September 17 – 23, 2019 | Bitcoin Options, Wells Fargo Stablecoin, and More
3iQ Research Group consolidates the top five cryptoasset stories of interest to investment advisors and our investors.
CME Group Will Launch Bitcoin Options in Early 2020
September 20 – The global markets company CME Group has announced that it will be releasing options for its bitcoin futures sometime in early 2020. According to Tim McCourt, the Head of Equity Index and Alternative Investment Products at CME Group, the launch of bitcoin options will provide clients “with additional flexibility to trade and hedge their bitcoin price risk”. Options contacts on the price of bitcoin do exist today; however, they are purchased and sold through market facilities which operate in foreign jurisdictions which could be subject to lenient regulations. The lack of oversight on these market facilities may make them unfit for professional clients. Deribit, one of the leading bitcoin options trading platforms, only offers European-style options on the price of bitcoin. “Based on increasing client demand and robust growth in our Bitcoin futures markets, we believe the launch of options will provide our clients with additional flexibility to trade and hedge their bitcoin price risk. These new products are designed to help institutions and professional traders to manage spot market bitcoin exposure, as well as hedge Bitcoin futures positions in a regulated exchange environment,” said McCourt.
CFTC Appoints Coinbase Lawyer to Head Division Overseeing Bitcoin Futures
September 17 – The US Commodity Futures Trading Commission (CFTC) has appointed Coinbase’s vice president, Dorothy DeWitt, as its new market supervisor. DeWitt has been appointed to direct the Division of Market Oversight (DMO), which oversees derivatives products and platforms, as well as bitcoin futures. At Coinbase, DeWitt served in the exchange’s general counsel for business lines and markets. Previously, DeWitt spent time at Citadel Securities, S&P Global, and served as a portfolio manager. “[DeWitt] brings to the CFTC more than 20 years of private sector experience in the financial services and legal fields. Her strong investment, risk, legal, and compliance background and familiarity with distributed ledger technology, including crypto assets, will be invaluable as the agency looks to develop a holistic approach to regulating 21st century commodities,” said Heath P. Tarbert, the chairman of the CFTC.
Privacy Coins Face Existential Threat Due to Regulations and Crypto Exchange Requirements
September 19 – The famed bitcoin bull and Fundstrat co-founder Tom Lee has noted in a recent interview on CNBC Fast Money that there is a correlation between US equities markets and the market price of bitcoin. Lee believes that bitcoin could become a “risk-on” asset after US equities print a decisive breakout. Based on a past Fundstrat analysis, bitcoin often performs best when the S&P 500 index is up more than 15% YTD. Lee notes that three out of the four best years for the S&P 500 index over the last decade has also coincided with the strongest performing years for bitcoin. “I think that there have been tailwinds building for bitcoin. One has been institutional money potentially coming through things like Bakkt and programs like Libra and the technicals have been better. But I think bitcoin has kinda stalled recently because the macro outlook has stalled. In a world without trend, bitcoin doesn’t go up. So I think the next big catalyst is a decisive breakout in the equity markets because once equities reach an all-time high, bitcoin becomes a risk-on asset,” said Lee.
Wells Fargo to Pilot Stablecoin Which is ‘Faster, Cheaper’ Than SWIFT
September 20 – Wells Fargo & Company has announced that it plans to pilot a stablecoin which is backed by US dollars. “Wells Fargo Digital Cash” will run on the bank’s first distributed ledger technology (DLT) platform, which is based on the R3 Corda Enterprise blockchain specification. The platform will enable the bank to conduct cross-border payments within the bank’s existing global network. Wells Fargo said that they successfully tested the technology between Canadian and US accounts using US dollars. According to spokesperson, the bank will consider other currencies after the project is piloted. “As a result of the increasing digitization of banking services globally, we see a growing demand to further reduce friction regarding traditional borders, and today’s technology puts us in a strong position to do that,” said Lisa Frazier, the head of the Innovation Group at Wells Fargo. “It’s faster than SWIFT, cheaper and definitely more efficient.”
German Newspaper Reveals Libra Currency Basket Weights
September 23 – The German newspaper Der Spiegel has released the basket of global currencies that Facebook has planned to underpin its Libra cryptocurrency. Der Spiegel reportedly got ahold of the planned currency basket through a letter to Fabio De Masi, who is a German legislator and former member of the European Parliament. The weights of the currencies used in the basket will be US dollars at 50%, the euro at 18%, the Japanese yen at 14%, the British pound at 11%, and the Singapore dollar at 7%. Unsurprisingly, the Chinese yuan will not be included in the basket of currencies. Another report from Reuters last week suggested that the exclusion of the Chinese yuan in the basket of cryptocurrencies could help Facebook in its discussions with US officials, given the current trade tensions between the two countries. Meanwhile, China has viewed the Libra as a direct threat, and is currently developing a central bank digital currency (CBDC) of its own.
3iQ Corp. (“3iQ”) is the first Canadian investment fund manager to agree to terms and conditions with the Canadian securities regulatory authorities which permit 3iQ to manage a multi-cryptoasset investment fund available to Canadian accredited investors. 3iQ provides accredited investors with exposure to bitcoin, ether, and litecoin through its 3iQ Global Cryptoasset Fund.
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