Although governments all over the world have are making moves to regulate and tax cryptocurrency, one small territory has made its way to the cutting edge of regulatory innovation.

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Gibraltar has positioned itself as one of the most crypto-friendly jurisdictions on earth. On January 1, a new set of laws establishing the Gibraltar Financial Services Commission as the body that will oversee all things DLT (distributed ledger technology) went into effect. Regarding the new laws, the GFSC stated that its primary objective is to protect the safety of consumers as well as the reputation of the territory.

“We are really excited to finally welcome applications from DLT providers; the team expects to be very busy in the coming months, and are looking forward to working on some interesting and innovative ideas with applicants,” said Nicky Gomez, head of Risk and Innovation at the GFSC.

The Gibraltar  Blockchain  Blockchain Blockchain comprises a digital network of blocks with a comprehensive ledger of transactions made in a cryptocurrency such as Bitcoin or other altcoins.One of the signature features of blockchain is that it is maintained across more than one computer. The ledger can be public or private (permissioned.) In this sense, blockchain is immune to the manipulation of data making it not only open but verifiable. Because a blockchain is stored across a network of computers, it is very difficult to tamper with. The Evolution of BlockchainBlockchain was originally invented by an individual or group of people under the name of Satoshi Nakamoto in 2008. The purpose of blockchain was originally to serve as the public transaction ledger of Bitcoin, the world’s first cryptocurrency.In particular, bundles of transaction data, called “blocks”, are added to the ledger in a chronological fashion, forming a “chain.” These blocks include things like date, time, dollar amount, and (in some cases) the public addresses of the sender and the receiver.The computers responsible for upholding a blockchain network are called “nodes.” These nodes carry out the duties necessary to confirm the transactions and add them to the ledger. In exchange for their work, the nodes receive rewards in the form of crypto tokens.By storing data via a peer-to-peer network (P2P), blockchain controls for a wide range of risks that are traditionally inherent with data being held centrally.Of note, P2P blockchain networks lack centralized points of vulnerability. Consequently, hackers cannot exploit these networks via normalized means nor does the network possess a central failure point.In order to hack or alter a blockchain’s ledger, more than half of the nodes must be compromised. Looking ahead, blockchain technology is an area of extensive research across multiple industries, including financial services and payments, among others. Blockchain comprises a digital network of blocks with a comprehensive ledger of transactions made in a cryptocurrency such as Bitcoin or other altcoins.One of the signature features of blockchain is that it is maintained across more than one computer. The ledger can be public or private (permissioned.) In this sense, blockchain is immune to the manipulation of data making it not only open but verifiable. Because a blockchain is stored across a network of computers, it is very difficult to tamper with. The Evolution of BlockchainBlockchain was originally invented by an individual or group of people under the name of Satoshi Nakamoto in 2008. The purpose of blockchain was originally to serve as the public transaction ledger of Bitcoin, the world’s first cryptocurrency.In particular, bundles of transaction data, called “blocks”, are added to the ledger in a chronological fashion, forming a “chain.” These blocks include things like date, time, dollar amount, and (in some cases) the public addresses of the sender and the receiver.The computers responsible for upholding a blockchain network are called “nodes.” These nodes carry out the duties necessary to confirm the transactions and add them to the ledger. In exchange for their work, the nodes receive rewards in the form of crypto tokens.By storing data via a peer-to-peer network (P2P), blockchain controls for a wide range of risks that are traditionally inherent with data being held centrally.Of note, P2P blockchain networks lack centralized points of vulnerability. Consequently, hackers cannot exploit these networks via normalized means nor does the network possess a central failure point.In order to hack or alter a blockchain’s ledger, more than half of the nodes must be compromised. Looking ahead, blockchain technology is an area of extensive research across multiple industries, including financial services and payments, among others. Read this Term Exchange, a subsidiary of the Gibraltar Stock Exchange, hopes to put the tiny British territory on the map as ‘Crypto Harbor’. In addition to a secure crypto exchange, GBX has developed a platform and a framework for hosting ICOs. Firms hoping to use GBX to host their token sales must undergo a rigorous application and vetting process in order to be accepted for listing.

The GBX is holding an ICO for the 'Rock Tokens' that will power the exchange in February. Recently, Finance Magnates spoke with GBX CEO Nick Cowan about the future of the cryptocurrency industry, and the Gibraltar Block Exchange’s position within it.

