June 4 – 10, 2018 | Investment Dealers, Regulations & More Crypto News
3iQ Research Group consolidates the top five cryptoasset stories of interest
to investment advisors and our investors.
Investment Dealers Should Ask Questions About Crypto Funds
June 4, 2018 – Despite the correction in the price of bitcoin from its December highs, interest in cryptocurrencies and the blockchain remains positive, particularly from fund managers who are still out to find a place for cryptoassets within their funds. Julie Mansi, a partner at Toronto-based Borden Ladner Gervais LLP, says that investment dealers must consider several factors before adding crypto-related funds to their list of approved funds. Some of the issues relate to fund strategy, such as “buy-and-hold” strategies or the crypto marketplaces where the funds buy, sell, and hold the cryptos. Because of cryptos being a relatively new asset within traditional investment funds, investment advisors and dealers need to be prepared to ask the right questions to fund managers that offer these innovative investments.
Mansi recommends that investment dealers ask how fund managers value their cryptoassets, and which exchanges the fund managers use to trade in. Some alternate cryptocurrencies lack liquidity across a broad range of exchanges; however, more established cryptocurrencies such as bitcoin and ether are significantly more liquid than the alternatives. Mansi pressed this idea further, and noted “that’s actually quite difficult in this space because there can be no consistency among the exchange pricing”. For dealers, Mansi said “you have to then ask: well, how did you pick your exchange? What were the criteria that you used to pick that exchange?”
3iQ is proud to work with Canadian advisors who have taken the time to be more knowledgeable in the blockchain and cryptoasset space, and those who are looking to improve their knowledge for the benefit of their clients. 3iQ offers “roundtable” education sessions to advisors to improve the understanding of blockchain basics and cryptoasset networks, as well as investment rationale for this asset class.
For more information, call or email us using our contact information here.
Analyst: Companies “Running Towards” Regulation is Good for Bitcoin
June 7, 2018 – Fundstrat analyst and co-founder Tom Lee has noted that recent moves from two major companies in the cryptocurrency market this week may be evidence that ongoing regulatory hurdles are getting smoothed out, which could provide a catalyst for currently low bitcoin prices. Major cryptocurrency exchange Coinbase has announced it would acquire the securities dealer, Keystone Capital, this past Wednesday in an effort to become a fully SEC-regulated broker-dealer. Goldman Sachs-backed Circle is also reportedly seeking a federal banking license to provide more crypto-related services across the entire banking spectrum.
“We believe the regulatory picture is now improving — best evidenced by Coinbase and Circle ‘running towards’ regulation,” Fundstrat co-founder Tom Lee said. “We are basing this on the notion that Coinbase and Circle would only take these actions if such was the case. We believe both companies would only make these moves if their perception of regulatory risks in crypto was improving.” For Tom Lee, these are indicators that the regulatory tide is shifting in favour of cryptocurrencies, and could provide a boost for the price of bitcoin.
SEC Appoints a New Leader for its Cryptocurrency Division
June 5, 2018 – The U.S. Securities and Exchange Commission (SEC) has chosen a new leader for its emerging cryptocurrency division, Valerie Szczepanik. Szczepanik, who had already worked at the SEC, was appointed to the new role of Associate Director of the Division of Corporation Finance and Senior Advisor for Digital Assets and Innovation. She is set to “coordinate efforts across all SEC Divisions and Offices regarding the application of U.S. securities laws to emerging digital asset technologies and innovations, including Initial Coin Offerings and cryptocurrencies,” said the SEC.
Fundstrat co-founder Tom Lee and other financial pundits have predicted institutions entering the market could boost liquidity and currently stagnant cryptocurrency prices, but that they are waiting for more guidance from regulators first. “At the moment we’re in purgatory with regard to regulatory clarity and I think that’s going to keep institutions on the sidelines,” said Tom Lee. “If I was an institution and I was going to make an allocation into crypto, I’d want some clarity.”
Fidelity Investments is Getting Serious About Bitcoin
June 6, 2018 – Fidelity Investments, which manages over $2 trillion USD in assets, is reportedly looking for new employees who can help them develop products to include cryptocurrencies. Despite Fidelity being seen as a more conservative financial firm, the company was early to accept the potentially revolutionary impact of cryptocurrencies within the traditional investment realm. The Chief Executive of Fidelity Investments, Abigail Johnson, has reportedly pushed the firm to experiment more with cryptocurrencies, and back in 2017, Johnson spoke at the Consensus conference, which is regarded as the largest and most influential crypto conference in the world.
Fidelity’s actual crypto efforts have been throttled so far, but some Fidelity clients can see their bitcoin balances in their Fidelity accounts. Despite their presence, clients still can’t buy and sell cryptocurrencies on Fidelity’s platforms. Fidelity has reportedly mined cryptocurrencies, and currently accepts some cryptocurrencies as a means of payment for their charitable contributions. Fidelity employees can even purchase food and drinks with bitcoin at the Fidelity cafeteria in Boston.
Hydro-Québec: Booming Crypto Mining Demand Prompts Halt in Request Processing
June 7, 2018 – Hydro-Québec has reported that it will temporarily stop processing requests from cryptocurrency miners, in an effort to fulfill its current obligations to supply electricity to all of Québec. Hydro-Québec, which is Canada’s largest electrical utility company, has reportedly faced “unprecedented” demand from crypto mining companies that exceeded Hydro-Québec’s short and medium term capacity. Power rates in Québec are the lowest in all of North America, for both consumers and large industrial customers, making the province attractive for crypto mining. The company has received “hundreds of applications” from crypto miners in just the last few weeks, which in sum would require more than 9,000 megawatts of energy. This is approximately one-quarter of the Hydro-Québec’s total generating capacity of just 37,000 megawatts.
“The blockchain industry is a promising avenue for Hydro-Québec,” said Eric Filion, president of Hydro-Québec Distribution. “Guidelines are nevertheless required to ensure that the development of this industry maximizes spinoffs for Québec without resulting in rate increases for our customers. We are actively participating in the Régie de l’énergie’s process so that these guidelines can be produced as quickly as possible.”
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