Category: Institutions

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Banking Bitcoin Crypto News Cryptocurrencies Institutions

Morgan Stanley CEO Admits Crypto ‘Isn’t a Fad’

Cryptocurrencies may not constitute a significant part of the business demand for Morgan Stanley, a top US investment financial institution, but chairman and CEO James Gorman believes they are not going away.

There are people who still argue in some way that bitcoin and digital currencies are “bubble”, not mindful of the fact that the sector has developed for over 10 years with a current market capitalisation of US$2.5 trillion.

Last week, JPMorgan CEO Jamie Dimon reiterated his view that bitcoin is “worthless” – he has in the past also referred to the asset as “a fraud”, and “fool’s gold”.

Taking a somewhat contrary view, Gorman said this week that cryptocurrencies are not a fad.

I don’t think crypto’s a fad, I don’t think it’s going away […] I don’t know what the value of bitcoin should or shouldn’t be, but these things aren’t going away and the blockchain technology supporting it is obviously very real and powerful.

James Gorman, CEO and chairman, Morgan Stanley

Crypto ‘Will Evolve’ and ‘We’ll Evolve With It’

Morgan Stanley is one of the few major financial institutions to have launched crypto-related investment products, just as global investors are shifting away from gold to emerging crypto assets. In April, the bank filed notice to offer a bitcoin investment product to its wealth management clients. 

Although its crypto offering isn’t pivotal to the bank just yet, Gorman said it “may evolve”. 

For us, honestly it’s just not a huge part of the business demand for our clients. That may evolve and we’ll evolve with it, but certainly it’s not what’s driving our economics one way or the other.

James Gorman, CEO and chairman, Morgan Stanley

Despite Gorman’s comments, Morgan Stanley – which reported net earnings of US$14.8 billion for the third quarter – has showed particular interest in crypto this year. Its US$150 billion investment unit Counterpoint Global explored bitcoin in February, and the firm purchased more than 28,000 shares in Grayscale’s Bitcoin Trust in June.

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Bitcoin Gold Institutions Investing

JPMorgan Says Institutional Investors Are Replacing Gold With Bitcoin

Bitcoin’s market cap hit the US$1 trillion dollar mark last week as BTC’s price surged to US$55,000. Analysts at American investment bank JPMorgan put forward three main reasons behind the recent BTC price surge, and one of them is institutional interest. 

Institutions Are Fuelling Bitcoin

It seems institutions are taking the lead again and driving the price this quarter, when it was retail investors that had out-bought institutions in the first quarter of 2021.

According to a Bloomberg report, JPMorgan said that institutional investors were the main driving force behind bitcoin’s recent price surge, mainly because they see it as a “better inflation hedge than gold”.

The re-emergence of inflation concerns among investors has renewed interest in the usage of bitcoin as an inflation hedge. Institutional investors appear to be returning to bitcoin, perhaps seeing it as a better inflation hedge than gold.

JPMorgan statement

The two other key factors were “recent assurances by US policymakers that there is no intention to follow China’s steps towards banning the usage or mining of cryptocurrencies”, and “the recent rise of the Lightning Network and 2nd layer payments solutions helped by El Salvador’s bitcoin adoption”.

JPMorgan Believes Bitcoin Could Go 10x – But Still Doesn’t Like It

JPMorgan has been one of the most hesitant traditional financial institutions when it comes to bitcoin and cryptocurrencies. But as cryptocurrencies and blockchain technology demonstrate their usefulness especially in times of financial crises, most institutional investors have decided to engage with cryptocurrencies one way or another.

While JPMorgan still doesn’t like Bitcoin – or any crypto, really – its CEO, Jamie Dimon, recently conceded bitcoin could grow by up to 10 times within the next five years, which could be his most positive comment yet about BTC.

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Crime Crypto News Ethereum Institutions

ETH Developer Pleads Guilty to Helping North Korea Use Blockchain to Evade Sanctions

Virgil Griffith, a prominent Ethereum developer and one of the most recognised names in the crypto industry, has pleaded guilty to a federal charge accusing him of conspiring with the North Korean government to evade US sanctions law.

