Word on the Street: Action-packed week ends with Fidelity high

Andrew Gillick , 09 Jun 2018 - BitcoinCryptocurrencyRegulation

A cascade of institutional interest this week that ended with news that trillion dollar fund manager Fidelity Investments is looking for developers to create a crypto exchange

The sun rises in the east:

(Monday) The first bit of positive news for the week started off in Japan with US-based echange Coinbase announcing they are going to open up shop in the country and appointing a former JP Morgan investment banker Nao Kitazawa as CEO of the branch. Also, the Hong Kong-listed Japanese financial giant, SBI Holdings, announced the launch of its own crypto exchange called VCTRADE. This is arguably the world’s first crypto exchange launched by a mainstream financial institution. VCTRADE is a network partner of Ripple and will begin by trading only XRP with more currencies to be added.

Also in Japan the financial watchdog (JFSA) barred an exchange from an operating license for the first time. It set an authoritative tone with Yokohama-based FSHO which had already been suspended twice by the JFSA for lacking “the necessary systems to operate its business” and is positive in terms of setting standards. Japan already has 16 JFSA-licensed crypto exchanges.

Crypto continues to attract millennial Wall St financiers:

(Monday) The outflow of young traders and wealth managers at top Wall Street firms to pursue a life in crypto from the small fortunes they’ve made continues, Bloomberg reports. Officials for BlackRock, Deutsche Bank and Goldman Sachs declined to comment on their employees’ investments or their departures.

bravenewcoin proportion generation bought crypto

When not being poached from fledgling crypto trading firms, Wall Street’s young guns are looking for a life less rigid than an investment bank and some even eschewing the lambo lifestyle to put their crypto to good use by starting their own businesses and investing in blockchain projects with a positive social or environmental impact.

"ICO bubble ready to pop" - head of Binance venture fund:

(Tuesday) The head of Binance Labs, the recently launched $1bn blockchain venture fund of the Japanese exchange, remains circumspect on the current ICO landscape and early-stage investments.

“We still see a lot of hype in the market, valuations are high and unreasonable,” Ella Zhang said. “We really think if the bubble bursts, it’s a good thing for the industry.”

Mike Novogratz no longer wants to create Goldman Sachs of crypto…

(Tuesday) Instead, the billionaire former Wall St trader turned bitcoin believer wants his crypto fund Galaxy Investment Partners to be Drexel of Crypto - the investment bank famed for creating the junk-bond market in the 1980s and infamous for one of the greatest insider-trading scandals.

It’s a dubious accolade to go after but speaking at a Bloomberg Invest conference in New York on Tuesday Novogratz said: “I was originally saying we were going to build the Goldman Sachs of this space I know this is going to get me in trouble, but it’s actually more like Drexel. If you think about what Mike Milken and his guys did, they helped credentialize junk bonds, high yield as an asset class. They were the proselytizers, the traders, the bankers."

Coinbase and Circle race to become first US registered exchanges:

(Thursday) The crypto unicorn Circle financial group, which provides OTC trading and exchange trading through Poloniex, declared it is on a mission to obtain a US federal banking license after it first secures an exchange license from SEC regulators.

Then, just hours after Circle’s announced its intention, its rival Coinbase also declared it is joining the race to become the first registered crypto exchange. 

Since for now the consensus from the SEC is that tokens are “unregistered securities”, both companies must register for either an alternative trading systems (ATS) or a dealer-broker license. Circle is interested in going after the ATS while Coinbase is hoping that it can acquire a dealer-broker license through one of its recent acquisitions that is already registered with the Financial Industry Regulatory Authority (FINRA). 

The Circle venture is partly backed by Goldman Sachs, which has co-led funding rounds for Circle and the crypto company is now at the forefront of companies in talks with US regulators.

Many speculate that institutional money has remained on the sidelines due to the lack of a federally licensed custodial service. Circle CEO Jeremy Allaire said, “The regulators need to figure this out because eventually other banks that they regulate are going to want to hold crypto. We can be a great guinea pig.”

Wu-who? Bitmain’s crypto billionaire mulls IPO of mining company:

(Friday) The 32-year-old founder and CEO of the world’s biggest crypto mining farms Bitmain Technologies’ Jihan Wu has been opening up a bit more about his company’s revenue and his own personal finance as he warms to the idea of an IPO on the Hong Kong stock exchange.

bravenewcoin pool power bitmain biggestAlong with co-founder Micree Zhan, Wu owns 60 percent of Bitmain which booked revenue of $2.5b last year and he estimates the value of the company at around $12b, though other estimates range from $9b.  

It’s a very attractive way for Wu to diversify out of his crypto holdings and of Bitmain’s largest competitors, Canaan Inc, has already filed for a Hong Kong IPO that some have estimated at around $1b. Bitmain’s revenue last year was 12 times that of Canaan. 

Bitmain’s bitcoin mining pools BTC.com and Antpool control 40% of the world’s bitcoin mining power and it controls up to 80% of the market for cryptocurrency mining rigs.

Wealth manager Fidelity Investments looks to set up crypto exchange:

(Friday) Big big big big news.

The Bostonian behemoth with over $2tn in assets under management has advertised positions for engineers "to create and deploy a Digital Asset exchange", reports the Business Insider. It is a huge gesture from a company from the staid world of retirement plans and financial planning.

CEO Abigail Johnson has stated publicly that she is a "believer" in digital currencies and has also deployed her staff to create "first-in-class custodian services for Bitcoin and other digital currencies", potentially venturing in the custodial market.

Currently, Fidelity customers can integrate their Coinbase holdings with their Fidelity portfolios but if the company did enter the crypto exchange market they would be by far the biggest player. The revelation will also mount pressure on regulators to come up with a concrete plan for the industry.

The Fidelity news also compounds a story from the start of the week that Philadelphia institutional trader Susquehanna International Group, is looking to trade clients money in the crypto markets. The company, which with the Vinkelvoss twins tried to create the first bitcoin ETF, has trading desks around the world and has been quietly trading the markets with its own money for the past two years. It proposes to trade bitcoin futures contracts with money from clients.

Gold catches the cryptobug:

The London bullion Market Association last week closed an invitation for submissions on ideas for how to better track gold after it’s dug up and traded to ensure what ends up with the consumer is ethically sourced and as pure as claimed. Of the 25 respondents, the LMBA said most incorporated blockchain technology into their proposals.

Commodity markets have been looking for supply chain applications for blockchain technology, with some success, notably the diamond industry where blockchain startup Everledger has been tracking the precious materials for one of the world’s biggest purveyors of diamonds, DeBeers Group.