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NFTs Backed By Gold and Precious Metals Can Create a Robust Portfolio



NFTs: What could non-fungible tokens and gold possibly have in common? More than you think, says Ahren Posthumus, the CEO of NFT marketplace Momint.

The NFT sector has been hit hard by the crypto market’s crash and economic uncertainty. Traditional assets are also becoming less reliable. The convergence of NFT and safe assets like gold could resolve this global issue.

NFTs: Promising but volatile

When the market as a whole went down, blue chip NFT collections lost up to 80% of their worth. Everyone talked about the obvious reasons, like Terra’s crash and Celsius’ bankruptcy, but these were only the tip of the iceberg.

The main cause, in my opinion, is the scarcity of projects and collections with solid fundamentals and real value at their core. Some investors may be interested in tokenized memes and tweets, as well as digital merch and art. But these applications are not enough to move the whole sector forward. So, in just a few weeks in May, the average number of non-fungible tokens sold each day dropped to about 19,000. According to the Wall Street Journal, which cited, this was a 92% drop from September, when about 225,000 non-fungible tokens were sold each day. After the economic boom ended, it became clear that there were far too many projects that were nearly identical and only provided a quick return.

NFTs Aren’t the Only Bubble

The same thing happened when the dot-com and housing bubbles burst, so there’s nothing new here. It simply means that NFTs and cryptocurrencies must mature to regain investors’ trust.

People commonly associate non-fungible tokens with art, but this is either untrue or partially true. NFTs function as digital certificates of authenticity and can represent a range of things from IP or property rights to legal agreements and membership access. They can only have one holder at a time. Ownership is managed by a unique identifier other tokens cannot replicate. Fractional digital ownership, in particular, offers nearly limitless opportunities, ranging from owning a portion of a sports team to owning a portion of a content creator’s revenue on social media platforms.

On average, 80% of NFT projects fail and shut down within 18 months of entering the market. It means that a user should be careful, when deciding to invest in a project, to determine a good one from a bad one. Even experienced investors can’t be sure they are putting money into the right thing. We can only rely on solid fundamentals, such as the project’s team, a unique solution (such as eco-friendly NFTs or tokenizing historic coins), credible funding sources, reliable partnerships, and the value of a real-world underlying asset.

That is not to say that speculative NFTs will vanish. Opportunities for quick buys and sells will always exist in any market. But after the purge, it will be easier to tell the difference between long-term and short-term assets, which will help users make better decisions. 

Gold: A scarce commodity with a proven track record

Gold has always been seen as a sign of wealth and power. It has been used to support governments since the beginning of time.

Gold’s resistance to economic uncertainty has been demonstrated over decades. When the value of the dollar, which remains one of the most important reserve currencies, falls against other currencies, people flock to the security of gold, driving up metal prices. Thus, the gold price nearly tripled between 1998 and 2008, during a period marked by several financial crises.

NFTs Backed By Gold and Precious Metals Can Create a Robust Portfolio
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So, when inflation causes fiat currency to lose its buying power, people rely on gold to save money. When prices drop due to deflation, investors look to this asset class as well.

Another factor working in gold’s favor is its scarcity. It can take from five to ten years to bring a new mine into production. The amount of gold available for mining decreases year after year.

Gold’s role, however, is not limited to hedging against inflation or deflation. It is used in computers, communications equipment, spacecraft, and jet aircraft engines. According to World Gold Council data, demand in all of the aforementioned industries remains strong, contributing to scarcity.

Still, there is an issue with this precious metal that must be resolved: the widespread circulation of fake gold. 

Tokenized gold: Lower risk, higher potential

One of the most important things that NFTs could do for gold is the verification of scarcity. There is more gold in circulation today than actually exists in the world. This is because of how hard it can be to verify the physical gold when trading promissory notes. When on the blockchain, the scarcity is immutable and transparent. As a result, investors gain access to a safe asset that is as simple to purchase as an NFT.

Gold is a safe asset that has played a significant role in human society for centuries. It is rare, durable, and often used as a store of value. In times of economic uncertainty, gold prices tend to go up. Sometimes this increase simply matches inflation but is a great currency hedge and a stable asset class in the long run. NFTs are still relatively new to the world, but they are gaining popularity. They are digital assets that are unique and can be used in a variety of ways. NFTs represent ownership. Together, the two assets can create a more robust investment portfolio. 

NFTs and gold: Using smart contracts

One approach is implementing a smart contract that enables users to trade NFTs for gold. This would let investors profit from the price movements of non-fungible tokens and gold, diversifying their portfolios and potentially lowering risk. 

The possibilities for such integration aren’t limited to gold. This mechanism is equally applicable to other metals. There are already use cases that demonstrate the viability of the concept.

A set of historic 1892 ZAR (Zuid-Afrikaansche Republiek) gold coins worth $1.2 million was recently tokenized. This was in order to make investing in gold and historic assets more accessible to a broader range of South Africans and people worldwide.