In the press release announcing the Gibraltar blockchain ICO, you said that the Gibraltar blockchain exchange seeks to create a new era of trust and global acceptance for the crypto industry. How exactly is the GBX working to legitimize the crypto industry?

Yes, of course, I’ll try and do my best. We have seen at the Gibraltar stock exchange a couple things happening. The first thing is that our government issued a consultation paper back in January 2016 (which was a long time ago now) putting forward a question to the community to say, “Should we--can we--regulate financial services companies who use distributed ledger technology, or the blockchain, to use, transmit, or store current assets? If we’re gonna do that, how do we do this? What would be your recommendations?”

That led to an 18-month consultation process that, in May 2017, resulted in a regulated framework being released by our government. It’s a principles-based framework that allows operators to move into Gibraltar and get licensed to regulate it.

It came to law January the 1st of 2018. That provides consumer confidence and regulatory certainty for operators. We’re the first jurisdiction in the world to have that regulatory framework. So that was the first bit of background.

Secondly, we saw enormous growth--$3.7 million dollars in the end. The ICO issuance drew a lot, and we saw that as obviously fantastic and interesting, but at the same time concerning because there didn’t seem to be any standards in terms of who can issue a token, and who’s eligible to issue a token.

Is the token a utility? If you’re an issuer--how do you know the advisor you’ve appointed is any good? How do you know that the token contributors are who they say they are? Have they been cleared for AML and KYC? If you’re an investor, have the controllers been vetted? Could this be a scam? Have you lost your money already? Etc etc.

We thought that against our framework--or what’s happening in the background--that we could bring some governance and leadership based on best practices to token issuance. That’s why we formed GBX, the Gibraltar Blockchain Exchange, a subsidiary of the Gibraltar Stock Exchange. GBX is there to bring rules and best practices to where there currently aren’t any.

The first step is that we got a sponsor’s code, which was released yesterday on our website, GBX.gi. You can go and see the sponsor rules and application form. You can think of the sponsors as the sort of leading ICO issuers from the US, Asia, et cetera. Anybody is eligible to apply.

If you meet our criteria, you are then approved as a sponsor, and you are then on our website. That means that ICO issuers can approach you as a sponsor and know that they’re coming towards a trusted network, where the sponsors are qualified to take you through the process of preparing your whitepaper, which has to meet our listing rules, and take you all the way through getting your application bundled together; carrying out due diligence in terms of controller, commercial, legal, financial, technology; and then submitting your application to us, the Exchange.

Once we approve you, you’ll launch your ICO, we publish your whitepaper, and then you’re basically good to go. When the tokens have been distributed and the public sale ends, you’re guaranteed a listing on GBX, our cryptocurrency exchange.

So, it’s a token sale platform, and a cryptocurrency exchange that’s owned and managed by a stock exchange. I think that’s really important for a couple of reasons.

Number one, we’re licensed and regulated at the parent level, and GBX is currently applying for its license, under the new regulations that I just referred to. Secondly, for a startup (or a fintech), it allows you to not only use a trusted network, but to go on a capital-raising journey right through to what is ultimately an equity issue, maybe six, seven years down the road perhaps.

We think that’s really important, and we think that’s also bridging the gap between traditional capital markets, and also the crypto community. We’re bringing that convergence together. We think also that that’s a vital part of trying to institutionalize and mature the cryptocurrency market from being primarily a retail market, true to how we saw Kodak announce a token a couple of weeks ago.

We see that really as the next stage of what’s been an incredibly successful marketplace; the maturing of investors to institutions, and the maturing of issuers through a mainstream corporate. So it’s a tokenization of economies that we think is now going to happen in a major way, and we want to be at the forefront of best practices, providing that same thing, investor protection, consumer confidence, and regulated certainty for issuers, and we think that’s really powerful.

You’ve mentioned the strategic partnership with Quoine. Has GBX formed any other partnerships? What kind of reactions are you getting from the established cryptocurrency community?

I can tell you what we’ve found and heard on our roadshow. As you can imagine, we met a huge number of investors. We spoke at all of the big conferences--Token Summit San Fran, Hong Kong Fintech Week, and others. We also spoke at the massive conference in Lisbon, Web Summit. We had--universally--at our stands or after our speeches, really overwhelming positivity--which for me of course, completely caught me on the back foot.

