While finance chiefs weigh crypto, unicorn fintech Ramp is adding stablecoins to its balance sheet
Alex Song has invested in a lot of esoteric financial products over the years.
Mortgage-backed securities. Litigation financing. Whatever it might be, the former private credit and financial technology investor, who previously worked at Sculptor Capital Management, Bain Capital, and Morgan Stanley, likely has some experience or interest in it.
So, it was only fitting that Song would take a slightly untraditional approach to managing a corporate treasury where securities like government bonds and investment-grade corporate debt have historically been finance executives’ preferred investments.
On Thursday, Ramp—the corporate card start-up where Song is now head of finance and capital markets— announced that it has been putting the “significant amount” of 5% of its corporate treasury into stablecoins through Circle’s Yield product. Built on the Circle-issued USD Coin, which is pegged to the U.S. dollar on a 1-to-1 basis, and fully secured by Bitcoin collateral, the offering promises companies access to “new, profitable ways to build corporate treasury programs via rapidly growing digital asset lending markets,” according to a Circle blog post.
The move comes as finance chiefs across corporate America continue to weigh whether to allocate part of their treasuries to the often volatile world of cryptocurrencies.
Bitcoin bull-led companies such as Michael Saylor’s MicroStrategy, Jack Dorsey’s Block, and Elon Musk’s Tesla have been plowing massive chunks of money into the world’s largest cryptocurrency for years now, of course. But others like Twitter CFO Ned Segal have expressed concerns. At an event hosted by The Wall Street Journal, Robinhood Markets CFO Jason Warnick said this week that “there aren’t compelling reasons strategically for our business to put any meaningful amount of our corporate cash into cryptocurrencies.”
For Song, stablecoins might represent a middle ground of sorts, one that provides exposure to the quickly growing cryptoverse but also less volatility than directly investing in something like Bitcoin, the Ramp executive recently told me.
Ramp’s corporate treasury is still primarily invested in traditional assets like government, corporate, and municipal bonds. The average duration of the holdings is about a year, with the yield coming in at around 0.4% in late November, Song says, though he adds that is likely higher now with interest rates on the rise.
The investment in stablecoins is paying off, so far, though. Because the stablecoins have a higher yield, Song says, than, say, an investment-grade corporate bond, that 5% allocation Ramp has made to stablecoins is able to provide it with the same level of returns it would see from a 95% allocation to those bonds. (Ramp declined to comment on how much in dollar-terms its allocation comes out to be.) And that already has Song thinking about increasing Ramp’s investments in stablecoins down the road.
“It’s definitely a dynamic exercise,” Song says.
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And with that, I say see you soon.
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Coinbase is buying FairX in a bid to wade into the crypto derivative markets... Payments company Checkout.com has raised $1 billion at a valuation of $40 billion... Federal Reserve Chair Jerome Powell sees nothing stopping a privately issued stablecoin from co-existing with a central bank digital currency... PayPal is considering issuing its own stablecoin... A new Web 3-focused ETF is in the works at Simplify Asset Management... Brex has raised an additional $300 million a Series D-2 and named Karandeep Anand as its chief product officer... Gemini has acquired crypto portfolio management company BITRIA... The Associated Press is building an NFT platform with the help of blockchain-tech company Xooa... Former CFTC Chairman Chris Giancarlo, a.k.a. CryptoDad, has joined CoinFund as a policy adviser.
A bipartisan group of federal lawmakers in Washington, D.C. want the CFTC is take on a bigger role in overseeing cryptocurrencies... Congress is also preparing to hold a hearing next week on the cryptocurrency industry's energy usage... Kim Kardashian and Floyd Mayweather are being sued for allegedly misleading investors in their promotions of EthereumMax... Only about 5% of JPMorgan customers see Bitcoin reaching $100,000 by the end of 2022... Royal has delayed its first mint drop after the NFT platform's servers crashed earlier this week... Coming soon to New York: An NFT restaurant.
FOMO NO MO
The world's most important number dies. It's not often that a number gets an obituary in The New York Times. But this is Libor, the interest-rate benchmark that, until recently, acted as the basis for determining interest rates on everything from your mortgage to your student loan. Officially known as the London interbank offered rate, Libor was at the heart of a widespread rate-rigging scandal more than a decade ago that ultimately led to its death by global financial regulators, who have been pushing since for it to be replaced. "It was 52," as The Times' Lananh Nguyen and Jeanna Smialek wrote.
From the article:
Libor is survived by several successors, each making a claim to its crown.
The Secured Overnight Financing Rate, or SOFR — a rate produced by the Federal Reserve Bank of New York that is based on transaction data, not estimates — has already been embraced by many banks in the United States and has the endorsement of the Fed. Others, like the American Interbank Offered Rate, or Ameribor, and the Bloomberg Short-Term Bank Yield Index, or BSBY, have their adherents. In Britain, the Sterling Overnight Index Average, or SONIA, seeks to inherit Libor’s place as the do-it-all benchmark.
J. Christopher Giancarlo, a board member of the American Financial Exchange, which calculates Ameribor, said Libor was once a “giant.” It was, he said in an interview, the foundation of a system that gave every player in the financial hierarchy a way to take a cut.
“The problem with Mr. Libor is, for a time, he had it all,” said Mr. Giancarlo, a former chairman of the U.S. Commodity Futures Trading Commission. Libor was once “on top of the world,” he said, but became a “disreputable, tottering old geezer at the end.”
It's a new, new start to the year for the world's biggest cryptocurrency. Following a 14% collapse over the first 10 days of 2022, Bitcoin is on its way back up. Since sinking below $40,000 on Monday, the crypto has risen 7.6% to more than $42,800, as of Thursday at 5 p.m. ET. But it's got a long way to go to get back into the same territory as its all-time high of more than $68,000.
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MEMES AND MUMBLES
Reese Witherspoon seems to be all in on the next phase of the Internet. On Tuesday, the actress, producer, and very good book picker, who just acquired her first ETH in September, tweeted: "In the (near) future, every person will have a parallel digital identity. Avatars, crypto wallets, digital goods will be the norm. Are you planning for this?"
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