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Stablecoins play an important role in the cryptocurrency ecosystem by allowing a fiat currency such as the dollar to be transferred around the world via a blockchain. These stablecoins are either backed by a centralized third-party who claims to have the fiat, or equivalent, to back each token they provide or the stablecoin is backed by a decentralised algorithm. Luna and UST are examples of the latter.
Luna is a cryptocurrency designed to back the stablecoin UST. The idea was that the supply of Luna would be regulated in such a way as to keep UST at $1 per token. Unfortunately, this failed and the peg was broken. Luna went from over $100 per coin to less than 1 cent. UST, which is meant to always trade at $1, was at less than $0.10 at the time of writing.
Many people lost huge sums of money that they believe they had safely stored as digital dollars. For some this will have amounted to their life savings and will be devastating to their lives. Let’s explore why people are using stablecoins, the risks involved and why I believe real estate may be a good alternative to some stablecoin use cases.
1. Why use stablecoins?
There are a number of uses of stablecoins. Some cryptocurrency traders simply use them as a means of holding cash while the cryptocurrency markets are down. This allows them to quickly buy back into Bitcoin and other digital assets without having to wait for a bank transfer to come through. This allows crypto traders to react quickly in changing market conditions.
Another use for stablecoins is as a means of saving. Mainstream banks are offering interest rates of less than 1%, and inflation is rising. Inflation is even higher if you base the rate of inflation on the amount of money that is being digitally printed, as many cryptocurrency enthusiasts do. This means that if you keep your money in a bank, it is losing value overtime.
With stablecoins, there are a range of centralized companies and decentralized protocols that offer much higher rates of interest. With the UST stablecoin, it was possible to earn up to 20% per annum. This is a far more attractive way to hold cash for those worried about the rate of inflation. Many investors use this method to save for the long term and mitigate the volatility of the wider cryptocurrency market. This allows cryptocurrencies to play a key role in the ecosystem of digital assets.
2. What are the risks of using stablecoins?
There are two primary types of stablecoins, centralized and decentralized. Both come with a set of risks. Centralized stablecoins are tokens issued on a blockchain that have a centralized third-party, such as a company, backing them. This third-party promises that each coin they issue is backed by money in the bank or by assets such as bonds. Holders of such stablecoins can redeem the tokens for the currency backing it by going to this issuer and meeting certain conditions. Mostly, however, these tokens are just traded peer-to-peer on exchanges.
The risk of a centralized stablecoin is that it may not be fully backed. An issuer of a stablecoin could be tempted to issue tokens that it does not have backing for given the fact that all the tokens are unlikely to be redeemed at one time. Furthermore, even if the token is fully backed, there are regulatory risks. If a government objects to the issuer of the stablecoin, they could freeze the money backing the coins. Either of these scenarios could lead to a stablecoin losing its peg and being worth less than $1.
The other approach is a decentralized, algorithmic stablecoin. These are programmed coins that are meant to be pegged to $1 via backing by other assets. This backing is adjusted on the blockchain by a bit of code known as a smart contract. The problem with this type of stablecoins is that it requires the programmers to see all possible eventualities in advance and not to make any mistakes. When things go wrong, like with UST, things can go very wrong indeed.
3. Using real estate instead of stablecoins for long-term savings
Stablecoins are very useful, but I wouldn’t risk my entire savings pot with them. I also wouldn’t store my wealth in the bank and allow inflation to eat it away. So what is the solution? For me, real estate. There is a limited supply of land and an increasing supply of people. All those people need to be housed. This means that capital appreciation protects you from inflation, while you can earn the equivalent of interest on your savings paid for by the rent paid by tenants.
I live and invest in the U.K. where land is particularly limited. The U.K. is also a popular place to migrate to. Property rights are protected by the law, and U.K. real estate is a historically proven, safe way to hold your wealth. Property also allows you to use leverage safely in the form of a mortgage, meaning you can make your money go much further.
