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Brands must tokenize their loyalty and rewards programs

The tokenization of rewards points for brands will open up the floodgates for mass crypto adoption, making it a global ecosystem.



The adoption of nonfungible tokens has served as a practical entry point for users joining the crypto economy, driven primarily by their respective fandoms and the benefit-centric nature of the tokens. For instance, if you’re a Lebron James superfan, you can understand why “The Block” from the 2016 NBA finals is valuable on NBA Top Shot without understanding the blockchain. But when it comes to brands, stablecoins are likely to become the biggest entry point.

Reimagining rewards points

Selling to existing customers costs brands less than acquiring new ones, which is a leading reason why more than 90% of companies have some type of customer loyalty program. Rewards points are one of the most effective methods for increasing both customer loyalty and revenue. For example, Starbucks Rewards is one of the most successful rewards programs around. It has more than 19 million members, with the redemption of points responsible for almost 50% of company revenue. Starbucks utilizes Starbucks Rewards to align with its business goals in a way that adds value and increases customer engagement through a fun, gamified approach.

Starbucks’ approach to reach the masses is very different from Neiman Marcus, which is focused more on status and exclusivity through its VIP, tiered rewards program InCircle. As an InCircle member climbs the tiers, they unlock access to concierge services that help customers plan extravagant vacations or attend sought-after events. Effective loyalty programs are not a one-size-fits-all solution, but a carefully tailored program can do wonders for revenues, engagement and retention. The evolution of digital assets now allows brands of any category to offer their consumers a unique and memorable experience.

Related: Understanding the systemic shift from digitization to tokenization of financial services

The limitations of loyalty and rewards programs

While it’s undeniable that loyalty and rewards programs are an essential component of the consumer-brand relationship, they have their limitations. Complexity, lack of liquidity, and interoperability are some of the main roadblocks to expanding loyalty and rewards programs to more customers. The lack of clarity around program rules leads to a lot of value left on the table.

According to a report published by Clarus Commerce, 75% of consumers want to be rewarded for engagement beyond their purchase. This alone signals the need for innovation and creates a massive opportunity for brands to revolutionize the business of loyalty.

When it comes to liquidity, the use of most points and rewards is limited to their respective brand ecosystem; consumers cannot redeem them at another company. Hotel brands such as Hilton, Hyatt and Marriott allow points to be used like cash within a certain threshold. However, this is only permitted during hotel stays — and in most cases, points are valued differently than dollars. That is not to mention issues like blackout dates or the limited number of rooms available for points. Because these programs lack interoperability, points are trapped behind a walled garden, restricting the movement of value. Impeded value transfer and lack of cross-program communication results in lower customer engagement and, in some cases, voided points.

If points systems more closely resembled cash in their ability to be spent, they would be much more successful. Despite these varying degrees of liquidity, what appears clear is that brands embracing this change are looking to grab consumer attention by introducing as much flexibility as possible in the usage of points currency.

Enter: Branded stablecoins

A branded stablecoin is a price-stable digital asset issued and supported by specific — or groups of — brands, enterprises or institutions. Branded stablecoins, which can be embedded directly into consumer-facing applications, offer brands a novel way of connecting directly with customers and acquiring insights to regain market share from competitors. Because blockchain and cryptocurrency remain strange concepts to most consumers, it’s essential to have a seamless experience where users may not even realize blockchain technology is powering the system.

Related: Cryptocurrency and the rise of the user-generated brand

Enabled by secure and transparent decentralized ledger technology, branded stablecoins provide marketing intelligence to brands on who their biggest fans are. At the same time, branded stablecoins incentivize and reward customers for their loyalty. Brands can store user purchasing histories on the blockchain and then apply associated savings to their purchases in the future. It’s akin to loyalty points but less complicated, more liquid and ultimately more useful. Other features could include removing the need for a credit card or even providing interest on branded stablecoin savings to incentivize customers to hold.