Furthermore, VNX, a Liechtenstein-based exchange, has made tokenized precious metals available for investment. The company owns physical gold bullion that has been certified by the London Bullion Market Association (LBMA). Another example is SilverBacked, which tokenizes physical silver on the blockchain and then pools it for use with NFTs.

The price of this type of NFT isn’t much different from the price of a regular one, but it’s a lot less than the price of a gold bar or coin. Hybrid NFTs can also be more affordable because of fractional ownership.

Blockchain gems
NFTs could be used with other precious metals and gems

Perspectives on the NFT-Gold Duet

Several factors can contribute to the success of an NFT. The first is the project’s team. To prosper, the company needs people with relevant experience and a proven track record.

Another critical factor is the technology employed. The blockchain that underpins NFTs must be robust and scalable.

Finally, having a clear and concise vision for the project is essential. Investors and users need to know what the company is trying to do and why it is using NFTs. Without a detailed plan, it is hard to get people excited about the project.

The popularity of hybrid NFTs could significantly impact the future price of gold. If more investors begin to purchase hybrid tokens as a haven asset, demand for gold may rise, driving up its price. However, it is also possible that the popularity of NFTs will cause the price of gold to fall. Only time will tell what the future of this asset class holds.

Non-fungible tokens and gold, in my opinion, are complementary. Because they do not always provide high returns, hybrid NFTs will not compete with standard NFTs. Almost certainly, new NFTs will become a popular option, but they won’t replace other digital assets.

About the author

Ahren Posthumus is the CEO of NFT marketplace Momint. Ahren is a seasoned entrepreneur who has been active in the cryptocurrency market since 2016, around the same time he was awarded the Investec Entrepreneur Leader of the Year award. He was also selected to present at the JSE (Johannesburg Stock Exchange) on breaking the walls of code and poverty in Africa. In 2020, Ahren was voted in the Mail & Guardian’s top 200 Young South Africans as the Editor’s Choice for Innovation. In 2021, he was awarded the GQ man of the year award and is now focusing his efforts on launching global impact projects using blockchain and Web3.

Got something to say about NFTs backed by gold, or anything else? Write to us or join the discussion in our Telegram channel. You can also catch us on Tik Tok, Facebook, or Twitter.


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US Treasury Sanctions Hit Russian Arms Dealer’s Crypto Wallets




The U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) has imposed full blocking sanctions on 22 individuals and entities across several countries, including Russia and Cyprus, as part of its sanctions evasion network that supports Russia’s military-industrial complex.

The sanctions were imposed under Executive Order 14024 and are part of the U.S.’s strategy to target sanctions evasion globally, close key channels, and limit Russia’s access to revenue for its war in Ukraine.

US Treasury Goes After Russian Arms Dealer’s Cryptos

The U.S. Treasury’s sanctions were imposed by the Russian Elites, Proxies, and Oligarchs (REPO) Task Force, a multilateral effort to identify, freeze, and seize assets of sanctioned Russians worldwide. This task force leverages information from international REPO partners and key data from Treasury’s Financial Crimes Enforcement Network (FinCEN) to share information, track Russian assets, and sever Russian proxies from the international financial system.

The REPO Task Force aims to maximize the impact of multilateral sanctions while preventing opportunities for Russia to evade or circumvent U.S. and partner sanctions.

The primary target of the sanctions is a Russian sanctions evasion network led by Russia and Cyprus-based arms dealer Igor Zimenkov and his son Jonatan Zimenkov. The Zimenkov network has been involved in projects related to Russia’s defense capabilities, including supplying a Russian company with high-tech devices after Russia’s full-scale invasion of Ukraine. They have also supported sanctioned state-owned Russian defense entities, Rosoboroneksport OAO and State Corporation Rostec, which are critical components of Russia’s military-industrial complex.

Igor and Jonatan Zimenkov have worked closely together to enable Russian defense sales to third-party governments and have engaged directly with Rosoboroneksport’s potential clients to facilitate sales of Russian defense material. Igor Zimenkov has also supported the Belarusian military-industrial complex by enabling the sales efforts of State Owned Foreign Trade Unitary Enterprise Belspetsvneshtechnika in Latin America.

Today, Igor Zimenkov was designated for operating in the defense and related materiel sector of the Russian Federation economy, while Jonatan Zimenkov was designated for having materially assisted, sponsored, or provided financial, material, or technological support for Igor Zimenkov, Rosoboroneksport, and other sanctioned entities.

The Zimenkov network used front companies to funnel money and maintain a lawful appearance. Singapore-based Zimenkov network shell company Asia Trading & Construction PTE Limited and its director, Serena Bee Lin Ng, have sold helicopters to clients in Africa on behalf of the Zimenkov network. Additionally, Cyprus-based Zimenkov network shell company Lobster Management Limited and its director, Mikhail Petrov, have facilitated sanctions evasion by providing support to sanctioned entities.

The Treasury’s OFAC continues to work with its international partners to coordinate information sharing and enforcement and to travel the world in pursuit of sanctions evasion. The sanctions imposed today are a clear signal to Russia and its military-industrial complex that the U.S. and its partners are committed to tightening sanctions enforcement and preventing the evasion of international sanctions.