If I had a large pot of money in stablecoins right now, which I intended to keep for the purposes of long-term savings, I would certainly take some of that money and invest in real estate. Using the correct strategies, there are many ways to get much better returns on investment than you can with stablecoins and with less risk. Whatever you decide to do, it is important to understand the benefits and risks of each approach and to diversify accordingly.
Many people have bought and sold cryptocurrencies as an investment, yet trying to live on a salary paid in crypto is tricky.
Alyssa Howell spent much of her career in the gold-mining industry before joining a crypto-wallet company last fall that pays all of its employees in bitcoin. The Denver-area resident said learning the ins and outs of the crypto industry — different types of virtual wallets, non-fungible tokens (NFTs), and browser extensions — has been quite an education.
“It has been a very steep learning curve for me,” said Howell, 35, who works in investor relations for Exodus, a bitcoin and crypto wallet firm. “It is just a new industry, but also it’s very fast-moving.
“So there’s always something new within crypto that has evolved.”
Howell never owned digital currencies before taking this job. Now she is paid in bitcoin on the first of every month — based on her salary in U.S. dollars.
“If bitcoin is $50,000 (per token) and I make $25,000 per month, I’ll receive half of a bitcoin,” said Howell. “Now on the first [of the month], our company sets the price, so at a certain time on the first of every month, they’ll say this is the exchange rate for bitcoin.” Employees can then convert their crypto paychecks into dollars, with the company covering the conversion fees.
Yet, this single mother of two has gone all-in with crypto. She recently purchased a new home, but struggled with the first lender she tried not accepting her bitcoin income.
Allysa Howell, left, works for a crypto-wallet company that pays all of its employees in bitcoin.
“I was disqualified from a mortgage, which made me really nervous,” said Howell as she reflected on the experience. “Luckily, that’s not the standard; the world is changing, the world is evolving.”
She found a lender to accept her bitcoin income and it was one that also let her make mortgage payments in cryptocurrency. However, the loan was recently sold and the new servicer will not take crypto payments.
“It was a huge disappointment for me,” said Howell, “I’ll have to buy fiat [U.S. dollars] to pay my mortgage, and I really try my best to live within the crypto space.”
Howell said she keeps 10% of her bitcoin pay for retirement savings and isn’t worried about the currency’s ups and downs. “I’m long-term cryptocurrency so I’m not watching the volatility on the day today,” she said. “I’m here for the next five years, the next decade, the next two decades.
“That’s where I really see the opportunity,” she added.
Exodus’ CEO JP Richardson said the company pays its employees in bitcoin to help make virtual currencies more mainstream.
“By us backing the technology and by us embracing that technology and paying our employees with the technology, we are saying that we believe in this long-term,” Richardson said.
Richardson also lives much of his personal financial life using crypto and he keeps enough money in U.S. dollars to manage expenses, he said, “in case, God forbid, something were to happen to cryptocurrency.”
Bitcoin prices have been a on a roller coaster. The price hit a high above $68,000 and has traded below $30,000 for the last two weeks.
Financial advisors caution investors to balance crypto investments with other financial goals. Before investing in crypto, make sure you have sufficient emergency savings and disability and life insurance and are saving enough for retirement.
Yet advising clients can be tricky.
Ersinkisacik | Istock | Getty Images
“We’re trying to figure out as an advisor, and as a fiduciary, what is the best way for us to help our clients in this space,” said Catherine Valega, a certified financial planner and chartered alternative investment analyst with Green Bee Advisory, based in the Boston area.
Other considerations include fees incurred when exchanging bitcoin for dollars as well as tax implications.
President Joe Biden issued an executive order in March for regulators to consider the risks and benefits of cryptocurrencies.
In the meantime, financial advisors warn consumers and investors that cryptocurrencies do not provide the same protections that come with a traditional bank or brokerage account.
Still, Howell views cryptocurrency as the future and wants her children to learn its value.
“What’s important for me to teach them is that money has value,” she said. Even though you can’t see it or feel it, we ascribe value to it.
“I am really focused on raising them to be prudent and spend well.”