A bumpier on-ramp before takeoff

Despite branded stablecoins being a step in the right direction, tokenized reward systems are still a form of centralization. A third party — in the form of a brand, bank or both — may be present to achieve one-to-one stability, bridging the gap between traditional finance and crypto. The upside to this centralization is that it potentially presents a more intuitive experience for the user, where they don’t have to download different apps or become acclimated to a new process. However, brands could find themselves having to make a hard decision between a frictionless, centralized user experience or a bumpier, decentralized on-ramp.

There is also the brands’ bottom line to take into consideration: Minting and redemption costs can be high due to expensive gas fees. Compounded with the brands’ operational, auditing and compliance costs — and combined with interoperability with legacy banking systems — this could present expensive barriers to entry. The uncertainty of regulations makes the waters even murkier. Brands might need to decide on taking a loss upfront for delayed future benefits. These are nuanced, mission-critical decisions that brands will have to make.

Consumers feel empowered and perceive greater value when receiving currency in their app instead of recieving points. For many, brands are an identity symbol. Let’s say Gucci identifies you as an ambassador and airdrops Gucci tokens to you as a thank you for posting positively about the brand across social media using your “GucciCoin” public tag. If you own a certain amount of “GucciCoin,” you may get access to an elite community, be it a physical space (an exclusive event, concert, in-store showroom, etc.) or an online one.

Related: Haute Couture goes NFT: Digitalization at the Paris Fashion Week

Perhaps you even get access to advanced or limited-edition merchandise drops others wouldn’t get and receive an NFT that allows you to showcase your status. Branded stablecoins are a win-win for brands and customers, enabling consumers to signal their support while brands increase engagement and loyalty.

Branded stablecoins provide a gateway for an interoperable, liquid and frictionless future. One day, maybe not so far off, a customer will have a digital wallet filled with all of their favorite brands, a global ecosystem opening up the floodgates for mass adoption.

This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.

The views, thoughts and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.

Michael Gord is the managing director of the DigitalBits Foundation and founder of GDA Capital. He has contributed to some blockchain ecosystems, including TRX, LRC, and ONT. He also served as the first enterprise blockchain developer at Toronto-Dominion Bank (TD Bank Group), one of Canada’s largest banks.

Related: Understanding the systemic shift from digitization to tokenization of financial services



PayPal logs its largest Bitcoin volume since May BTC price crash

Bitcoin volumes on PayPal reaches their highest levels since the May 19 crash. A retail boom ahead?



The world’s leading payment services provider processed $145.60 million worth of Bitcoin trades on the day BTC rallied to its record high of $67,000.

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PayPal logs its largest Bitcoin volume since May BTC price crash

Bitcoin (BTC) trading volumes on global payment service provider PayPal reached $145.60 million on Oct. 20, just as the benchmark crypto rallied toward its record high near $67,000.

The latest spike in volumes came out to be the highest since the May 19 Bitcoin price crash from around $43,500 to as low as $30,000. On the day, some $304 million worth of BTC changed hands, almost double the volumes logged on Oct. 20.

Bitcoin PayPal volumes. Source:

Nonetheless, in both instances, it was unclear if the volumes were due to the increase in purchasing during the Bitcoin price rally or selloffs near the newly-achieved highs. Whatever may be the reason, the PayPal readings reflected a rise in retail activity on Oct. 20, further attested to by a spike in internet queries for the keyword “Bitcoin.”

Bitcoin interest on internet peaked on Wednesday. Source: Google TrendsRetail boom?

Notably, PayPal allows users to start investing in Bitcoin by putting as little as $1. As a result, the payment service firm has emerged as a viable platform for retail investors, a move seen by the industry as a cue for wider crypto adoption.

Interestingly, since PayPal’s push into the crypto sector, the sum count of unique addresses holding at least $1 worth of BTC has surged from 26.83 million on Nov. 20, 2020, to 33.89 million at press time. Meanwhile, on Oct. 20, the count was 34.12 million, an all-time high.