We thought we were doing something important, but we definitely underestimated the feeling of support from the crypto community, which was (overwhelmingly): “we’ve been waiting so long for this to happen, this is so needed. We’ve had (for example) 400 white papers this year and have invested in four. If we had someone else vetting out the rubbish, and bringing quality ICOs to market, and knowing that all of that due diligence has been done, this is absolutely vital.” So, that was amazing.

The second thing is in terms of strategic relationships, we want to partner up with companies that have the same core values, and that are ideally licensed and regulated. That’s where we see the way the industry going. With regards to Quoine, Japan is the only jurisdiction right now that has a licensed and regulatory framework for exchanges.

For us, it was such an important step to take, not only in terms of technology development (licensing their tech et cetera) but it’s much more important because Quoine has supported our rock token issue. We have a lot of ideas about working together in the future, but also--more importantly--Quoine really liked the idea of their Japanese issuers with an EU partner exchange that they can use to dual-list their tokens on GBX, as well as Quoine.

Thirdly, we love the idea of being able to say to global issuers that list on GBX that we will dual-list you on Quoine, so you get access and exposure to the Japanese domestic market, but also you get access and exposure to having your token traded while we’re asleep. That’s gotta be absolutely fantastic, because when Europe sleeps,  Liquidity   Liquidity The term liquidity refers to the process, speed, and ease of which a given asset or security can be converted into cash. Notably, liquidity surmises a retention in market price, with the most liquid assets representing cash. The most liquid asset of all is cash itself. ·      In economics, liquidity is defined by how efficiently and quickly an asset can be converted into usable cash without materially affecting its market price. ·      Nothing is more liquid than cash, while other assets represent varying degrees of liquidity. This can be differentiated as market liquidity or accounting liquidity.·      Liquidity refers to a tangible construct that can be measures. The most common ways to do so include a current ratio, quick ratio, and cash ratio. What is the Definition of Liquidity? Liquidity is a common definition used in investing, banking, or the financial services space. Its primary function is to ascertain how quickly a given asset can be bought, sold, or exchanged without a disparity in market price.  Which of the following assets is the most liquid? By definition, in terms of liquidity, cash is unequivocally seen as the most liquid asset in an economic sense. This is due to its widespread acceptance and ease of conversion into other assets, forms of cash, or currencies, etc. All other liquid assets must be able to be quickly and efficiently converted into cash, i.e., financial liquidity. This includes such things as stocks, commodities, or virtually any other construct that has an associated value. By extension, illiquid or non-liquid assets are not able to be quickly converted into cash. These assets, also known as tangible assets, can include such things as rare art or collectables, real estate, etc. Liquidity Spectrum Liquid assets can be defined primarily as either cash on hand or simply an asset that can be easily or readily converted into usable cash. It is important to note that cash is not uniformly liquid for several reasons. The below examples encompass all types of assets and their corresponding level of liquidity. Examples of Liquid Assets or Securities A good example of this is the US dollar, which is recognized or accepted globally, and backed by the US government or Federal Reserve Bank. Other major forms of cash include Euros, or major currencies. This differs notably from the legal tender in many emerging countries or others for political or economic reasons.  Cash aside, assets such as stocks or equities, bonds and other securities, money market assets, marketable securities, US treasuries or T-notes, exchange-traded funds (ETFs), a savings account, and mutual funds serve as the most liquid assets. These are generally assumed to be quick assets. Each of these assets can be converted into cash either instantaneously, or via any brokerage platform, exchange, etc., often in as little as minutes or seconds. As such, these assets are liquid. Examples of Illiquid Assets or Securities Conversely, illiquid assets still retain importance and value, though are much more difficult to convert into cash. Common examples of this include land or real estate, intellectual property, or other forms of capital such as equipment or machinery. In the examples above, liquid assets are assumed to be convertible into cash without substantial fees or delays in time. Illiquid assets on the other hand often suffer from fees or additional conversion costs, processing times, ultimately creating a price disparity. The best example of an illiquid asset is a house. For many individuals this is the most valuable asset they will own in their entire lives. However, selling a house typically requires taxes, realtor fees, and other costs, in addition to time. Real estate or land also takes much longer to exchange into cash, relative to other assets.  