Two-Year Legal Battle Not Yet Over

Griffith’s September 27 appearance in the Southern District of New York courthouse ended a long battle with US authorities. Griffith had been arrested in November 2019 shortly after giving a keynote speech in the North Korean capital of Pyongyang. 

The reason for his arrest, according to prosecutors, was that the subject of Griffith’s presentation was how to launder money and evade sanctions using blockchain technology. While awaiting trial on house arrest, in July Griffith apparently violated the terms of his bail and was taken into custody.

Defence Lawyer’s Testimony Thwarted

According to Ethan Lou, a journalist who claims to know Griffith, he tried to seek legal advice on how best to prove his innocence. Griffith also tried to access his Coinbase account to pay his lawyers but access was denied numerous times. According to Lou, the court wanted a lawyer’s testimony to show Virgil tried to seek legal advice, but the lawyer was based in Singapore and was unable to travel.

Now that Griffith has pleaded guilty, US authorities have imposed a six-year prison penalty. The formal sentencing is expected to take place in January 2022. Needless to say, the case has raised a lot of eyebrows in the crypto community. “Unclear what new development caused this guilty plea,” tweeted Lou. “One possible reason is the barring of the remote testimony of an Ethereum Foundation lawyer.”

It is unknown what prompted the guilty plea. Griffith faced a charge of “conspiracy to violate” sanctions laws, meaning he was accused of trying to help North Korea but not actually helping the rogue state, giving the prosecution the green light to proceed without providing any tangible evidence.

Seven months ago, the US Department of Justice charged three North Korean hackers allegedly involved with cybercrimes that caused over US$1.3 billion in damages. These actors were said to have helped the North Korean government by stealing cryptocurrencies to fund its nuclear program.

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Institutions Investing Surveys

Report: 84% of Institutional Investors Interested in Crypto, ETF Needed

A survey of more than 1,000 institutional investors from across the US, Europe and Asia found that most believe digital assets have a place in a portfolio and were interested in crypto-based products such as ETFs. 

Respondents to the survey, conducted by Fidelity Digital Assets in early 2021, included financial advisers, high-net-worth investors, family offices, and professionals working for hedge funds, pension funds and venture capital firms.

Over half (52 percent) were already invested in digital assets (predominantly Bitcoin and Ethereum) and nearly nine in 10 said they found crypto appealing, especially in terms of its high potential upside. 

Key barriers to investment in crypto cited by investors include price volatility (54 percent), lack of fundamentals to gauge appropriate value (44 percent), and market manipulation (43 percent).

Key Findings of Institutional Investor Research

  • 70% of all investors surveyed had a neutral-to-positive perception of digital assets;
  • 84% of US and European investors, and 90% of Asian investors, said they’d be interested in institutional investment products that hold digital assets;
  • 62% of US investors expressed a neutral-to-positive view about a potential bitcoin ETF;
  • Nearly eight in 10 investors surveyed felt digital assets have a place in a portfolio; and
  • 43% of investors surveyed identified digital assets as part of the alternative asset class.

Regional Differences in Crypto Investment

The research provides insights into how digital asset adoption varies by region: 

For the second year in a row, the survey found that European investors have a more progressive view towards digital assets than Americans when comparing the responses across all categories. Even so, Asian investors, who we surveyed for the first time this past year, are by far the most accepting of digital assets, with more than 70 percent of investors surveyed currently invested in digital assets.

Jack Neureuter, Fidelity Digital Assets

Compared to previous surveys, more US investors said they’d bought digital assets through an investment product in 2021 while 30 percent of US respondents said they’d prefer to buy an investment product in future – which the report speculates could signal investors’ hopes that a crypto ETF will be approved by regulators.

While investment products were popular among European and Asian investors, they were more likely to buy digital assets directly. 

Fidelity Digital Assets’ survey results reinforce the views of finance professionals surveyed by Deloitte earlier this year – 76 percent of those respondents said they believed crypto would be a strong alternative to, or outright replace, fiat money within the next decade. 

Another report released this month found that six in 10 multinationals are already using crypto and blockchain technology, although typically for transactional purposes rather than as investment assets.

