INTERVIEW: Digital currencies unlock remote critical minerals supply chains: Salus

Digital currencies, in particular stablecoins, are allowing the creation of new supply chains to bring critical mineral production from small miners in remote regions, including Africa and Latin America, to market, according to Salus, a Singapore-based digital trade finance platform for critical minerals operating on IOTA, a decentralized blockchain network.

"Digital currencies are part of a working capital solution for small miners which need financing but don't have the time, resources or scale to negotiate credit lines with conventional banks," said Trevor Skidmore, one of Salus' founders, and a former Rio Tinto executive, in an interview with Platts, part of S&P Global Energy. "We're talking about cash conversion cycles, cheaper transaction cost and immediate execution: producers can be paid the same day they deliver their goods."

As high-grade mineral deposits become rarer, and major miners increasingly face environmental licensing hurdles, a growing proportion of critical minerals, especially niche materials, look set to be produced by small and artisanal miners in African, Latin American and Southeast Asian jurisdictions.

New uses in the technology sector, continued electrification, and higher defense spending mean "consumption of critical minerals is still far out-growing supply," Skidmore notes.

"These [small] miners are now seeking us out," said Salus co-founder James Rilett, a former innovation manager at Energy. "There's no shortage of demand for digital financing to get these goods to market, at costs typically 50% cheaper than with conventional bank transactions in fiat currencies."

Small miners in challenging geographies typically transport their production to an aggregation point, selling to cooperatives or traders, sometimes at unfavorably discounted prices. These transactions could then involve local insurers and both local and international banks in lengthy and risky supply chains.

"We need to find ways to make these materials flow, as the big banks have shied away from these trades," said Skidmore. "Stablecoin is a payment rail for a US dollar-equivalent payment and is very convenient for cross-border transactions. We're making this supply easier to finance through technology."

Salus started operating in May, and since then, it has facilitated stablecoin financial settlement for multiple shipments of tantalum, tin, and niobium from mines in the Great Lakes region, which includes Rwanda, Democratic Republic of Congo, and Uganda. This is one of the world's richest frontiers for critical minerals, producing around 50% of global tantalum along with significant resources of lithium, tin, tungsten, and rare earth elements.

Initial digital financing for these transactions has been put up by a Cayman-listed fund.

Salus has a facility at the mine sites, where it transfers title of the mineral product, issuing a digital warehouse receipt via blockchain with product origin, production and subsequent journey details all blockchain-monitored. This provides for a relatively risk-free supply chain for western consumers who would not consider direct sourcing from the small producers.

"OEMs don't like to buy materials in the mountains," observed Skidmore.

Salus, which charges a fee for its digitizing services based on a percentage of product value, sees potential for immediate transactions totaling $250 million via its platform, according to the founders.

Increasing crypto acceptability

According to global credit ratings agency Morningstar DBRS, a growing number of entities worldwide, including high-profile companies, now accept indirect or direct cryptocurrency payments. Cryptocurrency use is seen moving beyond simple transactions to embrace operational treasury functions.

While institutions may notably use bitcoin as their primary corporate reserve currency, stablecoins have demonstrated rapid growth with increasing integration into payment systems, with recent legislation having lowered the barrier to entry for banks to enter the stablecoin market, Maureen Levelis, Morningstar DBRS vice president of North American financial institution ratings, said in a Sept. 15 report.

Confidence in stablecoins is growing so significantly that Salus is now in conversations with state-owned capital institutions in the US, UK and Western Europe who have expressed interest in participating in stablecoin financing of critical minerals supply chains.

"Whether stablecoins ultimately represent an opportunity or a threat to US banks will depend on regulatory design and market adoption," the Morningstar DBRS vice president said. "A regulatory framework could channel stablecoin activity through banks, helping the sector capture new revenue streams while reinforcing their central role in the US financial system."

Salus is targeting trade flows worth $100 million by year's end and as much as $1 billion in 2026. The platform aims to diversify to other critical minerals and other producing countries in Africa, including Nigeria, Zimbabwe and Zambia, where it has had discussions on potential trades. Discussions have also occurred in Chile, Colombia and Peru, Rilett said.