Types of Liquidity Overall, liquidity is a broad term that needs to be defined by two different measures: market liquidity and accounting liquidity. Both measures deal with different constructs or entities entirely, though are useful metrics with regards to individuals or financial markets. Market Liquidity Market liquidity is a broader term that is used by a market maker to measure the ease of which assets can be bought and sold at transparent prices, namely across exchanges, stock markets, or other financial sectors. This can include among others, a real estate or property market, market for fine arts and collectable, and other goods. Market Liquidity Example As mentioned above, certain financial markets are much more liquid than others. The degree to which stocks from large companies or foreign currencies can be exchanged is much easier than finding a readily available market for antiques, collectables, or other capital, regardless of utility. Overall, a stock market, financial brokerage, or exchange is considered to have the high market liquidity. This is because the difference between both the bid and ask prices between parties is very low. The lower the spread between these two prices, the more liquid a given market is. Additionally, low liquidity refers to a higher spread between two prices. Why Liquidity Varies and What Does Liquidity Mean in Stocks? Every asset has a variable level of liquidity meaning this can change depending on what is being analyzed. One can define liquidity in stocks or stock markets in the same way as in foreign exchange markets, brokers, commodities exchanges, and crypto exchanges.  Additionally, how large the market is will also dictate liquidity. The foreign exchange market for example is currently the largest by trading volume with high liquidity due to cash flows. This is hardly surprising given that forms of cash or currencies are being exchanged. What is Liquidity in Stocks? A stock's liquidity refers to how rapidly shares of a stock can be bought or sold without largely impacting a stock price. By definition, liquidity in stocks varies for a number of reasons. Stocks with low liquidity may be difficult to sell and may cause you to take a bigger loss if you cannot sell the shares when you want to. In finance, the most liquid assets are always the most popular. By extension, if a spread between buyers and sellers increases, the market is considered to be less liquid. A good example of this is the real estate or property market. While highly valuable, there are large disparities between the purchase price and selling price of property, as well as the time associated in making these transactions, and additional fees incurred by other parties. Liquidity providers play a key role in this regard. Accounting Liquidity Unlike market liquidity, accounting liquidity measures something different entirely. Accounting liquidity is a measure by which either an individual or entity can meet their respective current financial obligations with the current liquid assets available to them. This includes paying off debts, overhead, or any other fixed costs associated with a business. Accounting liquidity is a functional comparison between one’s current liquid assets and their current liabilities. In the United States and other countries, companies and individuals have to reconcile accounting on a yearly basis. Accounting liquidity is an excellent measure that captures financial obligations due in a year. Accounting Liquidity Example Accounting liquidity itself can be differentiated by several ratios, controlling for how liquid assets are. These measures are useful tools for not just the individual or company in focus but for others that are trying to ascertain current financial health.As an example, accounting liquidity can measure any company’s current financial assets and compare them to its financial obligations. If there is a large disparity between these figures, or much more assets than obligations, a company can be considered to have a strong depth of liquidity.How to Calculate Liquidity Liquidity is of importance to investors, financial market participants, analysts, or even for an investment strategy. Calculating liquidity is a measure of firm or individual’s ability to utilize or harness current liquid assets to current cover short-term debt. This can be achieved using a total of four formulas: the current ratio, quick ratio, acid-test variation, and cash ratio. Current Ratio The current ratio is the easiest measure due to its lack of complexity. Quite simply, the current ratio measures a firm or individual’s current assets or those than can be sold within a calendar year, weighed against all current liabilities. Current Ratio = Current Assets/Current Liabilities If the current ratio’s value is greater than 1, then the entity in question can be assumed to reconcile its financial obligations using its current liquid assets. Highly liquid assets will correspond to higher numbers in this regard. Conversely, any number less than 1 indicates that current liquid assets are not enough to cover short-term obligations. Quick Ratio A quick ratio is a slightly more complex way of measuring accounting liquidity via a balance sheet. Unlike the current ratio, the quick ratio excludes current assets that are not as liquid as cash, cash equivalents, or other shorter-term investments. The quick ratio can be defined below by the following: Quick Ratio = (Cash or Cash Equivalents + Shorter-Term Investments + Accounts Receivable)/Current Liabilities Acid-Test Ratio  The acid-test ratio is a variation of the quick ratio. The acid-test ratio seeks to deduct inventory from current assets, serving as a traditionally broader measure that is more forgiving to individuals or entities. Acid-Test Ratio = (Current Assets – Inventories – Prepaid Costs)/Current Liabilities Cash Ratio Finally, the cash ratio further isolates current assets, looking to measure only liquid assets that are designated as cash or cash equivalents. In this sense, the cash ratio is the most precise of the other liquidity ratios, excluding accounts receivable, inventories, or other assets.  