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Blockchain Crypto News Institutions Payments

Mastercard Acquires Blockchain Forensics Company to ‘Help Keep Users Safe’ 

American multinational Mastercard has acquired blockchain forensic firm CipherTrace in an attempt to enhance its operations in the cryptocurrency industry. 

According to a September 9 press release, the deal would enable both companies to combine their technologies, from AI to cyber capabilities, to differentiate card and real-time payments architecture. Mastercard hopes to close the acquisition by the end of the year, giving the company insight into more than 900 cryptocurrencies.

[The acquisition] follows a number of investments the company has made, including partnerships with Uphold, Gemini and BitPay to create crypto cards, the creation of new platforms to test and support Central Bank Digital Currencies, programs to support the broader use of blockchain technology and NFTs, and the potential to support select stablecoins directly on its network.

Mastercard press release

Mastercard’s Multiple Plans for the Crypto Industry

Six months ago, Mastercard announced support for cryptocurrencies, prioritising stablecoins and popular tokens like Ethereum and Bitcoin. With this acquisition, Mastercard dives deeper into the digital assets space and brings a solution to protect its customers and merchants, also allowing global businesses and stakeholders to build upon and comply with regulations for their digital assets services.

We help companies – whether they are banks or cryptocurrency exchanges, government regulators or law enforcement – to keep the crypto economy safe. Our two companies share this vision to provide security and trust throughout the ecosystem. We are thrilled to join the Mastercard family to scale CipherTrace’s reach across the globe.

Dave Jevans, CEO, CipherTrace

Mastercard added it’s joining forces with a broad set of partners, including fintech companies, crypto-wallet providers, and governments, to further drive innovation in the digital assets space. A year ago, the credit card giant teamed up with Blockchain Australia and VeChain to track Aussie food and wine exports with blockchain technology.

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Bitcoin Crypto News Institutions Investing

$7 Billion Fund Manager Bets on Bitcoin to Protect Against Rising Inflation

Horizon Kinetics, one of the best-performing fund managers in the US this year, chooses Bitcoin (BTC) as one medium to protect its investors against currency debasement. 

In an interview with the Financial Times, Peter Doyle, one of the co-founders of the US$7 billion investment company, expressed concern over rapidly growing debt fuelled by government response to the Covid-19 pandemic. Doyle fears this will eventually result in global inflation, which is why investors need to protect their portfolios.

There is no turning back after the pandemic and globally there is a debt problem, and it means either default or currency debasement.

Peter Doyle, Horizon Kinetics

Horizon Bets on Bitcoin and Property

Horizon Kinetics is betting on property and Bitcoin to protect its investors, according to the Financial Times article. Bitcoin has a limited supply of 21 million, and therefore it is bound to be scarce. 

People should have exposure to the asset class.

Peter Doyle

Having reportedly invested one percent of its Paradigm fund to Grayscale Bitcoin Trust in 2016, today Horizon’s Bitcoin investment represents a tenth of the fund. The company offers investors exposure to Bitcoin via the fund, which as of July 26 had gained 47.76 percent despite the recent market crash.

Bitcoin has garnered lots of attention, especially from institutional investors, for the sole purpose of hedging against inflation. This is the same reason that drew MicroStrategy to Bitcoin, and it is currently the largest corporate BTC investor. US Senator Cynthia Lummis also believes in Bitcoin as a safe haven and hopes to bring BTC to the “national conversation”. 

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Banking Bitcoin Crypto News Institutions

Banking Giant JPMorgan Announces Crypto Support For Clients

On July 16, JPMorgan announced it had granted its wealth management clients access to cryptocurrency funds, becoming the first major US bank to support crypto.

Daniel Pinto, co-president of JPMorgan, hinted in discussions earlier in the year that he was interested in expansion into the crypto space.

In a humorous thought, rewind back to 2017 when CEO Jamie Dimon said “Bitcoin is a fraud”, and if he found out any JPMorgan employees were trading cryptos, “I would fire them in a second, for two reasons: It is against our rules and they are stupid, and both are dangerous.”

Five Crypto Funds Offered

With total assets worth US$3.4 trillion, JPMorgan is targeting the wealth management business with five new cryptocurrency products launched on July 19.