BTC addresses with balance greater than $1. Source: CoinMetrics, Messari

Alexander Vasiliev, co-founder/chief customer officer of crypto payment service Mercuryo, saw PayPal’s foray into the crypto industry as a sign of retail boom. He expected Bitcoin to end the fourth and final quarter of 2021 in profits as everyday traders look for safety nets against a persistently rising inflation.

Related: Bitcoin extends correction as Ethereum sees ‘picture perfect rejection’ at all-time highs

“The increased buying pressure from PayPal users and its corresponding impact on the price of Bitcoin may stir a notable up-shoot this fourth quarter and as the year runs to an end,” Vasiliev told Cointelegraph, adding:

“The company has millions of customers and a massive buy-up of BTC can effectively push Bitcoin to new highs […] With the ATH at $67k, we may see a worse case price hit of $80,000 by year-end and a best-case scenario of $100,000.”

PayPal has around 392 million active users worldwide, but its crypto services are available only in the United States and the United Kingdom. Meanwhile, the company is also eyeing an entry into the decentralized finance (DeFi) sector, signaling expansion outside the Bitcoin sector.

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Every investment and trading move involves risk, you should conduct your own research when making a decision.

Nonetheless, in both instances, it was unclear if the volumes were due to the increase in purchasing during the Bitcoin price rally or selloffs near the newly-achieved highs. Whatever may be the reason, the PayPal readings reflected a rise in retail activity on Oct. 20, further attested to by a spike in internet queries for the keyword “Bitcoin.”


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Sri Lanka appoints committee to implement crypto mining and blockchain

The Sri Lankan committee will report its crypto and blockchain-related findings to the Cabinet of Acts, Rules and Regulations.



The committee plans to propose a suitable framework for Sri Lanka after studying the regulations followed by international markets.

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Sri Lanka appoints committee to implement crypto mining and blockchain

Sri Lanka joins the global crypto adoption drive after setting up a committee for exploring and implementing blockchain and crypto mining technologies.

A letter shared on Oct. 8 by Sri Lanka’s Director General of Government Information, Mohan Samaranayake, shows that the authorities have approved a recent proposal that aims to attract investments in the country’s blockchain and cryptocurrency initiatives.

According to Samaranayake, the Sri Lankan authorities have identified the need of developing “an integrated system of digital banking, blockchain and cryptocurrency mining technology” as a means to stay on par with global partners and international markets. He added:

“This committee will be mandated to study the regulations and initiatives of other countries such as Dubai, Malaysia, Philippines, EU and Singapore etc, and propose a suitable framework for Sri Lanka.”

The proposal was made by Namal Rajapaksa, Minister of Project Coordinating and Monitoring, which requires the committee to report its crypto and blockchain-related findings to the Cabinet of Acts, Rules and Regulations.

Out of the eight members in the committee, two members represent international fintech giants including Mastercard’s Sandun Hapugoda and PricewaterhouseCoopers’ (PwC) Sujeewa Mudalige. Members from traditional finance include Colombo Stock Exchange CEO Rajeeva Bandaranaike and the Central Bank of Sri Lanka Director Dharmasri Kumarathunge.

The remaining four members represent various national authorities including Sri Lanka Computer Emergency Readiness Team (SLCERT), Department Of Government Information, Information and Communication Technology Agency (ICTA) and the President’s Council.

Supporting this initiative, the committee will also monitor laws and regulations implemented by other nations to establish rules against Anti-Money Laundering (AML), terror financing and criminal activities.

Related: Crypto transactions surge 706% in Asia as institutional adoption grows — Chainalysis

A recent Cointelegraph report highlighted a 706% surge in Central and Southern Asia and Oceania between July 2020 and June 2021. Based on data shared by Chainalysis, the value of the transactions in the region amounted to 14% ($572.5 billion), with India representing the highest global transaction value.