A more precise measure has its uses, namely regarding assessing financial strength in the face of an emergency, i.e., an unforeseen and time sensitive event. The cash ratio can help measure an entity or individual’s hypothesized solvency in the face of unexpected scenarios, events, etc. As such, the cash ratio is defined below: Cash Ratio = Cash and Cash Equivalents/Current Liabilities  The cash ratio is not simply a doomsday tool but a highly practical measure when determining market value. In the financial services space, even large companies or profitable institutions can find themselves at liquidity risk due to unexpected events beyond their control. Why is Liquidity Important and Why it Matters to You? Liquidity is very important for not just financial markets but for individuals and investors. Liquid markets benefit all market participants and make it easier to buy and sell securities, stocks, collectables, etc.  On an individual level, this is important for personal finance, as ordinary investors are able to better take advantage of trading opportunities. Additionally, high liquidity promotes financial health in companies in the same way it does for individuals. Conclusion – What Does Liquidity Mean? What is liquidity? This metric is a commonly used as a measure in the investing, banking, or financial services space. Liquidity determines how quickly a given asset can be bought, sold, or exchanged without a disparity in market price.  Which of the following assets is the most liquid? – cash, stocks, real estate. Of all assets, cash or money is the most liquid, meaning it is the easiest to utilize. All other liquid assets must be able to be quickly and efficiently converted into cash. This includes such things as stocks, commodities, or virtually any other construct that has an associated value. Conversely, illiquid or non-liquid assets are not able to be quickly converted into cash. These assets, also known as tangible assets, can include such things as rare art or collectables, real estate, etc. Frequently Asked Questions About Liquidity Is Liquidity Good or Bad? The term liquidity refers to a measure and is neither good nor bad but is instead a metric of how convertible an asset is to cash. However, high liquidity is associated with lower risk, while a liquid stock is more likely to keep its value when being traded.Is a Home a Liquid Asset? A home or properly is not considered to be a liquid asset. Selling any property can incur additional costs and take a long amount of time. Additionally, there is often a price disparity from the time of purchase, meaning a seller may not even get its original market value back at the time of the sale. Why Are Stocks Liquid? Stocks are some of the most liquid assets in financial markets because these assets can be converted to cash in a short period of time in the event of any financial emergency. Is Tesla a Liquid Stock? Tesla is a liquid stock and while hugely volatile, is an integral part of the NASDAQ and is a globally recognized company. Additionally, the company is a popular single-stock CFD offering at many brokerages, with very high volumes. Is a Pension a Liquid Asset? Certain pensions are liquid assets once you have reached a retirement age. Until you are eligible to withdraw or collect a pension, without early withdrawal penalty, it is not considered a liquid asset. The term liquidity refers to the process, speed, and ease of which a given asset or security can be converted into cash. Notably, liquidity surmises a retention in market price, with the most liquid assets representing cash. The most liquid asset of all is cash itself. ·      In economics, liquidity is defined by how efficiently and quickly an asset can be converted into usable cash without materially affecting its market price. ·      Nothing is more liquid than cash, while other assets represent varying degrees of liquidity. This can be differentiated as market liquidity or accounting liquidity.·      Liquidity refers to a tangible construct that can be measures. The most common ways to do so include a current ratio, quick ratio, and cash ratio. What is the Definition of Liquidity? Liquidity is a common definition used in investing, banking, or the financial services space. Its primary function is to ascertain how quickly a given asset can be bought, sold, or exchanged without a disparity in market price.  Which of the following assets is the most liquid? By definition, in terms of liquidity, cash is unequivocally seen as the most liquid asset in an economic sense. This is due to its widespread acceptance and ease of conversion into other assets, forms of cash, or currencies, etc. All other liquid assets must be able to be quickly and efficiently converted into cash, i.e., financial liquidity. This includes such things as stocks, commodities, or virtually any other construct that has an associated value. By extension, illiquid or non-liquid assets are not able to be quickly converted into cash. These assets, also known as tangible assets, can include such things as rare art or collectables, real estate, etc. Liquidity Spectrum Liquid assets can be defined primarily as either cash on hand or simply an asset that can be easily or readily converted into usable cash. It is important to note that cash is not uniformly liquid for several reasons. The below examples encompass all types of assets and their corresponding level of liquidity. Examples of Liquid Assets or Securities A good example of this is the US dollar, which is recognized or accepted globally, and backed by the US government or Federal Reserve Bank. Other major forms of cash include Euros, or major currencies. This differs notably from the legal tender in many emerging countries or others for political or economic reasons.  