The funds initially offered are:

JPMorgan’s advisers can buy and sell crypto on behalf of their clients; they cannot recommend any cryptos, but can only execute the crypto trades as instructed.

We are excited to be onboarded to the JPMorgan wealth platform. OBTC remains the lowest-priced publicly traded bitcoin fund in the US, and we believe JPMorgan’s clients will see value in the product.

Greg King, founder and CEO, Osprey Funds

A recent report estimated that US$43 billion is already held in global Bitcoin investment funds, and this new offering by JPMorgan follows other giants such as Goldman Sachs, Blockrock, Citigroup and Deutsche Bank.

JPM Coin

Depiction of JPM Coin

JPMorgan is also heavily investing in blockchain technology to facilitate instantaneous payments, including launching a coin called “JPM Coin” to be used for business-to-business money movement.

JPM Coin is a permissioned, shared ledger system that serves as a payment rail and deposit account ledger, enabling participating JPMorgan clients to transfer US dollars held on deposit with JPMorgan. JPM Coin facilitates real-time value movement, helping to solve common hurdles of traditional cross-border payments.

jpmorgan.com

JPMorgan Investing Heavily into Blockchain

It also launched a new service called “Liink” through Onyx by JPMorgan, which is a platform accelerator for businesses wanting to adopt Blockchain with a payments network infrastructure:

Over 25 of the world’s largest banks have already signed up to join in helping to improve transaction and information flows around the world powered by a peer-to-peer network and smart contracts.

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Australia Crypto News Institutions

ASX Highlights Risks of “Not Your Keys, Not Your Coins”

The Australian Securities Exchange (ASX) has issued a warning to Australians about the risk of leaving their crypto assets in a centralised exchange, stating that they should understand the risk associated with not holding their private keys.

According to a PDF submission to the Senate Select Committee on Financial and Regulatory Technology, crypto exchanges are a business just like any other and are subject to cyber-security attacks, so Aussies should weigh the risks of leaving their funds in exchanges.

In most cases, the custodian of the underlying digital assets is the exchange itself, and the user does not have access to their private key unless they choose to transfer their digital assets to an address away from the exchange and for which they directly manage the private key.

‘Not Your Keys, Not Your Coins’

The phrase “Not your keys, not your coins” is one of the many mantras of the crypto community. Relying on a custodian, usually a crypto exchange, entails a risk as these platforms are subject to various types of attacks. 

The ASX prompted the committee to consider and evaluate what regulations can be taken to address these concerns, besides disclosing the terms of custodial rights, capital technology, and operational management issues.

In saying this, we also note that crypto assets and crypto exchanges are subject to inconsistent, and in some cases minimal, regulation globally. Any measures such as those canvassed above would need to be considered in the context of the broader regulatory framework considered appropriate, in view of the nature and risks associated with these assets and activities.

ASX report

The ASX cited examples from last year, most of them hot wallet breaches. Several crypto exchanges were subject to these attacks, along with third party access, hacks, and more.

In September 2020, KuCoin experienced a hot wallet breach, losing over US$275 million. The attacker managed to steal several funds including BSV, ETH, BTC and USDT. KuCoin CEO Johnny Lyu said that most funds were recovered, though this hasn’t been verified. 

ASX Stockbrokers Prepare for the New Trading Platform

The warning comes shortly after news that stockbrokers were spending millions to adapt to the ASX trading platform upgrade.

The new ASX platform, which is expected to go live by mid-2022, uses blockchain technology to register and control financial transactions. Yet it seems that traders are bearing the high costs associated with the upgrade when they try to interact with the platform.

However, a spokesman told the Australian Financial Review newspaper that this was a change that people had requested, and costs were subject to the manner in which they connected to the platform.

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Crypto News Cryptocurrencies Institutions Investing

Survey Shows 70% of Institutional Investors Plan to Buy Crypto in Near Term

A recent survey by Fidelity Digital Assets, a multinational financial services corporation, has revealed that 70 percent of institutional investors are interested in buying cryptocurrencies.

Vast Majority Will Own Crypto by 2026

According to the survey, seven out of 10 respondents plan to buy digital assets in the near future and 96 percent of them aim to do so by 2026.