DUBAI, UAE, March 12, 2022 /PRNewswire/ — The debate revolving around the true meanings of sovereignty and freedom greatly increased over the past couple of years. The pursuit of one’s individuality in a world dominated by identification has made headlines, focusing heavily on the growing trend of cryptocurrency.
As blockchain technology continues to evolve, an increasing number of people have jumped on the bandwagon, investing in various types of digital currency.
While the growing values of major cryptocurrencies such as Bitcoin or Ethereum have undoubtedly played a significant role in attracting a large number of investors, it is the potential of cryptocurrency that remains its main allure.
But there is one more factor that makes cryptocurrency a highly sought out venture, the financial independence it brings to the table. Cryptocurrency is truly decentralized, giving its holders the freedom to roam free. Yet, there is another venture that provides similar advantages in terms of physical freedom; citizenship by investment.
Those with more than one nationality enjoy greater travel, economic, and political freedom than single nationality holders. This sovereignty gives breath to an entirely different lifestyle, just as cryptocurrency destroys the shackles of centralized finance. Hence, it is only reasonable that both ventures go hand in hand, but that is just the beginning.
Where Cryptocurrency & Citizenship by Investment intersect
The intersection point of both cryptocurrency and citizenship by investment is clear – freedom. But the real beauty of the matter is how both issues elegantly harmonize, complementing each other to achieve even greater potential.
Cryptocurrency on its own may be shackled by a certain government or regulation. In the US, for example, cryptocurrency investors can have a tough time dealing with their crypto-assets. Americans are notoriously excluded from certain new coin offerings, while the US Internal Revenue Service (IRS) taxes capital gains on profit made from cryptocurrency sales exceeding 10,000 USD.
But that is just the start of it. Let’s say a crypto investor sells one Bitcoin, which is about 68,000 USD. A staggering 58,000 USD of that sum would be liable for capital gains tax. But there is more.
Biden’s government is currently working on a tax reform that will increase capital gains tax from 20% to a whopping 39.6%. This reform could destabilize, if not outright demolish, a cryptocurrency investor’s profit margin.
Crypto in the Caribbean
In St. Kitts & Nevis, however, cryptocurrency gains are not taxed, mainly because the Caribbean nation’s government does not impose any capital gains tax.
Its citizens are not excluded from coin offerings, and banks in the nation do not shy away from working with crypto investors.
There are no limits on a Nevisian LLC, for example, in terms of working with cryptocurrency, and the twin-island nation even has Bitcoin ATMs littered throughout the country.
But the best part of it is; St. Kitts & Nevis has a citizenship by investment program.
Interested investors can obtain a St. Kittian passport for an investment starting at 150,000 USD (almost two Bitcoin), and are free to conduct their crypto activity as they see fit.
Major cryptocurrency investors, like the renowned Roger Ver, have taken the plunge, getting a St. Kitts & Nevis passport, renouncing their US one, and living life to the fullest in the Caribbean.
Cryptocurrency gives people a certain degree of financial freedom, but its entire potential is unlocked through obtaining a citizenship of a crypto-friendly, tax-favourable country like St. Kitts & Nevis.
But St. Kitts & Nevis isn’t the only option for cryptocurrency investors; as its neighbour Antigua & Barbuda has a similar mindset when it comes to cryptocurrency, and both are part of the Eastern Caribbean Currency Union (ECCU), which is the first political-economic organization to launch its own digital currency, dubbed DCash.
Whether the ECCU’s DCash garners the same enthusiasm as Bitcoin has is still to be seen, but the entire enterprise is a testament to the organization’s (and its member’s) attitude toward cryptocurrency.
St. Kitts & Nevis’ citizenship by investment program has long been a route for high net worth individuals (HNWIs) to obtain greater global mobility, enhanced financial freedom, and a robust plan to mitigate political and economic instability.
Crypto & Global Freedom
Combining Citizenship by Investment Programs with cryptocurrency elevates the degree of freedom, allowing a person to roam the globe along with their wealth.
Combining a second citizenship with cryptocurrency knocks down all types of major barriers, giving the term individual sovereignty much more meaning.