Cash aside, assets such as stocks or equities, bonds and other securities, money market assets, marketable securities, US treasuries or T-notes, exchange-traded funds (ETFs), a savings account, and mutual funds serve as the most liquid assets. These are generally assumed to be quick assets. Each of these assets can be converted into cash either instantaneously, or via any brokerage platform, exchange, etc., often in as little as minutes or seconds. As such, these assets are liquid. Examples of Illiquid Assets or Securities Conversely, illiquid assets still retain importance and value, though are much more difficult to convert into cash. Common examples of this include land or real estate, intellectual property, or other forms of capital such as equipment or machinery. In the examples above, liquid assets are assumed to be convertible into cash without substantial fees or delays in time. Illiquid assets on the other hand often suffer from fees or additional conversion costs, processing times, ultimately creating a price disparity. The best example of an illiquid asset is a house. For many individuals this is the most valuable asset they will own in their entire lives. However, selling a house typically requires taxes, realtor fees, and other costs, in addition to time. Real estate or land also takes much longer to exchange into cash, relative to other assets.  Types of Liquidity Overall, liquidity is a broad term that needs to be defined by two different measures: market liquidity and accounting liquidity. Both measures deal with different constructs or entities entirely, though are useful metrics with regards to individuals or financial markets. Market Liquidity Market liquidity is a broader term that is used by a market maker to measure the ease of which assets can be bought and sold at transparent prices, namely across exchanges, stock markets, or other financial sectors. This can include among others, a real estate or property market, market for fine arts and collectable, and other goods. Market Liquidity Example As mentioned above, certain financial markets are much more liquid than others. The degree to which stocks from large companies or foreign currencies can be exchanged is much easier than finding a readily available market for antiques, collectables, or other capital, regardless of utility. Overall, a stock market, financial brokerage, or exchange is considered to have the high market liquidity. This is because the difference between both the bid and ask prices between parties is very low. The lower the spread between these two prices, the more liquid a given market is. Additionally, low liquidity refers to a higher spread between two prices. Why Liquidity Varies and What Does Liquidity Mean in Stocks? Every asset has a variable level of liquidity meaning this can change depending on what is being analyzed. One can define liquidity in stocks or stock markets in the same way as in foreign exchange markets, brokers, commodities exchanges, and crypto exchanges.  Additionally, how large the market is will also dictate liquidity. The foreign exchange market for example is currently the largest by trading volume with high liquidity due to cash flows. This is hardly surprising given that forms of cash or currencies are being exchanged. What is Liquidity in Stocks? A stock's liquidity refers to how rapidly shares of a stock can be bought or sold without largely impacting a stock price. By definition, liquidity in stocks varies for a number of reasons. Stocks with low liquidity may be difficult to sell and may cause you to take a bigger loss if you cannot sell the shares when you want to. In finance, the most liquid assets are always the most popular. By extension, if a spread between buyers and sellers increases, the market is considered to be less liquid. A good example of this is the real estate or property market. While highly valuable, there are large disparities between the purchase price and selling price of property, as well as the time associated in making these transactions, and additional fees incurred by other parties. Liquidity providers play a key role in this regard. Accounting Liquidity Unlike market liquidity, accounting liquidity measures something different entirely. Accounting liquidity is a measure by which either an individual or entity can meet their respective current financial obligations with the current liquid assets available to them. This includes paying off debts, overhead, or any other fixed costs associated with a business. Accounting liquidity is a functional comparison between one’s current liquid assets and their current liabilities. In the United States and other countries, companies and individuals have to reconcile accounting on a yearly basis. Accounting liquidity is an excellent measure that captures financial obligations due in a year. Accounting Liquidity Example Accounting liquidity itself can be differentiated by several ratios, controlling for how liquid assets are. These measures are useful tools for not just the individual or company in focus but for others that are trying to ascertain current financial health.As an example, accounting liquidity can measure any company’s current financial assets and compare them to its financial obligations. If there