The survey ranged across investment banks, hedge funds, endowments, family offices, and financial advisers. It’s worth noting that Fidelity is one of the first traditional financial services that embraced cryptocurrencies. 

The message is clear – institutional adoption is growing, at least according to Fidelity’s last year survey. In 2020, the company found that only 36 percent of institutional investors would dare to invest in digital assets, and only 27 percent of US-based institutions had invested in Bitcoin and Ethereum.

Covid-19 Outbreak Was the “Catalyst for Investors”

Tom Jessop, president of Fidelity, said the pandemic was the catalyst for many institutional investors to look out for alternative assets while the traditional market was collapsing. 

The pandemic – and fiscal and monetary measures in response to it – has been a catalyst for many institutional investors to define their investment thesis and operationalise it.

Tom Jessop, president, Fidelity Digital Assets

A total of 1,100 institutional investors from across Asia, Europe and the US were surveyed. Interestingly, it appears that Asian investors had more exposure to the crypto market compared to North American and European institutions.

Yet some institutions remained sceptical, expressing fear of market manipulation and high volatility.

Corporate Crypto Conversion

As more institutions explore crypto and blockchain technology, it seems natural that clients would want insightful knowledge about the crypto market. According to a recent report, 26 percent of financial advisers would recommend cryptocurrencies to their clients in the next year.

Australians are leading the way when it comes to adoption. Earlier this year, Crypto News Australia reported that more than 5 million Aussies will own crypto by the end of 2021.

Additionally, 40 percent of millennials and 31 percent of Gen Zs favour digital assets over real estate, and the average Aussie crypto investor has 12.5 percent of total assets in crypto.

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Crypto News Cryptocurrency Law Institutions Regulation

Decentralised Autonomous Organisation (DAO) Framework Officially Approved in the US

Decentralised Autonomous Organisations (DAOs) are now legally recognised as businesses entities in the state of Wyoming, US.

The passing of the bill that took effect on July 1 has been praised by Wyoming’s Secretary of State, Edward Buchanan, as another step for the state to remain on the cutting edge of business technology.

The Merchant Advisory Group (MAG), which represents 165 of the largest merchants in the US, also expressed its support of the DAO filing.

Shortly afterwards, the American CryptoFed DAO was officially the first to be legally recognised as a distinct form of limited liability company (LLC). American CryptoFed is aiming to create “a monetary system with zero inflation, zero deflation, and zero transaction costs”, looking to stabilise currency and be immune to government votes on changing resource values as a separate entity.

Ideally we’ll see more money put into the coffers of local governments in a way that then allows them to hopefully fill more potholes and do more kinds of projects, without having that cut into their profitability of that transaction.

Mark Gordon, Governor of Wyoming

What Is a DAO?

The developers of the DAO believed they could eliminate human error or manipulation of investor funds by placing decision-making power in the hands of an automated system and a crowd-sourced process, which drastically lowers management costs.

By using a open-source blockchain protocol governed by a set of rules, which were created by its elected members, it can automatically execute certain actions with smart contracts without the need for intermediaries checking if requirements have been met.

Participants are not obligated by a legal contract, but rather incentivised by rewards in the form of native asset tokens that help them work towards a unified goal. Decentralised exchange (DEX) platforms such as Compound (COMP), yearn.finance (YFI) and Uniswap (UNI) are dependent on DAOs for governance. 

Wyoming, the Most Crypto-Friendly State in the Union

This move is another demonstration of Wyoming trying to lead the way as the most crypto-friendly state in the US. Its Senate representatives have made it very clear that they are crypto-positive and have already passed 23 laws to clear up regulation around digital assets and related fields, including crypto mining.

Major crypto companies Ripple and Kraken have both set up operations there, along with 50 smaller LLCs with “bitcoin” in their names. 

Wyoming is the leading digital assets jurisdiction in the USA, and now with this DAO law, Wyoming is arguably the top blockchain jurisdiction in the world.

Marian Orr, CEO, American CryptoFed DAO

The state has been busy trying to attract companies that play a role in the crypto or blockchain industry, especially bitcoin miners.