Notes from New York Blockchain Week

Courtesy of Techemy and Brave New Coin, I was fortunate to attend this month’s New York Blockchain Week. Here are some high-level observations from my personal notes (all views are my own):

First, depending on who you asked, attendance numbers for the headline event, Consensus (organised by Coindesk), were well down on last year. Certainly, compared to last year’s human zoo (based on feedback from people who were there), there was more breathing room in the conference venue, and less frantic activity in the crush to get to and from plenary sessions.

Second, the last time I attended a Consensus event, Consensus Invest in December 2017, Bitcoin hit a then record peak of US$10,000. And while we did not see new all-time highs this month, Bitcoin again obliged with a substantial rally – such that many delegates felt that the crypto winter had thawed. Certainly, it helped to buoy the mood of the whole week, and the organisers of the Magical Crypto Conference were confident enough to bring a live bull to their event. (And where my colleague, Josh Olszewicz moderated an excellent panel on Exchanges.)

Third, there were more corporate exhibitors at Consensus – a sign that the Blockchain and Digital Asset sector continues to mature. Some of the enterprise solutions on offer are still early stage (for example, one institutional custody provider I spoke to are only servicing their clients’ Bitcoin holdings), and we are yet to see some high-profile projects get beyond proof of concept stage. Meanwhile an important component in Smart Contract management, ChainLink, is about to launch on their main net, and there was a lot of discussion around scaling (such as the Lightning Network) and interoperability (such as Submarine Swaps).

Fourth, another recurring theme was Custody solutions. Pension funds and other institutional asset managers are demanding robust, industrial strength infrastructure before they will allocate any of their funds under management to the new crypto asset class, as they will not entrust assets to be stored on exchanges or in vulnerable wallets. Moreover, institutional players require segregated client accounts, full transaction records and holding reports, independent and fair-value pricing data for NAV calculations, in addition to clearing, settlement and custody services.

Fifth, and linked to the above, there were a number of projects talking about dark liquidity pools. Not for any nefarious reasons (and not to be confused with the dark net), but to replicate what happens in other asset classes. Parties may wish to trade with trusted counterparts, but they don’t necessarily want to know each other’s specific identity. When it comes to placing a particular buy or sell order they might not want to reveal a position.

Finally, while there were some frivolous and lunatic fringe elements to the week, in general it felt more “grown up”. There were fewer ICO’s being shilled, and a number of projects that I spoke to (exchanges, protocols, tokens) are going through a period of transition and restructure – across their management, organisation, finances, legal entity or business model. Another sign of growing up in public.

Next week: Postscript on the Federal Election

 

 

Crypto House Auction

Earlier this month, through my work with Brave New Coin, I was lucky enough to attend the first live property auction to be conducted in cryptocurrency. Although the property was passed in on the day, the event generated enough interest and PR value that it will surely be only a matter of time before more large ticket assets are transacted in this way.

Image sourced from LJ Hooker

Let’s not forget that it’s nearly 9 years since Laszlo Hanyecz paid 10,000 BTC for two pizzas (then valued at about US$41).

Although we may not yet be paying for our morning espresso with Bitcoin, a growing number of merchants are enabling customers to pay for goods and services with crypto, via payment platforms and intermediaries such as Living Room of Satoshi, and TravelbyBit. And services such as Coin Loft and CoinJar make it easier to buy and sell the most popular cryptocurrencies without having to set up accounts on multiple exchanges.

Meanwhile, the house in Casuarina, on the northern coast of New South Wales, was passed in at 457 BTC (A$3.4m). The property was listed by LJ Hooker, and the auction was facilitated by TrigonX and Nuyen, while Brave New Coin supplied real-time market data convert the crypto bids to Australian dollars.

Next week: Demo Day #1 – Startupbootcamp

 

Blockchain and Crypto Updates

Courtesy of Techemy and Brave New Coin, I’ve just been on another whistle-stop global tour: 5 cities, 4 countries, 3 continents in two and a half weeks….. Along the way, I caught up on some of the latest market and regulatory developments in Blockchain and cryptocurrency.

Giant billboard in Tokyo’s Ginza district

First, there was no hiding the fact that the past six-month “correction” in crypto markets has had an impact on trading volumes, investor appetite and institutional enthusiasm – as well as generating some regulatory noises. More on the latter below. At the same time, many of the first wave of Blockchain projects that attracted funding over the past 4 years are still at the development or test net stage, or only just launching their MVPs. Hence some investor caution on new token issuance.

Second, there are probably far too many Blockchain and crypto conferences – or rather, volume is diluting the quality of content, meaning too many sub-par events. There is no shortage of interesting topics and informed speakers, but the format and delivery of so many panel discussions and plenary sessions end up sounding tired and lacklustre.