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Digital Wallet Growth Will Enable More Closed-Loop Transactions




Crypto and fintech investment firm Ark Invest has made bold predictions about digital wallets, estimating that more than half the world will soon be using at least one.

In its Jan. 31 ‘Big Ideas 2023’ research report, Ark Invest revealed that digital wallet global population penetration is currently 40%. This equates to around 3.2 billion users, the firm added.

However, the research suggests that the number of online wallet users will increase at an annual rate of 8%. The firm predicted that this will result in a global population penetration of 65% by 2030:

“Having onboarded billions of consumers and millions of merchants, digital wallets could transform the economics associated with traditional payment transactions, saving them nearly $50 billion in costs.”

It also noted that digital wallets were gaining market share in online and offline transactions. Cash is definitely in decline, accelerated by government initiatives to go digital, as recently seen in Nigeria.

Payment method trends - Ark Invest
Payment method trends – Ark Invest

Digital Wallet Growth to Continue

Ark reported that digital wallets were scaling faster than accounts at traditional financial institutions. Furthermore, U.S. digital wallet adoption rebounded in 2022, surpassing previous highs following a COVID-induced dip.

The firm estimates that U.S. digital wallet users will increase by 7% annually during the next eight years. This will be a growth of around 160 million in 2022 to more than 260 million by the end of the decade.

Digital wallet user growth - Ark Invest
Digital wallet user growth – Ark Invest

Furthermore, online wallets are enabling “closed-loop” ecosystems. This is where consumers and merchants can transact directly, cutting out the middleman. 

“Digital wallets are onboarding millions of merchants to platforms that enable direct consumer-merchant transactions that disintermediate traditional financial institutions,” it noted.

In this closed-loop environment, wallet providers capture more value per transaction, enabling savings to be shared with merchants and consumers.

Open and Closed Lopp transactions - Ark Invest
Open and Closed Lopp transactions – Ark Invest

Additionally, Ark noted that closed-loop transactions could boost the margin structure of wallet providers.

It used Block Inc. (formerly Square) as an example, stating that it paid around 60% of customer transaction fees to third parties in 2022. The fees were paid for interchange, assessment, processing, and bank settlement fees. Block’s net take rate could more than double if customers transacted directly with merchants.

Block Inc. fee structure - Ark Invest
Block Inc. fee structure – Ark Invest

Closed Loop Transactions Could Top 50%

Finally, Ark predicted that these closed-loop transactions could account for over 50% of digital payments by 2030.

It used China as an example where wallets and merchants are largely internal or domestic only.

Closed loop cost savings - Ark Invest
Closed loop cost savings – Ark Invest

In conclusion, digital wallet growth is set to continue. Cutting out the intermediary which they facilitate is beneficial to both the consumer and merchant.


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Strike Launches Lightning Remittances in the Philippines




Bitcoin fintech giant Strike rolled out its Lightning Network money transfer service Send Globally in the Philippines, a $35 billion remittance market.

Send Globally launched in the Southeast Asian country on Jan. 31, 2023, enabling businesses and tourists to receive international money transfers in the Philippine peso. The country receives $35 billion in remittances globally.

How Strike’s Send Globally Service Works

“Remittances are a broken system and Strike delivers an incredibly empowering experience for people to send money around the world in nearly an instant,” Strike CEO Jack Mallers said.

According to a press release, Strike’s remittance service converts a sender’s fiat into Bitcoin and sends the Bitcoin to a Strike partner in the destination country using the Lightning Network, which in the case of the Philippines, is then converts the Bitcoin to the recipient’s fiat currency and credits their bank or mobile money account, with Strike shielding both parties from the tax implications of handling Bitcoin directly.

Bitcoin’s Lightning Network is a layer-two solution on the Bitcoin blockchain that allows micropayments between nodes over a payment channel. Unlike traditional payment networks, Lightning’s low fees enable almost zero-cost remittances.

Recently, Mallers announced a trial to bring Bitcoin Lightning Network payments to retailers through a partnership with Fiserv’s point-of-sale solution Clover Commerce. The trial allows any application with Lightning capability to pay Bitcoin for goods and services at Clover merchants.

Philippine Smartphone and Internet Adoption Auger Well for Strike

Send Globally rolled out to Strike users in Ghana, Nigeria, and Kenya on Dec. 6, 2022, where it has reportedly gained rapid traction.

However, mainstream adoption in the Philippines will depend heavily on network effects, driven by smartphone and internet penetration.

According to Statista, the number of smartphone users will increase from 85 million in 2022 to 87 million by 2023. Additionally, forecasts suggest smartphone users will increase to 91.5 million in 2025, representing roughly 83% of the island nation’s population.

Smartphone Adoption in the Philippines
Smartphone Adoption in the Philippines | Source: Statista

Additionally, Statista predicts that about three-quarters of the population will have internet access by the end of 2023. Growing internet access increases the chance of Strike’s success, since it helped drive adoption of crypto game Axie Infinity.

For Be[In]Crypto’s latest Bitcoin (BTC) analysis, click here.


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