October 16, 2022 | Issue 37
CRYPTO BEING EMBRACED BY INSTITUTIONS
While many crypto influencers debate BTC and ETH pricing trends, large mainstream financial institutions are embracing crypto. As reported below, BNY Mellow announced a new digital custody platform for clients’ bitcoin and ETH holdings. Also, Visa and JPMorgan announced a partnership to use a private blockchain to speed up cross-border payments. What about real estate institutions adopting crypto? I haven't seen any of them give a full-throated endorsement of crypto. Perhaps because the current real estate market is in a frozen state of fear as it watches macro economic conditions unfold. In the meantime, if you have ANY crypto topic that you would like me to cover, let me know. I'll dive in and share what I've learned with everyone else. Also, check out my YouTube videos and Podcast Crypto News for Realtors wherever you get your podcasts. Listen in and, hit SUBSCRIBE. All past issues of Crypto News for Realtors can be view on my website. Have a productive week and stay crypto curious! Rich Hopen richard.hopen@compass.com | 908.917.7926 PS. This newsletter is supported by home buyers and sellers in NJ who retain me as their real estate agent. If you know of anyone looking to buy or sell a home, please reach out to me.
CRYPTO NEWS
▸ BNY Mellon Announces It Will Hold Crypto
BNY Mellon began accepting cryptocurrencies. It is the first major US bank to be a crypto custodian. The bank will hold the crypto holder's "private keys," which is essentially the password. This gives the bank control over the assets.
BNY Mellon's bookkeeping services that it provides for stocks, bonds, and commodities will now be offered to customers with crypto assets.
BNY Mellon is the oldest bank in the US. It leaned into crypto in 2021 when it created an enterprise Digital Assets Unit.
"Touching more than 20% of the world's investable assets, BNY Mellon has the scale to reimagine financial markets through blockchain technology and digital assets," said Robin Vince, Chief Executive Officer and President at BNY Mellon. "We are excited to help drive the financial industry forward as we begin the next chapter in our innovation journey."
Spurring the bank forward was a 2022 survey it conducted of its institutional clients. The survey showed:
70% of respondents would increase their digital asset activity if services like custody and execution are available from recognized, trusted institutions.
88% are moving forward with their plans.
91% are interested in investing in tokenized products.
There was other news this week about companies embracing crypto. The online advisor Betterment launched a crypto investment portfolio for their retail and advisor customers. And Google's parent company Alphabet signed a deal with Coinbase allowing Google's cloud service's clients to pay in crypto.
▸ SEC Chair Gary Gensler on Regulating Crypto, Exchanges, and Greater Authority to the CFTC
Gensler announced this week, "I think the CFTC could well have greater authorities. They currently do not have direct regulatory authorities over the underlying non-security tokens.”
He quickly added there are likely less than 10 tokens that fall into this category.
In an interview with CoinDesk's Nikhilesh De, Gensler stated his position on regulating crypto.
Q. When will the SEC provide regulatory clarity?
A. "Most of the tokens meet the traditional standards that our Supreme Court has laid out, and that we, the SEC, have a role to help protect investors and instill and enhance trust in these markets."
Q. How should crypto exchanges, like Coinbase, be regulated?
A. "Right now, if you're investing on any one of these service providers [or] platforms, you're not getting those basic protections insuring against fraud, manipulation, what's called front-running. The platforms are an amalgam of different services. Not only are they doing what you might be familiar with at the New York Stock Exchange, but they are also … acting as a broker against you. They're like an amalgam of dealers trading against their public, they could be trading ahead of you. And our securities laws say no, that's not allowed. So there are a lot of protections that you right now are not getting the benefit from but should be because it's the law."
▸ FTX Superbowl Ad Characterized As Targeting Companies, Not Retail Investors
FTX CEO Sam Blankman-Fried said that the well-received (and very funny) Superbowl ad was for branding purposes. He said, “It’s much, much more about our branding as a company, and the institutional relationships we can create, than it is about mass-market activity.”
About 208 million people watched the Superbowl ad which featured Larry David as a naysayer throughout history. He questioned the utility of the wheel, a fork, indoor toilets, coffee, dishwashers, the US Declaration of Independence, the moon project, and crypto.
CRYPTO CLASS – Bitcoin Spot ETFs & Futures ETF
Buying cryptocurrencies involves purchasing through an exchange such as Coinbase or Gemini, and then figuring out how to move control of the bitcoin from the exchange to the buyer's wallet.
This process creates a lot friction and many investors interested in diversifying into crypto are reluctant to do so. Exchange-traded funds (ETF) offer a solution to investors with a brokerage account. It allows investors to be exposed to bitcoin without the hassle of buying the actual crypto. A bitcoin EFT simply tracks the price of bitcoin instead of a direct investment of the asset. Currently, bitcoin ETFs are limited to futures contracts. Futures contracts allow investors to bet on bitcoin’s future price by agreeing to buy or sell bitcoin at a specific price on a set date. Futures contracts are traded at the Chicago Mercantile Exchange (“Chicago Merc” or “CME”). The CME was established in 1898 as the Chicago Butter and Egg Board and was used for trading agricultural products. Over time, the traded commodities expanded beyond butter, eggs, pork bellies, and orange juice. Other asset classes include currencies, energy, interest rates, metals, stock indexes, and since 2021, a bitcoin futures ETF. An alternative to a futures ETF is a spot ETF. A spot ETF would allow an investor to purchase the ETF based on bitcoin’s current price. Grayscale applied to the Security & Exchange Commission for a spot-based ETF in October 2021. Grayscale is the world’s largest digital asset manager, has 850,000 investors in the US, and owns more than 3% of outstanding BTC. The SEC rejected Grayscale's spot bitcoin ETF application and Grayscale filed a lawsuit against the SEC. This week, Grayscale filed its initial brief. Grayscale argued that SEC’s approval of a futures ETF relies upon the same indices as would a spot ETF. An investor’s risks are the same and the SEC’s rationale to reject a spot ETF is flawed because it favors one type of product. Grayscale’s chief legal officer, Craig Salm, said, “[T]he test the SEC has applied to Bitcoin-related ETFs, and only Bitcoin-related ETFs, is flawed and has been inconsistently applied with a ‘special harshness’ to spot Bitcoin ETFs.” Over the next few weeks, legal briefs will be filed with the court by other companies and industry groups in support of Grayscale. The SEC will then file its response.
INFLUENCERS - People to follow
Rostin Benham - @CFTCbenham
Benham is the Chair of the Commodities Futures Trading Commission. As Chair, Benham, has advocated for the CFTC to use its authority to bring greater transparency to the complex markets, e.g. options, futures, and swaps. He also helped create a committee focused on how weather and climate changes will impact low-to-moderate income communities. Before serving on the CFTC, Benham was Senior Counsel to the U.S. Senate Committee on Agriculture, Nutrition, and Forestry.
RESOURCES – Books, websites, podcasts, interviews, articles, videos
If you want an overview of the most important aspects of Bitcoin and crypto, this is a terrific primer.
CRYPTO WORD – Rehypothecation. Rehypothecation is the practice where banks, and even the brokers themselves, use assets that have been posted as collateral by their clients for their own purposes. Clients that permit rehypothecation of their collateral can be compensated through a lower cost of borrowing or a rebate on fees. (From CoinMarketCap)
OH, ONE MORE THING – WHAT IS BITCOIN? This testimony by Coin Center's head of research, Peter Van Valkenburgh, gives one of the most clearly articulated explanations of crypto that I've seen. If you can find 5 minutes, you'll learn a lot.
Thanks for reading! See you next week.