Back in April, Sri Lanka’s central bank issued a public notice against the risks associated with cryptocurrency investments, citing a lack of legal or regulatory recourse. However, just a month after the notice, the central bank shortlisted three banks for developing a proof-of-concept for a shared Know Your Customer facility using blockchain.

Related: Crypto transactions surge 706% in Asia as institutional adoption grows — Chainalysis


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Crypto and pension funds: Like oil and water, or maybe not?

Pension funds, the most cautious of institutional investors, are now giving the booming crypto and blockchain sector a closer look.



There are good reasons why pension funds should not invest in the crypto and blockchain space. The industry is too new, too volatile, and stultifyingly technical. Moreover, the rules and regulations to govern the sector have yet to be settled.

But the fixed-income financial instruments that pension funds typically favor — like long-term government bonds — are scarcely paying anything these days, so the traditional caretakers of employees’ retirement funds have a dilemma: Where to find investment yield in a world where inflation is looming?

It may not be entirely surprising, then, that pension funds — the most cautious of institutional investors — are now giving the booming crypto/blockchain sector a closer look.

“Family offices led the charge into crypto funds several years ago, but we’ve seen increasing interest from pensions, and there are many pensions that now have exposure to crypto,” Stephen McKeon, a finance professor at the University of Oregon and a partner at Collab+Currency, told Cointelegraph.

“We’ve seen increased interest from pensions” in the past year, added Christine Sandler, head of sales, marketing and research at Fidelity Digital Assets — part of an uptick among all institutional segments — “which we believe reflects the growing sophistication and institutionalization of the digital assets ecosystem, combined with a strong macro narrative driven by response to the pandemic.”

Pension funds tend to be “more conservative, risk-averse investors relative to other segments,” according to Sandler, and they mostly favor investments that have exhibited long-term growth and low volatility, which might arguably make them leery of the crypto/blockchain space.

An early adopter

One of the first United States-based pension funds to invest in blockchain firms was the Fairfax County Police Officers Retirement System, based in Fairfax, Virginia. It tested the waters back in 2018 with an 0.5% allocation in a fund that was investing in blockchain-related enterprises, Katherine Molnar, the fund’s chief investment officer, told Cointelegraph at the recent SALT conference in New York City.

The fund raised its allocation to 1% in 2019, and in spring 2021, it added two new blockchain-related investment funds. The current target allocation is 2%, but because crypto and crypto-based companies have been rising in value, 7% of overall fund assets are now crypto-related — again, mostly “pick-and-shovel” type enterprises that support the industry — like crypto exchanges and custodians.

The pension fund can’t rebalance because it is invested in venture capital funds, Molnar explained, but in mid-September, Fairfax signaled its intent to invest $50 million with Parataxis Capital, a crypto hedge fund that invests in digital tokens and cryptocurrency derivatives. “It’s not a directional bet, but it’s not totally illiquid either,” she told Cointelegraph.

The fact that the police officers’ pension fund has invested until recently in crypto-related companies as opposed to cryptocurrencies — Coinbase rather than, say, Bitcoin (BTC) — isn’t uncommon, either. U.S. institutional investors surveyed by Fidelity Digital indicated a greater propensity for digital asset investment products rather than direct ownership of cryptocurrencies, Sandler told Cointelegraph, adding:

“From our study, we also know that pension funds and defined benefit plans, like many other institutional investor segments surveyed, favor active management of an investment product containing digital assets.”

More pension funds may now travel this road. “We’ve started to see participation not just from the hedge fund segment, which we’ve long seen participation from, but now it’s recently from other institutions, pensions and endowments,” Michael Sonnenshein, CEO of Grayscale Investments — the largest manager of digital assets — told Bloomberg earlier this year, adding he anticipated that pension funds and endowments would drive much of his investment firm’s future growth.