is a large disparity between these figures, or much more assets than obligations, a company can be considered to have a strong depth of liquidity.How to Calculate Liquidity Liquidity is of importance to investors, financial market participants, analysts, or even for an investment strategy. Calculating liquidity is a measure of firm or individual’s ability to utilize or harness current liquid assets to current cover short-term debt. This can be achieved using a total of four formulas: the current ratio, quick ratio, acid-test variation, and cash ratio. Current Ratio The current ratio is the easiest measure due to its lack of complexity. Quite simply, the current ratio measures a firm or individual’s current assets or those than can be sold within a calendar year, weighed against all current liabilities. Current Ratio = Current Assets/Current Liabilities If the current ratio’s value is greater than 1, then the entity in question can be assumed to reconcile its financial obligations using its current liquid assets. Highly liquid assets will correspond to higher numbers in this regard. Conversely, any number less than 1 indicates that current liquid assets are not enough to cover short-term obligations. Quick Ratio A quick ratio is a slightly more complex way of measuring accounting liquidity via a balance sheet. Unlike the current ratio, the quick ratio excludes current assets that are not as liquid as cash, cash equivalents, or other shorter-term investments. The quick ratio can be defined below by the following: Quick Ratio = (Cash or Cash Equivalents + Shorter-Term Investments + Accounts Receivable)/Current Liabilities Acid-Test Ratio  The acid-test ratio is a variation of the quick ratio. The acid-test ratio seeks to deduct inventory from current assets, serving as a traditionally broader measure that is more forgiving to individuals or entities. Acid-Test Ratio = (Current Assets – Inventories – Prepaid Costs)/Current Liabilities Cash Ratio Finally, the cash ratio further isolates current assets, looking to measure only liquid assets that are designated as cash or cash equivalents. In this sense, the cash ratio is the most precise of the other liquidity ratios, excluding accounts receivable, inventories, or other assets.  A more precise measure has its uses, namely regarding assessing financial strength in the face of an emergency, i.e., an unforeseen and time sensitive event. The cash ratio can help measure an entity or individual’s hypothesized solvency in the face of unexpected scenarios, events, etc. As such, the cash ratio is defined below: Cash Ratio = Cash and Cash Equivalents/Current Liabilities  The cash ratio is not simply a doomsday tool but a highly practical measure when determining market value. In the financial services space, even large companies or profitable institutions can find themselves at liquidity risk due to unexpected events beyond their control. Why is Liquidity Important and Why it Matters to You? Liquidity is very important for not just financial markets but for individuals and investors. Liquid markets benefit all market participants and make it easier to buy and sell securities, stocks, collectables, etc.  On an individual level, this is important for personal finance, as ordinary investors are able to better take advantage of trading opportunities. Additionally, high liquidity promotes financial health in companies in the same way it does for individuals. Conclusion – What Does Liquidity Mean? What is liquidity? This metric is a commonly used as a measure in the investing, banking, or financial services space. Liquidity determines how quickly a given asset can be bought, sold, or exchanged without a disparity in market price.  Which of the following assets is the most liquid? – cash, stocks, real estate. Of all assets, cash or money is the most liquid, meaning it is the easiest to utilize. All other liquid assets must be able to be quickly and efficiently converted into cash. This includes such things as stocks, commodities, or virtually any other construct that has an associated value. Conversely, illiquid or non-liquid assets are not able to be quickly converted into cash. These assets, also known as tangible assets, can include such things as rare art or collectables, real estate, etc. Frequently Asked Questions About Liquidity Is Liquidity Good or Bad? The term liquidity refers to a measure and is neither good nor bad but is instead a metric of how convertible an asset is to cash. However, high liquidity is associated with lower risk, while a liquid stock is more likely to keep its value when being traded.Is a Home a Liquid Asset? A home or properly is not considered to be a liquid asset. Selling any property can incur additional costs and take a long amount of time. Additionally, there is often a price disparity from the time of purchase, meaning a seller may not even get its original market value back at the time of the sale. Why Are Stocks Liquid? Stocks are some of the most liquid assets in financial markets because these assets can be converted to cash in a short period of time in the event of any financial emergency. Is Tesla a Liquid Stock? Tesla is a liquid stock and while hugely volatile, is an integral part of the NASDAQ and is a globally recognized company. Additionally, the company is a popular single-stock CFD offering at many brokerages, with very high volumes. Is a Pension a Liquid Asset? Certain pensions are liquid assets once you have reached a retirement age. Until you are eligible to withdraw or collect a pension, without early withdrawal penalty, it is not considered a liquid asset. Read this Term tends to go down a bit.

