justice. We are committed to hearing, learning from, and supporting our Black customers & communities in this fight for a more inclusive world.

Want to stay up-to-date on all things SALT? Signup for our monthly newsletter herehttps://cdn.forms-content.sg-form.com/76a45090-a050-11ea-8926-5efcf9d8f941

Questions about our products and offerings? Contact [email protected]

May Update from SALT

In case you’re not a subscriber to our newsletter, we want to share some of our favorite highlights from May right here on our blog to help keep you up to date on all things SALT. Image for post

Event Follow-Up with SALT’s CPO

We want to thank everyone who watched & participated in Bitcoin Magazine’s Halving live-stream celebration with us last month. To address some of the questions that came up from the event including questions regarding the SALT token, our CPO Rob Odell sat down with one of their team members for a follow-up video. You can learn more about the changes we’ve made to the SALT token from our blog post, New Changes Add Value for SALT Supporters.

Watch the full follow-up video here


Coins vs. Tokens

Ever get tripped up on the differences between coins and tokens? Our latest infographic breaks it down.

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We Want to Hear from You

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We have recently added an option to our “What’s New” feature for you to share your feedback on our content. You can share your thoughts by rating our content and/or leaving a comment.

See what’s new at SALT here.


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Twitter Poll Results: Bitcoin Pizza Day

On Bitcoin Pizza Day we asked our Twitter followers in a poll what they would do with 10,000 bitcoin, and these are the results. You can participate in our next poll by following us on Twitter.

To see the results on Twitter, click here.


Refer a Friend

Get $50 in bitcoin for you & your friend when they take out a crypto-backed loan. To learn how you can refer your friends, check out our blog post Pass the SALT, Grow Your Wallet.


Black Lives Matter

As operations at SALT carry on, it is not lost on us, as a company nor as individuals, that Black Americans continue to fight for racial justice. Until racism is eradicated completely, we are committed to hearing, learning from, and supporting our Black customers & communities in this fight for a more inclusive world. As we reflect internally on the immediate changes SALT can make to support this mission, we have proactively chosen to make Juneteenth a company holiday to honor the significance of June 19, 1865.


Want to stay up-to-date on all things SALT? Signup for our monthly newsletter herehttps://cdn.forms-content.sg-form.com/76a45090-a050-11ea-8926-5efcf9d8f941

Questions about our products and offerings? Contact [email protected]

The first card that lets you use
your crypto for everyday purchases,
without selling any of it.

The first card that lets you use
your crypto for everyday purchases,
without selling any of it.

Three SALT credit cards floating

The first card powered by your crypto,
not your credit score.

The first card powered by your crypto,
not your credit score.

Three SALT credit cards floating