Third, expect a crypto-backed ETF to be listed on a major exchange very soon. I even think it will come out of Europe, rather than the US, but that’s just a personal view. Such a product is going to help with investor diversification and will eventually enable retail investors to get exposure to this new asset class, even within their personal pension plans, without the same level of risk and volatility than direct holdings or spot trading.

Fourth, institutional investors are still looking for institutional products and services: proper custody solutions, robust benchmarks, hedging instruments, portfolio tools and risk analytics. One challenge is that the market is still trying to define crypto fundamentals – the sorts of analysis we take for granted in other asset classes (earnings per share, p/e ratio, yields, Sharp ratio, credit risk, etc.).

Fifth, Japan feels like a case of “two steps forward, one step back”. Just over a year ago, cryptocurrencies were formally recognised as a legal form of payment. Then in late 2017, the FSA issued the first batch of crypto licenses to qualifying exchanges. Japan continues to represent a significant portion of crypto trading (partly a legacy of retail FX trading, partly a result of regulatory restriction in other markets). But yet another exchange hack earlier this year prompted the regulator to put the industry on notice to smarten up, or face the consequences. Exchanges are subject to monthly monitoring, and the self-regulating industry body is undergoing a few changes. Plus, exchanges are no longer able to list privacy coins.

Finally, with the lack of legal clarity or regulatory detail around initial coin offerings (aside from blanket statements that “all ICOs are securities until proven otherwise”), there is still a lot of regulatory arbitrage. Certain jurisdictions are actively attracting new issuance projects to their shores, and positioning themselves as being “ICO friendly”. Ironically, even though the SEC in the USA has been particularly vocal about ICOs that may actually be deemed securities, it has not defined what constitutes a utility token (or made any announcement on the new category of security tokens). However, there have been some recent announcements out of the SEC suggesting that neither Ethereum nor Bitcoin are in fact securities. More interestingly, the State of Wyoming is looking to make Blockchain and associated crypto assets a major pillar of its economy.

NOTE: The comments above are made in a purely personal capacity, and do not purport to represent the views of Techemy or Brave New Coin, their clients or any other organisation I work with. These comments are intended as opinion only and should not be construed as financial advice.

Next week: Bad sports

More musings on ICOs and cryptocurrencies

In the same week that SEC launched a spoof ICO (was anyone really fooled?), I attended two informational sessions about cryptocurrency that revealed much about the ignorance, greed, fear and misinformation that continues to plague this new asset class. Thank goodness that rational thinking still prevails…Much of the public dialogue around Blockchain, bitcoin and cryptographic assets has been along the lines of:

1. Everyone and their dog is trying to sell ICOs; so

2. FOMO is driving trading momentum; but

3. Price volatility deters many institutional investors; while

4. Regulators don’t really know what, where or how to regulate the industry.

But out of this uncertainty, clarity will emerge in the form of a new asset class, with appropriate regulatory structures, disciplined markets, and sophisticated investment products.

The first session I attended, described as a “Beginners’ Guide to Cryptocurrency”, felt a bit like one of those “get rich quick” seminars, where greedy (but unsuspecting) punters are sold the dream of timeshare apartments and highly leveraged equity warrants. While I can’t blame the audience (some of them knew no better), I would take issue with the presenter – the CEO and founder of a company in the process of launching an ICO. Admitting that they had limited technical knowledge of Blockchain, cryptocurrencies and token sales, the presenter also revealed limited knowledge of securities regulations and tax legislation when it comes to crypto and ICOs.

Meanwhile, the second session I was invited to attend (featuring representatives from brokers, exchanges, fund managers, Blockchain platforms and compliance experts) was far more informed. Even though some of the topics covered are still full of hypotheticals, the speakers all gave credible accounts of their respective positions. Compared to the first session, this forum gave me far more confidence that there are experts out there who know what they are talking about.

When it comes to cryptocurrencies and digital assets, I think the a reason why regulators, policy makers, traditional capital markets and advisers are often bamboozled is this is the first asset class in decades (if not centuries) that has not relied on a trickle down effect (in terms of production, distribution and exchange). In theory, anyone with access to Satoshi’s white paper, and who was capable of deploying the open source code, and who maintained a suitable CPU could have started mining, accumulating and trading bitcoin – and all without leaving their own home. And while it still forms a small proportion of total global capital assets, this industry has grown exponentially in less than 10 years.

Having developed the technology, identified the value proposition and established the asset class, the industry is now waiting for the appropriate regulatory tools so it can get on and build the infrastructure – from security tokens to atomic swaps, from Blockchain interoperability to custody solutions, from robust wallet integration to self-sovereign digital identity management.

Next week: Fear of the Robot Economy….