Even pension-fund giants like the California Public Employees Retirement System (CalPERS) have dipped a toe in the crypto/blockchain sea. CalPERS invested in Bitcoin mining firm Riot Blockchain LLC some years back and has since raised the stake to about 113,000 shares — worth about $3 million in early October — though that is minuscule compared with CalPERS’ $133.3 billion in equity assets under management, as of its 13F filing in August.

How much is enough?

What sort of crypto allocation is appropriate for a pension fund today? Jim Kyung-Soo Liew, assistant professor at Johns Hopkins University’s Carey Business School, co-authored one of the earliest academic papers on crypto and pension funds back in 2017. That paper found that a 1.3% Bitcoin allocation would be “optimal” to fully reap the cryptocurrency’s diversification benefit.

What is appropriate today? “Going forward, an institutional investor should be looking at a 10%–20% allocation,” Liew told Cointelegraph, and he expects large pension funds to be investing as much as one-fifth of their total assets in the crypto/blockchain space within the next three to five years.

98% of retirement accounts in the US can’t access #Bitcoin.

That’s $36,800,000,000,000.

What happens when they do?

— Dan Held (@danheld) October 7, 2021

“We’ll see more institutional investors,” Liew said, adding, “Their horizons are long.” Today’s $2 trillion in cryptocurrency market capitalization could swell to $20 trillion in the next three to five years, he added, assuming a favorable regulatory environment.

Asked if this doesn’t fly in the face of pension funds’ traditional conservatism, Liew answered, “Pension funds have boards; they have investment committees,” and yes, “they’re often accused of being overly conservative and wanting to understand things 100% before acting.”

From an education standpoint, it will take some time and effort to bring them along, but chief investment officers are quite intelligent as a group, and they will be able to grasp the concepts, Liew said. One problem, he allowed, “They’re not rewarded for risk-taking.”

Obstacles remain

There may be other impediments. “One challenge is that pensions tend to require large tickets,” McKeon told Cointelegraph, “so the space had to mature a bit to accept that amount of capital. As funds continue to scale up, we expect to see more participation by pensions.” Volatility remains a concern, said Sandler, pointing to data:

“‘2021 Institutional Investor Digital Assets Study’ found that 73% of U.S. pension funds, defined benefit plans, and endowments and foundations surveyed cited volatility as the top barrier to adoption.”

U.S. pension funds and defined benefit plans still hold a fairly negative view of digital assets, according to the survey, “but I think we’ll continue to see that negative perception decrease as the market continues to mature and these investors get more comfortable with the technology, infrastructure and channels for exposure and have a more fully developed investment thesis about these assets,” she added.

As such, pension funds, like other institutional investors, are striving to find investment opportunities. As The New York Times noted, “U.S. Treasuries have been the bonds of choice for safe retirement income. But they could deliver no real return for the next decade.”

Related: The long game: Institutional interest in crypto is just getting started

Meanwhile, on the positive side, pension funds have long horizons, and they can withstand short-term volatility. Another plus, “Crypto talent is spread uniformly around the world, and we can source that talent,” Liew added.

Fiduciary constraints won’t disappear, of course. Many pension funds represent municipalities, and they are holding many people’s late-life financial well-being in their hands. That’s a lot of responsibility. But you “can’t get a ton of reward if you don’t take on some risk,” Liew said.

A while back, the president of Molnar’s board said, “I understand the need to do this” — the police officers’ pension fund, like most institutional investors, was struggling to grow its money in a continuing low-interest-rate environment — but some officers “are off the reservation,” he claimed. With the fund’s recent 7.25% rate of returns on its crypto investments, it’s probably safe to assume that some of those officers are back on the reservation now.

Pension funds tend to be “more conservative, risk-averse investors relative to other segments,” according to Sandler, and they mostly favor investments that have exhibited long-term growth and low volatility, which might arguably make them leery of the crypto/blockchain space.


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