August 20 – 26, 2018 | ETF Differentiation, Self-Regulatory Bodies & More Crypto News
3iQ Research Group consolidates the top five cryptoasset stories of interest
to investment advisors and our investors.
3iQ Advisor Jack Tatar Talks Bitcoin ETFs, Education
August 24, 2018 – Despite the US Securities and Exchange Commission (SEC) rejecting nine cryptocurrency ETFs last week, Jack Tatar, a managing partner at Doyle Capital Management and advisor at 3iQ Corp., sees the rejections as constructive and indicates that progress is being made. Unlike the rejected ETFs, Tatar believes that the VanEck and SolidX Bitcoin ETF may stand a better chance at passing the SEC’s approval due to the ETF being physically-backed, among other differentiating factors. “[The SEC reasoning] was more thoughtful than we’ve seen in the past. What it is showing to me is there is a greater receptivity on the part of the SEC to understand this asset and understand potentially how it can fit as an investment. I think that is a big change,” said Tatar.
“Two years ago they weren’t even viewing this asset class as an investment and saying that investors should stay away from this. I think now that there has been a level of education to the SEC and they are being more thoughtful about these types of decisions.” Tatar also believes that investors and advisors need to brush-up on their knowledge of cryptoassets, as lack of knowledge has led to people getting involved in assets they know nothing about. “It does a disservice to investors for an advisor not to be able to discuss it. We have billions of dollars being transacted in this, we have companies that potentially could be the next Amazon or Google being created in this space and we’re not allowing investors to make a decision about which one of these could potentially be a long-term growth company. That’s not fair.”
Leading Cryptocurrency Exchanges Team Up to Police Industry
August 20, 2018 – Some of the world’s largest cryptocurrency exchanges are now teaming up to help erase the crypto industry of bad behavior. The Virtual Commodity Association, created by Cameron and Tyler Winklevoss, has announced that it has added several cryptocurrency exchange participants to the organization. Some of the largest cryptocurrency exchanges, such as Bitstamp and Bittrex, will have their representatives meet for the first time in September to help the self-regulatory organization get started. The Virtual Commodity Association is intended to introduce industry-wide standards in cryptocurrencies, while promoting transparency and assisting regulators in preventing fraud and manipulation in cryptocurrency trading. On Monday, the Virtual Commodity Association had named Maria Filipakis as an interim executive director. Filipakis had previously worked for the New York Department of Financial Services, where she helped launch New York’s cryptocurrency permit which is known as the “BitLicense”.
“Given the absence of federal oversight jurisdiction in the crypto market, in February and again in March of this year I called on the crypto platform community to come together and develop a self-regulatory organization-like entity that could develop and enforce rules,” said Brian Quintenz, a commissioner at the Commodity Futures Trading Commission (CFTC). “Today’s announcement is a positive step towards that realization.”
World Bank Launches the First Public Blockchain Bond
August 22, 2018 – The World Bank has priced the world’s first public blockchain bond at $100 million AUD. The two-year bond, which is expected to be settled on August 28, has been designed to help improve the efficiency of automated financing for countries, particularly those suffering from extreme poverty. By moving away from the decade-old manual bond sales process, the new blockchain bond will test the viability of faster and cheaper automation in bond sales. The blockchain bond has been named “Bondi”, which is short for “Blockchain Operated New Debt Instrument”. The bond has been arranged by the Commonwealth Bank of Australia (CBA), and is priced to yield a 2.251% return. The bond is structured as a “kangaroo bond”, which are bonds issued in Australian dollars by overseas institutions, at 23 basis points above Australia’s benchmark rates.
The efforts from the CBA to push a public blockchain bond deal has come after the Australian Securities Exchange (ASE) plans to switch to a blockchain-based technology in efforts to help cut costs in equity trade settlements sometime in 2020. “You’re collapsing a traditional bond issuance from a manual bookbuild process and allocation process, an extended settlement then a registrar and a custodian, into something that could happen online instantaneously,” said James Wall, an executive general manager at the CBA.
August 23, 2018 – The crowdfunding company Indiegogo has announced that it will expand its initial coin offering (ICO) listing service to include security tokens. The first security token offering for St. Regis Aspen Resort, a luxury hotel nestled in Colorado’s Rocky Mountains, is now live on its platform. The security token, which is available only to accredited investors, will allow Indiegogo contributors to purchase “Aspen Coins”, which are essentially tokenized shares in a single-asset real estate investment trust (REIT). The “Aspen Coins” have been created for holding the $18 million in St. Regis Aspen stock made available through the Indiegogo sale. Unlike many ICOs, security tokens like the one offered on Indiegogo are completely SEC compliant, and will allow investors to own an income generating stake in the REIT.
“Security token offerings are the investment tool of the future, a mechanism designed to store wealth by utilizing income-producing digital assets,” said Stephane de Baets, the founder and president of the asset management firm that owns the luxury hotel. “By allowing access to investing in traditional assets like real estate, we are creating a new opportunity for investors to explore an ownership stake in something previously only accessible to private investors and high net worth individuals. Indiegogo is a well known and trusted name in alternative funding and cryptocurrency, making them an incredible partner for us to leverage their influence, experience and global audience.”
Coinbase Declares Guiding Principles for Institutional Investment Services
August 24, 2018 – Major cryptocurrency exchange and service provider Coinbase has declared its set of guiding principles aimed at institutional investors as the company expands its institutional product and service offerings. In a blog post, Coinbase notes that it will ensure fairness on its platforms by using a market operations team that will actively monitor cryptocurrency markets and provide the same surveillance practices as tier one global exchanges. In addition to the market oversight, the company also says that in order to protect its institutional clients, it will commit itself to regular third-party audits, and continue to offer crypto custody services by utilizing highly secure cold-storage techniques.
The announcement of these principles is critical for Coinbase to continue as the cryptocurrency industry’s leading custodian, as other major Wall St. firms have expressed recent interest in crypto custody services. “[Coinbase will] provide public trading rules and policies that are fairly applied to all market participants, publish transparent trading fees and incentive programs, clearly communicate market capabilities such as order minimums/maximums, execution options, trading volumes, and maintenance schedules and commit to ongoing independent third-party audits to ensure compliance with applicable regulations and industry standards”, notes the blog post.
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