Stablecoins have been a core part of the growth story for crypto and DeFi, with USD stablecoins being the de facto reserve currency of crypto thus far. However, when looking at investments in real-world assets, issues with foreign exchange risk start to take stage. In non-USD markets like Asia, locally denominated stablecoins will form essential building blocks for crypto and DeFi to expand into the real world.
At present, factors such as rising geopolitical risks and the prospect of higher inflation can give rise to higher volatility. There are also precedents in South-East Asia and elsewhere of currency crises with a potential for significant exchange rate moves.
Silta, on its mission to bridge DeFi with real-world infrastructure investments, has partnered with Bluejay Finance in an effort to mitigate the foreign exchange risk issue through Bluejay’s local currency denominated stablecoins. Bluejay Protocol is a system for creating and managing stablecoins to track different currencies around the world.
Silta partners with DeFi protocols wishing to finance the infrastructure market. Silta undertakes project viability and impact assessments on borrower applications, helping DeFi DAOs and lender communities get a better handle on the risks associated with lending to these types of undercollateralized projects.
The partnership supports Silta’s entry into the South East Asian market, where the project aims to channel decentralized finance towards building sustainable infrastructure. In Asia, investment spending on infrastructure is expected to increase along with population growth and urbanisation, with investment needs projected to add up to roughly US$ 50 trillion between 2020 and 2040 (Source: Global Infrastructure Hub).
WEnergy Global is one of the first borrowers seeking to tap into DeFi through Silta for their solar projects around South East Asia. When made available, crypto investors will be able to gain access to loan pools associated with these kinds of real world assets on third-party DeFi protocols.
Recommended for You
“Bluejay Finance is an incredibly interesting project for Silta, because they are developing several South-East Asian stablecoins that would be relevant for our project borrowers around the region. Using their locally denominated stablecoins would solve the issue of foreign exchange rate risk for borrowers, thus making the cost of capital more attractive,” says Ben Sheppard, co-founder of Silta Finance.
Sherry Jiang, founder of Bluejay Finance, sees the two projects’ missions as closely aligned. “We are firm believers in the next stage of DeFi in providing real world lending and yield opportunities for both borrowers and lenders. What’s attractive about Silta is that it gives anybody globally access to this asset class of infrastructure investments and an opportunity to invest with a purpose. This aligns with our mission to onboard next billion users and new use cases into DeFi,” she says. “We believe that the fundamental infrastructure layer is really around the stablecoins to reduce the centralization and risk related to USD denomination and ensure a connection to the local economy itself.”
Bluejay Finance is building an Asia-focused capital-efficient protocol for multi-currency stablecoins. The aim is to mirror the foreign exchange market in the fiat world onto the blockchain, in order to accelerate financial inclusion and access to DeFi for all users and businesses. Bluejay’s stablecoins — like the synthetic version of the Singapore Dollar, Philippine Peso, etc. — are distributed through partners like DeFi protocols, decentralized exchanges, centralized exchanges, fintech companies, and allow end users access a more inclusive, locally-familiar medium of exchange that limits foreign exchange risk and exchange fees.
Silta DAO steers DeFi towards sustainability-focused developers of real-world assets (RWA). Silta is paving the way for community-led, decentralized due diligence and impact assessment in project financing. The Silta Score represents the risks and impacts of a particular RWA project. DeFi protocols can use the Silta Score to give lenders insights into the use of funds and risks associated with a project. Find out more at silta.finance.