If you are looking for more information on our upcoming #RockToken #ICO, look no further. Make sure you get yourself #whitelisted ready to go! #Blockchain #CryptoHarbour #Crypto https://t.co/FHFa2PAPMd

— GB Exchange (@GibBlockEx) January 25, 2018

We’ll be trading for twenty-four hours anyway, but if you’ve got two exchanges trading your token, that can only be a good thing. If other jurisdictions put in a regulated framework, that means that other exchanges can get licensed and regulated. If that means we can sign up strategic partnerships, and if there’s a benefit to our clients, we will certainly look into doing that.

Our role here is, we hope, to grow the community globally, based on best practices. That can only help issuers and investors alike. That’s where this liquidity, or price transparency, or investor protection--that’s what this market needs to mature.

Gibraltar has positioned itself as a territory that’s friendly to cryptocurrency firms and the blockchain industry in general. On the other hand, governments and financial institutions around the world continue to tighten their grips on the industry. How do you expect that GBX will navigate this changing regulatory landscape?

That’s a really good question, and the answer is a complex one. I think the first thing is that Gibraltar is leading the way in terms of regulation. We expect, and hope that governments and other regulators enter into open and frank conversations with our government and our regulators, to see how the experience of Gibraltar is, and really the purpose behind regulation is (primarily) to protect investors.

That’s why regulators have behaved the way they’ve behaved--they’re concerned. So I think the first thing is that we hope to show other jurisdictions that our approach is the right approach. Rather than shut things down, you’re better to actually say, 'here’s our framework, come to us and you can be licensed and regulated.' That’s strike one.

Strike two is that I don’t believe that you can--nor should you--stop innovation. I think that we’re going to see over the next five to ten years, the emergence of new technology which is going to transform the way we live, the way we act, and the way financial services are carried out. I understand that banks are concerned about AML and KYC, and we totally understand that, but again--you are going to have banks taking the lead. I think the banks that take the lead will be the banks that will benefit.

I think if you try to shut the system down, you’ll drive people towards the reason behind the evolution of Satoshi and Bitcoin, which was to have appeared to be a payment system that didn’t need the banking system. I think what will happen is that with added regulation, banks will be more comfortable, banks will take the lead, and you’ll end up with a much more mature financial system.

I think the way that we should navigate around it is that we’ve got to work firstly with those banks that are crypto-friendly. There are banks out there that are crypto-friendly. It’s like GIB--who obviously were caught off-guard on the 27th of December when RBS made the decision they made--when in fact, they denied that they had made that decision, and it’s a bit confusing.

When it was on our local news, the RBF actually denied that they have pulled the plug on crypto market segments correspondent banking for GIB. It’s a bit of a confusing situation. We have banks that are Crypto-friendly, and we still have some banks that are concerned, but I think they will come around to it in time.

It might be that the genie’s out of the bottle, and this business is only gonna grow. Innovation has to be embraced. That’s why I think the regulated framework that we have at Gibraltar is absolutely vital and leading the way.

I had a meeting this week with a digital bank that’s about to be licensed in Gibraltar. Those types of organizations, I think, will lead the way. One of the things we’ve thought about ourselves at the GSX group level is actually making our own banking solution out in 2019.

Maybe we’ll open our own bank, just to make sure we can provide our clients with the certainty they need to grow their businesses, because if we’re happy that the AML and KYC boxes have been ticked, and we can provide our clients with basic banking services to build their businesses, then that has to happen. We’ll be looking at those solutions in the future. Fingers crossed, these solutions will be delivered and the banking system will get more comfortable, and the business will grow.