Stablecoins: Sygnum provides a secure bridge between the crypto and traditional financial markets
Stablecoins are an important source of liquidity, and as a regulated Swiss bank, Sygnum provides a convenient, secure bridge for stablecoins as the digital asset markets evolve.
by Dominic Lohberger, Head of Trading and SIS at Sygnum
What are stablecoins?
Stablecoins are cryptocurrencies designed to maintain a stable price based on a particular fiat currency, and they ensure this peg either through an asset-backed or algorithmic function. They provide an effective on and off-ramp between fiat currencies and crypto assets, and as such, stablecoins have become a central source of liquidity and a convenient gateway. Currently, the dominant and most accepted stablecoins are Circle’s USDC and Tether’s USDT.
Recent developments and risk management
Since the recent depegging of the Terra algorithmic stablecoin UST and the fallout of centralised lenders, market participants have become more attentive to managing counterparty risk. The stablecoin issuer constitutes an often-overlooked counterparty risk to their holders. Assessing their risk profiles with regards to applicable regulations and transparency of the issuer as well as the assets or algorithm that back the stablecoin are the most critical parts of risk management for stablecoin owners.
Sygnum provides a convenient bridge between the crypto and traditional financial markets as a trusted counterparty adhering to highest regulatory standards, and as a regulated Swiss bank, is directly supervised by the Swiss Financial Market Supervisory Authority (FINMA).
The advantages of Sygnum include the convenient all-in-one offering for stablecoin custody, trading and subsequent fiat payments or transfers. Stablecoins under custody with Sygnum are held offbalance sheet and as such are not exposed to counterparty risk. The stablecoin-fiat conversion at Sygnum is available for a low single-digit spread and converted assets can subsequently be transferred to Sygnum's e-banking platform.
As a regulated Swiss bank, Sygnum provides its clients with a safe way to utilise stablecoins and weather market extremes with peace of mind and trust.
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