The head of the St. Kitts & Nevis citizenship by investment program, Les Khan, recently stated in an interview that one of the largest applicant nationality pools were Americans, and it comes as no surprise.
True freedom has evolved from just being able to travel visa-free into something much more complex, and cryptocurrency investors tend to have that mindset of emancipation, which intersects beautifully with citizenship by investment.
But it isn’t just Americans, as no one knows how global governments will deal with taxing, or even banning, cryptocurrency trade; and the best route around that uncertainty is through obtaining a second citizenship.
Book A Free Consultation
The United Arab Emirates and MENA regions are home to some of the wealthiest individuals in the world.
At Savory & Partners, we have assisted an important number of crypto investors in the Middle East and North Africa region, securing their second citizenship and passport for themselves and their families.
If you would like to know more about getting a second citizenship and how it could enhance your lifestyle as well as your cryptocurrency trading, contact us today to book a free, comprehensive consultation with one of our seasoned consultants.
Savory & Partners is an accredited agent for multiple governments where citizenship by investment is offered. Founded in 1797, the agency has evolved from pharmaceuticals to family assets and legacy protection through second citizenship and residency. The company’s professional, multinational staff is made up of expert advisors who have guided thousands of clients, including many North African investors, on their journey to find the most suitable CBI program for them. The Savory & Partners team will be happy to answer your enquiries in English, Arabic and French.
For more information, please send an email to firstname.lastname@example.org. You can also call +971 04 430 1717 or send a WhatsApp message to +971 54 440 2955.
SOURCE Savory & Partners
GULFPORT, Fla. – The Gulfport house listed for sale as an NFT is off the market, helping Tampa Bay made history in real estate.
On Thursday, the property at 6315 11th Avenue South became the first house to sell at auction as an NFT or non-fungible token using cryptocurrency in the United States. Pinellas County realtor Amy Heckler listed the house for the seller Leslie Alessandra, co-founder of the crypto company DeFi Unlimited. Lots of eyes watched the online auction as two anonymous bidders made offers over the digital market, but one came out on top. The house sold for about 210 Ethereum, a type of cryptocurrency, coming out to $631,790 after the currency conversion.
“This is the first time this has ever been done. Maybe there was a little trepidation among bidders and et cetera, and because it hadn’t been done before,” said Heckler, who said she hoped the house would sell for more.
The new owner now gets a physical house, instead of something purely digital, and the transfer was instant.
Heckler said real estate transactions may trend toward using cryptocurrency and NFTs, considering “what people might want to look at and which auctions they might want to bid on and why you might want to bid on this one as opposed to that one based on what type of coins are accepted.”.
The house technically sold under its $650,000 asking price by the time the currency was converted, and that’s a risk with cryptocurrency. University of South Florida business professor Balaji Padmanabhan explained.
“So although you could say that 210 Ethereum, which is what it sold for was $650,000 at that point. Within hours, the range could have either been $688,000 or $650,000. That’s a big range, right within a short period of time,” said Padmanabhan. “With the amount of liquidity in that market right now, one house in that risk is quite low. Now, if the person holds on to the cryptocurrency, then you’re riding the fluctuations of that currency.”
Business experts said the auction was a big moment, but there’s work still needed, like ensuring real estate protections for all sales.
“I think the real estate industry will end up partnering with tech firms to create solutions for the buyer so that the buyer is just doing what they think is normal,” said Padmanabhan. “But behind the scenes you have, like companies like the company that actually facilitated this one and real estate companies together figuring out how to set it up so that the buyer and seller can transact easily.”
Heckler said the process was an adventure, and she’s ready to handle the next one that comes her way.
“We’re looking forward to assisting people in the future to sell or buy property with NFTs and cryptocurrency,” she said.
Business experts said the home sale marks the beginning of an interesting future for NFTs, not just in real estate but any physical product that could be tied to an NFT. Realtors said the next step is figuring out how to keep current protections for properties when working with cryptocurency on the blockchain.